The Spending Plan policy 1: freeze the basic state pension and minimum income guarantee in 2016–17, then uprate with CPI
Each day we will publish a blog on one of the policies from our Spending Plan. This blog is the first in the series.
Spending on the state pension and pension credit has become unaffordable. The “triple lock” promise – that pensions will always rise by whichever is higher out of inflation, earnings growth or 2.5 per cent – made by the Conservatives before the 2010 election was irresponsibly profligate. It is doubly so to keep it now as spending is forecast to rise from £93 billion to £107 billion in 2019–20 (revised down ahead of the 2015 budget from £108 billion). Instead, the next government should ditch the policy and freeze pensions in 2016–17. Thereafter, they should increase them in line with inflation. This would save £10 billion by 2020–21, part of our programme to bring spending down to 31.7 per cent of GDP.
As part of our list of savings to meet the current government’s aim in the 2014 autumn statement of reducing spending to 35.2 per cent of GDP by 2019–20, we also assessed a less prudent policy. This would scrap the triple lock and increase pensions by inflation but not freeze them in 2016–17. We estimated that this would save around £6.8 billion.