Future of triple lock depends on cuts in public sector spending, says Hunt

The government is set to borrow £114.1 billion this financial year. Photo: Kirsty O'Connor/HM Treasury

The «triple lock on pensions» can only be maintained by cutting public sector spending and improving economic growth, Jeremy Hunt has warned.

The Chancellor says she pledges support the growth of state pensions based on the maximum rate of inflation, average earnings or 2.5% per year, depends on the success of plans to improve the efficiency of public services.

When asked about the sustainability of the triple lock and the retirement age, he said that “both of these things are under control.

Addressing the Lords Economic Affairs Committee, Mr Hunt said: “The answer depends very much on how successful we are. If we can manage public services more efficiently, if we can increase our long-term growth rate, then it is possible that we can continue to have the level of public provision that we have now and support for pensioners, and I really hope that is the case .

“We are confident that we can continue to support retirees in the same way as before.”

The State Pension is set to rise by 8.5% in April to £221.20 a week as payments increase in line with annual wage increases recorded in the three months to July last year.

This follows an increase by 10.1% last year, reflecting the rapid pace of inflation a year earlier.

According to the Office for Budget Responsibility (OBR), along with other benefits including pension credit and winter fuel payments, the triple lock means pensioner welfare costs will rise from £142 billion this financial year to £171.8 billion in 2028 -2029.

It comes at a time of significant pressure on public finances.

The government plans to borrow £114.1 billion this financial year, the OBR estimates, with public debt forecast to be by 2028-2029 almost £2.7 trillion will rise to £3 trillion.

At the same time, forecasters are predicting a robust economic recovery with GDP growth accelerating from 0.3% last year to 0.8% this year and 1.9% next year.

Mr Hunt said: “The priority now is to be if we want to reduce our debt ratio to get back to our normal growth rate of around 2%, which we are not were the last couple of years.”

The Chancellor outlined plans in his Budget earlier this month to boost the productivity of the NHS through investment in technology.

On Tuesday he told colleagues he plans to cut the civil service by 66,000 people, «which will take it to pre-Covid levels.”

Mr Hunt said: «A more productive workforce is a happier workforce and you can achieve significant productivity gains through natural attrition rather than forced redundancies, but we absolutely need to improve productivity in the public service.»

Meanwhile, he said, Great Britain risks becoming dependent on “unlimited migration.” with devastating consequences for the economy and living standards.

He added: «The risk is that if you end up with a model that depends on unrestricted migration, you will end up undermining per capita GDP growth and also create a lot of social unrest.»

“What I think we need to say as a country is that we are going to move decisively towards a high-skill, high-wage economic model that is not dependent on unrestricted migration.”

He declined to specify an “optimal” level annual migration, but noted that the OBR forecasts the figure will fall from 672,000 in the last 12 months to 315,000 per year in the future.

At the same time, the Chancellor said he wants more adults to work and receive benefits.

Mr Hunt said: “We need to stay committed to welfare reform. It's incredibly destructive to society if the system inadvertently and for all the right reasons causes the system to leave people out of the workforce.

“Part of it is disease, but part of it is barriers, such as absent parents. unable to work because of the cost of child care, older adults are coming to believe that they need to retire early—perhaps at age 50—because of the tax benefits associated with pensions.»

There are 9.25 million people. of working age, classified by the Office for National Statistics as «economically inactive» because they are not working or looking for work.

This includes 2.7 million long-term ill people, 1.1 million on early retirement for retirement and 2.6 million students.