Downing Street today tried to kill off rumours that the state pension ‘triple lock’ could be axed amid Treasury fears costs could soar due to furlough warping wage figures.
With the public finances under huge pressure, there has been mounting speculation that Rishi Sunak wants to save £4billion by suspending the manifesto pledge for a year.
However, Boris Johnson wants to keep the lock in place, even though it is likely to grant pensioners a 6 per cent or higher rise because wages have spiked as people go back to work after the pandemic.
Asked about the possibility of a one-year suspension of the manifesto pledge, the Prime Minister’s spokesman said: ‘We are fully committed to the pensions triple lock.’
Mr Johnson was challenged about the triple-lock reports during a visit to a laboratory in Hertfordshire today.
He told broadcasters: ‘I’m reading all sorts of stuff at the moment which I don’t recognise at all about the Government’s plans.’
Meanwhile, Kwasi Kwarteng insisted driving growth is the ‘best way’ of balancing the books amid claims Mr Sunak is looking at a separate pensions raid to raise revenue.
The Business Secretary suggested tax rises and reducing reliefs such as the £1million lifetime allowance was ‘not necessarily the way forward’.
Tensions emerged as Boris Johnson faces Cabinet disquiet over big spending decisions being railroaded through without consultation.
Kwasi Kwarteng (left) insisted driving growth is the ‘best way’ of balancing the books amid claims Rishi Sunak (right) is looking at a pensions raid to raise revenue
The tensions emerged as Boris Johnson faces Cabinet disquiet over big spending decisions being railroaded through without consultation
Mr Johnson, Mr Sunak and Health Secretary Matt Hancock had been expected to meet tomorrow to discuss proposals on social care – expected to cost another £5billion a year. However, No10 said the meeting will not be happened as billed.
In a round of interviews this morning, Mr Kwarteng was asked about tax rises to cover the huge cost of coronavirus – with the national debt mountain now £2.17trillion.
‘I am hopeful as business secretary as you can imagine that we can grow the economy,’ he told Sky News.
‘That in the past has always been the best way to raise tax revenue… the tax revenue from a thriving economy can pay down some of the debt.’
Asked about the option of a raid on pensions reliefs, he said: ‘I don’t think that is necessarily the way forward.’
On the state pension, he said: ‘Obviously it is a decision of the Chancellor, but I am pretty sure the triple lock will stay.’
Treasury sources said changing pensions tax relief is ‘certainly not something the Chancellor is actively looking at’.
Officials say Mr Sunak is also refusing to fund the £200million cost of Johnson’s pet project to build a Royal Yacht, with the Ministry of Defence, the Cabinet Office and the Department of International Trade also reluctant to foot the bill.
In a sign of rising tensions, one official branded the funding for the yacht ‘a complete and utter s***show’ and another even suggested the PM should ‘set up a trust to pay for it’ – a reference to his failed attempt to get Tory donors to fund the cost of renovations to his Downing Street flat.
Mr Johnson urged G7 nations to sign up for a ‘Marshall Plan’ to help drive global green growth at the summit in Cornwall, but there was no UK money announced and the Treasury was apparently not consulted.
Mr Sunak has already laid out plans for tax rises in the coming years to fill the massive black hole in the government finances.
The Chancellor has told colleagues that he does not think families should face any further rise to personal taxation to pay for the extra spending.
The national debt mountain now stands at £2.17trillion, and is higher as a proportion of GDP than after the credit crunch
The CPI index hit 2.1 per cent in May, up from 1.5 per cent the previous month and above the official 2 per cent goal
There are fears that without greater restraint from No 10, the manifesto pledge not to raise income tax, national insurance or VAT during this parliament will become strained.
Mr Sunak is, however, said to be open to cutting the money for state pensions.
Treasury officials are also believed to be working up plans to cut the £1million pensions lifetime allowance, bring in a single tax relief rate, or tax employer contributions
An online sales tax is likely to be unveiled this autumn.
Taxes on gambling giants are also in development, with a Whitehall tussle under way over whether the levy targets profits or turnover.
There are claims today that the Cabinet is demanding more of a say in spending plans to rein in Mr Johnson.
‘The cabinet has to be involved in all the big decisions that reflect what the party stands for, the cabinet needs to be more involved in those decisions,’ one Whitehall official told the Guardian.
‘All cabinet ministers have to be part of making decisions that are part of a bigger picture. If you aren’t taking decisions as a collective it is very hard to go out and sell a coherent argument.’
A No 10 spokesman said: ‘The Prime Minister and Chancellor work closely together, and have been in lockstep throughout the most challenging period any government has faced since the Second World War.’