The government plans to increase state pensions by 10%, while public sector workers have been attacked by a former Conservative finance minister as “ridiculous” for taking an actual pay cut.
Jim O’Neill, the former chief economist at Goldman Sachs who served as minister under George Osborne, said it was “crazy” to protect pensioners’ incomes while wages for young people were at their highest rate of inflation in 40 years. was declining.
Asked why pensions rose in line with inflation as ministers pushed for a ban on public sector wages, Lord O’Neill said on the BBC’s Radio 4 Today programme: ‘I don’t know. I do not know. In the face of tax policy pressures and pensioner inequalities, the continued protection of pensioners seems ridiculous in itself and particularly insane in these circumstances.”
He was also concerned about the general lack of government oversight of the economy and said central banks were guilty of “groupthink” about the impact of quantitative easing and lower interest rates on inflation.
Official figures show that the government’s preferred inflation rate rose to 9.1% in May from 9% a month earlier, the highest rate since February 1982. This comes as the government seeks to confront railroad unions amid the most widespread strikes on railroads. At the end of the 1980s in a dispute over pay and working conditions.
Boris Johnson has warned against demanding large wage increases from workers as it could risk a “wage-price spiral” similar to that of the 1970s, in a marked change from the language he was using last October when he claimed Britain was on the way to a high wage economy. lead him.
Chancellor Rishi Sunak confirmed last month that the triple pension freeze would be reinstated, while benefits would also increase in line with inflation from next spring. Under the triple freeze, the state pension is increased each year by the inflation rate of the preceding September, the earnings increase of the preceding July, or 2%, whichever is greater.
Bank of England forecasts suggest that inflation, as measured by the CPI, is likely to hit 10% in September, pushing pensions and benefits up by that double-digit amount next spring.
Sunak pledged to restore the link with inflation after being heavily criticized by Tory backbenchers for suspending the triple lockdown last year, which would have resulted in an 8% increase in pensions and benefits from April 2022.
Finance Minister Simon Clark confirmed the policy’s return to Parliament on Tuesday. “Next year, the triple lock on the statutory pension will apply,” he said.
“Pending review by the Secretary of State, pensions and other benefits will be boosted by this September’s CPI, which on current projections is likely to significantly exceed the projected inflation rate for 2023-24.”
But ministers like Clark have repeatedly warned that offering a near-inflation wage rise for public sector workers would “prolong and deepen” the cost-of-living crisis.
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O’Neill, a Crossbench colleague who is now helping with a trade policy review for Labour, said the government does not have a “clear and clear policy framework” for its economic programme.
“I expect him to provide a clear framework for his economic policy. All that leveling and ‘northern powerhouse’ stuff… will get lost in all of this. What the government needs, rather than trying to jump from policy and deviate at everyone’s whim, is to come up with a clear and unambiguous policy framework, which we don’t have. ,
Deputy Prime Minister Dominic Raab defended the government’s measures on public sector wages, saying a hike could lead to a “vicious cycle of inflation”. He said it was right to protest higher wages for railway workers who are on strike over their wages this week, adding that the government should not bow to “militant unions”.
He defended the decision to increase pensions in line with inflation, saying:[Pensioners] are particularly vulnerable and disproportionately affected by the increases in energy costs that we are all familiar with.”