An economist with close links to Andy Burnham has urged the Prime Minister to “get real” about the cost of the triple lock pension pledge and welfare spending. Lord Jim O’Neill, who recently turned down the offer of a formal position in the PM’s team, said a surge in government borrowing costs should force Mr Burnham and Whitehall to tackle thorny issues facing the country.
He told the BBC: “It’s going to force his own political party - and hopefully the whole Whitehall system - to get real about dealing with some of the things that are out there that no political figures seem to want to deal with, such as the triple lock, excessive spending on welfare.”
Triple lock pledge under scrutiny
Labour has insisted it will keep to the triple lock, which guarantees that the state pension increases each year by inflation, average wage growth between May and July, or 2.5%, whichever is higher. Sir Howard Davies, a former chairman of the Royal Bank of Scotland and now in the same role at pensions giant the Phoenix Group, said of the triple lock: “We can’t afford it and it really has to be changed. If a government doesn’t grasp that nettle at some point then its credibility is going to be on the rack.”
Cabinet Office minister Sally Jameson told BBC Radio 4’s Today programme: “We have been clear that we are sticking to the triple lock and have also been clear that we want to give people breathing space.”
Borrowing costs and Budget pressure
It came as the return of MPs after the summer break brought renewed focus on the pressures facing the government ahead of the Budget at the end of October. To make matters worse for the Treasury, and Chancellor John Healey, a global spike in government borrowing costs has driven up the cost of servicing the UK’s debt mountain.
Ruth Curtice, chief executive of think tank the Resolution Foundation, said: “More of government spending has to go on these debt interest costs which means less available for other things.” She added it created more uncertainty ahead of the Budget and that makes it harder to plan policies in the coming weeks.
Market turmoil and consumer confidence
Sir Howard said there was a “circus” built around the Budget, adding: “I think we going to face a very dicky period between now and the Budget.” “I think we are going to see a very uncertain period for the next three or four weeks and it would be helpful if the government could make some signs about their overall approach to the fiscal balance, which I think could calm things down a bit,” he told the BBC.
A global sell-off of bonds extended on Wednesday, fuelled by renewed attacks in the Middle East war and feeding into higher energy prices and fears of a renewed jump in inflation. The yield on a 30-year gilt rose to 5.89% on Tuesday, the highest since 1998. Despite that, new research has revealed that consumer confidence picked up over the summer. A Consumer Confidence index from pollsters YouGov and the Centre for Economics and Business Research rose from 105.5 to 106.4. Any score greater than 100 indicates positive sentiment.
