A Treasury minister has suggested that benefit increases in 2023 will be linked to soaring inflation, with the triple lock also “in place” for pensions.
Simon Clarke told MPs that high inflation “will be reflected” in the improving figures for April 2023 if current forecasts come to pass.
The government will increase benefits by 3.1% this April, although the inflation rate is expected to average nearly 8% for the year.
The triple lock ensures that pensions grow in line with the higher of earnings, inflation or 2.5%, but the earnings element has been suspended for 2022/23 due to fears of an unaffordable increase caused due to the impact of the coronavirus crisis on wages. .
Clarke, opening debate on the National Insurance Contributions (Increased Thresholds) Bill, told the House of Commons: “The UK spends £243bn a year on our wider social spending, including pensions. This is a country where we do a lot to make sure everyone is supported.
“We have to consider all of our decisions in the context of broader affordability and also how the system works. The welfare system always operates on the basis of an update in September for changes in the following April.
“If there is high inflation, as forecast, over the course of 2022 that will be reflected in the improving figures for April 2023 and the triple lockdown will be put in place to protect families.”
He later confirmed: “To the extent that the very high inflation forecasts for this year come true, that will be reflected in the improvement figures that will be delivered this fall for the 2023 earnings upgrade.”
The bill implements a policy announced by Foreign Minister Rishi Sunak in his spring statement to raise the threshold at which people pay for National Insurance (NI).
Initial NI thresholds will rise from £9,880 to £12,570 from July, aligning income tax and NI in a tax cut worth more than £6bn, according to the Treasury.
The Government believes it will benefit nearly 30 million UK workers and save the typical employee more than £330 in the year from July.
It was previously announced that a UK-wide 1.25 percentage point increase in NI contributions will be introduced from 6 April, with funds raised set aside for health and social care.
Labour’s Stephen Timms, who chairs the Work and Pensions Committee, highlighted concerns that Universal Credit claimants will lose 55% of the £330 tax cut “because of a reduced Universal Credit grant.”
Clarke said he would look into the matter, but had no figures to hand.
For Labour, Shadow Treasury Secretary James Murray said the bill had more to do with the chancellor’s “increasingly desperate” desire to paint himself as a tax cutter than to help people with the struggles they face.
He said: “We will support today’s bill as any help for people facing the Chancellor’s national insurance tax increase in April is something we welcome. There are benefits to raising the threshold at which people start paying for national insurance.
“But we need to be aware that this bill has more to do with the chancellor’s increasingly desperate desire to cast himself as a tax-cutter than with a well-thought-out package of measures to help people with the struggles they face. Even after this bill passes, the truth is that the tax burden in our country will remain the highest in 70 years.
“We remain the only G7 country to raise taxes on workers this year.”
Murray noted that “the truth is that the chancellor realized that his national insurance increase in April is wrong.”
Former Labor Shadow Chancellor John McDonnell said action on wages was also needed, warning: “Unless we have inflation-proof wages, I will predict that we will now see an outbreak of industrial conflict within our country.”
Mr. McDonnell gave the example of municipal workers and their below-inflation wage deal.
He said: “Which we should be doing, and I only invite the Government to consider the issue with respect to public sector wages because obviously they also set the private sector terms, unless we establish inflation-proof wage agreements. we will find that often the lowest paid workers will be severely affected by the erosion of their wages as a result of inflation.”
The bill received a third reading without opposition and will come up for further scrutiny in the Lords at a later date.