When inflation unexpectedly tickled down a fraction, make no mistake: Rachel Reeves remains under acute pressure.
In the weeks ahead she faces almighty challenges in convincing markets that her plan for economic growth, set against a backdrop of financial probity, remains on course. Last November, as confirmed four days ago, the economy grew by a miserly 0.1 per cent.
Despite the recent dramatic ratcheting up in government borrowing costs, Ms Reeves (for the time being at least) is sticking to a script that says further painful tax rises – on top of those coming in this April – are not around the corner. Maybe she will be proved right as a combination of subdued inflation of 2.5 per cent and lower interest rates (starting with a cut next month) come to her rescue.
But then again, Rachel from Accounts could be wrong. If inflation edges up again in response to the imminent hike in business National Insurance costs and rising energy bills, she might have no choice but to go back to taxpayers (personal and business) for more of our income, wealth, and profits.
What is irrefutable is that steep government spending cuts – outside the protected NHS and the crucial defence budget – are coming our way. Some of these – for example, a reduction in the civil service headcount – would be widely welcomed. Others, such as trimming the welfare benefits bill, would be more controversial.
New pensions minister Torsten Bell
Yet one cut, if implemented, would provoke an outrage surpassing that which followed last year’s axing of the universal right to winter fuel payment when someone hits state pension age.
I’m referring to the removal of the triple lock, which in theory ensures the state pension increases every year by whichever is the higher out of inflation, average earnings or 2.5 per cent.
The first indication that the triple lock might be under threat was last Tuesday when the Financial Times opined about Ms Reeves’s troubles. It said that while she is right to rule out further tax rises (for the time being), Labour ‘must be prepared to make savings in high-cost, yet politically sensitive areas such as welfare benefits, the Civil Service, and the triple lock’. The FT ended by saying: ‘It’s time the Government spelt out – with alacrity and detail – its strategy to deliver growth and cut costs.’
A ripping up of the triple lock cannot be ruled out. Although Sir Keir Starmer has repeatedly said he is committed to maintaining it, Labour has shown nothing but contempt for pensioners, as evidenced by its cruel, rushed decision to restrict winter fuel payments to all bar the impoverished. So a move to weaken the triple lock on the grounds of ‘needs must’ would surprise no one.
The recent rearranging of the chairs at the Treasury to accommodate the resignation of former Economic Secretary Tulip Siddiq makes its overhaul more likely. While pensions minister Emma Reynolds has stepped into Siddiq’s shoes, her job in turn has been taken by Torsten Bell, former head of Left-leaning think-tank the Resolution Foundation.
Bell loves to upset the pension applecart. Just days into his new job he has already angered millions of women born in the 1950s (named Waspis after the Women Against State Pension Inequality campaign) by defending the Government’s decision to deny them compensation for not being given sufficient time to prepare for an increase in their state pension age.
At the think-tank, Bell had plenty to say on pensions, most of it controversial and perturbing. He has argued for the introduction of a flat rate of tax relief on contributions into work pensions – and capping the tax-free amount that can be taken when drawing a pension at £40,000.
To put this in context, the current cap is typically 25 per cent of a person’s pension fund, subject to a maximum of £268,275. Ahead of last year’s election (and admittedly after Bell had left the think-tank to seek election as a Labour MP), the Resolution Foundation also called for employers to start paying National Insurance on the contributions they make into workers’ pensions.
Bell also has strong views on the triple lock. Back in 2020, he described it as a ‘silly system’ because of its link to unpredictable measures of earnings growth and inflation. He also said that pensioners had fared much better financially as a result of the triple lock compared to the ‘poverty-increasing policies’ imposed on struggling families.
I doubt Bell would lose any sleep if the triple lock was disbanded. He might get his wish if Ms Reeves’s fiscal arithmetic fails to improve – or she is sacked or falls on her sword. Torsten Bell, for sure, is a Chancellor in waiting.
If the triple lock was ditched, the backlash from the elderly would be huge. But as Labour has shown over winter fuel, it doesn’t much care for the nation’s army of pensioners – just striking train drivers and junior doctors.
Getting power of attorney ‘is a nightmare’
Having a lasting power of attorney (LPA) to ensure your financial or health matters are looked after by a loved one if you fall ill in later life is an absolute must.
Yet putting an LPA into action can be tricky, as I learnt just over three years ago when I took over my mum’s finances after she went into hospital and began her long goodbye (she died just over a year ago).
I was forever being challenged by her bank to confirm that withdrawals made on her behalf were genuine. But the problems I encountered pale into insignificance compared to those experienced by Heather Cunliffe, who lives near Bedford.
Heather, 61, gained an LPA in 2022 when her mum, Maureen, now aged 89, was diagnosed with Alzheimer’s and went into a care home. With monthly care costs of £6,200, Heather was keen to get Maureen’s finances in order. But she says dealing with financial institutions has been a nightmare.
ID requests were impossible to meet as her mum no longer had photographic ID such as a driving licence or passport, and institutions delayed the setting up of savings accounts. She has received compensation from Kent Reliance, NS&I and Santander for shoddy service. ‘I don’t think some businesses have invested enough in dealing promptly and satisfactorily with people looking after a loved one’s finances,’ she says. Heather is dead right.
- Have you had problems as an attorney? Email jeff.prestridge@mailonsunday.co.uk.
