State pension set for surprise boost as Chancellor prepares for rise in inflation next month But it could restrict Jeremy Hunt’s room for tax cuts to the tune of hundreds of millions of pounds
Official figures published on Wednesday are expected to confirm that inflation fell by around a percentage point to 6.8 per cent in July.
This could add hundreds of millions of pounds to next year’s state pension pot, which is increased in line with the highest of three measures – a flat 2.5 per cent rise, average earnings growth measured from May to July each year, and inflation measured in the year from September – according to the Government’s triple-lock policy.
While inflation is still on course to halve by the end of the year, meaning Rishi Sunak’s key economic pledge is on track, Treasury sources urged Tory MPs anxious for tax cuts to offer voters to hold their nerve. IFS director Paul Johnson said cutting taxes in the next year or so would be a “political and not an economic decision” that could risk an adverse response from the Bank of England, which is responsible for cutting inflation via interest rates.
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