Rishi Sunak considers inflation-linked rise in pensions and benefits

Move would prevent some Tory MPs from rebelling and avert criticism for other unpopular cuts

British Prime Minister Rishi Sunak. AFP
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British Prime Minister Rishi Sunak is considering raising state pensions and benefits in line with inflation in a move that would require further spending cuts and higher taxes.

Mr Sunak and Chancellor Jeremy Hunt are looking at ways to bring in up to £60 billion ($69bn) in tax rises and spending cuts in the autumn budget on November 17.

Treasury sources insisted no decisions have been made, but did not deny a report in The Times stating they would avoid real-terms cuts on pensions and benefits.

The move could cost a combined £11bn next year but would prevent a rebellion from some Tory MPs and avert at least some criticism of the decisions being unfair.

Members of Mr Sunak’s Cabinet including Michael Gove have warned against going back on the manifesto commitment of maintaining the pensions “triple lock” as inflation soars past 10 per cent.

But with Mr Hunt considering up to £35bn of the “fiscal tightening”, any extra spending would leave more severe savings and higher tax rises required elsewhere.

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Mr Hunt was understood to be considering a stealth raid on inheritance tax by extending a freeze on the inheritance tax “nil-rate band” from 2025-27 to 2027-28.

The Financial Times, which first reported the plans, said the move could raise at least £500 million for the Treasury.

Mr Sunak will meet with his Cabinet on Tuesday as he seeks to find departmental savings.

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He is also understood to be considering a major gas deal with the US after returning from the Cop27 climate summit in Egypt.

An “energy security partnership” would see Britain sold billions of cubic metres of liquefied natural gas over the coming year, The Daily Telegraph reported

But Downing Street sources suggested that no deal was imminent, meaning it is unclear how much of the gas would be in the UK for this winter.

Fresh supplies would reduce the risk of power cuts as the Russian invasion of Ukraine causes energy shortages.

Business Secretary Grant Shapps hinted on Monday that the windfall tax on oil and gas giants could be expanded to ease the burden on taxpayers.

“I think that might be a clever way of asking me what’s in the autumn statement again, but we will be setting that out, the Chancellor will be setting that out, very shortly,” Mr Shapps told Sky News.

Updated: November 08, 2022, 5:22 AM