The Office for Budget Responsibility’s forecast cost of the triple lock on the state pension is over seven times higher than its original forecast.
In its welfare trends report, published today, it says the protection – which uprates pension payments based on the highest of CPI inflation, earnings or 2.5 per cent – is expected to cost £2.9bn in 2014/15, £2.4bn higher than its June 2010 forecast.
The OBR says: “Outturns have been significantly different, reflecting a combination of sustained shortfalls in productivity and real earnings and high inflation relative to the June 2010 forecast”.
Uprating takes place at the start of the fiscal year, based on the annual inflation rate from the previous September or average earnings growth from the previous July.
This week senior Tory backbencher Liam Fox said the triple lock was “difficult to explain” to young family.
And outgoing JLT chief executive Mark Wood told Money Marketing the promise, which is guaranteed until the end of this parliament, was like an “institutionalised version of quantitative easing”.
He said: “It’s almost Orwellian to be thinking about the increase in the cost of the NHS, which is about £100bn, at the same as you’ve got something that is £1.6trn unfunded.”