Newspaper article The Evening Standard (London, England)

Huge Pension Rises on Way but Riddle of Who Will Pay the Bill

Newspaper article The Evening Standard (London, England)

Huge Pension Rises on Way but Riddle of Who Will Pay the Bill

Article excerpt

Byline: PAUL WAUGH

TONY BLAIR is set to restore the earnings link to the state pension in a bid to prevent millions of people falling into poverty in old age.

The Prime Minister and Work and Pensions Secretary John Hutton are determined to adopt the "core" of a plan to upgrade the pension in line with workers' pay, the Standard understands.

In a highly symbolic show of unity, Chancellor Gordon Brown today said the Government was agreed on its reform plans, including keeping the means-tested Pensions Credit.

The proposals are set to be announced in the Government's White Paper on pensions due out in May. The White Paper will not deviate much from reforms confirmed today by Mr Blair's pensions guru Lord Turner, it is understood.

Among them, Lord Turner refused to back down from his proposals to raise the retirement age to 68 by 2050. It is understood that "95 per cent" of the White Paper has been agreed and the only remaining issue is the exact costings and mechanism of restoring the earnings link.

Mr Blair and Mr Brown are due tomorrow to jointly launch Labour's local elections campaign in London and aides are determined to avoid the event being dominated by questions about "splits" between the pair.

It is understood that the Chancellor was not in principle opposed to restoring the earnings link, which was abolished by Margaret Thatcher in the early 1980s, but the detailed policy is still being worked out. The cost of restoring the link, up to [pounds sterling]8 billion a year extra by 2020, will trigger claims that income tax would have to soar by 2p in the pound to foot the bill.

But Government sources insist tax rises are far from certain and that costs could be kept down. If the Tories agree to a cross-party consensus the issue could even be defused at the next election, they added.

Among the options being worked out within Whitehall are ways of phasing in the uprated pension. Contrary to some suggestions, the Pension Credit will be retained, but it will be accompanied by a big rise in the basic state pension.

The Department for Work and Pensions favours Lord Turner's plan to hike both by around 4. …

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