• Government faces a battle over possible reforms to the state pension triple-lock, with almost a third (30%) of UK adults saying breaking the manifesto pledge would be ‘unacceptable’
o There is a clear generational split over the policy, with people over 55 twice as likely to deem breaching the commitment unacceptable compared to those aged 18-34
o Based on Office for Budget Responsibility average earnings and inflation forecasts, the flat-rate state pension could rise by over 21% by 2022
o By contrast, average earnings are expected to increase by 9.7% over the same period
• Around a quarter (26%) say it would be unacceptable if the Conservatives broke their manifesto promise to not increase VAT or National Insurance rates
o Recent reports suggest the Chancellor is actually considering cutting VAT in an emergency Budget later this year
o Treasury could also consider levying National Insurance on retirement incomes
• Meanwhile, just under a quarter (23%) say breaking the manifesto pledge not to raise income tax rates would be unacceptable
o Separate AJ Bell research found the average UK worker would accept a 4% rise in income tax to help pay for COVID-19
Tom Selby, senior analyst at AJ Bell, comments:
“As the UK begins to emerge from lockdown, attention will inevitably turn to an expected July emergency Budget and the measures that might be needed to deal with the £300billion black hole gouged into the Treasury’s balance sheet by COVID-19.
“While the manifesto this Government was elected on in December feels like it was written in an entirely different world, it is clear a sizeable portion of the nation still believes those promises should be kept.
“Of the four key personal finance pledges in the Conservative manifesto, the state pension triple-lock looks set to cause the most controversy, with almost a third of UK adults saying breaking that promise would be unacceptable.
“This could pose a serious problem as, based on OBR economic forecasts, the triple-lock could see the state pension rise in value by over 20% between now and 2022 – costing the Treasury billions of pounds in the process.
“The backlash if the policy is revisited looks set to be most vociferous from the over 55s - always a key demographic for political parties - with 40% of this age group saying failing to maintain the triple-lock would be unacceptable. This compares to just a fifth (20%) of those aged 18-34 and a quarter (26%) of those aged 34-55.”
No income tax, no VAT (rises)?
“Just under a quarter (23%) of UK adults felt the Government breaking its pledge not to increase income tax rates would be unacceptable. Previous research AJ Bell has conducted suggests on average UK adults would accept a 4 percentage point rise in income tax rates to pay for COVID-19.
“If Boris Johnson wants to swerve breaking his manifesto pledge here, one option could be to create a new ‘COVID tax’ designed to achieve the same aim. However, the Government will need to weigh up the need to raise revenues with the impact extra taxes could have on people’s willingness to spend in the shops.
“A similar proportion (26%) said breaking the commitment not to raise VAT or National Insurance rates would be unacceptable. On the former, reports suggest the Government could in fact go in the other direction and cut VAT rates in order to stimulate spending.
“While National Insurance is likely viewed by most people as income tax in all but name, one revenue-raising option open to policymakers would be to levy National Insurance on retirement incomes, which currently enjoy an exemption.
“This would clearly bring in some much-needed cash, although again there will be a difficult trade-off between boosting the coffers of the Exchequer and risking taxing off the UK’s economic recovery.”
Research conducted by AJ Bell/Opinium in a nationally representative sample of 2,000 adults between 19 June – 22 June.
