22OCT

IEA plan would suspend triple lock

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16:23UTC

The IEA's Alternative Budget would suspend the state pension triple lock for three years and freeze welfare in cash terms; Tax Justice UK says ten tax reforms would raise over £60bn a year.

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EconomicAssessed

Key takeaway

Rival pre-Budget plans from the IEA and Tax Justice UK carry no official costing.

The Institute of Economic Affairs (IEA), a free-market campaigning think tank, published an Alternative Budget on 19 October⁠¹. It would suspend the State pension triple lock for three years, freeze welfare in cash terms and move tax onto a wider value added tax (VAT). The triple lock is the promise to raise the pension each year by the highest of inflation, earnings growth or 2.5%. The Office for Budget Responsibility had already raised its estimate of the lock's cost to £15.5bn a year by 2029-30.

The IEA says its plan returns the day-to-day budget to surplus in 2027-28. Its VAT route runs into a promise from Chancellor John Healey, who has ruled out rises in VAT, income tax and corporation tax.

Tax Justice UK, a left-leaning campaigning group, sets out the other pole in a brief dated 10 October: it says ten tax reforms would raise over £60bn a year for public services⁠². The IEA plan cuts spending and moves tax onto VAT; Tax Justice UK raises taxes. Both are positions rather than findings, and neither headline figure is an official costing.

Deep Analysis

In plain English

Ahead of every Budget, think tanks and campaign groups publish their own plans. Two arrived this month from opposite sides. The Institute of Economic Affairs (IEA), which favours a smaller state, wants to pause the triple lock. That is the promise to raise the state pension each year by whichever is highest: inflation, wage growth or 2.5%. It would also freeze benefits. Tax Justice UK, which campaigns for fairer taxes, wants to raise money from the wealthiest instead. Neither plan has been checked by the official forecaster, so their headline figures are claims, not forecasts.

Deep Analysis

Root Causes

The triple lock raises the state pension each year by the highest of inflation, earnings growth or 2.5%. Over time that ratchet pushes pension spending up faster than either prices or wages alone.

Chancellor John Healey has ruled out raising VAT, income tax or corporation tax at this Budget. That leaves campaign groups to argue over pensions, welfare and smaller taxes on wealth, the levers still on the table.

What could happen next?

Meaning
The debate over how to close the gap has split into spending-led and tax-led camps, with the triple lock at the centre.
Risk
Proposals with uncosted headline figures may anchor public expectations above what the OBR would score.

Source Landscape

This story draws on neutral-leaning sources

Primary parallel: In 2021 the government suspended the earnings link in the triple lock for one year, because pandemic distortions had inflated wage growth to about 8%. Pensions rose with inflation instead, showing the lock can be paused without being abolished.

Counter-parallel: In December 2020 the independent Wealth Tax Commission estimated a one-off wealth tax at 1% a year for five years on wealth above £500,000 could raise about £260bn. No government adopted it, showing how far a costed tax proposal can sit from policy.

Immediate: neither the IEA's surplus claim for 2027-28 nor Tax Justice UK's £60bn has been scored by the OBR. Both rely on behavioural assumptions about how people respond to the change.

Structural: the state pension is the largest single item of welfare spending, so any serious spending-led plan must touch it. Wealth-based taxes face the opposite problem: high estimated yields but uncertain collection, because wealth is easier to move than income.

Consensus view: The free-market side treats spending as the lever. The IEA targets the triple lock, which the Office for Budget Responsibility now costs at £15.5bn a year by 2029-30 against an original £5.2bn projection.

The Adam Smith Institute argued in August that higher income tax rates would cut revenue, putting the revenue-maximising top rate at 54%.

Counter-view: Tax Justice UK argues the gap should close through taxes on wealth and high incomes, which it says could raise over £60bn a year. The Institute for Public Policy Research took a different route in August, arguing joint defence procurement with allies could free £3.4bn of borrowing room.

Key tension: Whether the triple lock's cost can be cut without breaking a promise to pensioners, who vote in higher numbers than any other age group.

Sources:Institute of Economic Affairs·Tax Justice UK

Mentions:Institute for Public Policy Research →John Healey →Institute of Economic Affairs →Tax Justice UK →State pension triple lock →VAT →Autumn Budget 2026 →Adam Smith Institute →Office for Budget Responsibility →The Alternative Budget 2026 →

First Reported In

Update #5 · Debt passes £3trn, its ratio below forecast

Institute of Economic Affairs· 22 Oct 2026

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Causes and effects

Caused by

Triple lock now costs triple the forecast

The IEA targeted the triple lock, which the OBR costs at £15.5bn a year by 2029-30.

Occurred 31 Dec 2025

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This Event

IEA plan would suspend triple lock

The two plans set out the opposite ends of the pre-Budget argument, and neither headline figure is an official costing.

Different Perspectives

Pension Protection Fund

Acting chief actuary Aaron Pang put the rise to 135.0% funded down to liabilities falling 2.1% against a 1.0% fall in assets, reflecting higher gilt yields. On Lowdown's reading, the yields that lift the Treasury's interest bill leave 4,838 company schemes with a £280.7bn surplus that does not reduce state borrowing.

Torsten Bell

The Labour figure wrote on 14 October that the IMF's October figures show the fastest fiscal consolidation in the G7. The IMF forecasts the UK deficit falling from 3.8% of GDP in 2026 to 1.4% in 2031, a squeeze still to be delivered through taxes and spending.

Tax Justice UK

The left-leaning campaign group says ten tax reforms would raise over £60bn a year for public services, and on 22 October asked why higher taxes on extreme wealth remain politically difficult. It offers the tax-led exit to the IEA's cuts; the £60bn is its own claim, not an official costing.

Institute of Economic Affairs

The free-market think tank's Alternative Budget of 19 October would suspend the state pension triple lock for three years, freeze welfare in cash terms and move tax onto a wider VAT. It claims the day-to-day budget returns to surplus in 2027-28, its own projection rather than an official costing.

Resolution Foundation

The living-standards think tank said welfare spending ran about £2.5bn above expectations in September, City AM reported on 21 October, and its economist Greg Thwaites urged targeted energy support. Its figure lands as a Chancellor who calls welfare cuts a moral duty finalises the 28 October Budget.

Institute for Fiscal Studies

Director Helen Miller said a steady-as-she-goes Budget is not an option, with the IFS putting 2029-30 headroom at about £20bn, The Independent reported on 12 October. The IFS puts the cost of avoiding cuts and funding higher defence at around £35bn of tax rises or benefit cuts, more than any headroom estimate in circulation.

Written with AI from Lowdown's published reporting. Not individually reviewed by an editor. Editorial standards.