Rachel Reeves has been urged to abandon the "bonkers" state pension triple lock in what would mark a major blow to the savings of millions of hard-working Britons.
Jim O’Neill, a former Treasury minister who quit the Tories to later personally advise the Chancellor, has warned that Reeves has "hemmed herself in" through Labour's manifesto commitments ahead of her much-anticipated spring statement on Wednesday.
Lord O'Neill said that abolishing NHS England and taking an axe to foreign aid were "tackling some sacred cows" - and has pointed the party in the direction of the triple lock for its potential next target.
"They already busted a manifesto commitment by cutting international aid, so why would that not open the door to breaking other manifesto pledges?" he asked.
The now-crossbench peer added: "To really give them the scope for a lot of the things they want to do on current spending, and not get into the Tory game of constant cutting at the margins, they are going to have to deal with serious income taxes or break the triple lock.
"Keeping the triple lock is just bonkers - at least they could means-test it."
O'Neill continued: "They have hemmed themselves in because of the manifesto commitments - and compounded that by announcing such large increases in areas such as health and school buildings the first time around."
LATEST STATE PENSION UPDATES:
Moving to means-test the triple lock, which ensures pensions increase annually by the highest rate out of 2.5 per cent, average earnings, or inflation, would likely spark a similar uproar from Britain's pensioners to the one which erupted after Labour's winter fuel payment assault last year.
The move prompted outcry from charities, poverty campaigners and politicians alike - though Reeves defended it to GB News at the time.
"We committed to the triple lock in our manifesto - not just for one year but for the duration of this Parliament," she said.
"And a triple lock means that, this winter, the new state pension is worth £900 more than it was a year ago."
With the Treasury's fiscal headroom slashed, growth projections falling and major public sector spending cuts looming, the Chancellor has been offered an alternative route, too: "Getting creative".
Ben Caswell, a senior economist at the National Institute of Economic and Social Research, said Reeves could look to emulate Germany by shifting defence spending "off the books" and excluding it from fiscal rules.
"If you start investing in new factories to build munitions and tanks, that wouldn't actually affect our fiscal space because it's investment capital expenditure," he said.
But one source close to the Chancellor rejected the idea.
They said: "First, we changed the fiscal rules last year to unlock £100billion of capital spending. Second, we've already announced how we’ll meet the 2.5 per cent defence target by 2027.
"And third, if we did what Germany did, borrowing costs would have gone up by £4bn a year - that's the size of the prisons budget."
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Jim O’Neill, a former Treasury minister who quit the Tories to later personally advise the Chancellor, has warned that Reeves has "hemmed herself in" through Labour's manifesto commitments ahead of her much-anticipated spring statement on Wednesday.
Lord O'Neill said that abolishing NHS England and taking an axe to foreign aid were "tackling some sacred cows" - and has pointed the party in the direction of the triple lock for its potential next target.
"They already busted a manifesto commitment by cutting international aid, so why would that not open the door to breaking other manifesto pledges?" he asked.
The now-crossbench peer added: "To really give them the scope for a lot of the things they want to do on current spending, and not get into the Tory game of constant cutting at the margins, they are going to have to deal with serious income taxes or break the triple lock.
"Keeping the triple lock is just bonkers - at least they could means-test it."
O'Neill continued: "They have hemmed themselves in because of the manifesto commitments - and compounded that by announcing such large increases in areas such as health and school buildings the first time around."
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Moving to means-test the triple lock, which ensures pensions increase annually by the highest rate out of 2.5 per cent, average earnings, or inflation, would likely spark a similar uproar from Britain's pensioners to the one which erupted after Labour's winter fuel payment assault last year.
The move prompted outcry from charities, poverty campaigners and politicians alike - though Reeves defended it to GB News at the time.
"We committed to the triple lock in our manifesto - not just for one year but for the duration of this Parliament," she said.
"And a triple lock means that, this winter, the new state pension is worth £900 more than it was a year ago."
With the Treasury's fiscal headroom slashed, growth projections falling and major public sector spending cuts looming, the Chancellor has been offered an alternative route, too: "Getting creative".
Ben Caswell, a senior economist at the National Institute of Economic and Social Research, said Reeves could look to emulate Germany by shifting defence spending "off the books" and excluding it from fiscal rules.
"If you start investing in new factories to build munitions and tanks, that wouldn't actually affect our fiscal space because it's investment capital expenditure," he said.
But one source close to the Chancellor rejected the idea.
They said: "First, we changed the fiscal rules last year to unlock £100billion of capital spending. Second, we've already announced how we’ll meet the 2.5 per cent defence target by 2027.
"And third, if we did what Germany did, borrowing costs would have gone up by £4bn a year - that's the size of the prisons budget."
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