The government has been urged to increase the state pension so pensioners can cope in a no-deal Brexit scenario.
Think tank the Centre for Policy Studies called on the government to increase the already planned top up for 2019/20 by 1.4 per cent, which would correspond to a rise of £123 next year.
The recommendation was included in a 54-page report published today (March 8) titled A Budget for no deal, in which the think tank set out measures the Chancellor of the Exchequer should consider in a no-deal scenario, designed to complement the Treasury’s own contingency planning.
The think tank is proposing that workers pay less National Insurance to increase their disposable incomes, and a top-up of the state pension so that pensioners can have a similar benefit.
Under the current triple lock system, the state pension increases each year in line with whichever is the highest: consumer price inflation (CPI), average earnings growth, or 2.5 per cent.
On current uprating plans, this will see pensions rise by 2.6 per cent in 2019/20 in line with average earnings, the think tank stated.
In a no-deal Brexit scenario, the government should consider topping up this planned increase in the state pension by an additional 1.4 per cent, so that the total rise for 2019/20 is 4 per cent, it added.
Compared to current fiscal plans, this would mean that people receiving the new state pension got an extra £123 over the course of the year. The cost to the Treasury would be about £1.6bn compared with current plans, CPS stated.
The think tank stated the government’s main priority, if a deal cannot be reached, should be to avoid the shock and disruption of no deal creating a general crisis of confidence.
While the Bank of England will have a role to play in monetary policy, the report suggests there would also be scope for a limited fiscal stimulus - worth up to £44bn, or approximately 2 per cent of GDP - to incentivise business investment and put more money in consumers’ pockets as a cushion against rising prices.
CPS officials also urged the government to keep the economy open to the world and make sure Britain post-Brexit will be the 'most business-friendly and lowest-tax country in Europe'.