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Britain pushes for triple pension reform to keep inflation under control

The government must reform the triple pension scheme to boost public finances, a major business body has said.

According to the Organization for Economic Co-operation and Development (OECD), the extension will increase the government’s fiscal flexibility and help stimulate economic growth.

He also called for labor market reforms to ease the UK’s tight labor market, as well as changes to the planning system to help achieve net zero targets.

The triple lock, meaning state pensions rise every April by a maximum amount based on average earnings, inflation or 2.5 per cent, was introduced in 2010 to ensure rising costs of living did not impact or erode pensions over time.

The OECD has added its influential voice to the chorus of critics who say it has become too expensive, unfair and puts pressure on working-age people already struggling with the current economic crisis.

The OECD said the reform would give ministers more “fiscal flexibility”.

“Against the challenging backdrop of high borrowing and indebtedness, and as higher interest payments on debt have weakened fiscal space, maintaining and strengthening current fiscal policy efforts is critical,” the OECD said in its global report. economy.

“Reforming the costly tripling of public pensions would help by linking pensions to the average of the consumer price index (CPI) and wage inflation, and by providing direct transfers to poor pensioners to reduce the risk of poverty,” the report said.

The Bank of England, along with other central banks, may have to keep interest rates high until 2025 – longer than many had predicted or hoped – to contain ongoing inflationary pressures, the report warns. The rate is projected to remain unchanged at 5.25 percent through 2025 before falling to 4 percent by the end of the year.

Headline inflation is falling but will remain above central banks’ targets in most economies, including the UK, while core inflation in some sectors will be “supported on a resilient basis by pricing pressures and strong profit margins”.

The report calls for tight fiscal controls to support public finances following major energy price hikes and the fallout from the pandemic. Monetary policy should remain contractionary until it is clear that core inflation pressures are “steadily declining.” The risk of recession due to continued strict controls is “high.”

The UK’s economic growth will be 0.5 percent this year (up from 0.3 percent at the start of the year), but it is estimated to see growth of just 0.7 percent next year, down from 0.1 percent , which is the second weakest among the G7 countries. economy represents Germany.

According to the OECD, global economic growth is slowing and is not expected to pick up until 2025, when incomes begin to recover from the inflation shock and borrowing costs begin to fall. Global economic growth is expected to slow from 2.9 percent next year to 2.7 percent this year.

Source: I News

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