Healey faces pressure to fund pension tax relief as triple lock pushes retirees into income tax

Because of the triple lock, the state pension is set to rise by a minimum of 3.9%, reaching a little above £13,000 and moving most retirees into the income-tax band for the first time. Ministers have pledged to shield those whose sole income is the basic pension, yet Sir Steve Webb estimates the measure will help only about one in 16 pensioners, leaving the vast majority liable for tax. The proposal would require raising the tax threshold for pensioners, a step that could cost more than £1 billion, which the Chancellor appears reluctant to fund.

Former Bank of England economist Andy Haldane warned that markets are already pricing in higher borrowing costs unless spending is curbed. The government plans to announce details at the upcoming Budget, while Chancellor John Healey is under pressure to identify large savings to calm jittery financial markets. The issue stems from a long-standing freeze on tax thresholds introduced by the previous Conservative administration and extended by former Chancellor Rachel Reeves.