"Average Earnings Growth" and triple lock

BlackKnightMonty

SnowMan said:

BlackKnightMonty said:

SnowMan said:

SnowMan said:

SnowMan said:

The earnings percentage used for the earnings element of the triple lock calculation has been established through custom to be the July 2025 seasonally adjusted total pay including bonuses figure published today (16th September) of 4.7%. The July 2025 figure is the average of the year on year increase in earnings for the 3 months of May, June and July. 

This July 2025 earnings figure can be subject to a small revision when further earnings data is published on 14th October and 11th November. These publications occur before the budget takes place on 26th November, which is when the triple lock increase is usually announced. For example in 2024 the corresponding July 2024 earnings figure of 4% published in September was revised to 4.1% in October and the triple lock increase was based on this 4.1% revised figure.

So while CPI is unlikely to exceed 4.7% and the earnings element will almost certainly bite, there could still be a small revision to the 4.7%. 

The October further earnings data mentioned above has been published today (14th October) and the July 2025 seasonally adjusted total pay including bonuses figure of 4.7% published on 16th September has been revised upwards to 4.8%.
Consequently the anticipated triple lock increase, that should be announced in the budget, should now be 4.8% and not 4.7% unless this July 2025 earnings figure is further revised in the earnings data publication of 11th November. 

CPI is out for September 2025, and at 3.8%, this is what is used for checking the inflation element of the triple lock, so that just confirms that it is the earnings element that will bite, based on the established custom of how triple lock increases are calculated.

So the triple lock increase is expected to be 4.8% unless the July 2025 earnings figure is further revised in the earnings publication of 11th November (which is before the budget date of 26th November). And if it is further revised there would then be the question of whether the revised figure would be used or the 4.8% figure.   

On a separate point the September 2025 CPI figure of 3.8% is relevant for statutory increases in deferment to final salary deferred pensions, as it's this figure that is used as the basis of excess (over GMP) increases into the 2026 calendar year (subject to the rules on which excess the increase applies to and the cumulative over the deferment period 2.5% and 5% maxima that apply).

Totally unsustainable.

Not sure why you've quoted my post, which was a factual post about what next year's triple lock increase would be

Your post is great. No issues there.

I personally don’t see how we can maintain these sorts of increases as a country.

m_c_s

The UK still has the highest inflation in the G7 and ofcourse the 3.8% CPI data published today is not personal inflation which for some (tends to be lower income) can be 1 or 2% higher. Food, energy and other household costs tend to dominate personal inflation levels for lower income households.
Let's see where inflation trends in the next few months because that should show if we can get anywhere near the BoE target of 2% over the next year or two.

Secret2ndAccount

Among people who purport to understand these things I'm hearing increasing chatter that 2% will not be the number in the mid-long term. 2.5%, even 3% could become the accepted number. Not just in UK.
Interesting to study where the 2% idea came from (New Zealand?). It's not a number cast in stone on a mountain.

BlackKnightMonty

Secret2ndAccount said:

Among people who purport to understand these things I'm hearing increasing chatter that 2% will not be the number in the mid-long term. 2.5%, even 3% could become the accepted number. Not just in UK.
Interesting to study where the 2% idea came from (New Zealand?). It's not a number cast in stone on a mountain.

Yes, it’s an arbitrary number antiquated to a millennial world which no longer exists.

https://www.theguardian.com/commentisfree/2024/feb/01/the-damning-truth-about-the-uks-2-inflation-target-its-completely-made-up

The_Green_Hornet

BlackKnightMonty said:

Secret2ndAccount said:

Among people who purport to understand these things I'm hearing increasing chatter that 2% will not be the number in the mid-long term. 2.5%, even 3% could become the accepted number. Not just in UK.
Interesting to study where the 2% idea came from (New Zealand?). It's not a number cast in stone on a mountain.

Yes, it’s an arbitrary number antiquated to a millennial world which no longer exists.

https://www.theguardian.com/commentisfree/2024/feb/01/the-damning-truth-about-the-uks-2-inflation-target-its-completely-made-up

Personally, I wouldn't base my evidence solely on an opinion piece written by a Canadian academic.

Other economic views are available.

MeteredOut

Secret2ndAccount said:

Among people who purport to understand these things I'm hearing increasing chatter that 2% will not be the number in the mid-long term. 2.5%, even 3% could become the accepted number. Not just in UK.
Interesting to study where the 2% idea came from (New Zealand?). It's not a number cast in stone on a mountain.

I use 3% as the baseline inflation in my speadsheet for retirement planning. I can't see it getting any where near 2% in the next few years.

OldScientist

The_Green_Hornet said:

BlackKnightMonty said:

Secret2ndAccount said:

Among people who purport to understand these things I'm hearing increasing chatter that 2% will not be the number in the mid-long term. 2.5%, even 3% could become the accepted number. Not just in UK.
Interesting to study where the 2% idea came from (New Zealand?). It's not a number cast in stone on a mountain.

Yes, it’s an arbitrary number antiquated to a millennial world which no longer exists.

https://www.theguardian.com/commentisfree/2024/feb/01/the-damning-truth-about-the-uks-2-inflation-target-its-completely-made-up

Personally, I wouldn't base my evidence solely on an opinion piece written by a Canadian academic.

Other economic views are available.

The official story (e.g., see https://www.bankofengland.co.uk/monetary-policy/inflation ) suggests that 2% falls in some goldilocks zone of not too much and not too little - their own practice (+/-1 percentage point) suggests that the zone, should it exist, is not narrowly defined beyond inflation should 'ideally' lie between 1% and 3%.

While here is some economic view expressed in the guardian article - the main thrust looks at the historical origins of the target - do you have any evidence to suggest that NZ's initial adoption of 0% to 2% was supported by some theoretical or empirical underpinning (beyond not too much and not too little!)?

Out of interest, historically, since the UK left the gold standard (late 1931), annualised inflation has been around 4.5%, i.e. fairly well above the target adopted by the the BoE.

It is also well known (including by the BoE - a look through the historical letters between the chair and the chancellor are interesting) that managing inflation through changes in interest rates is a somewhat coarse tool.

Anyway, interesting but getting somewhat OT!

BlackKnightMonty

The_Green_Hornet said:

BlackKnightMonty said:

Secret2ndAccount said:

Among people who purport to understand these things I'm hearing increasing chatter that 2% will not be the number in the mid-long term. 2.5%, even 3% could become the accepted number. Not just in UK.
Interesting to study where the 2% idea came from (New Zealand?). It's not a number cast in stone on a mountain.

Yes, it’s an arbitrary number antiquated to a millennial world which no longer exists.

https://www.theguardian.com/commentisfree/2024/feb/01/the-damning-truth-about-the-uks-2-inflation-target-its-completely-made-up

Personally, I wouldn't base my evidence solely on an opinion piece written by a Canadian academic.

Other economic views are available.

Available, and yet absent, from your post.

The_Green_Hornet

BlackKnightMonty said:

The_Green_Hornet said:

BlackKnightMonty said:

Secret2ndAccount said:

Among people who purport to understand these things I'm hearing increasing chatter that 2% will not be the number in the mid-long term. 2.5%, even 3% could become the accepted number. Not just in UK.
Interesting to study where the 2% idea came from (New Zealand?). It's not a number cast in stone on a mountain.

Yes, it’s an arbitrary number antiquated to a millennial world which no longer exists.

https://www.theguardian.com/commentisfree/2024/feb/01/the-damning-truth-about-the-uks-2-inflation-target-its-completely-made-up

Personally, I wouldn't base my evidence solely on an opinion piece written by a Canadian academic.

Other economic views are available.

Available, and yet absent, from your post.

You could try reading The Economist or the Financial Times.

BlackKnightMonty

The_Green_Hornet said:

BlackKnightMonty said:

The_Green_Hornet said:

BlackKnightMonty said:

Secret2ndAccount said:

Among people who purport to understand these things I'm hearing increasing chatter that 2% will not be the number in the mid-long term. 2.5%, even 3% could become the accepted number. Not just in UK.
Interesting to study where the 2% idea came from (New Zealand?). It's not a number cast in stone on a mountain.

Yes, it’s an arbitrary number antiquated to a millennial world which no longer exists.

https://www.theguardian.com/commentisfree/2024/feb/01/the-damning-truth-about-the-uks-2-inflation-target-its-completely-made-up

Personally, I wouldn't base my evidence solely on an opinion piece written by a Canadian academic.

Other economic views are available.

Available, and yet absent, from your post.

You could try reading The Economist or the Financial Times.

So no evidence then.

Btw if you look further up the thread you will see me providing data from the FT.


Game Set Match I would say.