Like a dispute with a neighbour, the triple lock on the state pension was a perfectly reasonable situation to get into, but after 15 years it’s become a bitter, expensive nightmare. It was so easy, 15 years ago, to tell Martin from next door that his new fence was a bit big. And now you’re accusing Martin of poisoning your cat, and he’s demanding you pay his legal fees, and you’ll probably both have to move.
Similarly the triple lock (which guarantees that the state pension will rise by inflation, or in line with wages, or by 2.5 per cent, whichever is highest) was a straightforward and popular way to spare future generations the poverty experienced by pensioners in previous decades. In 2010, it was an easy commitment to make. But it has gone too far. Its impact on future spending has become disproportionate, and pensioners are now disproportionately unlikely to experience poverty (the people most likely to be in poverty are children). The nature of the policy means we can’t say how much it will cost in future, but it’s a lot – tens of billions per year in today’s money.
The British Chambers of Commerce – which, like most business groups, typically avoids weighing in on debated political issues – has become the latest institution to recommend breaking the triple lock. This follows similar recommendations from the centre-left Resolution Foundation (whose former chief executive, Torsten Bell, is now the pensions minister) and Burnham’s former economic advisor, Jim O’Neill. The right-wing Centre for Policy Studies, the OECD and the Tony Blair Institute agree. Editorials from the Guardian to the Telegraph recommend scrapping the policy. Most economists, and most politicians, agree the triple lock is an idea whose time has passed. The Chancellor, John Healey, has spoken this morning of making fiscal discipline his “first priority”. Will he get rid of it? No.
(It is of course possible that this article will be proven wrong, and that John Healey will announce that pensions will only rise with inflation within minutes of publication. If the country saves tens of billions in future spending and one journalist is made to look foolish then that’s a price worth paying.) That said, the triple lock looks secure.
Firstly, it is one of a number of things that Labour, in its 2024 “Change” manifesto, promised not to change. This promise was made because there 13.2 million pensioners in the UK, and because the triple lock is a slightly fiddly thing to understand, many of these people seem to think that scrapping it would mean they get less money. The triple lock has the most support among people over retirement age, 91 per cent of whom support keeping it. It might be unaffordable but it’s very popular.
The over-65s are wrong to support it so fervently. They are the group for whom scrapping the triple lock will make the least difference; it is the 18-34 year olds who have the most to gain from keeping it, because it is their future pensions that would be uprated the most by it over time. (Only 44 per cent of 18-34 age group support keeping it, though; the young people are also wrong.) The fact that people of all ages don’t understand the effects of removing the policy creates an opportunity to exploit that lack of understanding. This is what the Liberal Democrats did last year when Kemi Badenoch mentioned taking a look at the triple lock: Lib Dem attack ads read “don’t let the Conservatives wreck your pension” and made it appear that it would be retirees who would suffer from “a huge blow to pensioners”.
Labour have already experienced one wave of irrational pensioner outrage, during the failed attempt to remove the winter fuel payment from millions of people who didn’t need it. This is a benefit that was quietly being eradicated by inflation, and which most recipients did not need. Would they stand for it being taken away? Certainly not!
In order to justify a second wave of retiree rage, then, scrapping the triple lock would need to raise a good chunk of money that could be spent buying the electorate’s forgiveness. But while the triple lock is fantastically expensive for the future, scrapping it doesn’t raise that much money in the present. The British Chambers of Commerce estimated that doing so would raise £3.3bn over two years. That means that for all the furore it would provoke, breaking the triple lock would reduce public spending by about one eighth of one percentage point.
Finally it is worth remembering that despite its faults, the triple lock has worked. It has brought the British state pension closer to the retirement benefits paid in other European countries (most of which are much more generous, relative to the cost of living). The Pensions Commission reported in May that 15 million people aren’t saving enough for retirement. A consistently and fairly uprated state pension is going to be even more important in the decades to come. Simply binning it, without planning more seriously for an older society, would be robbing the future of current workers to pay for popularity now. The more likely solution will be to protect poorer pensioners by continuing the raise the state pension, but to use fiscal drag to raise more taxes from retirees who have other income. Everyone hates stealth taxes (and with good reason) but without greater political courage, they will remain the default option.
[Further reading: The gospel according to Nigel Paul Farage]
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