Like every other country in the world, the UK is currently racking up a large bill — £300 billion to be precise according to the Centre For Policy Studies. Next year’s tax receipts are expected to be skeletal after the Office for Budget Responsibility forecast a contraction of 35 per cent in output for the second quarter of this year. The awkward question everyone at the Treasury will now be mumbling is: who is going to pay for all this?
In the US, a strange guilt-tripping consensus has emerged on the Republican right, whereby elderly Americans talk about sacrificing their own health to keep the economy open for the young. Perhaps it is no surprise that this shrill theatricality dominates in Trump’s America. But buried beneath the hysterics, there was a genuine question being posed when, last month, the 69-year old lieutenant governor of Texas Dan Patrick exhorted Trump to put an end to lockdown on Fox News for the sake of millennials. Namely, how do governments balance a health crisis for the elderly with an economic crisis for the young?
Setting out its stall early, the Social Market Foundation (SMF) argued last week that part of the answer in the UK lay in scrapping the pensioners’ triple lock — which since 2011 has guaranteed that the basic state pension rises every year by whatever is the highest index out of inflation, average income growth and 2.5 per cent. The SMF says that £20 billion could be saved over five years by simply removing the third guarantee of the triple lock — the 2.5 per cent figure.
During the years of austerity, there is evidence to suggest that the munificence of the triple lock did disproportionately benefit the elderly. In 2017 the Institute for Fiscal Studies calculated that from 2010 to 2016, pensions had grown by 22.2 per cent — almost triple the growth of average earnings over the same period. And pensions make up a staggering proportion of the UK budget. The Office for Budget Responsibility found that 59 per cent of all welfare payments went to pensioners in the financial year of 2016-17, constituting 16.6 per cent of all government spending.
But the Conservative party is understandably reluctant to broach the topic of pension reform.
“Every chancellor for the next 15 years will be looking for fair funding solutions,” says one former Tory minister. “But it is horrible politics to say, ‘Here’s a disease that impacts the health of the elderly and oh, by the way, one of the results of this is that we’re going to cut your pension in years to come.’ It shows the difference between the think-tank world and the real world.”
Although it’s tricky to make international comparisons, by most metrics the UK’s pension scheme was and remains less generous than other European nations. The coalition-era triple lock is something Tory MPs tend to take pride in — after all, it is an issue which is perhaps more salient for them than it is than for opposition MPs. Researchers at Bath University found that the median age of voters in constituencies won by the Conservatives in 2017 was 50.4 versus 44.9 for Labour —a trend that only became starker in 2019.
Various cross-party reviews have come to the conclusion that the triple lock needs to go. The Department for Work and Pensions select committee called for an end to the triple lock in 2017. In November, the House of Lords select committee on intergenerational fairness added its voice to the chorus (incidentally, the average age of the peers advocating the change was 67.5).
The interesting question is: does Labour under Keir Starmer press the pensions button? During the election, the party was stung by its £58 billion concession to the WASPI women. Furthermore, the manifesto guaranteed the free TV licence, the free bus pass and winter fuel allowance, all while dismissing the Conservative proposal to raise the State Pension Age to 66.
“Lots of people in the baby boomer generation through luck and hard work did well for themselves, and they have their wealth concentrated in assets,” says one senior Labour MP. “But there are also a lot of pensioners living in hardship and poverty. I think fundamentally we want to fight on the issue of fairness and there is a generational element to that.”
As the Labour party under Keir Starmer seeks to establish a reputation for fiscal responsibility, there will be renewed calls for an income tax raise on higher earners. It will be intriguing to see if the party has the mettle to consider pensions as well.