It was a significant announcement from Prime Minister Andy Burnham on his plans for the triple lock after the general election. It will reverberate well beyond the hall. For months, I have heard suggestions that Andy Burnham was warm to suggestions that the triple lock as we know it had to go. I had expected him to try to forge a political consensus on this thorny issue at this stage, but he has gone further than that.
He has tried to take the sting out of the politics of his decision by tying it to funding a new national social care service. The government calls it an “adjusted triple lock” as it is keen that pensioners are reassured. It is more like a double lock plus. The sensitivity over this political gamble is clear.
Under Burnham’s plans, the state pension will go up by either the pace of price rises or 2.5%, whichever is higher. So, it will still keep up with inflation and go up every year. The link to rises in yearly average earnings, which is the factor currently setting the rise under the triple lock, will be gone on an annual basis and instead be reflected over time. The policy would be to maintain the state pension as a share of earnings at the record level it is due to reach in 2030.
This change is sharper than expected. Not a review or a consultation. Ministers and MPs will have to back the plans in interviews and, at some point, MPs will have to vote on changing the historic annual earnings link to the state pension. It seems far more significant than a mere “adjustment”.
This will save many billions in the coming decades, but not so much in the next few years. The Institute for Fiscal Studies thinktank says that, had Burnham’s tweak been in place since 2011, it would have more than halved the annual £16bn cost of the triple lock, a £9bn saving every year. Government sources said the decision to make the change now will save around £15bn a year by 2040. The prime minister was repeatedly advised that bond markets would show some appreciation for a UK government capable of taking tough decisions.
Former chancellor Rachel Reeves might have imagined the same reward for her decision to scrap the winter fuel allowance, which was one of her first acts and later reversed. Part of the UK premium in bond markets has been an understandable perception that UK politics cannot have long-term debates. And the triple lock is only one of those debates started by today’s speech – with significant further moves on energy and post-Brexit policy expected – that the prime minister and chancellor need the markets as well as the country to get behind. What are your views on the triple lock?
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