The growing plot to kill off the state pension triple lock

Labour MPs are privately urging Andy Burnham to consider ditching the state pension triple lock from the next general election manifesto after top economists warned it risks consuming the UK economy. Under the triple lock, the state pension rises each year in line with whichever is highest of inflation, wage increases or 2.5 per cent. But there are growing calls for it to be axed after high inflation in recent years has seen costs balloon to around £146bn a year, accounting for nearly half of welfare spending and more than double the entire defence budget. Shorts “From my perspective, the main objective is for Labour not to put it in the next manifesto,” one Labour MP told The i Paper. They suggested the party could use “vaguer wording on delivering dignity and financial security to all old people”, or something similar. The fact the policy has been questioned by senior Conservative politicians, including newly-appointed shadow Foreign Secretary Tom Tugendhat, suggests “there could be a political space for [reform] at some point”, they added. Tugendhat previously said the triple lock is “simply not sustainable over the next 20-30 years”, arguing that the economy is geared towards pensioners rather than young people. Paul Johnson, the former director of the Institute for Fiscal Studies (IFS) think-tank, recently told The i Paper that politicians had to stop pretending that the mechanism “can carry on for ever” and warned that without change it would end up consuming the British economy. But Sir Steve Webb, the former coalition minister who helped introduce the policy, warned it is too early for the lock to go, with pensioner poverty on the rise and workplace pensions “not big enough to take the strain”. “It is true that the cost of the pension triple lock could be unsustainable if maintained for many decades, but it does not follow that it should go straight away,” he told The i Paper. He argued the policy should be kept under “constant review”, saying: “All we need to do now is decide whether it should remain parliament by parliament, and at the moment private sector pensions are so modest that we should not be taking our foot off the gas on the state pension.” The British Chamber of Commerce (BCC) has called on Chancellor John Healey to abandon the policy to help get the Government out of its “fiscal bind”. The BCC argued that scrapping the policy and raising the state pension by inflation each year could save the Treasury £3.3bn over two years, which could be used to fund a tax break on employers for hiring under-25s to “tackle the youth employment crisis”. Another Labour MP, who has long supported replacing the triple lock with a different mechanism, suggested that it would make sense to “look at” the state pension alongside the wider Department for Work and Pensions (DWP) reforms to avoid “unbalanced support”. The backbencher said they were willing to wait for the outcome of Labour grandee Alan Milburn’s review into youth worklessness, but added: “If we’re looking at welfare then we have to look at the whole of the DWP budget or we will end up with even more unbalanced support.” Major reforms to the welfare system are not expected until 2027, as The i Paper recently revealed. The legislation is expected to set out the Government’s response to the review of disability benefits led by disability minister Sir Stephen Timms, and Milburn’s review of young people who are economically inactive or Neets – not in employment, education or training. The backbencher added that other Labour colleagues are keen to move away from the triple lock in private, but are “understandably scared of the politics”. Any move to dilute the state pension is widely seen as politically toxic as older generations are more likely to vote. There has been some cross-party support for scrapping the triple lock, with former chancellor Sir Jeremy Hunt telling the BBC he hopes the policy is phased out over time and that “none of the major parties promise to keep the triple lock going into the next election”. Meanwhile, Tory peer Matthew Elliott argued that it should be replaced with a mechanism that links the state pension to inflation. He argued this would “help put the public finances on a sustainable footing and free up money to cut the cost of employing young people”. The Treasury has been contacted for comment.