The prime minister’s plan for a new care service has fuelled speculation that the state pension guarantee, in place for 16 years, could be scrapped after the next election.
A policy long considered politically untouchable may now be up for debate. Prime Minister Andy Burnham’s plans for a national care service have prompted speculation that the government is preparing to drop the state pension triple lock.
What the PM said
In a Sunday morning BBC interview, Burnham said he would set out difficult decisions on funding the new service in Labour’s next general election manifesto. He wants a mandate to carry the changes out in the next Parliament.
He did not name the triple lock. But the timing of the announcement led many to wonder whether the 16-year-old policy is about to be signalled for the chop.
How the triple lock works
Under the triple lock, the state pension rises each April by whichever is highest: 2.5%, inflation, or earnings growth. In theory, the guarantee expires at the end of this Parliament.
A telling non-denial
Earlier this month, BBC News asked Chancellor John Healey directly whether the lock could change in the next Parliament. He did not rule it out. He replied that the prime minister, like himself, has said welfare costs must come down.
The case for change
The economic argument is being pressed hard. The prime minister has reportedly been advised, including by some economists he favours, that scrapping the lock, or even hinting at it, would be a valuable opportunity. The timing matters because bond markets are unsettled for heavily indebted countries.
Successive UK governments are widely seen as having avoided difficult long-term decisions. A move on the triple lock could be an attempt by Burnham and Healey to change that perception, even in choppy borrowing markets.
The cost is a central part of the case. The lock now costs £15.5bn a year, three times the original estimate for 2030. Volatility in prices and earnings is a large part of the reason. Returning to an earnings-only link could save tens of billions of pounds a year over the long run.
That could be enough to pay for some form of national care service, and possibly leave a cushion for uncertain times. Much depends on how ambitious the care plan is, how generous any replacement for the triple lock would be, and how volatile prices prove to be.
The political risks
The politics are harder. Reform’s leaders view the triple lock as a potential dividing line with Labour.
Many in Westminster privately accept that the policy, introduced in the Osborne era, is economically unsustainable. But they argue it is politically impossible to unpick.
Pensions campaigners argue that, even after the increases, the UK state pension is not generous by international standards. Other countries, however, operate very different systems and rely more heavily on private provision.
Former ministers suggest the trade-off could change the debate. If money saved on pensions were redirected into a care service that people receive directly, the argument might look different.
A shift in thinking
Scrapping the triple lock was once deemed unthinkable. The government now appears to be thinking about it, at least as a future possibility.
