18 June 2021

Time to scrap the triple lock – and bring in the double-lock

By

The Conservative Party has a deep structural problem: its future, and that of the country, hinges on providing a better deal for young and working-age voters, but the core of its electoral coalition are older and retired voters.

Housing is the most obvious battlefield on which this dilemma is playing out. Elements of the Government, seemingly led by Robert Jenrick, are serious about getting houses built and getting them built in the south, where they’re needed. Tory backbenchers, worried about opportunist anti-development posturing by the Liberal Democrats, are fiercely opposed.

But Rishi Sunak’s GB News debut highlighted another front on which the party will have to face a reckoning sooner or later: pensions.

In his interview, the Chancellor confirmed that the Government plans to abide by the ‘Triple Lock’, the Cameron-era policy which guarantees that pensions will rise by 2.5%, inflation, or in line with wages – whichever is greater.

There may have been a case for this policy when it was first introduced. But more than ten years on from the recession, it has rightly become a focus of ire for those concerned with intergenerational inequality because it guarantees that pensioners will continue to get better and better off, regardless of their improved economic situation or the challenges faced by the rest of the nation.

Bad as this was before, the unique economic conditions created by the pandemic look set to make things even worse. Shutting down whole sections of the economy for over a year has, understandably, suppressed wage growth to a huge (and artificially engineered) extent.

As the economy rebounds, so will wages. And so, thanks to the triple lock, will pensions. Sunak suggested this could see pensioners’ incomes rising by eight per cent in a single year, even though said incomes have not suffered the dip that wages are bouncing back from.

This is indefensible. It is especially so if the Treasury starts pleading fiscal rectitude to start scaling down Covid-19 support (even whilst parts of the country are still in lockdown) and restraining spending in other areas that benefit working-age people, or failing to subsidise Net Zero policies which will impose substantial costs on millions of households (another issue Andrew Neil pressed him on).

The Chancellor could surely win support for a one-off exemption to the Triple Lock, justified on the same grounds as the Government’s one-off setting aside of the 0.7 per cent target for overseas aid spending.

But that still leaves the question of what to do about the triple lock in the long-term. Left in place, it will continue to misallocate public funds and fuel generational conflict. But those demanding the Government abandon pension protection altogether are whistling in the wind. The grey vote underpins the Tory coalition, and the Party is not going to adopt a strategy that doesn’t reflect that reality.

So how about meeting in the middle: replace the triple lock with a ‘double lock’, and abandon the link to wage growth?

Such a policy would still protect pensioners’ incomes from being eaten away by inflation (such as there is), and ensure a small but consistent year-on-year increase, whilst making the policy much more affordable in the long term and freeing up public money for people and projects that actually need it.

There is no good reason for pension increases to match wage increases, after having outstripped them for so long. Preventing this unnecessary transfer of wealth to the already wealthy will be a test of Sunak’s credentials as a ‘fiscal conservative’, and the Government’s claims to govern for the entire nation.

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Henry Hill is News Editor of ConservativeHome.

Columns are the author's own opinion and do not necessarily reflect the views of CapX.