13 September 2023

The Labour case for ditching the triple lock


If Keir Starmer wants to show Labour are serious about sorting out the public finances and driving growth in the economy, he must look again at the pensions triple lock.

The triple lock for pensioners was introduced after the 2010 general election by the Cameron-led coalition government. The measure ensures that pensioners have an annual increase of whichever is highest, inflation or wage growth. Labour are being extremely cautious on any spending commitments prior to the next general election and have thus far refused to commit the party to raising the state pension if it wins the next general election, stating that it will not make unfunded spending commitments.

But one of the problems with the triple lock is that it is to an extent an unfunded spending commitment. The policy is determined by future inflation data which cannot be predicted precisely. The past few months have shown how trying to forecast inflation figures can be a difficult business as the UK remains stubbornly high compared to global competitors. On current figures the cost of pensions next year could be approximately £2bn higher than the Spring Budget forecast as the CPI figure for inflation in September is now likely to be higher than 8% compared to a forecast earlier in the year of 6%.

An incoming Labour government is going to face enormous demands for spending. We have school roofs crumbling and headteachers unable to resource classrooms. Our transport infrastructure is in dire straits. The public’s rage at being unable to access GP appointments and other NHS services is growing by the day. The cost of social care is now crippling local government and many local authorities are facing bankruptcy. Then there’s the ever-increasing demand for more spending on climate change as well as the party’s own commitment to massively expand housebuilding. All this will mean Rachel Reeves, as Chancellor of the Exchequer, will need to look at all options to deliver the growth the country needs. Therefore, it would be perfectly reasonable, on this occasion, for a Labour government to listen to the advice of William Hague, and create the space to examine whether the triple lock ought to be scrapped.

We are living in a period where young people are unable to get on the housing ladder and the idea of home ownership is just a dream. Where their education and first years in the employment market were severely disrupted by the pandemic. Many of those young people who do have jobs are in unstable and low paid roles. Meanwhile, the UKs pensioner population is the group least likely to be poor. Indeed those aged 65 and over own a third of the total wealth in the country. Many of them bought their homes cheaply and have enjoyed monumental increases in their assets, untaxed as the price of property has soared. Of course, not all pensioners are wealthy. But there are sensible alternatives to the triple lock. The last Labour government introduced pension credit to top up pensioners incomes and there is no reason why measures such as this could not be revived and enhanced without having a universal increase for all pensioners. Giving the wealthiest pensioners huge rises in their welfare payments while 31% of children in the UK live in poverty is not what I’d call Labour values.

Bold leaders win elections. Even though Labour’s poll lead suggests victory is in sight, it is not guaranteed. The Tories have demonstrated in the past their remarkable ability to recover. In the last few years, the UK has changed enormously. The unparalleled costs incurred by the British economy because of Covid and then the supply pressures brought about by the war in Ukraine means that difficult decisions will have to continue to be made. Labour has said it will take tough decisions to drive growth and balance the books. One of the first decisions an incoming Labour government needs to make is the abolition of the Triple Lock as a universal benefit and demonstrate to the electorate that equity and fairness will be at the heart of Keir Starmer’s Labour government.

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Brendan Chilton is Chief Executive of the Independent Business Network, Director of the Institute for Prosperity and a Labour Councillor in Ashford, Kent.

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