For years, the Conservatives have refused to budge on the pensions triple lock, even as the cost of it threatens to blow out to £147bn, writes Adam Hawksbee.
The last decade in Westminster has seen many iron laws of politics tested, bent and broken. One rule, however, has remained unchallenged: protect pensioners at all costs.
The politics of the state pension triple lock are tricky for the government. People of pensionable age make up a sizable portion of the Conservative vote, and those who have shifted towards “don’t know” since 2019 are disproportionately of that demographic. But the conservative case against the triple lock is getting stronger by the day.
The first rule of conservative statecraft is to balance the books. There is a reason that the Prime Minister cites Nigel Lawson as his political hero – both understand the moral obligation to safeguard the nation’s finances. Demographic pressures, international events, and low trend growth mean the government currently has the unenviable task of weighing up tax rises and spending cuts.
Enormously difficult decisions have been made on the tax side of the ledger. Personal tax allowances have been frozen for the longest period in history, bringing £30bn into the exchequer from the pockets of working people. A graduate on an average salary faces a marginal tax rate of 55 per cent.
There are few easy decisions on the spending side. Public services are already creaking under enormous demand. Capital investment has been too low for too long. Some have suggested that cuts to the number of officials in Whitehall or defunding equality initiatives might bring finances into balance – these are not serious proposals on the scale required.
In this challenging context it is important that pensions, while still being generous, should be affordable. Pensions are estimated to reach a total cost of £147bn in 2027-2028, a 41 per cent increase from the £104bn spent at the start of the decade and more than education, defence and policing combined. If state pension spending was held constant as a share of GDP, instead of the predicted rise of 0.1 per cent per cent that would equate to savings of roughly £2bn a year.
But conservatives care about more than just fiscal responsibility. We also care about stewardship and leaving behind a stronger society for future generations. Prioritising pensioners over the working age population, particularly the young, weakens the foundations from which we’ll build a better economy. Young people are struggling to get on the property ladder, start a family, or build a business – all things conservatives should champion. Intergenerational unfairness needs to be addressed.
Conservatives also care about supporting the most vulnerable in society. Pensioners are in need of support – they have a uniquely limited earnings capacity. The most vulnerable pensioners are, and should continue to be, supported by the pension credit. But since the late 1990s, the share of pensioners in poverty has fallen from one in three to one in six. Given a quarter of working age adults with children are now in poverty they should be as much – if not more – the focus of government efforts.
Both government and opposition are unlikely to make such a political gamble. But politics aside, the pensions triple lock should be replaced with a single promise: the state pension will rise in line with an average of earnings and prices. The 2.5 per cent guarantee is an irrelevance as we move into an era of higher inflation and it should be scrapped. This new promise would still see state pensioners protected in real terms – but free up billions of investment for public services and infrastructure.