£15.5bn triple lock could be scrapped to fund a national care service
The state pension triple lock, which now costs about £15.5bn a year, could be dropped after the next general election. Andy Burnham has said Labour's next manifesto will include tough decisions to pay for a new national care service. Nothing has been announced yet, but the government is no longer ruling the idea out.
The triple lock has been in place for 16 years. Every April it raises the state pension by whichever is highest of three things: price inflation, earnings growth or 2.5%. Anyone drawing the state pension today benefits from that guarantee, and so will anyone who expects to claim it in the years ahead.
The policy is due to end with this Parliament. Burnham wants voters to give Labour a mandate at the next election to change it in the following Parliament. That would put the next pension-setting decisions on the ballot paper.
Earlier this month the BBC asked Chancellor John Healey directly whether the triple lock could change in the next Parliament. He replied that "the PM has said, like I have, that we must bring down welfare costs". That is not a denial. According to the BBC, the prime minister has been told by several economists that scrapping the lock, or even hinting that it could go, would calm nervous bond markets at a time when heavily indebted countries are under pressure.
The money is at the centre of the argument. The lock's yearly cost is around three times what was originally forecast for 2030, mostly because prices and wages have swung so sharply. Linking pensions to earnings alone could save tens of billions of pounds a year in the long run. According to the BBC, savings on that scale could plausibly pay for some kind of national care service. How much would be left over depends on how ambitious the care plan is and how generous any replacement for the lock turns out to be.
The politics are much harder. Reform's leaders see the triple lock as a clear dividing line with Labour, and many at Westminster privately say the Osborne-era policy is unaffordable but impossible to undo. Pensions campaigners point out that even after years of rises, the UK state pension is still not generous compared with other countries, although pension systems elsewhere work very differently.
Some former ministers believe the case changes if the money saved goes straight into care that older people can see and use. Offering a care service in return for a smaller pension rise is the trade Labour appears to be preparing.
For households, the bottom line is simple. No one's pension changes this April because of this. But a guarantee that has protected pensioners from rising prices for 16 years is now openly being questioned by the people in charge of the public finances. If it goes, future rises could be smaller, and pensioners will want solid proof that the care service promised in return actually appears.
