unpicking the triple lock
I have to admit that as I listened live to the budget t’other day I also was thinking something not unlike Kensington Kemi’s ‘is that it?’. Notwithstanding the very welcome hundred quid handout that I’ll be fortunate enough to get my grubby-mitts on and the scrapping of the gas standing charges, there seemed to be lots of tiny concessions with precious little consequence and I did find myself contemplating ‘is this what you ousted Sir Kier for?’ and had to remind myself it’s still very early days and the steady-as-she-goes fiscal event shows governing in these cash-strapped times is far harder than braying from the opposition benches.
If there is a real disappointment though, it’s the lack of immediate action on both welfare and defence and these thorny issues appear to have been kicked-down the road awaiting further analysis, review and consideration. With Reform embroiled in scandal after scandal, the Greens imploding in anti-Zionist confusion and the Tories wiping their hands of the frozen north, you’d’ve thought the opportunity for a more radical approach was there for the taking. In the New Year, when energy bills hit two-grand, mortgage rates rise and inflation erodes savings, that opportunity will be long gone.
Being of a certain age, the nettle I’d like him to grasp sooner than later is that of social care, specifically the future of the state pension and its current triple-lock. We know King Andy plans to eventually downgrade or ‘adjust’ the system but how exactly? Weakening the guarantee on pensioner income is apparently not a debate any politician wishes to have, but, as it now accounts for over 45% of all welfare spending, it is one the UK urgently needs to have. The total spent on the state pension is #154bn and, is by far, the UK’s largest benefit.
Fifty years ago, the difference between state pension age and median age at death (for men) was a little over five years. Now that age is 82. The goal of the triple lock, a policy in place only since the coalition government’s decision in 2011 when both earnings growth and inflation were almost zero, is to ensure that the value of the pension keep pace with both price and wage inflation. Over the last fifteen years , prices have risen 60%, earnings by 66% and the pension by 89%. In the interests of generational fairness and to help balance the country’s books this is simply unaffordable. A quick fix would be link the ‘pension wage’ to solely that of earnings and smooth out the earnings link where we should look at five years’ growth, not one. Simple, logical and potentially effective.
If the aim of any proposed change is to stop subsidising wealth, a more direct target is the relatively generous tax treatment of private pension savings. A taxpayer contributing #100 to a pension can receive #40, or #45, in tax relief compared with #20 for the basic rate, costing the government a staggering #84bn each and every year. A flat rate of 20% of tax relief on these pensions would preserve the incentive while reducing the additional subsidy. Relatively simple. The key, however, and the difficult bit, is to ensure such a change is supported on a cross-party basis and that seems increasingly unlikely. In the longer term, the legally-binding pension auto-enrollment will do some of the heavy-lifting but, as mentioned, comes at a huge tax-relief cost in excess of #80bn.
The chancellor, John Healey, with his 98 budget announcements reminded me of Leicester City’s most famous manager, Claudio Ranieri. Known as ‘tinker man’ for his constant tiny changes to the team, its formation, structure and playing style, he achieved, by winning the Premiership title in 2016, more than anyone thought possible. Sadly, he was sacked halfway through the following season. Unpicking the triple lock is going to be no less testing.
