Tony Blair’s thinktank urges Labour to scrap ‘unaffordable’ pension triple lock | State pensions
Labor has been called by Tony Blair’s think tank to lift the triple lock on pensions amid growing pressure on government finances.
With the Iran war threatening to derail public spending plans, the Tony Blair Institute (TBI) said the “unmet” manifesto pledge to maintain the triple lock should be scrapped as part of a wider overhaul of the state pension.
The triple lock ensures that basic and new state pensions will increase each April at whatever rate is highest: inflation, average wage growth or 2.5%.
The change is “inevitable” as Britain’s aging population increases the cost of politics, the think tank said, suggesting a pre-election agreement between the main political parties was needed to ensure the triple lock does not persist after the next general election.
The policy, introduced in 2010 by George Osborne under the Conservative-Liberal Democrat coalition, has added billions of pounds to annual government spending in recent years amid inflation shocks from the Covid pandemic and Russia’s invasion of Ukraine.
As conflict in the Middle East triggers further inflation and increases government borrowing costs, Rachel Reeves said “tough choices” will have to be made to finance energy support to households and a rise in defense spending.
But the chancellor told the Guardian on the sidelines of the International Monetary Fund spring meetings in Washington last month that he was not ready to lift the triple lock. “We made a commitment in our manifesto on the triple lock and we are not changing that,” he said.
Inflation is expected to rise sharply this year as global energy prices rise and puts pressure on households already struggling with a cost-of-living crisis. High headline inflation will also force the government to introduce higher annual pension and benefit increases next year.
The UK’s aging population means urgent changes are needed to the pension system, the TBI said in its report. Highlighting the expected increase from 12.6 million pensioners currently to almost 19 million by 2070, the report said that under current policy, this would increase total government spending on pensions from 5 per cent of gross domestic product to 7.8 per cent, or an extra £85bn a year in today’s money.
“This means higher taxes, deeper pressure on other public services, or both,” the think tank said.
The former Labor prime minister’s organisation, which has close ties to the government, argued that wider changes were also needed, including replacing the existing state pension.
It was stated that ministers could develop a new “lifetime fund” to replace the basic and new state pensions. Under the proposal, individuals will contribute to a notional fund that will provide support for up to 20 years. Before retirement, people can set aside some of their rights to use during unemployment, retraining or care, within the framework of safeguard rules. Access to support will no longer be tied to a single state pension age but will be personalized.
Thomas Smith, director of economic policy at TBI, said: “The UK’s state pension system was built for a different era. We cannot continue to pour money into a system that is increasingly unaffordable. Pension spending must be brought under control, meaning the triple deadlock cannot continue after the next election.”
“It will take political leadership from all parties to end this – but that should only be the first step. Real reform must also build a better system: fairer, more flexible and tailored to the way people live today.”
A Department for Work and Pensions spokesman said: “Supporting pensioners is a priority and our triple-lock commitment for the rest of this parliament means annual state pensions for millions of retirees will increase by up to £2,100.
“The Pensions Commission is already examining how we can secure secure retirements so that a range of options are available for tomorrow’s pensioners and those who have not reached state pension age but need extra support, such as Universal Credit and other means-tested and disability-related benefits.”
