Triple Lock Change by Andy Burnham: An Important but Risky Step
Prime Minister Andy Burnham drew attention with his statement regarding the triple lock after the general elections. This change will have profound effects not only on politics but also on the social security system. Burnham's thoughts that the current state of the triple lock is unsustainable have been expressed for a long time. However, while it is expected that he will seek a broader political consensus at this stage, he took a bolder step by linking this decision to the financing of a new national social care service.
The government refers to this change as the "adjusted triple lock" and is trying to alleviate retirees' concerns. However, the implementation seems to resemble a "double lock plus" in reality. Within the framework of Burnham's plans, the state pension will be determined either by the rate of price increases or by an increase of 2.5%. This way, pensions will continue to rise in line with inflation every year.
However, the connection with the annual average earnings increase will not apply every year and will be observed over time. The new policy aims to maintain the record level of income share expected to be reached by 2030. This change stands out as a more radical approach than expected; it will be implemented directly without any consultation process. This means that ministers and MPs will have to support changing the historical annual earnings link of pensions.
This change is expected to save billions of pounds over the next decades, but its short-term impact will be limited. The Institute for Fiscal Studies states that if Burnham's proposal had been implemented since 2011, it would have reduced the annual cost of the triple lock, which is £16 billion, by 50% and saved £9 billion each year. Government sources indicate that this change will save approximately £15 billion annually by 2040.
The Prime Minister had been continuously warned that a government capable of making tough decisions would be appreciated in the bond markets. Burnham's speech sheds light not only on the triple lock but also on important issues such as energy and post-Brexit policies. It is evident that the government needs to gain support from both the markets and the public on these issues.
Source: BBC Business
