Poor George Osborne. He’s barely been gone for three months – not even long enough to really get his speaking career going – and his legacy is already being trashed. First up looks to be his “triple lock” for the state pension.
Since 2012 the basic pension in the UK has been increased every year by the greater of one of three things – the inflation rate, the growth in average earnings, or 2.5%. The first two make some sense. Back in the 1980s our pensioners were much more likely to be living in a degree of poverty than the population as a whole: their post housing income came in at around 65% that of a working household. Today they’re doing just fine: according to the Institute for Financial Studies, the retired now have slightly higher average incomes than the working. The triple lock has served its purpose.
We don’t want to go back to the bad old days – the basic state pension is still only just over £119 a week and no one wants to see it fall in real terms. So let’s make sure the state pension at the very least rises with inflation or wages – a “double lock”, if you like. But the 2.5% bit is a nonsense – a vote grabbing number plucked from the air at a time when Osborne presumably assumed that inflation and wages would forever rise at more than 2.5% a year. It hasn’t worked out like that.
Thanks to the 2.5% promise, the triple lock has cost taxpayers going on £20bn more than if pension payments had simply risen in line with average earnings. That’s too much. Let’s not forget that the UK deficit is huger than ever: this year we are looking at a shortfall of over £70bn or £17bn more than George Osborne had predicted. So much for austerity – something has to give.
There isn’t much agreement on much these days. But on benefits for pensioners there is. Many people agree that bus passes, fuel allowances and the like should be means tested (I’m not including the basic pension here – that would encourage people not to save for their old age).
And most people are also coming round to the idea that random increases in benefits to one group of people only doesn’t have much of an “all in it together” look to it. It’s time – as a report just out from the work and pensions committee suggests – for the triple lock to go.
What it isn’t time for, however, is for any savings to be recycled to the “millennials” – something intergenerational inequality zealots are now calling for. Instead, how about we just keep any savings as actual savings – and hope we can find enough more of them to make a start on filling our £70bn gap?