State pension triple lock under threat in Rachel Reeves' desperate hunt for cash

It would be fair to say the country is strapped for a bit of cash at the moment. Weak economic growth, Rachel Reeves blunder budget and Donald Trump’s tariffs bombshell has left the government checking down the back of the sofa for some much needed loose change.

Keir Starmer has already slashed Foreign Aid to save a few billion quid in order to beef up Britain’s defence budget. Then the Chancellor announced scything spending cuts to balance the books in last month’s spring statement as she scrambled to fill a £14 billion black hole in the treasury’s finances. She swung the axe at Britain's bloated welfare bill - lopping off £3.4billion.

Let’s also not forget Labour’s devastating cut to the winter fuel payment for pensioners within days of entering government last summer. And the desperate quest to save money has turned attention to another benefit for the elderly, the Triple Lock on pensions.

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Until now, the sacred cow of British politics has widely - and rightly, as far as the Daily Express is concerned - been regarded as untouchable.

The lock guarantees that the state pension rises each year by the highest of the Consumer Prices Index measure of inflation, wage rises and a 2.5% floor.

The Government has committed to keeping it for the duration of this Parliament until the next general election which must be held by August 2029.

But the spectre of reform has grown in recent months. Despite Sir Keir’s protestations that policy will stay, many in Labour ranks are questioning its future.

Perhaps more worryingly, questions are being raised among Tory circles too. In December, a couple of months after Michael Gove was made editor, the politically conservative magazine The Spectator suggested its time is up.

A punchy editorial on Sir Keir’s performance suggested not everything the Prime Minister had done to that point was wrong.

“Although the ending of the winter fuel payment created anger, it is just the beginning of what will be necessary to prevent an ageing population from bankrupting the nation,” it said.

“At some point a government will have to be brave enough to abandon the triple lock on pensions, too.

“Those battles will be bitterly fought, but eventually many of their opponents will be forced to concede that cuts were necessary.”

The article was published a month after Kemi Badenoch, a one-time close ally of Mr Gove, became Tory Party leader.

A month later Mrs Badenoch was accused of suggesting her party wants to explore greater means-testing of Government support, because the UK has a poor record in prioritising help to those who need it the most.

Her comments, in response to a question about the state pension, led other parties to accuse her of wanting to water down the triple lock.

The Liberal Democrats even parked an advertising van outside Tory HQ depicting a sad-looking pensioner.

Around the same time Labour’s Torsten Bell was made Pensions Minister and immediately had to distance himself from remarks he made before entering office.

In June 2020, Mr Bell, who was then chief executive of the Resolution Foundation think-tank, told MPs the triple lock is a “silly system.”

The issue’s political toxicity flared in the full public gaze of PMQs earlier this month when Sir Keir and the opposition leader clashed at the dispatch box, with both insisting it is still their party’s policy to keep it.

In a recent interview with this newspaper Mrs Badenoch insisted the triple lock “remains” Conservative policy, “nothing has changed”.

But for how long? When it was introduced under David Cameron’s Conservative-led Coalition in 2011, the triple lock was expected to cost around £50 million a year.

But unstable economic conditions including high inflation, and high earnings growth has caused the value of the state pension to skyrocket in recent years, rising by 10.1% in 2023, and by 8.5% in 2024.

Roughly half of the UK’s current benefits bill is spent on the state pension, which cost £110.5 billion between 2022 and 2023, and is expected to rise to £124 billion from 2023 to 2024.

Currently, the full new state pension is worth £230.30 per week (£11,975 per year). Some experts have mooted suggested changes to the lock, such as linking it only to wage growth to make it more affordable.

Critics say that with competing pressures for government spending it is now too costly and more thought should be given to helping the very poorest pensioners, perhaps by means testing the benefit.

Under such a change pension payments could be assessed based on an individual’s income or savings, reducing payments for wealthier retirees.

However, the minister who first signed off on the pensions triple lock doesn’t believe it’s time is up just yet and it doesn’t “actually cost that much”.

Former Liberal Democrat MP Sir Steve Webb, who served as pensions minister in the coalition government, thinks there is still a case for keeping it now, and there is still “a pretty low state pension” in the UK.

Now partner at pension consultants LCP, Sir Steve said: “The irony of all of this is it doesn't actually, in any five year Parliament, cost much, really.

“The law of the land requires the pension to rise in line with the average wage. The triple lock is not the law of the land, it’s the policy.

“So in theory, all the triple lock does is give you an underpin of 2.5% when prices or wages aren't rising by 2.5%.

“And that doesn’t happen very often, and it gives you an underpin when inflation is bigger than wage growth, and that could happen.

“But in any given five year period, the assumption is it's actually - compared with an earnings link, which is the law - not that expensive, which is part of the reason it keeps being rolled on.”

Sir Steve says he doesn’t believe the triple lock should continue “indefinitely” but thinks it’s unlikely there will be any significant policy changes for the next “seven to 10 years”.

“If you carried on forever, it would be, obviously, unaffordable, but no, it's not going to go on forever,” he said.

He says the triple lock needs to run for a few more years to get “pension protection back up to a more realistic level”.

“In retirement, let's say you need two thirds of what you had when you were in work.

“Well, if a third comes from the state and the third comes from you, from your own workplace pension and stuff, that's kind of a reasonable division of labour kind of thing.

“So that's the kind of logic for saying the state pension should be about a third the average wage.

“So that would imply you keep the triple lock for a few more years and then when you've reached a third the average wage.

“So essentially, you have an earnings link from then on, right, and that makes it sustainable in the sense that if wages are growing, the pension goes up, or if wages are growing, then taxes are growing.”

But he says politically individual parties won’t want to “blink first” in signalling any changes, citing Theresa May, who blew a big majority in the 2017 election when she pledges to scrap the triple lock.

This means that party manifestos at the next general election, due in 2029, are “likely” to remain committed to the benefit for the following five-year parliament.

The other issue the government needs to consider is how the triple lock, combined with frozen income tax thresholds, is causing “fiscal drag,” where rising state pensions push more pensioners into paying income tax, effectively increasing their tax burden in a so-called “stealth tax”.

Dennis Reed, director of the Silver Voices campaign group for the elderly, has campaigned for years along with the Daily Express to protect the triple lock.

He said threats to it will “always remain.”

“Because of the economic downturn the triple lock will come under scrutiny,” he said.

“But no political party can afford to lose votes at the next election, which is what will happen if they don’t commit to it for another five years.

“The other big thing is that because of the frozen tax threshold the triple lock is already being undermined for most older people.

“Every increase we get in the triple lock is immediately being reduced by 20% because it's being taxed.”