Labour leader Jeremy Corbyn has today committed to protecting the state pension triple-lock in his speech at the Party’s conference in Liverpool. This means the state pension would rise in line with the highest of earnings, inflation or 2.5% under a Labour Government.
Corbyn made the pledge as part of an electoral pitch to the “older generation”. He also said a Labour Government would protect the winter fuel allowance and free bus passes for over 65s, and reaffirmed a manifesto commitment to establish a National Health and Care Service.
Tom Selby, senior analyst at AJ Bell, comments:
“It is hard to put a price on the state pension triple-lock because its value depends on the performance of the wider economy, and specifically earnings and prices levels.
“What we do know is that the amount of the state pension increased by 22.2% between 2010 and 2016, compared to earnings growth of 7.6% and CPI inflation of 12.3% over the same period*. If the triple-lock is retained over the longer-term the costs could spiral, with estimates from the independent Office for Budget Responsibility suggesting extra spending of £35billion in today’s terms if the triple-lock is retained by 2060/61, versus £15billion under earnings indexation only.
“Aside from the billions of pounds extra the triple-lock could cost the Exchequer, it is hard politically to justify increasing the retirement incomes of Baby Boomers at a faster rate than younger generations – especially when it is younger generations’ taxes that ultimately fund the guarantee.
“There is also a legitimate question about whether increasing the state pension at random intervals – which is essentially what the triple-lock does - is really sensible policymaking. If Jeremy Corbyn thinks the state pension level is too low, surely it would make more sense to simply raise the payment to a level he thinks is fair, and then peg that amount to earnings or prices, or both.
“As Labour kicks into election mode it seems inevitable Labour will look to weaponise issues surrounding older people. In particular, the fact life expectancy improvements have stalled in the UK in recent years – coupled with plans to accelerate the rise in the state pension age to 68 - could be political dynamite for Corbyn and his Labour colleagues.”
*Source: IFS briefing note https://www.ifs.org.uk/publications/8942
