Many of the younger Labourites who entered Parliament in 2024 possessed a burning ambition to address what they call “intergenerational inequality.” Or, put more crudely, to bash the Boomers.
MPs like Torsten Bell, former head of the left-wing Resolution Foundation, believe that over-65s are being cosseted by the state, despite many enjoying healthy private pensions and considerable asset wealth from decades of real estate price inflation. Many pensioners have long since paid off their mortgages, while younger Britons feel locked out of the property market.
The focus of resentment has been the so-called state pension triple lock, introduced by the Conservative Prime Minister David Cameron in 2010. It was intended to eradicate pensioner poverty by increasing the state pension annually by the rate of inflation, average earnings, or 2.5 per cent, whichever is the highest.
Many MPs and some economists believe the triple lock is simply unsustainable. The new Labour Prime Minister Andy Burnham agrees and, in his first speech to the Labour Party Conference as leader Tuesday, he announced that the arrangement will change starting in 2030. Thereafter, the state pension will only keep pace, broadly, with prices.
It is not as if the basic state pension is exactly a king’s ransom. At around £12,500 (equivalent to $15,000) a year, it is barely enough to survive on in an age of rampant inflation. Yet nearly 13.2 million UK pensioners somehow have to live on it. Many more are living just above that limit on private pensions that average only around £11,000 a year.
Comparisons are difficult, but there is no doubt that the UK state pension is one of the lowest in the Organization for Economic Co-operation and Development. In some European countries, like France, the state pension is linked to lifetime earnings and is considerably more than the UK rate.
There is a further misconception. Many people believe that the pension is a universal benefit and is not taxed. That may be the case for the souls condemned to live on this miserable stipend, but not for the majority of pensioners who have other occupational or private pensions. For them, the state pension is taxed. The state pension is simply added to other sources of income.
That the triple lock is supposedly unsustainable at a price of around £15 billion a year is perhaps another indication of how much poorer the UK has become in recent years. Andy Burnham said that the money saved would be used to help pay for social care for elderly people. But there is no clear indication of how this might work.
At present, anyone possessing more than £23,000 in assets has to pay their full care home costs, which can easily amount to £1,000 a week. This means most have to sell their houses to pay for care. Burnham suggested today that he would help older people in care to retain the value of their homes. But that would be a big ask. The Institute for Fiscal Studies believes that cutting the triple lock will not pay for Burnham’s proposed National Care Service, free at the point of need.
The former Tory Prime Minister Boris Johnson promised in 2020 to do something very similar. Care home costs, he said, would be capped at around £85,000. He even introduced a new tax, the Social Care Levy, to pay for it. But the scheme never got off the ground. Labour did not seek to revive it until now.
The problem with the triple lock is that it is not actually a tax like income tax, but rather presents itself as a contributory insurance scheme. Workers in the past had to buy 44 years’ worth of National Insurance “stamps” to qualify for it.
This has, not surprisingly, led to current recipients believing that it is theirs by right, given what they have paid into the scheme. But in reality it is not. Their contributions may go into a fund called the National Insurance Fund, but, perversely, it is not used to pay for pensions, which come from general expenditure. Go figure.
This is one reason why some leading trade unionists say that the prime minister is most unwise to fiddle with the triple lock. Sharon Graham of the Unite union said it may create a similar row to the former Prime Minister Keir Starmer’s attempt to cut pensioners’ entitlement to the Winter Fuel Payment in 2024. (This latter move eventually compelled Starmer to make a U-turn, but only after months of negative headlines.)
Burnham will be hoping that his effort will at least signal to the bond markets that Labour is serious about tackling the welfare bill, which is forecast to reach £400 billion—a third of all government spending—by 2030. It might well indicate that he is not shying away from difficult decisions—but only if he sticks to it.
On the other hand, it may simply lead to accusations that Labour is punishing pensioners in order to protect the millions of adults in the UK who are not in employment. At least pensioners have put in the hard yards, working for over 40 years. Many will be furious if they think they have done all that simply in order to fund a generation who don’t seem to want to work at all.
And one final point. Unlike young people on benefits, pensioners tend to vote.
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