Are the Conservatives locked into pensions deal for the long term?

Written by Tom Smithard on 1 August 2016 in Diary
Diary

A row between former pensions ministers Ros Altmann and Steve Webb could have far-reaching consequences for those relying on the state handout.

With a snap election potentially just months away, today’s skirmish over pension policy could prove far more important than at first appears.

Two former pensions ministers, Liberal Democrat Steve Webb and his Conservative successor Ros Altmann (pictured above), today squared up over whether the government should keep the triple lock.

This flagship coalition policy ensures pensioners always see their hand-out rise by whichever is the greatest each year: average earnings, prices or 2.5%.

It was a policy designed to right the wrongs caused by deindexing pensions in 1980, which meant that, by 2010, pensioners were significantly worse off compared with other groups.

But the policy has proven hugely expensive, with government actuaries revealing in October the extra cost of the triple lock now stands at £6bn a year. And if Brexit leads to a long period of low inflation and low earnings, as many expect, pensioners will still see a guaranteed 2.5% increase each year – far outstripping workers, putting huge strain on the public purse.

This morning Baroness Altmann, who quit as pensions minister last month, said she believed the commitment to increasing by 2.5% should be dropped at the next general election. She said:

"Absolutely we must protect pensioner incomes, but the 2.5% bit doesn't make sense. If, for example, we went into a period of deflation where everything - both earnings and prices - was falling, then putting up pensions by 2.5% is a bit out of all proportion."

The former director general of Saga, who only held the ministerial brief for 14 months and was known to have had a rocky relationship with former work and pensions secretary Iain Duncan Smith, said the triple lock had "fulfilled its purpose" and pensioner households were now "no more likely to be poor than other age groups".

But her predecessor Steve Webb, who created the triple lock scheme, today said it should “absolutely not” be scrapped:

“The point of the triple lock was to reverse thirty years of decline in the state pension and you can't do that in seven years. There's a long way to go before we have a decent state pension. If you look at the pensioner population half of them are too poor to pay income tax. That's the extent of the distance we've still got to travel and that's what the triple lock is about."

A Downing Street spokesman today confirmed the government was committed to the policy, saying: "The manifesto contains a commitment to protect the triple lock. That commitment still stands."

But while the Conservative manifesto explicitly states the policy would be kept until 2020, increasing talk of an early general election calls into question whether it will remain a commitment for as long as many will have expected.

Expect the Conservative manifesto in any early general election to be scrutinised for a continued commitment to a triple lock - and for it to become a huge issue if it is missing.

Picture by: Jonathan Brady/PA Archive/Press Association Images

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Comments

David Seymour (not verified)

Submitted on 1 August, 2016 - 16:35
Please explain how there can be a snap election when we now have fixed term parliaments

Graham Smith (not verified)

Submitted on 2 August, 2016 - 08:50
With the stare pension being so low, even 2.5 percent increase per year is derisory. If as a country we can afford to send £12,000,000,000 a year to non contributing people surely we should look after our contributing pensioners better. 10 percent dosesn't seem too much to me as the pension recipient age increases.

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