UK to Drop Pension Triple Lock to Fund New Social Care Service

Prime Minister Andy Burnham said he would drop the UK’s pensions triple lock to help fund a new national social care service, saying he was willing to pay a political price to fix a crucial issue.

Burnham said the state pension would rise by the higher of inflation or 2.5% from 2030, a change from the current policy where it also increases by wage growth if that is higher.

“This change will generate significant savings which we will use to build up our national care service,” Burnham said in his keynote speech at Labour Party conference in Liverpool on Tuesday. Burnham said the state pension would “hold its value relative to earnings over time,” without giving further details.

Burnham is seeking to move away from the cheaper feel-good policies that have characterized his first two months in office by fleshing out his longer-term vision for tackling some of the biggest challenges facing the UK. His office billed his first conference speech as prime minister as one in which he wouldn’t shy away from “the things politicians usually avoid,” pledging to end the “drift” that’s characterized British politics in recent years.

Governments of different stripes have tried and failed to overhaul the UK’s patchwork social care system for decades, but successive proposals — including by Burnham himself as health secretary in 2009 — have failed to gain traction because of the cost involved. Burnham on Sunday said he wanted a system that’s free at the point of use, like Britain’s National Health Service.

The Health Foundation estimates that would come at an £18.5 billion ($24.5 billion) price tag, though Burnham on Sunday told the BBC “it’s not that high.” Nevertheless, it would leave Chancellor of the Exchequer John Healey seeking to find billions of pounds to pay for the new policy. Easing the pensions triple lock will help him.

The triple lock has been in place since 2011, guaranteeing that the state pension rises annually by the highest of inflation, wage growth or 2.5%. That’s helped reduce pensioner poverty, but many economists warn the policy is increasingly unaffordable given other pressures on the public purse.

The Institute for Fiscal Studies estimates the triple lock has added an extra £16 billion to the annual state pensions bill since 2011, compared to aligning increases with wage growth. Keeping it in place could add as much as £40 billion to the price tag by 2050, it says.