SerpApi.Org
When the sun rose over Downing Street on May 11, 2010, Britain was mired in political uncertainty.
Five days after a general election, Gordon Brown was still in No 10, but in a room nearby, the Conservatives were hastily thrashing out a deal with the Liberal Democrats.
By the evening, David Cameron was prime minister, but those frantic attempts to end the logjam had inadvertently created one of the nation’s most divisive policies – the triple lock.
At the time, a senior coalition minister reveals, the pledge seemed innocuous, with Treasury officials considering it a “free lunch”.
Since then, millions of retirees have escaped poverty after their state pensions almost doubled, but the spiralling bill of £154bn a year continues to drain the national purse – and spark furious debate.
Pensioners steadfastly claim they’re entitled to what they’ve paid for, standing shoulder-to-shoulder with anti-poverty campaigners who fear a return to the days when retirees were among the poorest groups in Britain. Brown’s infamously stingy 75p-a-week rise in the state pension lives long in the memory.
On the other side, however, political luminaries, think tanks and economists are lining up against an “unaffordable” mechanism they say will stifle defence spending and bury a generation in debt.
Andy Burnham, the new Prime Minister, has not shown all his cards, committing only to Labour’s manifesto pledge of leaving the triple lock in place until at least 2029.
Meanwhile, it’s indisputable that spending on the state pension has risen by 208pc since the triple lock was introduced. What is less clear is whether Britain can afford the commitment – and how it can defuse an “unexploded fiscal bomb”.
‘A free lunch’
In the aftermath of the 2010 general election, the Conservatives faced the prospect of winning the battle but losing the war.
With 306 seats to an incumbent Labour’s 258, they fell 20 MPs short of a majority and Brown confirmed he would stay in Downing Street until someone formed a government.
Five days of discussions followed, with future Conservative chancellor George Osborne and Oliver Letwin locked in a room negotiating with Danny Alexander and David Laws of the Lib Dems.
As the two parties fought for their own interests, the triple lock – a Lib Dem manifesto pledge – entered the agenda.
Sir Steve Webb, who would become pensions minister for the duration of the coalition, recalls: “It was a Lib Dem policy and in the coalition negotiations, it was like, ‘we want this, you want that, can we have the triple lock?’
“They went off to the Treasury to ask how much it would cost, and they said ‘nothing really’. It was almost a free lunch, so the Conservatives said it could be included in the coalition agreement.”
The policy was implemented in 2011, but first used the following year. Since 2012, the state pension has risen by the highest of wages, inflation or 2.5pc.
For those at the helm of government policymaking, it was a vital step caused by a decision made three decades earlier.
Every party had the triple lock in their manifesto
The triple lock was originally introduced to combat retirement poverty and resuscitate the state pension, which had fallen well behind workers’ wages.
Until 1980, it increased by the same amount as average earnings to reach a paltry £27.15 a week. In 2026, this would be worth just £119.85 – way below today’s basic state pension of £184.90 a week.
The Thatcher Government had decided the right move was to tie the annual rise to inflation. Pensioner poverty subsequently soared during the next decade, according to the Institute for Fiscal Studies. At the worst point, four in 10 pensioners were living in poverty.
In the run-up to the 2010 election, one in five pensioners were still below the poverty line – and the Lib Dems had found a solution.
Sir Steve adds: “For decades after [1980], the argument every year was ‘pensions are falling further and further behind what people earn’.
“The argument for linking to earnings had been pretty much won by the 2010 election, [but] you can’t undo 30 years of damage in five.
“The triple lock is not a hike, it’s a ratchet. It was always going to be more than one parliament, and every party had it in their 2015 manifesto.”
The impact has been tangible since the triple lock’s debut. The old basic state pension has risen 81pc, while the new state pension – created in 2016 – has increased by 55pc.
After years of falling behind, retirees have become the least likely group to be in poverty and their typical household income is now similar to that of the average worker’s, according to the Resolution Foundation think tank.
At £12,548 a year, today’s retirees receive a state pension equivalent to almost a third of the average wage – up from just 21pc in 2012.
Progress, however, has come at a huge cost – and experts are starting to voice their concern.
‘Outdated, rigid and unaffordable’
The amount we spend on the state pension has been difficult to predict ever since it was universally introduced in 1948.
At the time, ministers estimated that the cost would hit £501m by 1978. But when 1978 arrived, increased life expectancy had sent the true figure soaring to £7.6bn.
In recent times, this has been accelerated by the triple lock. When it was introduced, annual state pension spending was £74bn. This year, it is expected to be £154bn – more than double.
By 2029-30, the Office for Budget Responsibility (OBR) estimates that the triple lock itself will cost £15.5bn a year compared with if just wages were used to increase pensions, some three times the initial estimate.
Meanwhile, the state pension already costs 4.8pc of GDP – more than is spent on education and over half of the cost of the NHS. New figures from the OBR show this burden is on course to hit 8.6pc by 2075.
The spiralling cost has led to a long line of political luminaries breaking cover to argue for its abolition. Former chancellor Sir Jeremy Hunt, and former education secretary Michael Gove, both of whom spent years supporting the policy while in government, have both now said it should be reconsidered.
Sir Tony Blair, the former prime minister, went further earlier this year, calling for the “outdated, rigid and increasingly unaffordable” mechanism to be ditched entirely.
His foundation proposed a Lifespan Fund, which would abolish the retirement age and provide people with a pension based on their health and when they decided to retire. However, the plan would force people to work up to five years longer, and opponents have criticised it as “dystopian, complex and highly intrusive”.
The Resolution Foundation also said that pensioner poverty had in fact risen by 2.3 percentage points with the triple lock in place, driven by more pensioners forced to rent homes, while income growth has been concentrated among wealthier retirees.
In a report released last month, its authors, Ruth Curtice and Alex Clegg, said the policy had always been “a poorly designed, unfair, arbitrary ratchet that we could never afford”.
They wrote: “The case for boosting pensioner incomes over and above others has now run out, while the case for the triple lock as a way to deliver such a boost was always poor.
“Former statesmen from Tony Blair to Jeremy Hunt have called time on the triple lock. The polite way to do this is to say that the triple lock was a good policy for a period but it is no longer justified.”
Defence spending under threat
There are some who believe that the rising cost of the state pension is dangerous for Britain, forcing a choice between protecting pensioners and the defence of the realm.
Dr Benjamin Caswell, senior economist of the National Institute of Economic and Social Research, said defence spending could be at risk because the triple lock was “unsustainable by definition”.
He said: “It’s not a matter of if you change it, it’s when you change it. If you don’t change it, it will increase as a share of GDP. It will become more difficult and the government will have to find a way to finance that.
“You’re not going to do it through fiscal borrowing, so you’d have to either raise taxes or cut spending elsewhere.
“We live in a more dangerous world. Defence spending needs to increase. Given the welfare budget is quite large, are you going to defund defence spending or welfare? There’s going to have to be a trade-off between those things.”
Other countries have cut pensions... can Britain?
Drastic action is possible when it comes to cutting state pension spending and some European countries have already taken it.
In Slovakia, the pension will now increase by 95pc of wages, down from 100pc. Romania preferred the nuclear option and, under pressure from the EU, froze its state pension in 2025 for at least two years in a series of financial reforms.
Of the obstacles that successive British governments have faced in trying to get spending under control, the law is not one of them. The triple lock is not enshrined in legislation and the state is only obligated to provide increases equivalent to wage growth.
The mechanism has also been suspended once already, in 2022-23, after abnormally high wage growth following the Covid-19 pandemic. Pensioners should have received an 8.4pc increase, but instead were handed an inflationary rise of 3.1pc before the triple lock was restored the following year.
However, there is a clear disincentive for politicians to tackle the problem. According to the British Election Study, voter turnout is below 55pc among 18- 34-year-olds, but it rises to almost 79pc among those who would be affected – those aged 65 or older.
Kemi Badenoch, the Conservative leader, came under serious pressure for even appearing to suggest watering down the triple lock.
Tom Selby, of AJ Bell, said: “There is a very obvious reason politicians of all stripes are falling over themselves to pledge allegiance to the triple lock. As the winter fuel payment fiasco proved, it is easy to offer things to specific groups of voters, in this case pensioners, and much more difficult to take them away.
“Any political party that simply proposes scrapping the triple lock knows their opponents will jump all over it, with potentially disastrous electoral consequences.
“However, the longer this unexploded fiscal bomb is left untouched, the harder it will be to defuse – and the greater the chance proposed state pension increases will need to be accelerated to balance the books.”
Some call for a cross-party group of MPs to examine the issue and share the political fallout in the national interest.
Sir Edward Leigh, a Conservative MP, told the House of Commons that the triple lock was “bankrupting the country” and called for all political parties to work together and phase it out.
The OECD, a major think tank based in Paris, also said the triple lock created “significant fiscal risks” and suggested replacing it with an average of wages and inflation in a move that could save more than £60bn in the long term.
However, there are no known plans to make any changes.
A Department for Work and Pensions spokesman refused to comment on whether the triple lock was sustainable in the long term, but confirmed that the Government was committed to it for the rest of this parliament.
He added: “The Pensions Commission is examining how we can ensure secure retirements for tomorrow’s pensioners.”
‘Just plain wrong’
There are also fears that scrapping the lock would seriously harm pensioners’ incomes.
The Centre for Better Ageing said that 17pc of pensioners were already in relative poverty and 8pc couldn’t afford key essentials such as food and heating bills.
Caroline Abrahams, of charity Age UK, said it was “plain wrong” that pensioner poverty had disappeared.
She added: “We accept that the triple lock may not be needed forever, but it is certainly needed today. The state pension still doesn’t provide enough to live on, even if you get it in full, which many don’t, and one in three older people still miss out on Pension Credit.”
Despite the spiralling cost, there is little evidence to suggest the triple lock is under threat.
Every major political party remains committed to it for the duration of this parliament, including Mr Burnham.
Although several of his advisers have been publicly sceptical, including Andy Haldane, the Bank of England’s former chief economist, and Richard Hughes, previously chairman of the OBR, Mr Burnham said he stood by Labour’s manifesto pledge to keep it in place until at least 2029.
Yet without further action, costs will keep rising and people could be forced to work even longer. Britain’s demographic shift doesn’t help. Pensions are paid from current National Insurance receipts, so you need a strong pipeline of younger workers paying in for today’s pensioners.
Raising the state pension age is one way to control costs without cutting pensions. By April 2028, you will have to wait until your 67th birthday to qualify for it, and by 2046 it will be 68. However, an official review of the state pension age is expected to recommend swifter increases when it reports back in 2029. There were also reports earlier this month that the increase to 68 could begin as early as 2037.
Last year, Jack Carmichael, then of consultants Barnett Waddingham, warned that the retirement age could hit 80 without further reforms.
As experts continue to analyse the costs and make predictions, the spiralling cost is very clear.
The debate over whether it’s fair, sensible or sustainable to prioritise pensioners, however, is anything but.
