In his first Labour Party Conference Speech as prime minister, Andy Burnham offer the UK “a new social contract for the 21st century.” He has promised to make housing more affordable for younger Britons, he has promised to take greater control of water and electricity and he has promised to introduce a new social care service. The latter is extremely important because such a system is needed to take pressure off the National Health Service. It is seen as a huge gap in the safety net where caring for granny can cost the family its home. The trouble Mr. Burnham has is paying for it. He is going after the pensions “triple lock” as of 2030, and it is causing some strife among his supporters.
The British state pension is a rather miserly £12,547.60 a year. Each year, it rises by 2.5% or by the inflation rate or by the rate of average wage increases, whichever is the greater. In other words, it is guaranteed to rise by 2.5% as a minimum, and it could be much more. In addition, Britain is greying. A new state pension system entered into effect in 2016 with 10.6 million over 65. Today, that number is about 13 million, a 25% increase. That trend will continue. All of this suggests that taking care of older Britons will cost more.
What Mr. Burnham is proposing is a change to the triple lock, after the next election. He is waiting because he has no electoral mandate beyond the Labour Party manifesto on which Sir Keir Starmer stood for PM. This democracy deficit means the plan should wait until after the next election when the voters can give their opinions. And this means there will be a couple of years of arguing before any of this happens. But if Britain is to have any sort of social care, it needs to be funded wisely, which means planning now.
Mr. Burnham wants to take away one part of the triple lock, the earnings comparison. He said that the 2.5% minimum and the CPI-inflation link were secure but said the pension increases would keep up with earnings. That is not the same as a solid link. If wages rise more than 2.5% and their rate of growth exceeds the rate of inflation, then pensions will slip behind wages earned.
As the BBC put it
In April 2030, he says they will adjust it, and the state pension will continue to rise every year at least by prices – or by 2.5%.
And, Burnham adds, “it will hold its value relative to earnings over time” so that pensioners “will always share in the rising prosperity of the nation”.
He then says this will “generate significant savings” which will be used to “build up our national care service”.
That is probably accurate insofar as it goes. The trouble is that one doubts if the savings from the downgrade to a ‘double lock” will prove sufficient to pay for a social care system. Because this is a devolved area of government, the four nations of the UK break down this way:
- England: £34.5 billion total value (with £29.4 billion in direct local authority gross current expenditure).
- Scotland: Approximately £4.5 billion – £5 billion annually.
- Wales: Approximately £2.5 billion – £3 billion annually.
- Northern Ireland: Approximately £1.5 billion – £2 billion annually
Perhaps the savings will be adequate, but one cannot help looking at the demographic trends and consider tax increases. Abour £18 billion a year is needed. However, the Labour Party Manifesto had commitments on deficits and so forth that kept the bond market quiet, but after an election, that too could be over.
Already, the plan has run into opposition from the left. The leader of the Unite union Sharon Graham said it would be “electoral suicide” to abandon the triple lock. These are the very people Mr. Burnham needs if he is to accomplish anything like a social care system with zero cost at the point of delivery. He needs to get Unite and others to either back his plan or help him find a better funding mechanism.