Should We Abandon The Triple-Lock

00:00:00: Hello, we're Sandalwood.

00:00:01: And Sage – We are AI-generated characters who work with our creator Gareth to generate short serious punchy debates.

00:00:09: Debates that don't just help you figure out what you think but why YOU THINK IT!

00:00:15: So… What do we argue about this week?

00:00:28: In his Labour conference speech at the end of September twenty twenty six The Prime Minister signalled a decade and half of cross party consensus on state pension.

00:00:38: To outsiders, it feels like we've had two equally strong points of consensus across the political class.

00:00:44: On one hand unwavering public commitment to the so-called triple lock.

00:00:48: on other private agreement that is rationally indefensible.

00:00:52: Now Andy Burnham has cracked open that fragile cognitive dissonance.

00:00:56: The triple lock was introduced by the coalition government in twenty-ten.

00:01:00: Across the United Kingdom, the flat rate state pension rises each April by the highest of three measures consumer price inflation average earnings growth and a minimum baseline of two point five percent.

00:01:12: The Triple Lock is a policy commitment not a law!

00:01:15: The legal minimum is an earnings related operating only.

00:01:18: The Chancellor could abandon it as early this autumn's budget or seek to revisit the issue after next general election.

00:01:25: But in either case, is abandoning The Triple Lock right thing-to do?

00:01:29: I'm arguing that Andy Burnham IS RIGHT to signal the end of the triple lock!

00:01:33: It's a bad policy that MUST be abandoned.

00:01:36: My argument is twofold.

00:01:38: First it is financially unsustainable.

00:01:40: A question of when not IF we ditch it.

00:01:43: Second even if were swimming in cash It is unsustainable because it functions as an endless, compounding upward ratchet in a heavily indebted economy with zero fiscal headroom rising debt costs and urgent defence pressures.

00:02:01: Here's how the ratchet works.

00:02:03: Inflation spikes in year one Wages surged to catch up in Year two.

00:02:08: Because of the highest-of-three design.

00:02:10: The pension jumps in both years With no downward recalibration.

00:02:14: We saw this post Ukraine.

00:02:20: Those spikes now form a permanent baseline.

00:02:23: By twenty-twenty six to twenty seven, state pension spending hits one hundred fifty four billion pounds roughly defence and education combined And fifty percent higher than our national debt servicing costs.

00:02:35: It runs sixteen billion pounds higher today then it would under simple earnings linking.

00:02:40: Meanwhile the worker-to-pensioner ratio shrinks from four to one in nineteen fifty To two to one by twenty fifty.

00:02:47: Consider the political irony.

00:02:49: The government is scrambling for thirty billion pounds to reach its defence targets, roughly what state pensions will automatically add over the next twenty-five years.

00:02:57: Shall we strip that combined sixty million pounds out of the NHS, social care and public transport?

00:03:03: I didn't think so!

00:03:06: Even if affordable it's simply bad policy.

00:03:09: We are loading debt onto younger generations despite median pensioner income after housing costs matching working age incomes.

00:03:16: A huge shift from thirty years ago when it was twenty percent lower.

00:03:21: Over a quarter of pensioner households hold net wealth exceeding half-a million pounds.

00:03:25: Universal uplifts for asset.

00:03:27: rich retirees are not a safety net, they're a windfall.

00:03:31: After Thatcher unlinked pensions from earnings – a correction is needed.

00:03:35: Mission accomplished.

00:03:36: Pension poverty now sits at seventeen per cent Below the national average and far below child poverty at thirty one per cent.

00:03:44: So what is the triple lock for today?

00:03:46: Nobody knows and no one can say when its job is done.

00:03:51: It's not as though there aren't better alternatives, some simple changes like a committed end date or a mandatory five-yearly parliamentary vote would solve the endless ratchet problem.

00:04:01: The IFS pensions review recommended the Australian model where the pension tracks earnings over the long run with temporary protection When inflation outstrips wages.

00:04:11: Former chancellors unanimously agree the triple lock must go, as soon as they leave office.

00:04:17: From next April a worker earning twelve thousand six hundred pounds pays income tax while a pensioner on thirteen thousand pounds does not!

00:04:26: That isn't social justice.

00:04:27: it's a one-way ticket to a fiscal car crash and its todays young people who will be onboard when goes off the cliff.

00:04:34: Pensioners cannot ask for pay rise.

00:04:37: Replacing the triple lock with a simple earnings link saves around six hundred million pounds per year by twenty thirty, according to The IFS.

00:04:45: That is less than half of penny in every pension pound and people who stand to lose most are not today's retirees.

00:04:52: they're todays thirty-year olds that will end up retiring on crumbs from their grandparents table.

00:04:58: The triple lock has been vital in reducing pensioner poverty.

00:05:02: A full new state pension is roughly twelve percent higher today than under an earnings-only scheme.

00:05:08: since twenty ten, median pension income after housing costs now matches non-pensioners

00:05:14: up from twenty

00:05:15: percent lower thirty years ago.

00:05:17: it makes no sense to stop the medicine just because This isn't a problem already solved.

00:05:24: About one and half million pensioners still live in poverty, for the one point four million relying almost exclusively on state support, scrapping the lock without robust protection risks dragging them back to a baseline so grim that even David Cameron and George Osborne couldn't stomach it.

00:05:43: It is not as if the UK offers lavish pensions.

00:05:46: We sit well below the OECD average for earnings replacement rates, ranking fourteenth out of thirty-four on old age poverty.

00:05:54: Our pension replaces roughly forty to fifty percent of average earnings compared over sixty per cent across the OECD and seventy to eighty percent in countries like Austria or Spain.

00:06:05: UK women also face an extraordinarily high gender pension gap of over thirty five percent.

00:06:12: Now, Sandalwood would argue that the UK relies heavily on private pensions making international comparisons unfair.

00:06:20: That may be true for high earners Sandalward but it certainly isn't for the renter ,the carer and low paid or self-employed For whom state pension is their primary lifeline Beyond economics.

00:06:33: this about political trust.

00:06:35: The triple lock is a solemn commitment.

00:06:37: Every major party pledged it, citizens planned their retirements around it and workers paid national insurance expecting a decent return.

00:06:46: Stripping it away without a mandate corrode democratic trust.

00:06:50: The fallout from the twenty-twenty four winter fuel payment decision proved just how damaging breaking promises to the vulnerable can be.

00:06:58: We must look at the bigger picture.

00:07:01: Society faces systemic under-saving, longer lifespans The death of final salary pensions and a declining worker to pensioner ratio.

00:07:10: Rewriting a social contract takes generations.

00:07:13: A democratic government cannot simply abandon its obligations.

00:07:16: midstream Sandlerwood you paint an alarmist picture but if fiscal savings are your goal Abandoning the triple lock would only save about six hundred million pounds a year by twenty thirty over an earnings-based uprating, according to IFS.

00:07:32: Larger leavers like raising the state pension age already deliver far bigger results.

00:07:39: Most importantly today's young people Our future pensioners bear the real compounding loss if we scrap this protection.

00:07:47: They will pay their taxes now, inherit public debt and then receive a gutted pension when that time comes.

00:07:54: It is no surprise.

00:07:55: YouGov found that eighteen to thirty four year olds support The Triple Lock two-to one.

00:08:01: Want to penalise today's pensioners?

00:08:03: Scrap the triple lock!

00:08:05: Want to penalty todays thirty years old even more?

00:08:08: Scrape the triple lockdown.

00:08:09: Who exactly are they supposed help?

00:08:12: You've made a valiant attempt Sage, but claiming the triple lock only costs six hundred million pounds completely misses the point.

00:08:20: That's just the marginal tweak over the next few years.

00:08:23: in reality it already cost sixteen billion pounds per year.

00:08:27: more than an earnings link.

00:08:29: It is not a tweak Sandlewood its perspective.

00:08:33: But if we're looking globally look at Austria or Germany.

00:08:36: Austria's state pension replaces over seventy percent of pre-retirement earnings.

00:08:41: When you start from that height, capping increases just below inflation makes sense.

00:08:46: ours replaces less than fifty percent

00:08:48: Except Austria and Germany.

00:08:50: prove my point.

00:08:51: Those models are hitting a demographic brick wall.

00:08:54: Australia spends roughly thirteen percent of its GDP on public pensions And is forcing through automated sustainability mechanisms, below inflation caps to stop from going under.

00:09:05: They're actively cutting growth because the maths eventually wins.

00:09:10: But Austria's baseline is like a fortress.

00:09:13: Whereas ours, it's more like a tent!

00:09:16: Trimming of fortress still leaves the house – trimming a tent leaves people out in colds.

00:09:21: Besides…the British public knows this.

00:09:24: Poland consistently shows two-to-one support for keeping the triple lock even among eighteen to thirty four year olds.

00:09:31: Ah, headline polling.

00:09:33: Ask the public do you want pensioners to have more money?

00:09:36: And of course they say yes but ask if they support a smoothed double lock which sounds like what the Prime Minister is considering linking pensions to earnings or inflation.

00:09:46: and even better!

00:09:48: Deep down voters know that a three-way ratchet is absurd.

00:09:52: People aren't stupid, Sandalwood.

00:09:54: They support it because they see the broader collapse of private defined benefit pensions and realise state provision is all there have.

00:10:02: You call a ratchet The public rightly sees as only guaranteed floor left in volatile economy.

00:10:09: A floor that drifts endlessly upward isn't a floor sage.

00:10:13: It's an elevator with no stop button.

00:10:15: From next April, our frozen tax thresholds mean a worker earning twelve thousand six hundred pounds pays income tax while full-state pension hits thirteen thousand pounds.

00:10:26: Taxing low paid workers to fund tax free pension increases isn't social contract it's intergenerational extraction.

00:10:33: You

00:10:34: love that tax paradox, Sandalwood.

00:10:36: But those workers become pensioners eventually.

00:10:39: if we abandon the lock now We pull the ladder up right as today's thirty-year olds reach The steep part of the climb.

00:10:46: That isn't fiscal heroism.

00:10:48: It's ensuring future generations inherit both higher tax debts and a gutted safety net.

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00:11:16: Thanks for watching, see ya next time!