Scrapping Triple Lock Could Save Nothing, Warns IFS

Scrapping the triple lock might not raise any money at all, the Institute for Fiscal Studies has warned, threatening Andy Burnham’s plan for a ‘National Care Service’ and raising the prospect of huge tax hikes. The Telegraph has the story.

The [IFS] said that any potential savings from the Prime Minister’s reforms to the state pension would vary hugely depending on wage growth, meaning it would not be a guaranteed way to fund new spending measures.

Helen Miller, the Director of the IFS, told BBC Breakfast: “It depends on how prices and earnings pan out over the next decades.

“Under a certain set of assumptions, it is possible that by the end of the next decade, you could be saving £15 billion a year.

“It’s also possible that you could save absolutely nothing – or a bigger sum. So it’s very uncertain.”

This will ring alarm bells for the Prime Minister, who has vowed to use savings from scrapping the triple lock to help fund a new national care service that is free at the point of use.

Miller added: “It’s also worth saying that you should probably think of this as being an unfunded thing.

“There was an unfunded commitment in the triple lock that’s now being got rid of and if the Government wants to pay for a new commitment, it will need to find some new money to do that.”

The limitations of these savings signalled the possibility that Burnham would need to announce major tax rises to fund his social care service, which the Health Foundation estimated would cost around £18.5 billion per year.

Speaking to Times Radio on Wednesday, Burnham addressed the possibility that his changes to the triple lock might not raise enough for his proposed new policy.

He said: “If there’s a shortfall, well, we’d have to be honest about that shortfall and say where that money is coming from.”

In his Labour Party conference speech on Tuesday, the Prime Minister said that from April 2030, he would reform the triple lock, which determines that the state pension is increased each year by whichever is highest of inflation, wage growth or 2.5%.

Burnham said that the state pension would rise instead by whichever is higher of inflation or 2.5%, with an adjustment to make sure that it keeps pace with long-term wage growth.

The Prime Minister said the change “will generate significant savings which we will use to build up our national care service”.

Worth reading in full.

And will it really cost £18.5 billion a year? Ross Clark in the Spectator points out that when something is provided free demand always goes through the roof. Plus it won’t cover residential care, so people will still have to sell homes to pay for that.