Tony Blair’s Thinktank Calls for Labour to Axe ‘Unaffordable’ Pension Triple Lock: Here’s Why

Tony Blair’s policy institute has called on the Labour Party to abolish the pensions triple lock due to the increasing strain on government budgets.

Amid the ongoing conflict in Iran, which poses risks to public expenditure plans, the Tony Blair Institute for Global Change has labeled the commitment to maintain the triple lock on pensions as “unsustainable.” The institute advocates for a comprehensive reform of the state pension system.

The triple lock ensures that both the basic and new state pensions increase each April by the highest of the following: inflation rate, average earnings growth, or a minimum of 2.5%.

The think tank claims that reform is essential due to the rising costs associated with an ageing British population. It suggests that a cross-party agreement should be reached before the upcoming general election to ensure the discontinuation of the triple lock.

Originally implemented in 2010 by George Osborne during the Conservative-Liberal Democrat coalition, the triple lock has significantly increased government expenditures in recent years, exacerbated by inflationary pressures from the COVID-19 pandemic and the conflict in Ukraine.

As conflicts in the Middle East contribute to further inflation and increase government borrowing costs, Rachel Reeves has indicated that “tough decisions” will be necessary to finance energy assistance for households and boost defense budgets.

Despite these challenges, the Chancellor expressed to the Guardian at the International Monetary Fund spring meetings in Washington last month, a commitment to maintaining the triple lock, stating, “We made a promise in our manifesto to keep the triple lock, and we intend to honor that.”

With global energy prices soaring, inflation is anticipated to spike this year, placing additional burdens on households already grappling with a cost of living crisis and necessitating higher pension and benefit increases by the government next year.

The TBI report underscores the need for urgent changes to the pension system as the number of pensioners in Britain is expected to rise from 12.6 million today to nearly 19 million by 2070. Under the current system, this demographic shift would elevate total state pension expenditure from 5% of gross domestic product to 7.8%, equating to an additional £85 billion annually in today’s currency.

The think tank warns that this scenario would result in higher taxes and increased strain on other public services, or both.

The organization founded by the former Labour Prime Minister, which maintains close ties with the government, argues that more extensive reforms are necessary, including a revamped state pension scheme.

Its proposal includes the creation of a “lifespan fund” to replace the existing state pensions. This plan would involve individual contributions to a notional fund aimed at providing up to 20 years of support. Under certain conditions, individuals could access part of their entitlements before retirement for purposes such as unemployment, retraining, or caregiving. This system would also detach support from a fixed state pension age, making it more personalized.

Thomas Smith, the TBI’s director of economic policy, remarked, “The UK’s state pension system was designed for a bygone era. Continuously funding an increasingly unsustainable system is not viable. We need to manage pension spending, and that includes ending the triple lock post-election.

“This will necessitate leadership from all political parties, but it should only be the beginning. True reform must also cultivate a system that is fairer, more adaptable, and in tune with contemporary living standards.”

A Department for Work and Pensions spokesperson stated, “Supporting our pensioners remains a priority, and our commitment to the triple lock throughout this parliament session ensures that millions of pensioners will benefit from an increase in their annual state pension by up to £2,100. The Pensions Commission is currently reviewing how we can secure comfortable retirements for future pensioners and exploring various support mechanisms for those not yet of state pension age, including Universal Credit and other targeted benefits.”