Triple lock could still be axed – pensions minister

THE triple lock on pensions is unsustainable in the long run and could be axed within four years, Pensions Secretary David Gauke warned yesterday.

The controversial Tory manifesto pledge to scrap the mechanism, which protects the value of the state pension, was left out of this week’s Queen’s Speech, leading to speculation it could be ditched in the wake of the election result.

But speaking at a Westminster lunch yesterday, Mr Gauke pointed out that the existing pledge to retain the triple lock expires in 2020 and that the policy is simply too expensive to be retained.

The triple lock, introduced by the coalition government, guarantees the state pension will rise in line with earnings, inflation or 2.5 per cent, whichever is higher. It was designed to end the derisory pension rises seen under Labour, which in some years amounted to as little as 75p a week.

But Mr Gauke said it produced a ‘ratchet effect’ which meant that pensions would eat up an ever greater share of national income.

‘If you look at what the triple lock does, it has a ratchet effect because pensions go up by the higher of inflation or earnings,’ he said. ‘But over time it will mean that a greater and greater share of gross domestic product goes to paying the state

‘I cannot see how we can keep it’

pension, even without any increases in pensioner numbers, because that’s just the way it works.

‘And that means a smaller and smaller percentage of GDP going to non-pensioners.

‘Do I think that in ten, 20, 30 years’ time we will still have a triple lock? I cannot see, in all honesty, how we can.’

Some Tories have suggested the Government will ease up on austerity measures in the wake of the election. But Mr Gauke, said the controversial benefits freeze would stay, despite inflation hitting 3 per cent.

Meanwhile, the Institute for Fiscal Studies said the Government could loosen purse strings on austerity measures without having to raise taxes.

The think-tank said Chancellor Philip Hammond has £23billion of ‘headroom’ in the budget that could be used to increase public sector wages and ease spending cuts. Paul Johnson, director of the IFS, told Newsnight: ‘It looks at the moment there’s lots of headroom but the economic outlook is uncertain, to put it mildly. Also, they might want to leave themselves in a position where they are not scrambling to make cuts in 2020 because, for example, the economy does badly as a result of Brexit.’