According to Rupert Harrison, George Osborne’s former special adviser, the triple lock on pensions was a Liberal Democrat demand for the Coalition agreement in 2010, which was accepted by the Conservatives on the basis that it would just cost £50m. The triple lock has meant that the state pension has been increased by the highest of earnings, inflation or 2.5% since 2010.
Analysis by the Centre for Policy Studies shows that this decision has been one of the most costly and long-lasting decisions taken by the Coalition Government.
The report further highlights that the policy has been one of the main causes of growing inter-generational inequality. Key conclusions include:
Daniel Mahoney, head of economic research at the Centre for Policy Studies and author of the report, said:
“Nick Clegg’s insistence on the triple lock policy during the Coalition negotiations has increased intergenerational unfairness and caused huge fiscal problems for the Government.
“Had the state pension’s purchasing power stayed the same since 2010, the Government could have implemented a series of growth promoting tax cuts for all demographic and income groups, as well as given additional funds to areas that require more resources – all the while being in a similar, if not better, fiscal position.
“Of course, political realities mean that removing the triple lock will be difficult. However, at the very minimum, the guarantee in the triple lock should be dropped to 1.5%. This would still be a triple lock but would guard the Treasury from additional fiscal burdens arising from a situation where inflation and earnings growth hover at around 2%”.
NOTES FOR EDITORS