Burnham should follow triple lock reforms with more boldness on other fiscal problems

As part of his first conference speech as prime minister, Andy Burnham announced the reform of the triple lock on pensions from 2030.

The triple lock, in place since 2011, has become a totemic policy that parties across the political spectrum have supported at most elections since its introduction. It has also become a symbol of successive governments’ inability to be honest with the public about what is and is not affordable.

Burnham said that his speech would be honest and show he is able to take big decisions. The changes – what the government terms “adjustments” – to the triple lock pass that test and he should be commended. By explicitly tying this change to his plans for a national care service, Burnham showed adept political sales skills, something some recent predecessors have lacked. Initial polling suggests that this combination can command considerable public support.

But the reforms only remove an unfunded and unaffordable future pressure, rather than releasing new funds to pay for social care or other areas of spend like defence. Burnham will need the same boldness and political skill at the budget and beyond.

Burnham is right to adjust the triple lock

The triple lock has ensured that pensions have risen by the highest of inflation, wages and 2.5% in (almost) every year since 2011. ⁷ Rishi Sunak suspended the triple lock in 2022 when the relevant inflation figure was especially high.  Initially expected by the Treasury to cost very little, in practice it has increased the annual cost of the state pension by over £16bn through a ‘ratchet effect’: every time inflation is faster than wage growth, the pension gains relative to pay packets and then continues to increase in line with pay in future years. This means pensions have increased significantly faster than average wages, but in an essentially random way depending on which figure of the three is highest in each year. As OBR projections show, over the long term this is clearly unaffordable, especially as pensioner numbers are already due to put upward pressure on the bill. ⁸ https://obr.uk/frs/fiscal-risks-and-sustainability-july-2026/  It is a bad policy.

Burnham’s reform still protects pensions: they will never fall in real terms and will continue to rise in line with average wages over the long-term. However, the new system (explained by the IFS here) ends the rachet. This a much more sensible way to increase pensions over time. If the government feels at some point it wants to be more generous to pensioners, it can still decide to hike the pension, but it is not forced into doing that by the swings and roundabouts of a pre-determined formula.

While other parties have (opportunistically and regrettably predictably) opposed the move, detailed discussion in the years before it is implemented should put them in an uncomfortable position. If they are drawn on the substance, they will need to defend a status quo that privately many of them acknowledge is badly designed.

Burnham's political bargain is a model for other tax and spend changes

Burnham explicitly linked this reform to his new national care service, arguing that the same people who might lose out from pensions increasing more slowly would benefit from the peace of mind of extra state support. Packaging policies in this way is a good way to overcome the political challenge of implementing reforms that create losers.

The Pensions Commission in the 2000s similarly created compelling packages to make the case for increasing the state pension age. On the other hand, Philip Hammond’s botched attempts to increase self-employed national insurance in 2017 floundered in part because a giveaway – more generous pensions – had already been announced, making it harder to tie the generous policy to the tax rise.

Burnham should look to sell further reforms in a similar way. Such arguments are also easier to make when the government ‘goes big’ and announces several changes at once, rather than tinkering as prime ministers and chancellors have been prone to do.

More difficult decisions will be needed to fund social care and fix the public finances

While the packaging of social care and the triple lock is good politics, unfortunately the maths is not as neat. The triple lock was essentially an unfunded and unaffordable future commitment with an uncertain cost. Reforming it removes a significant future fiscal liability but does not on its own unlock more money for social care because we didn't know how we were going to pay for it in the first place.

The Labour conference did nothing to ease the looming challenge of the budget, where more difficult decisions – higher taxes or lower spending – will be needed to fund a genuine increase in the generosity of the social care system and other pressures. And while packaging is an effective tool, the fiscal reality means this government will need policy combinations that save the exchequer more money than they cost.

However, by demonstrating a skilful approach to slaying a political sacred cow, Burnham has a template that he – and his chancellor, John Healey – can follow for delivering the tax and other reforms needed to put the public finances, public services and the economy on a stable path.