We must scrap the triple lock
5 min read
It is time for political parties to be brave and honest. Our welfare spending is not sustainable.
Britain’s finances are not sustainable. Our debt levels are the highest they have been for over 60 years, our taxes are at record levels, and we cannot currently find the resources necessary to protect our national security. Something has to give.
A serious analysis of the situation will conclude that we need to look again at welfare expenditure.
According to the Office for Budget Responsibility (OBR), total welfare spending is forecast to rise from £314.7bn in 2024-25 to £406.2bn in 2030-31. As a share of GDP, total welfare spending is forecast to increase from 10.8 per cent in 2024-25 to 11.2 per cent by 2030-31. If we look only at spending on health and disability benefits, it will rise from £76.8bn in 2024-25 to £109bn in 2030-31. This increase in health and disability benefits alone is broadly similar to the entire Home Office budget. Or, to put it another way, it is comparable with the revenue raised by 3 or 4p on the basic rate of income tax.
Pointing this out is easy, however. The hard task is identifying precisely what to do about it. In that context, Prosper UK has set out detailed proposals as to how we can control the welfare bill.
Prosper UK is a centre-right political movement that believes in facing up to the real choices the country faces. This means accepting the trade-offs and being transparent about the tough decisions that need to be made. Labour failed to do that in opposition, and the populist right – in the shape of Reform UK – is doing that today.
So what would Prosper UK do? We have set out a series of proposals that would control public spending but still provide support for those most in need. We would tighten up access to health benefits with more face-to-face assessments and a greater focus on a “work first” approach; bring back a reformed two-child benefit cap; raise the savings cap in universal credit so that this system is not unduly harsh on those who have a relatively small amount of savings; increase the sharing of data across DWP and HMRC; and use data analytics and AI to reduce fraud and improve personalised support.
All of this can make a difference in controlling spending on working-age benefits (for example, we think we can save net £6.4bn on health and disability benefits while providing substantially more support in getting claimants back into work). But none of the political parties is brave enough to confront any aspect of the £150bn we spend on one very large part of the welfare budget – and that is the state pension. That is an approach we can no longer afford.
In truth, our proposal is very modest. It is not to cut the state pension. Indeed, we are making the case that the state pension should not only be protected in real terms (ensuring that it always increases at least in line with inflation), but that over time it will increase in line with average earnings, which is generally higher than inflation. In other words, this is still a system for increasing the state pension that is more generous than what was in place from 1980 to 2011, when it increased merely in line with inflation.
What could be more reasonable than that? But, at present, no party is prepared to commit to the policy because it means the end of the triple lock through which the state pension increases by the higher of inflation, earnings or 2.5 per cent. It has a ratchet effect that is particularly strong in periods of economic turbulence and, since its introduction in 2010, has been far more expensive than anyone had expected. One cannot be certain how much it might cost (because it depends on what happens with inflation and earnings in future years), but the Institute for Fiscal Studies estimates that it might be as high as £40bn by 2050. That is additional expenditure we simply cannot afford.
Would it be politically brave to abandon the triple lock? It is all too tempting for those seeking office to go round making easy but expensive promises (just as Andy Burnham did last week, promising compensation for the entirely unmeritorious case of the WASPI women), but it is time for politicians to be brave and honest. We need to find savings, and a government with the capability and determination to do so would be rewarded by the bond market that currently prices our debt more expensively than other countries because of that failure to face up to the realities. Deliver savings in one area, and the credibility won should result in a fall in our debt interest bill as well.
All the political parties have to get serious about our public finances. That means controlling our welfare bill and, in doing that, scrapping the triple lock must be part of the plan.
David Gauke is Vice Chair of Prosper UK and a former cabinet minister
