Prime Minister vows to end triple lock in 2030

Prime Minster, Andy Burnham has announced plans to reform the state pension triple lock from 2030, with the changes intended to generate savings to help fund a proposed national care service in England. The Prime Minister said the triple lock – which sees pensions rise each year by whichever is highest of inflation, average earnings growth or 2.5% would remain unchanged until 2030, after which the earnings growth element would be removed. Officials have suggested the change could save around £15 billon a year by 2040.

Responding to the Prime Minister’s speech, Shanika Amarasekara MBE, Chief Executive of the Finance & Leasing Association (FLA), said “The Prime Minister has set out an ambitious agenda for long-term economic change, with a focus on re-industrialisation, better jobs and creating opportunities in every part of the country.

“If Britain is serious about reindustrialisation, technology adoption and good growth in every postcode, we need to think much harder about how capital actually reaches the households and businesses expected to deliver it.

“FLA members provide around £165 billion of new finance every year, helping households finance vehicles and businesses invest in machinery, equipment and technology across the country. Ambition needs investment behind it. Every decision government takes that affects the supply and cost of finance should therefore come with a simple test: will this help or hinder investment in the real economy?

“Getting that right will be critical to turning plans for reindustrialisation, productivity and better jobs into growth on the ground. The FLA and its members stand ready to work with the Government to help deliver that ambition.”

Rain Newton-Smith, CBI Chief Executive, said “The Prime Minister has painted a vision in the boldest of primary colours for the transformation he wants to unlock for the country, one with a stronger role for the state, but ultimately dependent on private sector investment and delivery.

“Key to making this partnership a success will be recognising what business brings to the table – its expertise, innovation and, most crucially, the investment needed to turn ambition into growth. Public investment should be designed to crowd in, rather than crowd out, private capital.

“Government is about choices, and the Prime Minister deserves credit for being willing to confront difficult questions about the long-term sustainability of the state pension in order to tackle the challenge of social care. Business will welcome an honest conversation about the trade-offs needed to deliver lasting reform. The same ambition must be brought to tackling youth unemployment where delivering on Milburn’s recommendations will depend on creating the conditions for businesses to grow, invest and create the jobs young people need.

“Just as important is the recognition that transforming the state cannot come at the expense of sound public finances. Fiscal credibility matters. The Prime Minister’s commitment to discipline should reassure markets that reform will be pursued alongside stable and sustainable public finances.

“Pragmatism on the North Sea is a welcome signal, while the detail of GB Grid should now be developed with business, with a clear test: does it accelerate connections and unlock, rather than displace, the private investment needed to deliver them.

“British firms are competing for investment in an increasingly challenging global environment. A more ambitious economic partnership with the EU that removes practical barriers to trade, improves market access and strengthens cooperation can deliver tangible gains for growth on both sides.

“The model of growth developed in Manchester – bringing government and business together around a shared plan for investment and delivery – is one businesses across the country can get behind. The Budget now needs to provide the first downpayment on that partnership. That means giving firms breathing space from the cumulative cost pressures holding back investment and hiring, so they have the confidence and capacity to raise living standards and deliver growth in every postcode.”

Caroline Abrahams CBE, Charity Director at Age UK said “We have an ageing population, we’ve been slow to adapt to this reality and a new deal for pensioners is long overdue so it’s great to see a government recognising this – but of course what really matters is what it contains.

“The Prime Minister’s commitment to social care reform is hugely welcome, after decades of dither and delay. A modern, progressive social care system, free at the point of use, would be transformational for older and disabled people, and their families too. We’re excited about this aspiration at Age UK and we will do everything we can to support Louise Casey’s independent Commission in thinking through what it should look like, and politicians on all sides in bringing it about.”

“Good social care support that you can depend on is certainly critical for older people if they’re to live decently in retirement, but so too is financial security. For a generation, the Triple Lock has given older people confidence that the value of their State Pension won’t be eroded in an uncertain and volatile world, and now the Government wants to change it from 2030, when their manifesto pledge expires. Pensions policy is notoriously complex so we postpone judgment on the overall impact of their proposed reform until we can scrutinise the detail.

“However, much will depend on where we are by 2030 , including what level the State Pension has reached by then. We will need to be absolutely certain that those who are reliant on the State Pension alone can attain a decent standard of living, and that means the Government must have a cast iron plan to ensure no-one is left behind. There is much to do, including moving to a new approach whereby the older people on the lowest incomes actually receive the top up benefits they are due – at present fully one in three are missing out.”

“Pensioner poverty has not been vanquished and the last few years show how insidiously it can come creeping back if governments look away. Protecting those older people who are vulnerable, or on the lowest incomes, should be the ultimate test of this Government’s reforms – it can’t be social care or financial security, in a civilised society it must be both.”