Cameron’s triple lock is a set of shackles on the young

Tuesday, January 28, 2014
Richard Holloway

The famous triple lock, guaranteeing pensioners a rise of at least 2.5 per cent  in their state pension every year, is here to stay. Proposed by the Liberal Democrats in their 2010 manifesto of dreams (it also included the abolition of Trident and tuition fees lest we forget) the policy means that the state pension will rise by whichever is higher – inflation, wages or 2.5 per cent.

The electoral carrot being dangled in front of the increasing grey vote is clear. 74 percent of people over 65 voted in the general election in 2010. That chunk of voters is also set to massively increase as the first sets of baby boomers hit the magic 65 mark and start to retire. Combined with the generous bus passes, TV licenses and winter fuel payments promised by David Cameron in a rash moment during the TV debates you’d be forgiven for thinking that austerity Britain had passed pensioners by.

Why is so much attention now focused on the state pension, when it was only introduced in 1909 as a means tested benefit to people over 70? One of the biggest problems is that what was originally only a safety net has turned into a sofa to relax on. It’s not a very well sprung sofa, but it has a well-worn groove. 40 per cent of people aged 55 to 64 have not saved anything for their retirement.

That’s over two million people who are about to become entirely reliant on the state for their income in old age. In 1942 even William Beveridge, founder of the welfare state warned that: “The danger of providing benefits which are both adequate in amount and indefinite in duration is that men, as creatures who adapt to circumstances, will settle down to them.” When 40 per cent of people have not planned anything for their retirement during 30 years of relative peace and prosperity it’s clear that provision has turned into dependency.

But, the cry goes up, these pensioners have worked hard all their lives, shouldn’t they reap the harvest of national insurance contributions that they have sown? The rosy view of national insurance is that it is somehow contributing to your future pension, but it never has and it never will. State pensions have always and will continue to be funded straight out of the pocket of the current working generation. In the next ten years a huge number of people will become reliant on politicians’ beneficence, exactly the same people who will continue to vote in their retirement, hence the importance of guaranteeing state pension rises.

Who will pay for this ticking triple timebomb that is expected to double in cost to more than £120 billion over the next 20 years, a bill bigger than the total economic output of counties such as Israel, Malaysia and the Czech Republic? It will be the young and they are going to start to get very angry at this state of affairs.

In David Willets’ excellent book, the Pinch, he argues that the contract between the generations has been upset by the large cohort of baby boomers now beginning their long retirement. Debt is increasingly being laid at the door of the current young working population, who will in all likeliness not enjoy a 30 year retirement, a fully paid off mortgage and a final salary pensions scheme their parents will get. They will pay for their parents to enjoy them with very little chance that they will reap the same rewards.

This sets up a dangerous situation, with resentment from the baby boomers towards the next generation for not appreciating their achievements, at the same time as envy and scorn from the current generations for the advantages they will not enjoy, paid for out of their pocket. The young have been hardest hit by the 2008 crash and they are set to be harder hit by the recovery.

For those entering the job market now the triple lock isn’t about pensions, it’s the shackles that they will bear through their whole lives. Locked out of the housing market unless they are willing to take on extreme levels of debt? Click. No state pension for themselves until 70? Click. Hardly any businesses offering final salary pensions? Click.

The triple lock may well be electorally advantageous now, but it will come back to bite the Conservatives in years to come.

Richard Holloway is Conservative Future National Training and Skills Officer. He is an active campaigner for the party in London and works as an internal communications manager at a major UK retailer.