Andy Burnham, widely expected to become Prime Minister next month, could scrap the Department for Work and Pensions (DWP) triple lock, a perk introduced in 2011, as his advisers reportedly view it as a "no-brainer" for the sake of public finances.
Triple Lock Under Threat
The triple lock, which ensures state pensions rise by the highest of inflation, average earnings, or 2.5%, is under threat from Burnham's economic team. His advisers, including former Treasury minister Lord O'Neill of Gatley and former Bank of England chief economist Andy Haldane, believe abandoning the metric is essential for fiscal stability.
Advisers and Fiscal Rules
Lord O'Neill, speaking before Burnham returned to parliament, stressed the need for "very clear and credible fiscal rules." He noted that the gilt market respects current fiscal rules under Rachel Reeves but warned that Burnham would need to strengthen them to maintain market stability. "The gilt market is telling us that whoever tries to lead this country going forward has got to focus on the four or five very big clear things that this country has got to do," O'Neill said.
Potential Reforms
Jon Greer of Quilter suggested Labour might reform the triple lock by linking increases to earnings rather than inflation. "What was intended as a mechanism to protect pensioners from poverty is now colliding with fiscal drag," Greer said. He proposed linking increases to earnings, with temporary CPI indexation when inflation exceeds wage growth, to align pension growth with the wider economy.
Investment Opportunities
O'Neill also highlighted room for borrowing under existing fiscal rules to boost infrastructure investment. "We can do way more to boost infrastructure projects, and that is what we should be doing," he said.
