There is much discussion in the media this morning about a supposedly temporary suspension of the pension triple lock.
The triple lock was a George Osborne in 2010 and was one of the very few useful things he did. It offers a guarantee that old-age pensioners will get an increase in their payment of the highest of the increase in average earnings in the previous year, the CPI rate of inflation, or 2.5 per cent.
Now ministers claim that they cannot afford the triple lock because average earnings from May to July this year rose by 8.5%. They say that was inflated by one-off bonuses in the NHS and elsewhere. They want to take these out of the calculations. They will save £1 billion as a result. Pensioners would lose about £100 each as a result.
So far, my Taxing Wealth Report 2024 has suggested tax changes of almost £70 billion, all impacting the wealthy or highest earners. There are many more to come. The potential yield will go up as a result. It will likely considerably exceed any requirement a government might have. That is deliberate: I want to show that there is not only the capacity to tax more but choice on how to do so.
At this moment, the key point is, however, a simple one. It is that ministers need not punish pensioners, for many of whom the old age pension is their primary source of income. They could instead tax a bit more.
If they won't pensioners should not forget the fact at next year's general election. The struggle of those trying to get by on this income will have been imposed on them by ministers who have a bias to the wealthy and not those with real needs, which is exactly what the Taxing Wealth Report 2024 is intended to show.
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My biggest worry here is that Labour simply thinks the same and won’t do anything about this anyway – another symptom of the fake adversarialism between the parties on the direction of the country as it continues to roll back the state to ‘free-market’
nirvana.
This also reveals to what extent policy is an expediency of party political requirements – not societys’ needs.
PSR, whilst I agree with much of what you write, I take exception to this: ” is that Labour simply thinks”. I question the capacity of either individual or indeed collective vile-Liebore politicos to “think” beyond
a)win next election,
b)need to keep meeja on-side for a),
c)follow vile-tory “economic policies” (obvs using phrase losely) to enable b).
Maybe I’m being unfair given a, b, c, would certainly class as “simple thinking”.
On a related note: I am sending a present to Reeves, I ordered it on e-bay. It is a nice, shiny shovel, just in case she wears out the one she uses at the monent.
I seriously doubt anyone in the Labour leadwership thinks much abiuyt anything but beating the left
Mike
You are right.
They don’t think.
They just react. That is what management has become in this country. I see it everyday at work.
And Richard is right to BTW.
There is a serious debate to be had about the correct level of the state pension. There is also a debate about how pensioners are taxed (unearned v earned income, NI,etc.
However, the triple lock is a nonsense. The greater of three random variables will eventually lead to absurdly large pension.
I am not sure we are anywhere near that as yet though Clive.
Indeed…
So let’s get to the right point on a sensible timescale rather than relying on the randomness of inflation, earnings and the floor.
Accepted
Who decides what the right point is?
This winter pensioners are being given an extra £400 towards fuel bills. Isn’t that just as arbitrary?
I thought this small state government wanted less control over people’s finances. So why quibble about an extra £100 on the pension?
Do you know that pensioners also get a £10 Christmas bonus every year? Patronising or what?
So, Clive, you think it’s okay to take £100 away from 12 million pensioners next year, 4 million of whom don’t have enough to pay tax. That means they have less than £12570 income.
Two years ago there were 1.7 million receiving pension credit, which means they have less than £10450.
You are quite happy that people have to live on less than that, are you?
You will become a pensioner, too, I assume.
In fairness, I think Clive’s comment and nclarification shows he thinks we should be paying more
No. My point is that pension levels should not be determined in such an absurd way.
Personally, I would link pensions to a minimum wage (which would be a genuine living wage). The quid pro quo would be higher marginal tax on income over and above this level for pensions (NI, investment surtax etc..)
Not playing devils advocate here but who and how is it decided what should be the”right point”?
Good question…. but one that is understandable and can be determined through the democratic process.
I am sure you are not suggesting that the triple lock delivers a better outcome.
Personally, I would link it to a minimum/living wage…. with higher taxes on unearned income.
Clive,
We have one of the lowest state pensions in Europe. Not all of us have a private pension to top up the meagre state offering. We need to punch high not low, to protect the income of pensioners of little means.
I wouldn’t mind it if they evened up the state pensions. Do those born before 1953 need less heating and food than those born after? £50 a week less?
This situation is deeply unjust
What is rarely pointed out when the triple lock is being discussed is that there are two levels of basic state pension. As Dr Ros Altman has stated “ A proper pension protection policy would provide the best protection to the pensioners who need it most, but the triple lock does not. Since the new State Pension was introduced in 2016, the triple lock has been applied to the full new State Pension currently £203.85 a week, but this is only paid to the younger pensioners who are below their early-seventies, whereas everyone else has just the old Basic State Pension currently £156.20 a week, triple-locked. The Pension Credit is not triple locked at all, nor are the other parts of the old State Pension system such as SERPS and S2P. A promise to properly protect the same basic amount of state pension for everyone would be much fairer”
I agree
An absurdly large pension (how big would that be? enough to live on?) is a very, very long way off even with the triple lock. Quite apart from any other detail, the vast majority of pensioners are on the old pension (£8122 pa), not the new higher rate (£10600 pa) that is often quoted in the press and that is only going to the very youngest pensioners. And even that is still well below the tax threshold.
@ Clive Parry says: “The greater of three random variables will eventually lead to absurdly large pension”.
What is “absurdly large pension” and why have we not see it yet? Currently, despite the triple-lock, the state pension is around 50% of the minimum wage.
Only 50% of the retirees received the full post-2016 state pension of £203.85 a week, or around £10,600 a year. The rate for pre-2016 retired persons is £156.20 a week, or around £8,200 a year. Only 75% of the retirees receive the full amount.
Out of 12.6m retirees, 3.6 million receive less than £150 per week.
There is no sign of the “absurdly large pension” for most people and it will get worse because too many future retirees are unable to save much for private pensions and will rely upon the state pension. Austerity, real wage cuts take their toll.
We need to ensure that the state pension is aligned with the minimum/living wage.
https://leftfootforward.org/2023/09/its-time-to-align-the-state-pension-with-the-minimum-wage/
Thanks Prem
A brilliant article by Prem. I am surprised he is still a labour member of the house of lords.
I read an article on The Conversation this morning about the top 10% of earners having incomes over £60,000 and being concerned about being asked to pay more tax as it will stop them doing what they want to do, despite the fact that they say they care for those worse off.
https://theconversation.com/wealthy-but-worried-why-the-uks-top-10-are-turning-their-backs-on-the-rest-of-society-213270
I think they need to read Prem’s article.
Some do…
What especially offends me is the hypocritical claim that this is unfair to the young. The current situation is unfair to all, but heaven forfend we should be fair to both young and old equally. Equality is not recognized by the market.
This is exactly the situation the government is trying to foment. Pitting young against old, dividing the country, stirring up emotions and, crucially, deflecting attention.
The sooner we realise that we are all in this battle together against a dystopian, intellectually moribund, neo-liberal government the better. We all have the RIGHT to live a dignified life instead we are being ‘farmed’ by financialised corporations and a government supporting every neo-liberal aim.
What about universal basic income?
I wish I could be convinced, but I cannot be
Agreed to an extent. The economy currently is extractive by nature. The more money people have in their pockets the more intense will be the efforts at extraction. You only have to witness the burgeoning gambling industry, for one, to see this.
I believe Universal Basic Services and a Job Guarantee scheme deserve more attention in the effort to improve the quality of life for the majority.
Sorry, Clive, if I misunderstood, but my heating was on this morning when I woke up and I immediately went to turn the thermostat down to 17. Can’t afford to be heating the house yet!
No apology needed.
Always value your comments even (especially??) when they challenge my views.
‘…… ministers who have a bias to the wealthy…..’
Richard you are too kind. ‘Bias’ does not go near describing the way this government has blatantly exploited the reality of money supply which MMT exposes and which the government has always denied, to channel money to the richest sectors of society whilst falsely claiming unaffordability to support services for the poor – notably the NHS, now destined for full privatisation, by the most Machiavellian irony, under the next Labour government.
Britain’s State Pension is the lowest in the OECD area. The retirement age is higher than in most major EU countries. The extreme right wing media – the Telegraph, the Times etc are whipping up an attack on old people. They want to reduce their incomes just as they wish to bring about a universal cut for everyone. This is class warfare . Powerful institutions ,instead of serving the public a deliberately lowering our countries living standards. What the 1945 Labour administration bequeathed to the nation has been striped away. Thatcher and her cohorts planned this . They knew it couldn’t done overnight . So they set about destroying any power ordinary workers had. Viscous trades union legislation ,destruction of the manufacturing base, selling off council houses. New Labour refused to kill off the plan which gave the Cameron government the green light to speed up to a final solution. My parents used to describe life in the 1930s. It was hell. The Attlee Government changed our country by an economic miracle in 6 years. The Macmillan Tories carried on with the policies. The extreme Right hated the idea of ordinary workers having ever rising living standards and above all political power. They had to be taught to know their place. They have succeeded. There is no political party we can turn to.
I agree with all that, including the parental descriptions of the thirties.