When will Labour wake up to the fact that this country is living way beyond its means? Until it does, the rest of us will continue to inhabit a fool’s paradise.
Last month alone the Government borrowed nearly £21 billion – far more than most analysts expected and £6.6 billion more than in June last year. It is all but certain that taxes, already at a peacetime high, will go up again, and significantly, in October’s Budget.
Meanwhile junior doctors, who are expected to begin a five-day strike on Friday, are demanding an incredible 29 per cent pay rise after having been awarded a hike of 22 per cent only a year ago. They evidently believe we’re living in a country with endless amounts of money.
But we’re not. Like most people in the public sector, junior doctors haven’t got the message that Britain is becoming ever poorer, with public expenditure outstripping tax receipts by increasingly wide margins. We are borrowing our way towards bankruptcy.
And this means that, if the economy is going to prosper again, there will have to be cuts to public spending that many of us will not like. One of them is the so-called ‘triple lock’, introduced in 2011 by David Cameron and the Tory-led coalition. The state pension rises every year in line with inflation, annual average wage increases, or 2.5 per cent, whichever is the greater.
As a result, the value of the state pension has gone up appreciably in real terms over the past 14 years, which is a good thing. It used to be much lower than the European Union average, and even now has not quite caught up with it.
Nonetheless, it’s time to acknowledge that the triple lock is not sustainable. I say this with regret. In an ideal world it would be maintained but, alas, after all the grievous economic setbacks of the past few years, we can no longer pretend to live in that world.
The Government of course refuses to face reality. In announcing a review on Monday into whether the state pension age should rise, Work and Pension Secretary Liz Kendall specifically ruled out any consideration of the triple lock. She is terrified of broaching the issue. She is wrong.
Rachel Reeves appears before the economic affairs committee yesterday. Labour’s ‘only solution to our economic woes is to raise taxes, which will have the effect of throttling our flagging economy even further,’ writes Stephen Glover
Earlier this month, the Office for Budget Responsibility (which is a government body) estimated that the triple lock will cost £15.5 billion a year by the end of the decade. The OBR added that the size of the state pension has gone up steadily over the past eight decades from around 2 per cent of GDP to a current 5 per cent. According to the Government’s own figures, 55 per cent of the entire welfare budget goes to pensioners: some £175 billion for 2025-2026.
The OBR reckons the state pension will reach 7.7 per cent of GDP by the early 2070s under existing trends. This would entail people of working age paying an ever larger proportion of their astronomical taxes to subsidise the pensions of those who have retired – and of course are living much longer because of the wonders of modern medicine.
Granted, the OBR is sometimes haywire in its forecasts, but this one is in line with those of others. The independent Institute for Fiscal Studies recently suggested that the triple lock as it stands could cost as much as £40 billion a year by 2050.
Even former pensions minister and general expert Baroness Altmann – who is normally in favour of higher state pensions – concedes that the triple lock is ‘not sustainable’ in the long term, and will have to be reviewed.
Of course, it isn’t only the triple lock that must be reconsidered. Top of the list should be the bloated welfare budget for working-age adults, which is running at about £141 billion a year and expanding at an alarming rate. This includes £75 billion on benefits for disabled people and £35 billion on housing benefits.
The Government recently capitulated on its plan to trim a mere £5 billion from the annual welfare budget by cutting ballooning disability payments. Following a rebellion by economically illiterate Labour backbenchers, it is unlikely to try again in the foreseeable future to rein in welfare spending.
For example, there’s no prospect of Labour reducing soaring benefit claims made by nearly 1.3 million foreign nationals living in Britain, who are pocketing nearly £1 billion a month, mostly in the form of Universal Credit.
It would be unconscionable if the triple lock were ended without there being any attempt to control welfare spending. Unfortunately, the Government doesn’t seem minded to do either – which is why this country is hurtling towards a financial crash.
Where is the politician bold enough to tell the British people the truth about our economic predicament? Obviously not in the Labour Party, whose only solution to our economic woes is to raise taxes, which will have the effect of throttling our flagging economy even further.
And Reform UK? Sad to say, most of its recent announcements have been about spending money rather than saving it. Nigel Farage appears to be more focused on attracting disgruntled former Labour voters – who often instinctively support higher state spending – than telling us that we can’t carry on as we are.
As for Kemi Badenoch and the Tories, they probably realise in their hearts that the triple lock is no longer affordable. The danger is that they believe that their chances of ever again forming a government largely depend on the votes of older people, many of whom are not unnaturally in favour of higher pensions underwritten by the triple lock.
It will take an unusual politician to speak the truth, which is that this country urgently needs to rediscover the fundamental lesson that Margaret Thatcher taught us more than 40 years ago – that we must cut our coat according to our cloth.
Special interest groups will no doubt howl at the merest suspicion that the triple lock is going to be phased out. They will point to other European countries such as France where state pensions are still more generous than in Britain.
But why follow those who may be even further down the road towards catastrophe than we are? The French government’s finances are under such pressure that its prime minister was last week driven to making the novel suggestion that two bank holidays should be scrapped in order to reduce crippling public debt. With its unrealistically early retirement age and recklessly lavish state pensions, France is not a country to emulate.
No one is suggesting that the state pension should be frozen – only that it should be increased in line with what is affordable rather than according to a benevolent formula that was devised in happier times.
And for those who have no private pension, and depend entirely on a state pension that may well be less generous in future years than it has been in the past, special provision can be made.
The danger is that our political class will only grasp the issue when it is too late and the money has run out. In that eventuality, it won’t be a question of ending the triple lock in an ordered way but of suddenly slashing state pensions, as well as welfare payments, in order to keep the economy afloat.
Why do I fear that we don’t have politicians brave enough to act before disaster strikes?
