Baroness Ros Altmann, who resigned in last month’s reshuffle, says the £6bn a year state pension safeguard is no longer financially sustainable – or justifiable – because it diverts resources away from other policy priorities.
The Tory peer says she tried to persuade David Cameron to drop the flagship policy which sees pensions rise by the inflation rate, average earnings or a 2.5 per cent safety net – whichever is the highest – but that the then PM refused for political reasons.
However Baroness Altmann says the 2.5 per cent threshold could leave the Government facing a financial crisis, and pressure to cut working-age benefits still further, if Britain enters a period of deflation as a result of the decision to leave the European Union.
The intervention also brings into sharp focus the debate over whether other pensioner benefits, like free TV licences, are affordable – or if they are non-negotiable because OAPs are far more likely to vote in general elections than younger age-groups.
“The triple lock is a political construct, a totemic policy that is easy for politicians to trumpet, but from a pure policy perspective keeping it forever doesn’t make sense,” said Lady Altmann.
“I was proposing a double lock whereby either you increase state pensions in line with prices or with earnings. Absolutely we must protect pensioner incomes, but the 2.5 per cent bit doesn’t make sense. If we went into a period of deflation where everything, both earnings and prices was falling, then putting up pensions by 2.5 per cent is a bit out of all proportion.
“Politically, nobody had the courage to stand up and say we have done what we needed to do. Since 2010 the incomes of our 13 million pensioners have been boosted, and pensioner incomes are more than £10 a week higher now than they would have been if the state pension had only been linked to average earnings. Pensioner households are no more likely to be poor than other age groups in today’s Britain.”
Baroness Altmann says a report produced by the Government Actuary’s Department revealed the cost of the triple lock policy to be £6bn a year. She claims the report was published before being withdrawn 24 hours later because Ministers did not want to alarm the elderly.
“The GAD said the cost of the triple lock could well be ‘materially higher’ in future, especially if earnings and price inflation stay low for a longer time,” she added. “On its most likely scenarios, keeping the triple lock could add around 10 per cent to spending on state pensions by 2040, but in a deflationary scenario the costs would be significantly more.”
A spokesman for Theresa May, the new Prime Minister, reiterated the Tory leader’s support for the status quo. A Number 10 spokesman said: “The manifesto contains a commitment to protect the triple lock. That commitment still stands.”
However Mrs May’s joint chief of staff Nick Timothy wrote an article last year in which he revealed that the “obvious alternative” to welfare credit cuts to take the pressure off low-paid, working people – looking at the triple lock –- was “off the table” on the say-so of George Osborne, the then Chancellor.
Labour were quick to condemn Tory splits. Debbie Abrahams, the Shadow Work and Pensions Secretary, said ditching the triple lock would represent a “grand betrayal”.