The announcement that the triple lock we have today will be over in four years time isn’t quite true. There will still be 2.5% increases, CPI inflation increases and there will be an earnings underpin which will come into play in certain circumstances.
So how do people who have worked on the State Pension react?
In my book this links the two most knowledgeable people about the politics of the state pension that there are. They planned and saw through the changes to the transfer from old to new state pension (which is still in transition). They know where the winners and losers of the inevitable subsidisation are.
Let’s look at what is being said . First Sir Steve Webb..
and now Andy’s Young response
Of course there is a second view that comes from the IFS
I am sure there will be plenty of earnest lectures on how this does or doesn’t save the Exchequer money at the expense of the pension that wrinkles would have got under the old lock and will under the new triple lock.
There will be other conference sessions about long term care for those who need it and how it will be “free”. There will be discussions on how the fate of the elderly will have been rebalanced away from a pension payment to an insurance that in calamity there will be LTC as free as the NHS.
I see this as good news. Because people do not relate to proposed changes as Burnham has mooted, without knowing how they will pay for it. As I have written recently, it is hard to agree to set aside money as tax to the Government without understanding what it’s paying for and now that’s clearer. We will be getting free (er) long term care if we need it and as Webb and Young cotton on to, how free will depend on how effective the new triple lock is as paying for it.
The IFS go on producing charts that we will spend hours trying to understand but the success of this change (which will happen beyond this parliament – which may mean never), is down to our perception of fairness. Here we will be led by a few people who know and I will follow Webb and Young,
Here is the IFS’ second chart that puts this proposed new triple lock in the perspective of the old triple lock and what would have happened since the introduction of the old triple lock in 2010
Got that? No – I haven’t either and all I can tell from these charts is that folk like us, outside the economist and actuary’s tent, will have to take this new formula as fair or vote against it in 2029.
The real question is – as Young and Webb point out – whether the new triple lock generate enough to pay for the new long term care from the Government. That will undoubtedly be a much more interesting discussion to most of us
I may be misunderstanding this altogether, but does Andy Burnham’s proposal imply that Scottish pensioners (who already get free personal care) will in part fund free personal care in England?
Yes, potentially.
Whether Scotland is actually a net contributor to the English scheme, however, requires looking at the precise Treasury/Barnett calculations.
That’s the part that shouldn’t be assumed without doing the numbers.
There is also a rather nice policy question lurking here. If the UK Government changes a UK-wide benefit to finance a service which is devolved and which Scotland has already chosen to provide, should Scotland receive a corresponding fiscal adjustment?
That is probably a sharper constitutional/fiscal question than simply saying Scottish pensioners are paying for English care.
“…this change will generate significant savings which we will use to build up our National Care Service.”
That reads to me as thought Andy Burnham proposes hypothecating the pensions saving – generated from all pensioners in the UK – to fund social care in England. Of course, there may be a fiscal adjustment to the other parts of the UK, which reduces the amount available for funding care in England – and I haven’t seen any calculation that suggests anything less than all the pensions savings being applied to the new (English) care system.
You’re right, and Treasury have previous on this.
Examples …
Netting at departmental / spending-review level
Barnett is applied to the net change in a UK department’s budget, not to each announcement in isolation. Extra English social care spending can be offset by a cut (or smaller increase) elsewhere in the same department or across comparable services.
Scotland then only sees the net figure.
That is normal Treasury practice, not a rare trick.
http://www.gov.scot/publications/foi-202400404500/
Formula by-pass (money given without consequentials)
The classic case is the extra £1bn for Northern Ireland after the 2017 Conservative/DUP confidence-and-supply deal. Scotland and Wales got nothing.
City deals, some levelling-up pots and other one-off packages have also been allocated outside Barnett.
http://www.instituteforgovernment.org.uk/article/explainer/barnett-formula
Classification
Treasury decides whether a line is “comparable” (triggers Barnett) or reserved/UK-wide (does not).
Disputes have happened in the past, for example over 2012 Olympics regeneration spending.
If new care spending were classified as something other than straightforward England-only social care, consequentials could shrink or vanish.
again
http://www.instituteforgovernment.org.uk/article/explainer/barnett-formula
Offsetting through the fiscal framework
If the extra English care spending were funded by a reserved tax rise that does apply in Scotland, or by changes that enlarge Scotland’s block-grant deduction (the BGA for devolved taxes), the net Scottish gain can be smaller than the raw Barnett figure. That is a different mechanism, but it can cancel part of the uplift.
fraserofallander.org/funding-a-rise-in-social-care-spending-england-implications-for-the-scottish-budget/
So, the UK government has previously arranged funding so that extra English spending did not produce a matching, lasting rise in the Scottish block grant.
It could do so again.
It is not the default for a large, obvious England-only care programme, but it is within the Treasury’s existing toolkit.
I agree with Steve Webb that final judgement requires the details. But history tells us that an earnings link that depends on Government initiative rarely happens. This compares with the triple lock, which has happened.
I don’t know why you are all getting excited. In reality the likelihood is that the govt will cut pensions but refrain from funding a Care Service.
I believe you are absolutely right and its polical expediancy to rob us of our State Pension. ounce again. That is what we might expect from these ‘new sotialists’. It has always been our role if one is a pensioner to be at the bottom of the pile!