Tony Blair’s thinktank urges Labour to scrap ‘unaffordable’ pension triple lock

Labour has been urged by Tony Blair’s thinktank to scrap the pensions triple lock amid mounting pressure on government finances.

With the Iran war threatening to derail public spending plans, the Tony Blair Institute (TBI) said the “unaffordable” manifesto pledge to maintain the triple lock should be torn up as part of a wider overhaul of the state pension.

The triple lock guarantees that the basic and new state pensions will rise every April by whichever is highest: inflation, average wage growth or 2.5%.

Saying change was “unavoidable” as Britain’s steadily ageing population drove up the cost of the policy, the thinktank suggested a pre-election pact should be made between the main political parties to ensure the triple lock did not continue past the next general election.

Introduced by George Osborne, under the Conservative-Liberal Democrat coalition in 2010, in recent years, the policy has added billions of pounds to annual government spending amid inflation shocks from the Covid pandemic and Russia’s invasion of Ukraine.

As the Middle East conflict triggers yet more inflation and pushes up government borrowing costs, Rachel Reeves has said “difficult choices” will be needed to fund energy support for households and an increase in defence spending.

However, the chancellor told the Guardian on the sidelines of the International Monetary Fund spring meetings in Washington last month that she was not prepared to drop the triple lock. “We made a commitment in our manifesto to the triple lock and we’re not changing that,” she said.

Inflation is expected to rise sharply this year amid soaring global energy prices, heaping pressure on households already struggling with a cost of living crisis. Higher headline inflation will also force the government into higher annual pensions and benefits increases next year.

In its report, the TBI said Britain’s ageing population meant urgent changes to the pensions system were required. Highlighting an expected increase from 12.6 million pensioners now to almost 19 million by 2070, it said, on current policy, this would increase total state spending on pensions from 5% of gross domestic product to 7.8% – an extra £85bn a year in today’s money.

“That would mean higher taxes, deeper pressure on other public services or both,” the thinktank said.

The former Labour prime minister’s organisation, which has close links to government, argued that more comprehensive changes were also required, including a replacement for the current state pension.