The pension triple lock is bad politics that Britain can no longer afford

Beware of scared politicians looking for a populist solution to their dilemmas. They tend to be very expensive.

George Osborne was chancellor when the coalition government, in the midst of grumbling about the depth of its austerity policies, decided to be very generous to pensioners. He introduced the so-called triple-lock guarantee of how much the state pension would increase every year.

Osborne knew this was not really necessary in the short term or affordable in the long term, but the policy had two things going for it. It trumped Gordon Brown’s promise to link pensions to earnings rises rather than inflation, and it secured the grateful votes of millions of OAPs.

The triple lock means that the state pension now increases each year by either inflation or average earnings or 2.5%, whichever is higher. The average earnings figures released today by the Office for National Statistics show that these are increasing at 8.5%, so that is very likely to be the rate by which the state pension increases next year – unless there is a huge rebound in inflation, meaning it will increase by even more.

Small percentage changes on huge amounts of money add up very quickly and the cost of the triple lock is now staggering. The Institute for Fiscal Studies (IFS) calculates that it is currently costing £11 billion extra a year on top of what the government would have had to find if it had stuck to the old formula.

The IFS also found that today’s average earnings figures mean that the government’s own forecasts for how much pensions will cost next year are now also well off course. The chancellor will have to find another £2 billion pounds by 2024/25 just to pay pensioners more because of one month’s average earnings figures.

At a time when the government is struggling to find enough money for a dozen desperate priorities, this is a huge burden, and it is not as if the triple lock is well-targeted.

The state pension in the UK is a small one compared to most of our economic rivals, though that means many millions of pensioners do not depend on it but instead on the additional income they get from their private pensions. Therefore, much of that £11 billion is going to people who do not need it and can easily cope without it.

The people who really depend on the state pension and very little else are eligible for pension credit, which tops up what they receive. The extra money being spent on all pensioners under the triple lock would be far better targeted at these poorer OAPs. Yet unfortunately, about one-third of pensioners who are eligible for pension credit do not apply for it.

Remember that the next time the Conservatives bleat on about benefit fraud. The savings on people who are entitled to pension credit but do not claim it is huge. This probably explains why the government doesn’t make a proactive effort to find them and pay them what they are owed.

The whole thing is an expensive mess but then it was invented by George Osborne, so what did you expect?

The triple lock is also now, of course, almost completely politically untouchable. Despite all the evidence of its cost, which is paid for with higher taxes, mainly on the young. Despite the fact that much of the money goes to those who do not need it. Despite the fact that it is a hostage to fortune, with one month’s bad economic data potentially costing the government billions.

Even the suggestion of a minor reform of the triple lock is political suicide, your opponents will portray you as a callous betrayer of a decent commitment to stop dear old grannies from freezing to death.

But the next time you hear someone bemoaning the fact that the government has no money, remember this is a rod it made for its own back – or rather, one Osborne made for the back of everyone in Britain. But Rishi Sunak and Jeremy Hunt would have £11 billion a year and counting to spend on other stuff if their predecessor had not made this politically irreversible, expensive and unnecessary commitment.