Burnham pledges to reform triple lock to fund new National Care Service

Andy Burnham has said Labour will drop the triple lock on state pensions in its manifesto for the next election in order to fund a sweeping new National Care Service.  In his address to party members, Burnham said the party would link a rise in the state pension to inflation or 2.5 per cent every year, although it would hold its “value relative to earnings over time”. A government minister said it would ensure that the rise in the state pension does not outpace wage growth in the long term, making the new design more “sustainable”. Party analysis suggests it would save the government £15bn a year from 2040. The wide-ranging speech on welfare, youth unemployment and utility services also featured a pledge to end a ban on public ownership of water companies, which could set the path towards nationalisation of multi-billion pound businesses over 10 years.  He also announced that he would look to give councils greater powers over housing and announced that Labour will fight the next election on a platform of constitutional and electoral reform. The Prime Minister has previously backed a proportional representation voting system over first past the post. Burnham’s triple lock gamble Burnham said a commitment to drop the triple lock pension was a “good deal” to address social care costs, which could rise to £18bn in 2035 according to estimates by independent healthcare researchers. The Institute for Fiscal Studies has suggested the triple lock pension could raise public spending by up to an additional £40bn in the next 25 years. IFS boss Helen Miller said the new system would be an improvement but was still “imperfect”. The triple lock pension ensures that the state pension rises by whichever is highest out of 2.5 per cent, inflation or wage growth. Economists from across the political spectrum hit out at the policy, which was introduced by former Chancellor George Osborne in 2011, as “unsustainable” for public finances given it ensures the state pension rises above wage growth over a long period of time.  Burnham said politicians had been “too cowardly to fix something as basic as the care we give to each other”.  He pledged a “system in the best traditions of this party, that everyone contributes and everyone is covered, free at the point of use and no care charges paid out of your basic state pension”. On the eve of the speech, it was reported that Burnham would signal a review of the triple lock by the next election. Sharon Graham, the general secretary of the trade union Unite, said scrapping the mechanism would be “morally wrong”. “Instead of going to try and pick the pocket of pensioners, we need to move over to the other side of the equation and think about things like wealth taxes way before we try to stop something like the triple lock,” Graham said. Other Labour ministers said Labour remained committed to the triple lock due to its inclusion in the 2024 manifesto.  The announcement left the City scrambling to get into the detail. Nigel Green, chief executive of financial advisory firm de Vere Group, said: “Markets will look hard at the timing. Pension savings drip in slowly over decades. Care costs land the day the service opens. “Gilt traders price that gap. If the new spending arrives years before the savings, Britain borrows the difference, and the bond market charges for it.” ‘Public control is a plan for growth’ Burnham’s speech laid out his vision for “greater public control” of key utilities such as energy, water and housing. He said a “plan for public control is a plan for growth”. The Prime Minister said the country was “run for vested interests” and argued that his government would break with the “flawed thinking of the last 40 years”.  He also hit out at deindustrialisation, deregulation, austerity and Brexit for leaving Britain worse off.  “Britain has been on the wrong path for a long time,” Burnham said. “I am ready to do things my predecessors didn’t.”  Burnham’s announcements will be a political gamble given the significance of the triple lock in national voting.  He received rapturous applause after saying the “British Right” had given up powers to the private sector despite talking about “taking back control”. On housing, Burnham said he would end Right to Buy on new council homes.  No ‘crude cuts’ on welfare Burnham also referred to high levels of youth unemployment. The number of young people out of education, employment or training – referred to as ‘Neets’ – is hovering around the 1m mark while the unemployment rate for 16-24-year-olds has skimmed 16.4 per cent.  The government is waiting for the completion of an Alan Milburn review into youth unemployment, which is expected to only come after the Budget. Proposals in the paper are expected to lay out policies to reduce welfare spending.  While Burnham had no clear proposals on Neets, he re-iterated his ambition to get the “welfare bill down”.  “If we change the way we support people, we will get more people into work, and the welfare bill goes down,” he told Labour activists. However, Burnham said “crude cuts” would not be imposed on a welfare bill worth hundreds of billions of pounds.  Budget backdrop His address came against the backdrop of skittish gilt yields, which determine the cost of government borrowing. On Tuesday, gilt yields dropped by as much six basis points yet an auction of government debt meant the UK paid the highest interest since 1999 at an average yield of 5.38 per cent.  The City’s focus is now set to turn to the Budget in five weeks.  Economists at City banks believed the size of the £23.6bn previously available to the Chancellor has dropped by a half. The Resolution Foundation, a left-leaning think tank, has forecast a lower figure after it factored in constraints from public pay increases.  Burnham made little mention of wealth or investment from the private sector. Speaking on business and economic policy, Burnham said he wanted to preside over an “innovation nation” and would suggest a “global code” for AI when the UK hosts G20 next year.