Savings from triple lock reform could be large but will not be able to fund social care

Jonathan Cribb, Deputy Director of IFS, said,

“The government has estimated that its reform to the triple lock will save £15 billion per year by 2039–40. That number partly reflects inflation over the next 13 years. In today’s terms, the estimated saving is £11 billion per year. However, the saving is very uncertain, because of how unpredictable the old triple lock is, and new IFS analysis shows it could reasonably be anywhere between £4 billion and £20 billion.

Because the old triple lock ratcheted up the state pension over time, the savings are smaller if we look at a closer date. In 2034–35, we expect that the reform will save around £4 billion per year, but it could easily save nothing at all if earnings growth is strong.

There has been a lot of debate about whether this reform can fund a substantial package of social care reform. However, the key point is not how large these savings are compared with the cost of providing social care.

Instead, the crucial thing to understand is that the triple lock reform prevents unfunded increases in state pension expenditure from 2030 onwards. Cancelling an unfunded increase does not free up funds to pay for a new government commitment. Therefore tax rises or other spending cuts will be needed to pay for social care.  

To give a sense of scale, if the government wanted to raise around £10 billion to spend on social care, it could raise that by increasing the main rate of VAT by 1%, or add 1% to all rates of income tax.”