Andy Burnham has pledged to keep the state pension triple lock, but some of the economists advising him are said to favour scrapping the policy to help repair the public finances.
The former Mayor of Greater Manchester has been consulting a number of leading economists as he prepares for what many expect could be a move to Downing Street next month, to replace Prime Minister Keir Starmer.
While Mr Burnham has publicly backed the triple lock, his advisers view ending the policy as a straightforward way to reduce Government spending and replace it with a more affordable alternative.
The triple lock ensures the state pension rises each year by the highest of earnings growth, inflation or 2.5 per cent.
Pressure for a triple lock overhaul is coming from some of the economists closest to Mr Burnham.
Reports have shown that Lord O’Neill of Gatley has described ending the policy as a “no-brainer” for repairing the public finances, while former Bank of England chief economist Andy Haldane has warned that the pensions budget has become a “blockbuster” expense that could crowd out other priorities such as defence spending.
Both are advising Mr Burnham alongside former Office for Budget Responsibility chairman Richard Hughes, who has previously questioned whether the UK’s long-term spending commitments are sustainable.
Mr Hughes has also questioned whether the UK’s long-term spending commitments are sustainable, warning that the country “cannot afford the array of promises” made on pensions and healthcare when future costs are taken into account.
Former Greater Manchester Mayor Andy Burnham is widely expected to replace Prime Minister Keir Starmer
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Last week, Mr Burnham said scrapping the triple lock would be “very damaging” politically. The comments came before Sir Keir Starmer’s resignation as Prime Minister.
He noted that the earlier decision to remove winter fuel payments “still comes up on doorsteps a lot here in Makerfield”.
Mr Burnham has also endorsed Rachel Reeves’ approach to shielding pensioners from income tax as the state pension rises above the personal allowance threshold, with payments set to exceed £12,570 from next year.
The OBR has previously stated the triple lock cost three times more than initially estimated since George Osborne introduced it in 2011.
Several alternatives to outright abolition have been proposed, including an Australian-style system where pensions would be set as a percentage of median full-time earnings, rising with wages in normal years but tracking inflation when prices outpace pay.
Jonathan Cribb, deputy director at the Institute for Fiscal Studies, has warned that without reform the triple lock could cost anywhere between £5billion and £40billion.
Steven Cameron, pensions director at Aegon, cautioned that “the mathematics just aren’t sustainable in the current form over the decades ahead”, raising “serious questions around intergenerational fairness” as fewer workers support more pensioners.
Bond traders have expressed concern about Mr Burnham’s potential arrival in Downing Street, with Pantheon Macroeconomics warning that “risks are skewed to more borrowing than expected”.
