The most powerful cabal of voters in Britain — let’s call them pensioners — in whose interests the country is run chalked up another win this week when the chancellor awarded them a pay rise.
Rishi Sunak announced that the so-called triple lock would be deployed. That means a state pension will rise by 7.1 per cent, starting in April next year, in line with inflation expectations.
I am not for one second criticising older Britons or readers wanting to preserve decent pensions. Perish the thought. With life expectancy having extended so much since the war, thanks to medical advances and improvements in lifestyle, more was always going to be required to fund dignity. The state pension underpins the system, a bedrock of income for all, most of all the poorest. On top of that, if pensioners were part of an employment scheme or they have made decent investments they have more income each month. If they don’t, at least there is the state pension.
To safeguard that basic protection, the triple lock was introduced in 2011 by the coalition government, guaranteeing the state pension will increase each year by inflation, average earnings or a minimum of 2.5 per cent, whichever is higher. Unsurprisingly, this is a popular policy with pensioners.
In that respect, Sunak’s decision shows how politics works in contemporary Britain: the Tories are protecting their voters.
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The blunt truth is that older voters are far more likely to vote in general elections and they have become even more likely to vote Conservative. This trend was most evident in 2019, when Boris Johnson won a majority of 80 seats. Sixty-seven per cent of those aged over 70 who voted backed the Tories, according to YouGov. For those aged 60 to 69 it was 57 per cent; among 50 to 59-year-olds it was 49 per cent, with 28 per cent voting Labour.
If Labour is to have any hope of forming the next government, or even becoming the largest party, it needs to dent those Tory leads among pensioners. Which explains the air of desperation about the government’s triple lock manoeuvre. Ministers know retired voters are about to get clobbered by rising energy and food bills, as we all are. Although younger voters will be banjaxed too, they have greater scope for moving jobs or increasing hours worked. Pensioners have less flexibility, unable to respond as their limited disposable income shrinks. And pensioners vote, remember.
Many pensioners, even those relatively well-off compared with the poorest, will feel this squeeze in the year ahead. These are not people living extravagant lives. Perhaps they are still in the family home, thinking it afforded more space during the pandemic though now worrying about having to heat it. The bills are starting to land.
It’s not just energy and food that is the problem. There is a private pensions hit coming too. On Monday, in The Times business section, the economist Paul Johnson explained why the return of inflation means hardship. Those with a defined-benefit pension are protected from inflation, in their pension at least. In a defined-contribution scheme, though, or if a pensioner relies on their own investments, they will find their monthly income outstripped by high inflation. They’ll be poorer.
Most pensions now are defined-contribution, the sort that offers less protection, a legacy of the political and economic consensus that thought inflation had been vanquished for ever. Many of the millions coming up for retirement have this standard issue pension, unprotected against rising costs.
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This makes the present bout of inflation a watershed, the end of a long period when the more Tory-inclined older voters didn’t have to worry about it at all. Perhaps inflation will fade next year, but perhaps it won’t. Then it may return. There’s a new uncertainty, longer term, connected to our private pensions system, on top of energy, food and everything else.
On the state pension, initially there was some “argy bargy” in government about whether to restore the triple lock. Sunak is, as ever, worried about the state of the public finances and wary of even more spending. Last September he suspended the triple lock. Now, it is being unsuspended, pensioners will get their pay rise after all.
In Tory electoral terms, Sunak had little choice. There is a general election coming, and in an opinion poll-fixated No 10, whether it comes in 2023 or 2024, they need to do everything they can to help those older voters who have become an outsize part of the party’s electoral coalition.
That the young are at the rough end of this deal is obvious. Saddled with high taxes and student debt, they struggle to get on the housing ladder. The average age of a first-time buyer is now above 30, a factor that may be delaying family formation and helping to suppress the birth rate, a demographic disaster.
For voters of all ages, young and old, this is going to be a confusing and infuriating time. They will want explanations from a prime minister with no history of any interest in economics. They’ll want people to blame, possibly the chancellor.
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In Westminster I hear it said widely that what matters is for Johnson to handle the war well, and he is. That parties are ancient history. That he’s in the clear. This sounds implausible, when there is a squeeze of this kind under way.
There is considerable hardship coming, some of it to voters the Tories rely on to stay in power. It will be very surprising if that hardship does not turn into pain at the polls for the government. A row about party fines in No 10 is the least of the prime minister’s problems.