The black hole created in the Chancellor’s accounts by U-turning on welfare cuts already amounts to £5 billion or 0.2 per cent of GDP. Meanwhile, a terrifying new report forecasts an increase in the national debt of…176 per cent of GDP.
A baby born now will just be entering middle age in 2070, while someone graduating from university this summer will be preparing for retirement.
Labour’s response is to say that one big thing will change: growth. The Government has vowed to boost the economy, which means less borrowing and ultimately a shrinking debt pile, but it has not always taken the thorny decisions needed to do it.
And of course, things could get worse, not better. The OBR points to the risk of war, the fracturing of global trade systems and above all, climate change as threats which could push the public finances further in the wrong direction.
But the current occupants of Downing Street do have an opportunity to set an example by grasping the nettle and making some big calls that could echo down the rest of this century.
The reason for this is the triple lock. This mechanism, introduced by the coalition Government to address persistently stingy pension payments, guarantees that over time, payouts to retirees rise well above inflation. But it has been much more expensive than originally expected, and is currently on course to add £43bn a year to public spending if the volatility in inflation and earnings we’ve seen since its inception were to continue.
square HUGO GYE Reform’s plans for taxes and pensions are a joke
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Scrapping the triple lock could be a moment for Starmer and Reeves to prove that they are willing to face up to challenges dodged by their predecessors. Or, promising to ditch it in future could bolster Kemi Badenoch’s posturing as a bold truth-teller who treads where others eventually follow. Nonetheless, both Labour and the Conservatives insist they are still committed to the policy. After all, pensioners vote.
So what are the alternatives? Significant spending cuts may be off the table after the U-turn on welfare reform; Labour MPs believe they were elected to reverse austerity, not to entrench it. The left clamours for tax hikes, but they too can be politically toxic: witness the rolling street protests against the imposition of inheritance tax on farmland last year.
The only question is whether all of this happens when a government has the courage to be truly honest with voters, or in a crisis scenario, when a war, a financial crash or a global warming tipping point has made it impossible for us to lie to ourselves any longer.
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