It was early December 1973 and I remember my grandmother asking, ‘What would you most like for Christmas?’ I knew in an instant: ‘One day, perhaps, it would be good if the weekly rates of my basic state pension were to increase by the greatest of three candidate measures, namely (a) the year-on-year growth in the average weekly earnings index; (b) the year-on-year change in the consumer prices index for the month of September; or (c) a fixed nominal floor of 2.5 per cent – with the determination being a simple maximum function rather than an average, and the resulting uplift taking effect from the first Monday of the following tax year in April. Or, failing that, an Etch A Sketch.’
What is bizarre about the triple lock is that we are bankrupting ourselves in order to deliver something that nobody requested, and which is unaffordable. I’m not even convinced it was much of a vote winner when introduced but what it has become is an arbitrary touchstone which risks a massive loss in votes and credibility if abandoned.
How many pensioners would attach a higher value to unlimited free travel on under-booked trains than they would to the triple lock?
Something that always terrifies me about politics is the power of certain phrases to turn into kryptonite. (It was a Spectator writer who coined the phrase ‘dementia tax’, thus unwittingly consigning to oblivion a half-decent idea.) If no one had coined the phrase ‘triple lock’, many people might not have noticed had it been silently dropped.
There is a solution to this. You can maintain the manifesto commitment by allowing pensioners to opt into the triple lock, but encourage wealthier pensioners to remain on a single or double lock by offering alternative perks that are more attractive and less expensive to deliver. You could thus obtain all the efficiencies of means-testing by voluntary self-selection. People who simply need more money could revert to the triple lock, whereas better-pensioned people could choose from alternative government benefits, all of which might cost less to provide but which are valued more highly.
Businesses have been playing this trick for years. It’s called price discrimination. Generally, it works like this: poorer people need more money or lower prices (Tesco Value). Richer people have more diverse wants, many of them emotional (Tesco Finest). Businesses cannot ask what people earn before quoting a price, so design choices to get them to reveal their preferences and with it their level of discretionary wealth. The trick is to find out what richer people value most highly and then provide it at the lowest possible cost. At moments of supreme achievement, you can get more prosperous people to pay for things that cost you nothing at all. For instance, of necessity, some people must board an aircraft before others do, otherwise airports would be in constant logjam. Airlines ingeniously get the people who board first to pay a premium for doing so. It costs them nothing.
Here’s a thought experiment: how many pensioners would attach a higher perceived value to unlimited free travel on under-booked trains than they would to the triple lock? Yet this would cost far less to provide. There are plenty of other alternatives: insurance against needing care at home, stamp-duty exemptions, inheritance tax allowances. All might have a higher perceived value than the triple lock, yet at a lower cost.
This, of course, will never happen, because HM Treasury cannot abide giving people a choice, and loathes hypothecating taxes. All models thus cater for an ‘average’ citizen and end up pleasing no one. Government services in the 2020s are a bit like coffee in the 1970s. There’s no variety or choice, so nobody really values them.
One simple rule of psychology is that people attach a far higher value to things they have chosen than things that are imposed on them. Consequently, people are inordinately happier paying taxes when they can decide where the money goes or what they get in return. Hypothecated tax rises would work very well. My wife would give the extra money to widows and orphans, and I would pay to sponsor the tailfin on an MQ-9A Reaper Drone. Overall, it would net out fine.
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