Ben Ramanauskas wants to abolish the pensions triple lock. As a longstanding advocate of it, you'd expect me to disagree. And I do, but not violently.
Ben proposes replacing the lock with simply raising the state pension in line with average earnings. This has two great merits.
One, as Ben says, is that it aligns the interests of pensioners and workers. It tells today's pensioners: "you're in the same boat as workers: if they become better off so will you; and if they don't you won't." I'm not as sure as Ben that this will encourage pensioners to support pro-growth policies. But it might weaken their support for the parties of reaction and widen the coalition of pro-worker interests, which is good.
The second merit is that Ben's proposal isn't very much different from the triple lock simply because in normal times wages should rise faster than prices or 2.5%. This preserves the key feature of the triple lock, that it sees the state pension rise in real terms.
Over time, this amounts to creeping nationalization of the pensions industry, because the higher is the state pension the less need there is for us to provide for a private one.
This is a good thing because the state is better able to provide pensions than the private sector as it can better manage risk. It can pool longevity risk better; tax receipts are less volatile than investment returns; and distribution risk (the risk of incomes shifting from profits to wages) is less of a danger for the state than for private pensions.
Here, we must guard against a particularly silly and nasty notion - that real-terms rises in the state pension are unaffordable.
The OBR estimates that if the triple lock remains in place public spending on the state pension will rise from 4.9% of GDP now to 7.9% in 2073-74 - but this is less than many European countries such as Denmark France or Germany spend today. If a decent pension is affordable for them today, it'll be affordable for us tomorrow.
What's more, we must remember that there is no magic money tree. If we as a society cannot afford to pay taxes to provide state pensions then we cannot afford to pay into private ones either, if only because administrative costs on the latter are so eye-watering. On a £100,000 pension pot invested over 20 years a management fee of 0.5% a year compounds to over £20,000. The cost of administering the state pension is much smaller: fund managers are richer than civil servants, which is a clue.
I therefore strongly disagree with new pensions minister Torsten Bell that the triple lock is "silly".
My argument with Ben, however, centres upon what happens on the occasions when prices do rise faster than wages, such as when oil and gas prices soared in 2022*. Younger people have insurance against this risk by virtue of having more years in front of them in which to enjoy normal times in which real wages rise or in which they might enjoy a steep drop in commodity prices. Older people, by contrast, are closer to the exit and so don't have so much of this insurance. Worse still given successive governments unforgiveable failure to sort out social care insurance, some will face the risk of a drop in real incomes coinciding with a big bill for social care.
There is therefore a case for pensioners getting insurance against prices rising faster than wages. The triple lock does just this whereas Ben's proposal does not.
It does so, however, at a cost. In this situation there's a bigger fiscal giveaway than there would be under Ben's proposal. That would mean higher inflation, relative to what it would be in his plan. That, in turn, would require either a fiscal tightening elsewhere; or higher interest rates; or tolerating of a higher path for inflation which itself is nasty. Whichever we choose, there's a cost.
For me, this cost is mitigated by the advantage of accelerating the creeping nationalization of pensions. And, remember, the triple lock is not so much a transfer from younger people to old ones as from younger people to their older selves; the power of compound growth means that it is youngsters more than oldsters who benefit most from the triple lock, a fact they are smart enough to see.
I can appreciate, though, that others might find the cost too high.
Let's be clear, though, that it is here that we see the merit or not of Ben's proposal. The issue is not one of fiscal sustainability or intergenerational justice, but simply of how or whether we insure people against a particular type of economic risk.
* You might think that the danger of long-term falls in real wages are another issue here. I'm not so sure. Insofar as these occur because of a shrinking economy (rather than shifts from wages to profits) they mean we as a society can't afford so much of anything - be it decent pensions, public services or private consumption. It's not clear that future pensioners should be immune from this collective risk.
** I'm not going to bother engaging with Kemi Badenoch's proposal to means-test the triple lock, for the same reason that I don't bother cleaning the pants of toddlers who have wet themselves.