Government analysis has confirmed that triple lock pension reform proposed by Prime Minister Andy Burnham will not deliver savings exceeding £10 billion a year until 2040, as Burnham acknowledged a “shortfall” in the wider funding plan for a new National Care Service. The admission has prompted warnings from economists that further tax rises may be unavoidable.
Burnham set out the changes in his Labour conference speech, announcing that he would adjust the triple lock to link the state pension to whichever is higher out of inflation or 2.5 per cent, while preserving long-term earnings protection. The current triple lock guarantees the pension rises by the highest of inflation, wage growth or 2.5 per cent each year.
How the triple lock pension reform would work
According to GOV.UK, the adjusted triple lock would take effect from April 2030. From that date, the state pension would continue to rise by 2.5 per cent or inflation, whichever is higher, and by more than that if required to maintain its value relative to earnings. The government’s own projections show the change is expected to reduce state pension spending by £15 billion a year by the end of the 2030s, rising to £50 billion a year by 2050.
In cash terms, the Department for Work and Pensions analysis puts the annual saving at £15 billion by 2040. Once inflation is factored in, however, that figure falls to around £11 billion in real terms. The gap matters because the plan was announced as the primary funding mechanism for a new publicly-funded social care service.
The near-term picture is harder still. Bloomberg reports that the Treasury estimates savings from the state pension changes will amount to only around £5 billion a year by the end of the next parliament in 2034, well short of what a new care service would require in its opening years. The proposal would only be implemented if Burnham remains in power after the next election.
The funding gap and risk of further tax rises
In interviews following the conference, Burnham conceded the numbers do not yet add up. ‘The decision on the triple lock, the adjustment, and it is an adjustment, it’s not getting rid of the whole concept of the triple lock, this releases this much. The NHS truly will be able to make savings… from a better social care system,’ he told Times Radio. ‘And then if there’s a shortfall, well, we’d have to be honest about that shortfall and say where that money is coming [from].’
The scale of the challenge is clear. A universal social care service in England would cost an additional £18 billion a year by 2035, according to a report by the Health Foundation. The Burnham Programme notes that total adult social care spending in England reached £34.5 billion in 2024-25, a 7.9 per cent increase in cash terms, illustrating the baseline against which any reform must operate.
Jonathan Cribb, deputy director of the Institute for Fiscal Studies, was direct about what the gap means for the public finances. ‘Cancelling an unfunded increase does not free up funds to pay for a new government commitment,’ he said. ‘Therefore tax rises or other spending cuts will be needed to pay for social care.’
Helen Miller, director of the Institute for Fiscal Studies, said it was “uncertain” whether savings could be delivered at all.
Andrew Wishart, senior UK economist at Berenberg, said Burnham had ‘implicitly acknowledged that this can’t be achieved’ while keeping the manifesto pledge not to raise personal tax rates. Wishart argued that if the government does look for additional revenue, it would likely ‘have to tax middle earners or raise VAT’ rather than concentrate the burden on the affluent. ‘High earners are paying a large share of tax… really if you want to have a larger government and a larger state, then to pay for that you basically have to start levying more tax on those in the middle of the income distribution as well as the top,’ he said.
Economists have warned that Burnham will need to consider raising personal taxes such as inheritance tax and income tax to fill what has been described as a £7 billion gap. Wealth managers and advisers have expressed concern about a potential increase in the inheritance tax rate. Many clients are already preparing for more assets to come within the tax’s scope from April 2027, and a further increase in the rate would compound that exposure. One fund manager noted that a cut to the state pension is unlikely to affect wealthy clients directly, given their reliance on private pensions, but a lift in the inheritance tax rate is a separate matter.
With the government’s own figures showing triple lock pension reform will yield only £5 billion a year by 2034, the pressure to identify additional revenue before the next election is already building.
