OECD sounds alarm on pension triple lock in challenge to Burnham
The world’s leading independent economic organisation has warned that reform of the triple lock on state pensions is “necessary to reduce fiscal risks”, in a challenge to Andy Burnham as he prepares to take over as Prime Minister.
The OECD, the Organisation for Economic Co-operation and Development, described the triple lock guarantee as “unusually generous in international comparison”.
The system guarantees that the state pension will increase every April by a minimum of three measures: the previous September’s inflation print, average wage growth across the UK or a minimum floor of 2.5 per cent.
“Under the triple lock, state pensions have risen significantly faster than earnings, adding fiscal pressures and uncertainty, particularly during periods of macroeconomic volatility or weak growth,” the OECD’s latest UK economic survey report said.
It found the state pension had annually outpaced average earnings growth by 0.5 percentage points and consumer price inflation by 1.2 percentage points since its implementation in 2012.
“Reforming the triple lock is necessary to reduce fiscal risks, but requires careful preparation and consideration of public acceptability,” the Paris-based think tank said.
The uprating formula was also found to have “regressive distributional implications, benefitting wealthier and higher-income individuals more as they tend to live longer”.
Burnham has previously said it would be “very damaging” to break from Labour’s manifesto commitment of upholding the triple lock.
Total public expenditure of the state pension and other pensioner benefits reached around six per cent as of 2025.
The latest call to reform the triple lock follows the Office for Budget Responsibility warning UK public debt would swell three times the size of the economy. The state pension was named as one of the biggest drivers after expenditure was projected to nine per cent of GDP in 50 years, up from five per cent currently.
Burnham told not to raise headline tax rates
The pressure on public finances comes as Britain prepares to appoint its seventh Prime Minister next week.
The OECD warned the Makerfield MP is set to inherit an economy where government debt is projected to breach 105.4 per cent of GDP by 2027. This is to balloon to 200 per cent by 2050 in the “absence of policy changes and considering ageing costs and climate damage”.
Growth was forecast to languish at 0.9 per cent this year. Economists pointed to strains from global energy inflation and fiscal consolidation from frozen tax thresholds.
The think tank said it would nudge up to 1.1 per cent in 2027, supported by government expenditure and business investment as financial conditions become less restrictive.
Economists recommended a package of reforms that the OECD said, if successfully implemented, would boost GDP by up to four per cent within a decade.
This includes “essential” consolidation of taxes, which it noted were at “historically high levels”.
“Tax reforms should prioritise strengthening efficiency and revenues rather than raising headline rates,” the group said.
Burnham’s opponents have already sounded the alarm on fears of a tax raid after he made a number of spending commitments in his bid for Labour leader, including reviving the HS2 leg to Manchester and more nationalisation of utility firms.
His commitment to the fiscal rules imposed by Chancellor Rachel Reeves – which aim to bring down the amount of government borrowing – have forced the spotlight back onto tax hikes.
Reeves is expected to finish her tenure in the Treasury when Burnham takes the helm on Monday, with the names in the running to replace her spanning from energy secretary Ed Miliband to home secretary Shabana Mahmood.
Responding to the OECD report, Reeves said the government has the “right economic plan to build a stronger, more secure Britain.”
“The OECD agrees that we have restored stability, putting the economy in a much stronger position than it was two years ago”.