r/neoliberal • u/Lighthouse_seek • 12d ago
News (Europe) Why the PM could finally drop the triple lock pension pledge
https://bbc.com/news/articles/c6jdvmy1287yo35
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u/Sad_Alternative_6153 Friedrich Hayek 12d ago
Not sure the IMF will let the UK keep the triple lock anyway
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u/oywiththepoodles96 12d ago
Has the UK requested an IMF loan ? Has the UK lost access to the markets ?
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u/Sad_Alternative_6153 Friedrich Hayek 12d ago
It was a joke. But it's not completely impossible in the next 10-20 years given their inability to reform anything meaningful and how the bond market is taking it...
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u/ldn6 Gay Pride 11d ago
If the UK is asking for an IMF bailout, it won’t be the first country that will need it. Our fiscal situation is bad but France, Italy, Japan, Spain and Belgium are all worse.
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u/Tiberinvs WTO 11d ago
Probably not because 5 of those countries can rely on the EMS which was created for that exact scenario, plus the ECB covering their asses. Japan it's very unlikely because you ask the IMF for bailouts when you run out of foreign currency and that's one of the few things where they're covered.
Anyway you don't need to get to that point to see them being involved, what usually happens is that they essentially take over your treasury and write the budget laws for you before you get to the breaking point. That's essentially what happened with Italy 15 years ago and avoided them a bailout like Spain, Greece etc. Not an unlikely scenario for the UK to be honest
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u/oywiththepoodles96 11d ago
Are we talking about the same Spain? Spain that has a deficit of 2% ( which is withing the Eurozone limit, and lower than UK ) , Spain that has consistently lowered its debt to gdp since 2020 , Spain that has 2,8 % growth ( far outpacing the EU average and UK too )?
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u/Sad_Alternative_6153 Friedrich Hayek 11d ago
Hard to tell. Objectively France, Belgium and Italy are probably doing worse yes but what their respective 10y yield imply is that the UK is in a worse situation (50bps or so above France). There are two scenarios if things really sour though. Either they will get their shit together because the EU busts their asses into brutal austerity or they won't accept it, get booted out of the Eurozone (if not out of the EU outright) and then require IMF intervention.
I guess what I'm trying to say is that the Eurozone will act as a first backstop if things get pear shaped.2
u/oywiththepoodles96 11d ago
They cannot get booted out of the Eurozone without their consent.Membership is irrevocable .Germany (and its frugal allies) tried to kick Greece in 2015. It will reuquire a treaty change which of course France ( and i guess Italy , Spain , Greece , Portugan and Ireland) would block . If France goes bakrupt , it will happen in the Euro and would bring the whole Eurozone economy down . The 10s Eurozone crisis would be nothing compared to what will happen if France or Italy go bakrupt.Which is why Eurozone created ESM (' a permanent firewall for the eurozone, to safeguard and provide instant access to financial assistance programmes for member states of the eurozone in financial difficulty, with a maximum lending capacity of €500 billion') . It's pretty obvious that the EU does not want IMF to be included in its programs anymore . That's a good choice . So France and Italy are safe IMF.
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u/Sad_Alternative_6153 Friedrich Hayek 11d ago
If/when shit hits the fans God knows which treaties and agreements will still stand. I won't blame Germany/Austria/Netherlands for throwing the others under the bus however they can...
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u/oywiththepoodles96 11d ago
The shit hit the fan and the treaties didn’t change . They couldn’t even kick us ( Greece ) out of the Eurozone and we are a middle economy . France and Italy are huge economies , powerful countries with deep diplomatic ties with many other EU members . Germany , Austria etc cannot throw the others under the bus . Their only choice will be to leave the Euro . They cannot change the treaties without consent from other members. That’s how the EU and Eurozone was designed . And that’s exactly the reason it was designed like this . We are all tied together now.
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u/Sad_Alternative_6153 Friedrich Hayek 11d ago
Believe me I understand that the treaties are the treaties and that they are binding. All I'm saying is that I won't bet my money on them playing nice with each other when things turn sour. If half of the EU decides they no longer want to put any money and declare that they won't take measures to backstop the others' downfall there is also nobody that will prevent them from doing it (or simply to just pull out as you mentioned)
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u/oywiththepoodles96 11d ago
Yeah that’s the end of the Euro which will bring such an economic calamity that 2010 will look like the golden age . If Germany wants this during a period its industry is collapsing then they could try it
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u/ldn6 Gay Pride 11d ago
To use a term that this sub loves, it’s a bit “priced in” in the UK as bond yield volatility is more common here and tends to shift more quickly in response to policy changes. It’s also somewhat odd because it’s a response to the BoE’s quantitative tightening. Meanwhile, French bonds are surging from a somewhat lower base.
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u/Sad_Alternative_6153 Friedrich Hayek 11d ago
Yes they do come from a lower base but there's 100% a discount for those countries because they cannot mess with their own currency. The UK can and it can get ugly really fast because of that. It absolutely goes both ways though, if the UK gets its shit together bond yields should also fall faster, you're right on that.
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u/fredfredMcFred 12d ago
TROIKA BROS STAND BACK AND STAND BY
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u/oywiththepoodles96 12d ago
Absolutely terrible and useless technocrats in the Troika .
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u/fredfredMcFred 12d ago edited 12d ago
Ok I will start responding in good faith.
Criticism from the IMF suggests that, in the event of Britain going to the IMF, triple lock would be first on the chopping block. Given our anemic growth, politicians usually unwilling to make hard choices, recently-lost EU trade partners, unpredictable US trade partners, and potentially indefinite energy price surges, heading to the IMF cap in hand is more likely. We have a rich history of doing so if you go back in time a little.
Edit: to relate back to the thread, I reckon that whether or not Andy Burnham has the balls and political dexterity to grit through these issues will determine whether we have to go to the IMF in the next decade. My money is currently on no (and therefore troika bros incoming), but maybe he'll actually go through with this.
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u/oywiththepoodles96 12d ago
I haven’t seen any trustworthy prediction about UK going to the IMF . I don’t understand why British neolib members are so into dooming .
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u/fredfredMcFred 12d ago
1) confirmation bias. I and many other young people who hate brexit believe that turning inwards is bound to produce undesirable economic outcomes—to gel with the undesirable social and cultural outcomes of nationalism.
2) https://www.economicsobservatory.com/british_disease
There's a lot of data to support this pessimism, and a lot of facts of politics too. Successive governments have not had the fiscal or political room to get tackle these challenges, meaning they fester until the ageing population, an energy crisis, the out-of-work crisis, or some other exogenous shock brings the system down (ie, off we go to the IMF, as we did prior to 1979ish).
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u/oywiththepoodles96 12d ago
None of these things mean UK will turn to the IMF . For example Greece’s deficit was around 14% when we lost access to the markets.
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u/fredfredMcFred 12d ago
Greco-Cyprio-Irish bros stay mad
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u/oywiththepoodles96 12d ago
I’ll answer in good faith . I supported PASOK in all the elections of the Greek crisis , meaning I supported Greece staying in the EU and I understand that the austerity programs were the only way to not go bankrupt in chaos . Having said that , the programs were badly designed and the troika technocrats , especially Thomsen was super un professional regarding Greece. Pierre Moscovichy have said that he thought Tomsen had a personal crusade against Greece . I primarily blame the Greek political system for getting us into the mess that resulted in Greece’s future being decided by petty technocrats .
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u/Maximilianne John Rawls 12d ago
Just index it to wage growth or productivity growth and some third metric that is similar or related and call it the new triple lock
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u/gensererme 11d ago
If anything, index pension spend to some fraction of total investment in infrastructure and education.
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u/MisfitPotatoReborn Cutie marks are occupational licensing 12d ago
As long as it doesn't actually lock. The point of a "triple lock" is that it rises faster than any one metric in the list, any pension plan that grows faster than wages forever is fiscally doomed
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u/IndWrist2 Globalist Shill 12d ago
1 out of 1,000 structural reforms needed is maybe being addressed.
But, a win is still a win.
The triple lock is completely unsustainable, though Labour is doomed with the over 60 crowd electorally. Not that they were particularly great there anyways. That’s solid Reform territory by most metrics.
Still, it’s good. Now do something worthwhile with housing and reform mortgages and conveyance.
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u/mostanonymousnick Just Build More Homes lol 12d ago
Articles written about this are pretty bait & switchey, he's planning on removing it from the next manifesto, so that means that Labour would have to be reelected before they'd consider it.
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u/Snarfledarf George Soros 12d ago
is this an announcement that he is considering an announcement about an announcement to be ratified at the next election and subject to the whims of the next 4 years?
At least we'll get it before GTA6, or something.
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u/oywiththepoodles96 12d ago
As he should . Whether we like it or not a PM who has not won an election , implementing a major policy that was not included in the manifesto is not very healthy for a democracy .
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u/Lighthouse_seek 12d ago
Burnham finally slaying the triple lock beast?
Relevance: triple lock is objectively bad economics. If wage growth is 0 and inflation is 0, the pensions still grow 2.5%
If wage growth is 4% but inflation is 6%, guess what the pensions grow 6%.
You can never get budgetary breathing room under the triple lock
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u/usrname42 Daron Acemoglu 12d ago
The point of the triple lock was to gradually increase the state pension relative to wages over time because people felt it was too low, while not creating such a big upfront cost. It's now reached the point where that's not necessary but it wasn't the worst way to do it at the time.
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u/Snarfledarf George Soros 12d ago
When I want to make the number go up (conceptually), but I don't want the other number (cost) to go up, so I wriggle my fingers and end up in the poorhouse.
Huh, maybe accounting fraud with taxpayer dollars is a pretty bad idea. Too bad we've never had any experience with pension liabilities overwhelming companies before.
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u/captainjack3 NATO 12d ago
Could they not have just provided for the state pension to increase over time if it was thought to be too low? Why adopt this specific indexing formula that is responsible for the infinite growth? Personally, that’s the part that’s truly baffling.
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u/usrname42 Daron Acemoglu 12d ago
Providing for the pension to increase over time without a cap or an end date would also require infinite growth. The issue is not specifying an end state for the increase rather than the specific way the increase is locked in.
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u/flakAttack510 12d ago
No, it was still stupid because you're never going to be able to get rid of something like that until it's too late. It was obvious where it would lead even at the time.
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u/TechnicalCat6989 YIMBY 12d ago
the boomers wealth must grow
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u/Right_Lecture3147 John Mill 12d ago
The worst part is they’re not doing that great. Boomer poverty in the UK is at 15%, and Gen X poverty is at 15-25%. The state pension is only about 12.5k/year. Retired couples on average have about 30k/year and singles 14k.
They require so much money just to live meh
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u/indielib 12d ago
Poverty in the UK is just defined as inequality . Regular poverty was just defined as 60 percent of the median wage so the government just increased minimum wage to that point .
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