Government Is Going To Renege On The Triple Lock

The government is preparing to renege on its triple lock guarantee to pensioners, as the consequences of its Brexit disaster, and money printing causes inflation to rocket.

The triple lock guarantees that pension will rise by whatever is the greatest of wage rises, inflation or 2.5%.  Inflation has been rising for months, as the economy reopens, and all of the money printing done by the Bank of England over the last few decades, and particularly over the last year, floods out to finance a rapid increase in monetary demand for goods and services whose supply has been reduced by the government imposed lockouts and lockdowns.  A similar thing has been happening across the globe, causing global inflation to rise sharply, including the prices of primary products, including food and energy, which also then passes through into further price rises of manufactured commodities, and higher wages, as workers seek to maintain their standard of living amidst the rises in their cost of living.

Governments and central banks have tried to sell the line over the last few months that inflation  was only temporary, and largely due to base line effects compared to falls in prices a year ago.  That became increasingly hard to sustain, as inflation not only continued to exceed estimates month after month, but every month was rising at a faster pace than the month before.  Those rising prices would undoubtedly pass through into subsequent waves of inflation, including higher wages to compensate, and then, as firms tried to avoid a squeeze on their profits from rising wages, central banks would print more money tokens to enable businesses to raise their prices once again.  But, they face another problem, and that is that Brexit had already caused rising costs, and a shortage of labour in various sectors of the economy.

Even before the government imposed lockouts and lockdown, there was a shortage of around 70,000 lorry drivers.  Brexit made that worse, as many EU lorry drivers no longer find it worthwhile completing all of the paperwork required to operate in the UK.  All of the red tape created by Brexit also means that the time taken for every lorry trip is much longer, which means both more lorries and more drivers are required to shift the same amount of freight.  A further problem in that area is likely to arise with the Channel Tunnel.  It has now passed into French hands, and is likely to need subsidy from either or both of the French government and EU.  There will be a strong incentive for them to ensure that freight moving from the EU to the UK pays lower fares than traffic in the other direction, so that UK exports to the EU will become less competitive, forcing UK companies to bear that cost from their profits.

The shortage of lorry drivers is now such that the British government has all but scrapped the safety standards for lorry drivers working hours.  That is just a taster of the kind of reductions in working conditions, that British workers can expect as a consequence of Brexit.  But, at the same time, even that is not enough to overcome the shortage of drivers, and so firms are having to pay higher wages.  Tesco is offering £1,00 to any lorry driver that comes to work for them, as the large increase in its online deliveries has led to an increase in its business.

There is also a shortage of around 180,000 workers in the leisure and hospitality sector.  A lot of that is because the workers in that industry, most of whom got furloughed, and many of whom came from the EU, actually left and went back to the EU, not to return.  Even with the existing limited reopening in that sector, the demand for workers has been such that wages rose by around 18%.  That also shows why one of the excuses used by governments and central banks over he latest figures for wage rises, are bunk.

According to the latest data, wages rose by 8.8% last month.  According to the triple lock, the government should increase pension by that amount.  But, its arguing that the figure is a freak number.  Actually, for the reasons cited above, the figure for future months could easily be even higher.  The government is arguing that its only the fact of low wages this time last year, as workers got furloughed, that explains the increase.  But, that is not what is being seen in terms of those wage rises for workers in the hospitality sector, for lorry drivers, and a range of other jobs.

For example, before lockdowns I had arranged for a plumber to come and do some work, but had to cancel it, due to the lockdowns.  Recently, I tried to get him to do the planned work, but he was fully booked up.  I tried a firm that I used to use to do my annual central heating service, but they told me they were not taking on new business till next year, because they could not cope with the work they already had.  They gave me the name of a plumber who used to work for them, but who had gone on his own, but he too was fully booked.  I have found the same thing with trying to get work done on my roof, and even a fencing company said they were not taking any new business till next year.

All of this is confirmed in the official data, which shows that there are now over 1 million job vacancies.  Its a similar picture to what is being seen in the US, where there is also an increase in the number of people quitting their existing jobs, because they can now get better paid jobs, just by moving to another company.  The government, and various pundits are claiming that the rise in wages is spurious, because, as well as these base effects from last year, there are also compositional effects.  That is that many of the jobs that have actually been lost over the last year are amongst those lower paid jobs, mostly occupied by young workers.  But, as was indicated above in relation to the hospitality sector, the shortage of workers there now means that wages have risen by 18%.

As furlough ends, there will undoubtedly be a rise in unemployment, as I have set out before.  In some sectors jobs will be lost.  In reality, we are likely to see they already have been lost, as workers in them left, and went to other jobs, or back to the EU, whilst employers continued to pocket the furlough money.  Many of those workers will not be in the right place, or have the required skills to fill the jobs where there is currently a large shortage.  You can't become a plumber or a roofer overnight, and now, unlike the early 2000's, when such a situation arose, we do not have the possibility of quickly obtaining a large number of skilled workers from the EU to fill the gap.

The government is blaming the rise in wages on a statistical freak and on COVID, but the real basis of the problem is a combination of Brexit and the excessive money printing that the Bank of England has been engaged in.  The problem lies with the government and its policies, and now it is trying to make pensioners pay the price for its Brexit disaster.