Neil Collins’ Notebook: Unlock! Time to scrap the Triple Lock
Will there ever be a better moment to signal the end of the wretched Triple Lock? This crowd-pleaser for geriatrics guarantees that the UK’s old-age pension will rise each year by the greatest of the Consumer Prices Index, average earnings, or 2.5 per cent. Introduced in 2010, it got the rickety coalition government round the next political corner and has cranked up the relative value of the payment no end. Now, though, there’s a roadblock ahead, as wages bounce back following the lockdown. The figure for the relevant annual rise in average earnings could be as high as 8 per cent as employees come off furlough and employers bid up for staff.
That would not only be ruinous for the public finances – adding about £5bn a year to spending on top of a 2.5 per cent increase – it would be a statistical freak following last year’s plunge in wages. More to the point, it looks like a grossly unfair windfall at the expense of the rest of the population who were forced to make personal sacrifices to try and protect the people who are getting the money. A more cynical calculation might conclude that we are still a long way off the next election, and even without Jeremy Corbyn, old (conservative) voters are unlikely to defect to Labour in large enough numbers to upset the sums.
If the political cost of a clear breach of this manifesto commitment is still considered too great, then future payments could be frozen until the CPI catches up with this year’s jump in earnings. If the pessimists are right, this might not take very long, as inflationary pressures are clear to see, from building materials and commodities to second-hand cars and electronic components. Pubs, restaurants, hairdressers and businesses which have had to borrow to stay alive will raise prices, otherwise they are simply working for their creditors. The labour shortage will also drive up their costs. The history of UK inflation shows that it is slow to get going, but once started requires crisis measures to stop.
So has Rishi Sunak the confidence and clout to end the iniquitous lock? Even arch-inquisitor Andrew Neil was unable to force a definitive answer from him on GB News this week, but breaking it would reassure those of us who fear that, working for a prime minister who has no idea about finance, the chancellor is powerless to bring public spending back to stability. An acid test, if you like.
Just don’t ask
Dangerous things, referenda (we know, we know). A month ago, polls showed that voters in Switzerland were 60 per cent in favour of approving the changes to their lifestyle needed to get to carbon neutrality by 2050. Nearly all the newspapers, commentators, politicians and the middle classes were on board. After all, they said, without action to curb global warming, the Alps would have no snow on them by then. This week the vote took place, and 51.6 per cent voted No.
It was the Swiss equivalent of the Brexit vote, and will cause as much trouble, so what happened? The few dissidents pointed out just how painful the move would be, especially for those outside the major cities. There would be no more oil or gas home heating, motor fuel and car purchase costs would rise punitively, flying would be restricted and expensive, and a ruinous carbon tax would be applied. The pain would fall on those least able to bear it.
Nothing that was being proposed is much different from what the citizens of the UK are being asked to bear, in our merry dance to the energy poverty that cutting back hydrocarbons entails. The difference is that the UK government dare not spell out the true costs, and it double-dare not ask us in a referendum. The Treasury is working on a document to give us some idea of the necessary extent of our sacrifice on the green altar, but no realistic assessment will ever see the light of day. It’s too painful to publish.
How very Wise
Pricing companies coming to the stock market for the first time is an art dressed up as science. The bankers do due diligence (or say they do) prepare detailed reports, go round big investors to assess the appetite for the stock, and collect fees, but this only disguises the fact that they often have hardly a clue. Too many recent flotations have left the sponsors looking silly, either because they were far too optimistic, (Deliveroo) or because their estimate of demand was hopelessly inadequate (Darktrace).
One answer is a direct listing, where the company is not raising money. It produces the numbers and then invites interested buyers to find a price at which some existing shareholders will sell. In the old days of the Stock Exchange it used to be called an introduction, and was rather frowned upon, particularly by those hoping for a cut of the action on launching a new issue. Now the irritatingly-named Wise, which grew up with the perfectly serviceable name of TransferWise, is trying the direct listing route.
Wise is no market minnow. Its owners expect it to be worth as much as £6bn, or a mere 55 times last year’s earnings. At that value it hardly looks a snip until you look into the price gouging on an epic scale that the banks practice on retail international money transfers. Not only do they charge commission, but there’s usually an uncompetitive exchange rate to start with. Wise specialises in these transfers. It has $75m of this $2tn market which is overdue for disruption. It may be that this upstart will force better behaviour onto the banks. Unless and until it does, it will warrant the eye-watering valuation that fashionable tech companies find themselves awarded.