The Prime Minister’s conference speech was a week ago, but there is still plenty of confusion about how it should be interpreted. Indeed that confusion may be partly shared by Burnham himself. Here is what I think it all means. The Triple Lock The Triple Lock is the way the UK state pension has been uprated every year for more than a decade, and it has led to pensions rising faster than earnings. Whatever you may think about this so far, it is clearly unsustainable in the long run without additional tax rises or spending cuts, given that the state pension is paid for by those currently working, and the ratio of those receiving a pension to those working is rising not falling. This unsustainability is clear in the OBR’s long term projections that I discussed here. The UK state pension is well below the level in many European countries, but that is because the UK has always had a mixed system of public and work-based pensions. There is a good argument for increasing the state element in that mix, but also a clear argument against. [1] However the Triple Lock is a strange way of increasing the state element, because it does it in an unpredictable way. It would be better for many reasons to make a shift towards a bigger state pension an explicit policy goal.[2] . The reason why ending the Triple Lock is such a political risk is that it will be portrayed by political opponents as an attack on current pensioners, and pensioners tend to vote in greater numbers than workers. Since Burnham’s speech that is exactly what has happened. This is the first misconception. Pensioners only benefit from the Triple Lock when earnings increase by less than inflation or 2.5%, and the number of periods when that will happen for most current pensioners will be small. The real benefit comes for those currently working, because the number of such periods will be larger by the time they start receiving a pension. Unfortunately intertemporal thinking is beyond most political/media discourse, so ending the Triple Lock will be portrayed as an attack on current pensioners. Burnham is to be congratulated for having the political courage to adjust the Triple Lock so that it moves with rather than beyond earnings over the medium term. He is also to be congratulated for having the political skill to link ending the Triple Lock with the establishment of a National Care Service. He has made it look like the former is necessary to create the latter, producing a benefit that goes with the cost of slightly lower pensions. Polls taken just after the speech confirm this. But in this case linking extra spending to budget savings is about politics rather than economics, as I note below. Although the Triple Lock is not planned to end until 2030, legislation will be introduced before the next election, so the battle over this is not being postponed until the next election. A National Care Service Getting the state to pay for elderly care in the same way as it pays for most other health needs through the NHS is about insurance. We don’t know when we might need health care, and such care is very expensive, so it makes sense to take out insurance against that possibility. But for well known economic reasons it is very difficult for the private sector to provide that insurance, and much easier for the state to do so, which is why the NHS makes sense. Exactly the same arguments apply to insuring against the need for non-NHS care when we grow old. (In fact most state spending is about insurance.) Extending state insurance to cover elderly care requires people to pay insurance premiums, which means paying more tax, or cutting some other spending. Resistance to higher tax is a key reason why previous attempts to do this have failed. For the moment at least, Burnham has avoided this problem by suggesting that ending the Triple Lock will fund the new National Care Service. Which may be fine politically, but as the OBR’s fifty year projections make clear this doesn’t hold water in economic terms, because this element of the Triple Lock was never sustainable beyond the short term. Saying otherwise means the government is in effect replacing one unsustainable element of spending with another. Whether Burnham understands this but just wants to keep the trade-off alive for political reasons is unclear. The reality is that introducing the National Care Service will require higher taxes, and if this service is also to raise the quality of care and the wages of carers (as Burnham suggested), taxes will have to be significantly higher. More than ever a new Labour leader needs a Chancellor who is able to deliver what he needs. Whether he will is the biggest question mark behind Burnham’s speech. The EU, Electoral Reform and more One other notable feature of Burnham’s speech was the acknowledgement that Brexit has not worked and that some substantive reversal of it will be required, including the possibility of rejoining. Another misconception among some is that the speech didn’t talk enough about economic growth. This misses the fact that a substantive realignment towards the EU on trade is the most assured and probably largest pro-growth measure the government could take. Burnham’s recognition that the tipping point in terms of popular opinion on Brexit has been reached is overdue. In addition, it allows the government to pinpoint the blame for the lack of growth in living standards over the last decade on Brexit and those that campaigned for it. The government can now investigate whether popular opinion would be happier to move towards the EU incrementally, or whether a seat at the table will be seen as sufficiently important for ‘going all the way’ to become the preferred option. Of course a lot of