Key facts
- The OECD recommended reforming the UK's state pension triple lock to reduce fiscal risks.
- The OECD urged the UK to maintain budget discipline and address high energy prices.
- The OECD suggested an alternative to the triple lock would be an average of earnings and inflation.
- The OECD estimates that reforming the triple lock could save 2% of GDP in the long term.
- The OECD advised against raising tax rates, focusing instead on efficiency and revenue.
- The OECD forecasts UK economic growth at 0.9% this year and 1.1% in 2027.
The Organisation for Economic Co-operation and Development (OECD) has urged the UK to reform its state pension triple lock to mitigate fiscal risks and improve economic growth. The Paris-based club of industrialised nations suggested that the current guarantee, which uprates state pensions by the highest of wage growth, inflation, or 2.5%, puts upward pressure on public expenditure and adds significant fiscal risks.
The OECD's latest survey of the UK economy also called for budget discipline and action on energy prices, noting that modest growth, high public debt, and increasing spending pressures limit fiscal space. The organization forecasts UK economic growth at 0.9% this year and 1.1% in 2027, with downside risks from the Middle East conflict and global trade fragmentation.
In its assessment, the OECD suggested that an alternative to the triple lock could be an average of earnings and inflation, estimating potential long-term savings of 2% of GDP. It also recommended improving hospital productivity and cautioned against raising tax rates, prioritizing efficiency and revenue over headline rates. Prime Minister-elect Andy Burnham, set to take office next week, faces pressure to adhere to fiscal rules while potentially increasing public spending.