Conservative-DUP deal: what it means for pensions, benefits and more

A deal between the Conservatives and the DUP has been struck. Find out what the ‘confidence and supply’ agreement means for your pension and benefits.

The Conservatives have managed to strike a deal with the Democratic Unionist Party (DUP), two weeks after the disastrous general election result where the Tories failed to win an outright majority.

The ‘confidence and supply’ agreement means the DUP’s 10 MPs will support the Conservative Government in key Commons votes like the bills set out in the Queen’s Speech and the Budget.

But the deal has come at a price. Apart from a reported £1 billion bung for Northern Ireland over the next two years, the Tories have had to back down over some major manifesto pledges on pensions and benefits.

Pensions

The Tories had laid out plans to scrap the State Pension ‘triple lock’, which ensures pensioner income rises by the higher of inflation, average earnings or 2.5% each year.

It wanted to replace it with a ‘double lock’ system in 2020, which would have meant the State Pension rises by the higher of average earnings or inflation.

However, the DUP opposed this pledge and under the new deal the Government has agreed to keep the triple lock in place.

This means that, regardless of what happens to inflation or earnings over the coming years, pensioner incomes are guaranteed to rise by at least 2.5% a year.

The triple lock has been a contentious topic for some time as it is estimated to add £6 billion a year to the State Pension bill.

However, rising inflation is starting to make the triple lock obsolete. Inflation as measured by the Consumer Price Index (CPI) is currently at 2.9% and expected to climb throughout the year.

Benefits

The pledge to make the Winter Fuel Payment means tested has also been scrapped.

This benefit pays up to £300 a year to help pensioners with fuel bills – whether they need it or not.

The scheme costs £3 billion, which the Institute for Fiscal Studies reckoned could have been halved by moving to a means-tested system. The money raised was supposed to go towards health and social care.

However, the DUP pledged to “resist any assault” on this kind of benefit, which explains why it has been dropped.

Brexit

One of the main reasons a DUP-Tory partnership makes sense is that they both support Brexit.

The new Tory-DUP agreement solidifies that: “In line with the parties’ shared priorities for negotiating a successful exit from the European Union and protecting the country in light of recent terror attacks, the DUP also agrees to support the Government on legislation pertaining to the United Kingdom’s exit from the European Union; and legislation pertaining to national security.”

However, despite this united front there could still be tensions behind closed doors.

While Theresa May repeatedly campaigned for a hard Brexit – effectively a clean break from Europe – the DUP are more in favour of a soft Brexit.

The DUP has stated that it wants to retain a “frictionless border with the Irish Republic assisting, those working or travelling in the other jurisdiction.”

It’s also called for “comprehensive free trade and customs agreement with the European Union”, and for “business to retain competitiveness and not face additional costs.”

Clearly these do not fit within the hard Brexit remit, so some further concessions will likely need to be made going forward.

'Off the hook'

Tom McPhail, head of policy at pension firm Hargreaves Lansdown, commented that the Conservative-DUP deal has let the Tories off the hook with their key voters.  

He said: “The Conservatives’ assumption they could win the election comfortably whilst withdrawing policy support from their core constituency of older voters back-fired painfully.

"The DUP position of retaining the triple lock and the winter fuel payment allows the Conservatives a welcome way out of this bind in the short-term.” 

Others think the DUP deal could mean more benefits for pensionsers.

Steve Webb, Director of Policy at Royal London said: "Retaining the triple lock is likely to be relatively cheap, now that inflation has risen above the 2.5% floor. 

"Means-testing winter fuel payments was always going to be complex and controversial, so many Conservative MPs will be pleased to see this policy ditched. However, the DUP decision to back Conservative Finance Bills probably means a greater likelihood of getting cuts to pension tax relief through Parliament."

The Queen’s Speech delivered last week revealed the other key Tory pledges that have been dropped.

Missing from the legislative agenda for the next two years were changes to school lunches, the introduction of an energy price cap and controversial plans to reform how we pay for social care. For more take a look at: Queen’s Speech 2017: what it means for your money.

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