Rachel Reeves to reinstate winter fuel payments for nine million pensioners

Times

2 days ago

Rachel Reeves has announced plans to restore winter fuel payments for all pensioners with an income of less than £35,000 in her biggest U-turn since taking office.
In one of her first acts as chancellor, Reeves stripped ten million people of the benefit, worth between £200 and £300 per year, in an effort to balance the books.
The decision was met with widespread criticism from cabinet ministers and backbenchers, and was blamed in part for Labour's poor performance in the local elections last month.
The chancellor announced that the payments will be reinstated for nine million pensioners, with money clawed back from higher income households at the end of the next financial year.
The Treasury said that only about two million pensioners would miss out.
It is not clear how the government will pay for the move. Ministers admitted the new threshold would cost the government £1.25 billion — wiping out all but £250 million of the planned £1.5 billion worth of savings from restricting the benefit this year. However, the government insisted that even after the U-turn the policy would save £450 million.
The Treasury said Reeves would set out how the shortfall will be covered in the autumn budget amid warnings that it would require tax rises in other areas in order for the chancellor to hit her fiscal rules. Ministers said that the cost of the change would not be paid for through additional borrowing.
The delay to explaining how the policy change will be paid for is likely to lead to accusations that the chancellor is making an unfunded pledge, something she has repeatedly insisted she will not do. The government argues that it is right to defer the announcement until the autumn budget, when decisions on tax and spending are made.
Reeves insisted that her original decision had been the right one. Economists pointed out that the fiscal picture is significantly worse now than it was then.
She said: 'Targeting winter fuel payments was a tough decision, but the right decision because of the inheritance we had been left by the previous government. It is also right that we continue to means-test this payment so that it is targeted and fair, rather than restoring eligibility to everyone including the wealthiest.
'But we have now acted to expand the eligibility of the winter fuel payment so no pensioner on a lower income will miss out. This will mean over three quarters of pensioners receiving the payment in England and Wales later this winter.'
Kemi Badenoch, the Conservative leader, said Starmer was attempting to 'clear up a mess of his own making'.
'This humiliating U-turn will come as scant comfort to the pensioners forced to choose between heating and eating last winter,' she said.
Under the plans, the payments will be restored to all pensioners this winter. The government will then recoup the money from those earning more than £35,000 automatically through their tax bills.
The announcement will be seen as an attempt by Reeves to clear the decks before the spending review on Wednesday. The review will allocate £113 billion on infrastructure such as public transport schemes and nuclear energy.
It will also increase the NHS budget by about £30 billion a year and boost investment in the Ministry of Defence. However, there are likely to be some significant losers, as unprotected departments face real-terms cuts.
Yvette Cooper, the home secretary, is still in negotiations with Reeves over her budget amid a row over police funding. The chancellor has offered the home office a real-terms increase in police funding. However, Cooper argues that this is not enough to cover the cost of meeting the government's flagship pledge to recruit 13,000 more neighbourhood police officers.