Analysis: Rachel Reeves Has Been Left Humiliated By Winter Fuel U-Turn
She tried to put a brave face on it, but there is no doubt that the U-turn on her decision to remove winter fuel payments from 10 million pensioners is a humiliation for Rachel Reeves.
The chancellor confirmed today that she was raising the income threshold to qualify for the benefit, meaning millions more old folk will qualify for it this year.
Her climbdown followed a furious public backlash to the policy – and mounting anger among Labour MPs.
Reeves' reputation as an 'iron chancellor' has taken a battering from which it may never recover.
What's more, her explanation for why she has junked one of her signature policies does not stand up to a moment's scrutiny.
She told Sky News: 'I had to make urgent decisions last year to put the public finances back on a firm footing. We inherited a £22 billion in-year black hole in the public finances.
'I was always clear that the number one priority of this government was to return stability to the economy.
'We did that with a number of difficult decisions, but because of those decisions our public finances are now in a better position, which means that this year we're able to pay the winter fuel payment to more pensioners.'
But it is misleading in the extreme to suggest that, after 11 months of a Labour government, everything in the Treasury garden is now rosy.
Both the Office for Budget Responsibility and the OECD have downgraded their forecasts for the UK economy, not least because the impact of Donald Trump's tariffs have yet to take effect.
The idea that there is suddenly a load of spare cash to pay the £1.5 billion the winter fuel U-turn till cost is simply not true.
Indeed, Downing Street has admitted that we'll need to wait until the autumn Budget to find out how it will be paid for. How's that for a fiscal black hole?
On Wednesday, Reeves will announce how much money each government department will have to spend over the next three years as she unveils the result of her spending review.
She was already under huge pressure to explain how she plans to make the government's sums add up.
The winter fuel shambles means she has even less room for manoeuvre.
Revealed: Which Pensioners Will Get Winter Fuel Payments Again After Labour U-Turn
Rachel Reeves Confirms More Pensioners Will Get Their Winter Fuel Payments This Year
'Cack-Handed': Laura Kuenssberg Slams Labour's U-Turn Over Winter Fuel Payments
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Yahoo
20 minutes ago
- Yahoo
Labour MPs call for action on benefits after winter fuel U-turn
Labour MPs have broadly welcomed the government's decision to reinstate winter fuel payments for three-quarters of pensioners but some are using the U-turn to renew their calls for planned benefit cuts to be reversed. Nine million pensioners in England and Wales with an annual income of £35,000 or less will now be eligible for up to £300 to help with energy bills this winter. Labour MPs thanked the government for listening to their concerns, arguing means testing the payment was fair but that the threshold was set too low last year. However, several urged ministers to also think again on planned cuts to disability payments, while others called for the two-child benefit cap to be scrapped. Under planned changes to the benefits system it would be harder for people with less severe conditions to claim personal independence payments (Pips), while the government is promising more support to help people get into work. While the two-child benefit cap policy prevents most families from claiming means-tested benefits for any third or additional children born after April 2017, which critics say has pushed people into poverty. Ministers are considering lifting the cap, with a decision expected in the autumn, when a child poverty strategy is published. Pressure from Labour backbenchers over the issues - as well as on winter fuel payments - has been growing since the party's poor performance at local election's in May. The winter fuel payment was previously paid to all pensioners but last year the government announced only those receiving pension credit or another means-tested benefit would be eligible in England and Wales. The original cut last year was estimated to save £1.7bn, with the government arguing it was necessary because of the state of the public finances. But the move, which meant more than 10 million pensioners did not receive the payment in 2024, was criticised by charities, unions, opposition parties and many Labour MPs. Following mounting pressure, Prime Minister Sir Keir Starmer announced a U-turn last month, with the details of who will get the payment this winter set out on Monday. The chancellor said she would detail how the £1.25bn policy would be paid for in the autumn Budget. How much is the winter fuel payment and who will get it? Labour hope to put winter fuel misstep behind them At-a-glance: Key changes to benefits in welfare shake-up Imran Hussain was among the Labour MPs to call for the planned benefit cuts to be scrapped in response to a government statement in the Commons on changes to winter fuel payments. "It is clear the government has listened, so I ask them to listen again to the growing calls in this chamber and scrap their planned, devastating cuts to disability support," the MP for Bradford East said. Fellow Labour MPs Nadia Whittome and Richard Burgon also welcomed the winter fuel U-turn but urged the government to listen to backbench concerns over benefit cuts. In response, Torsten Bell, who is both a Treasury minister and pensions minister, told MPs there needed to be "a better system focusing on supporting those who can work into work". He added that the status quo - where 1,000 people a day are going onto Pips - was not "a position that anybody should support". Labour MP Rachael Maskell, who has been a leading campaigner for restoring winter fuel payments, welcomed the government's change in policy, saying it was "long overdue". She told BBC Radio 4's World at One programme the £35,000 salary threshold for the payment was a "sensible measure". However, Maskell called on the government to consider a larger payment following increases in energy prices over the past year. The MP for York Central also urged a rethink on planned benefit cuts, adding: "You can't rob disabled people in order to pay older people, that doesn't make sense." Meanwhile, she was among several MPs to reiterate their calls for the government to scrap the two-child benefit cap. In the Commons Rebecca Long Bailey, Labour MP for Salford, also asked for reassurances minsters "are doing all they can to outline plans to lift the two-child cap on universal credit as soon as possible" to bring children out of poverty. In response Bell said "all levers to reduce child poverty are on the table". The minister added: "She's absolutely right to raise this issue, it is one of the core purposes of this government. "We cannot carry on with a situation where large families, huge percentages of them, are in poverty." The Conservatives have called for the government to apologise to pensioners who lost out on winter fuel payments last year. Shadow work and pensions secretary Helen Whately described the U-turn as "the most humiliating climbdown a government has ever faced in its first year in office". She told the Commons "this rushed reversal raises as many questions as it answers", arguing the move was "totally unfunded" and could lead to tax rises. Liberal Democrat leader Sir Ed Davey said: "Finally the chancellor has listened to the Liberal Democrats and the tireless campaigners in realising how disastrous this policy was, but the misery it has caused cannot be overstated. "Countless pensioners were forced to choose between heating and eating all whilst the government buried its head in the sand for months on end, ignoring those who were really suffering." Sign up for our Politics Essential newsletter to read top political analysis, gain insight from across the UK and stay up to speed with the big moments. It'll be delivered straight to your inbox every weekday.
Yahoo
20 minutes ago
- Yahoo
The benefits system is out of control
The decision to axe the winter fuel payment for most pensioners must rank among the most ill-judged policies introduced by a Chancellor in recent times, and there is strong competition for that accolade. Rachel Reeves made the decision shortly after taking office because she said it was necessary to help plug a £22 billion 'black hole' she had discovered in the nation's finances. Her argument might have had some merit had she not then blown much of the savings on pay rises for train drivers and public sector workers. The juxtaposition of help for Labour's union allies while pensioners shivered rapidly became toxic for the Government, generating one of the fastest reversals of support for any new administration. In the end, with Reform advancing in the polls – and pledging to restore the payment – Sir Keir Starmer ordered a screeching U-turn which the Government maintains is possible because the economy is doing so well, as if anyone believes that. Now, instead of around 1.5 million older people on pensioner credit receiving the payment, it will be paid to about nine million OAPs with an income below £35,000. Why this figure has been chosen is as much a mystery as other 'cliff edge' sums that abound in our overly complex tax and benefit system. Indeed, this U-turn just makes it even more convoluted. Everyone will receive the payment but it will then be clawed back from an estimated two million people earning more than the £35,000 threshold via PAYE or a tax return. In other words, yet more red tape will be imposed to make a quarter of pensioners return an allowance that began life in 1997 as a universal benefit. Although many better-off pensioners often said they did not need the money, and many gave it to charity every Christmas, at least it was straightforward. To some extent so was limiting it to people on pensioner credit, since that is already linked to income. But what is now proposed is a dog's breakfast, with opt-outs and other implications still to be resolved. Tomorrow, Ms Reeves will unveil her spending plans for the next four years. She is being urged to get a grip on the rapidly expanding benefits budget; but if this experience is to be our guide, there is little chance that it will ever be reined in. Broaden your horizons with award-winning British journalism. Try The Telegraph free for 1 month with unlimited access to our award-winning website, exclusive app, money-saving offers and more.
Yahoo
28 minutes ago
- Yahoo
Federal vs. private student loans: What borrowers should know
Many student loan borrowers may not realize how different federal and private loans can be when it comes to repayment. Student Loan Servicing Alliance executive director Scott Buchanan explains what to know about repayment plans, budgeting strategies, and how to handle loans in default. To watch more expert insights and analysis on the latest market action, check out more Wealth here. While student loans offer a grace period for repayment, you will usually eventually have to pay them back. Yeah. All week, we're giving you everything that you need to know about paying back this money. And today, we're breaking down the difference between paying off federal and private student loans. For that, we have Scott Buchanan, who's the Student Loan Servicing Alliance Executive Director. Scott, good to have you here with us. So let's start by explaining the difference between federal and private loans. Yeah. Thanks, Brad, for having me. Um, yeah, the difference is primarily is who is the lender. Um, federal student loans are lent directly by the federal government using money from Treasury. And private education loans are generally made by banks or other financial institutions, um, using sort of a private credit. Um, they're very similar in private education loans to other consumer credit like credit cards or mortgages or things like that where there are there's a test of credit worthiness, um, that that the lender will make. Um, as opposed to the federal student loan program where generally, it's a federal entitlement, and so if you're going to school have filled out the FAFSA, then you're entitled to get those loans. How should borrowers approach federal loans? Listen, federal loans are incredibly flexible in terms of your repayment options. You need to know what kind of loan you have. Do you have a unsubsidized loan? Do you have a plus loan or things like that, um, because they can have different benefits. But there's a lot of options, including forbearances, deferments, income-driven repayment plans, um, that can all dramatically adjust your monthly payment amount. Um, so something you need to always look at is the total balance of your loans and thinking about even when you're in school and thinking about potential repayment, remember you're going to have to borrow the course of two or four years. Um, and think about that in your repayment options. What about private loans? When should borrowers consider applying for them? Listen, you should always apply for these loans as early as possible. Once you get your federal financial aid award letter from your institution, talk to the financial aid office. Make sure you've maximized any institutional aid, um, that you can possibly get that would reduce the amount you have to borrow. Figure out how much federal loan ability you have, and then determine what your gap is going to be because the federal loans may not cover all your costs, and that's when you might turn to private education loans. And doing so earlier is better because you can shop around on private education loans and find a lender, um, who's got the best offering for you in terms of an APR, um, and the best sort of program options that are available under that loan. So what should the plan of attack be for repayment? Yeah. Well, listen, make a budget like all financial things. Um, you need to know in advance, like that's sort of the advantage of of of, you know, sort of going to school and having this period of time generally when we don't have to make repayment. You have plenty of time to put together sort of what your plan of action is going to be when you graduate and leave. Um, so, you know, number one, don't overborrow in the first place, as I always say. Um, but if you have already borrowed, um, then make sure that you sit down, figure out each monthly payment that you're going to have, the differences between your federal and your private loans because they're going to all have different monthly payments, different interest rates, um, and then put together a budget, a plan of action about how you're going to do it. If, remember, when you first graduate, your income is likely to be a lot lower than it will be in the future, that's when you need to talk to your federal loan servicer and say, hey, here's my financial situation on the federal student loans. How can I lower my monthly payment or how can I meet this this budget that I have today? And they're going to have a lot more options, whereas on the private loan side of things, um, it's going to be relatively set about the monthly payment. If your loan has gone into default, what are the steps that you should start to take to make sure that you get back into good standing? Yeah. Well, that's very different between federal and private loans as well. But on the federal student loan, um, once you reach 270 days delinquent, your loan can go into default. And that's when you need to call the Default Resolution Group at the Department of Education. Um, they will reach out and let you know that you're in default, and your servicer will as well. Um, but that's who you need to talk to. There are lots of options, including rehabilitating the loan, potentially consolidating the loan, um, because getting out of default, um, is something that you definitely want to do. And that's why loan rehabilitation would probably be your best bet on federal student loans because that removes that default from your credit history. On private education loans, it's different, and that's why you need to be very mindful about keeping on top of those private education loans because once they go into default and charge off, there's not a whole lot you can do other than sort of negotiate a settlement or potentially a repayment plan, um, to try to resolve the total amount of that debt. And so once you have finally gotten to the point where you've fully paid off your student loans, then at that point, how are you kind of able to take advantage of other tax advantages as well that you should be making sure that you're also reporting? Sure, absolutely. Uh, there's a there's a federal interest deduction on on student loans that you can take advantage of potentially. Now, that is tied to income. Um, so, you know, the higher income you are, the less likely are you to be able to take that benefit. But you should definitely during all of your repayment make sure that you're uh that you're uh as you're doing it in TurboTax or working with your accountant, make sure that you calculate the amount of interest that you pay. You'll get a statement from your loan servicer, just like you get W-2s and other things, um, from uh from your employer, and they will tell you how much interest may be eligible, and you should definitely take advantage of that. Scott, thanks so much for taking the time and breaking this all down.
