Winter fuel payments will extend to everyone over the state pension age with an income of or below £35,000 a year, Chancellor Rachel Reeves has announced.

The Treasury said the change will cost around £1.25bn in England and Wales but still save £450m if the universal allowance had been kept.

Politics Live: Chancellor makes winter fuel announcement

Dropping the benefit for all pensioners was one of the first things Labour did in government, despite it not being in their manifesto.

The change meant only those on pension credit or other benefits were eligible – a deeply unpopular move that was widely blamed on the party’s poor performance in May’s local elections.

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Ms Reeves 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.”

The government signalled its intention to widen eligibility last month, but no detail was given on what the new threshold might look like.

The lack of clarity threatened to overshadow Ms Reeves’ spending review on Wednesday, when she will set out what funding has been allocated to each government department over the next three years.

The chancellor repeatedly faced questions on winter fuel during a speech in Manchester last week to promote a £15.6bn funding settlement for local transport projects, when she said changes would be in place for this winter.

However ministers still could not give further detail, with Science Secretary Peter Kyle telling Sky News on Sunday that the new eligibility would be set out “in the run up to the autumn”.

It is still not clear how the new policy will be funded, with the costs to be accounted for in the autumn budget.

Asked by Sky News’ deputy political editor Sam Coates if the change is a signal to markets that she can’t say no to her MPs, Ms Reeves said after her spending review “markets and the public will be able to see public services living within their means”.

‘Humiliating U-turn’

Tory leader Kemi Badenoch said: “Keir Starmer has scrambled to clear up a mess of his own making. I repeatedly challenged him to reverse his callous decision to withdraw winter fuel payments, and every time Starmer arrogantly dismissed my criticisms.

“This humiliating u-turn will come as scant comfort to the pensioners forced to choose between heating and eating last winter. The prime minister should now apologise for his terrible judgement.”

The Treasury said that by setting the threshold at an income of £35,000, over three-quarters of pensioners – around nine million people – will benefit.

The universal system meant some 11.4 million pensioners were in receipt of the benefit, which was slashed down to 1.5 million when the initial means-test was brought in.

The new threshold is above the income level of pensioners in poverty and broadly in line with average earnings, the Treasury said.

No pensioner will need to take any action as they will automatically receive the payment this winter.

US chipmaker Qualcomm has agreed a $2.4bn (£1.8bn) takeover of Alphawave – a deal set to result in another UK tech firm falling into foreign hands.

Shareholders in the UK firm, which designs semiconductors attractive in artificial intelligence (AI) development, will receive 183p per share under the terms.

The price represents a 95% premium to that seen before Qualcomm disclosed its interest.

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News of the agreement was announced as the annual London Tech Week got under way in the capital, with Prime Minister Sir Keir Starmer speaking of tech’s importance to the UK’s prospects.

Softbank-owned chipmaker ARM – previously a London-listed firm before it was snapped up under a £32bn deal in 2016 – had also been chasing Alphawave but has since walked away.

The UK company’s “serdes” technology is said to be the main prize within the deal.

It underpins the speed at which data is processed by chips – crucial for AI development.

Qualcomm said the deal would bolster its enhancement of AI. Its chips have been widely used by Apple and Samsung though its interest in iPhones has recently been curtailed through the development of Apple’s own chip components.

Alphawave said it considered the terms of the cash offer to be fair and reasonable and that it intended to unanimously recommend it to its shareholders.

In his speech marking the start of London Tech Week, the PM said tech and AI were “absolutely central” to the UK.

Cheap valuations and a weak pound have made UK firms attractive to US investors in recent years, while a number of UK listed firms have shifted primary listings to the United States in a bid to attract greater investment.

The government has moved to make UK listings more attractive as part of its growth agenda.

The prime minister launched a new free government partnership with industry, including Nvidia, Amazon, Google and BT, to train 7.5 million UK workers in essential skills to use AI by 2030.

A separate “TechFirst” initiative will roll out AI training to every secondary school over three years.

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Sir Keir told the audience in central London: “AI and tech makes us more human, which sounds an odd thing to say, but it’s true.

“We need to say it because… some people out there are sceptical. They do worry about AI taking their job.”

He said: “For people listening to us, they worry about will it make their lives more complicated? Even for businesses who get it, the pace of change can feel relentless.”

Sir Keir added: “I believe the way that we work through this together is critical.”

“It’s a big deal for this government,” says Simon Case.

“It’s the clearest indication yet of what they plan to do between now and the general election, a translation of their manifesto.

“This is where you should expect the chancellor to say, on behalf of the government: ‘This is what we’re about’.”

As the former cabinet secretary, Mr Case was the man in charge of the civil service during the last spending review, in 2021.

On Wednesday, Rachel Reeves will unveil the Labour government’s priorities for the next three years. But it’s unclear whether it will provide all that much of an answer about what it’s really about.

Unlike the Autumn budget, when the chancellor announced her plans on where to tax and borrow to fund overall levels of spending, the spending review will set out exactly how that money is divided up between the different government departments.

Since the start of the process in December those departments have been bidding for their share of the cash – setting out their proposed budgets in a negotiation which looks set to continue right up to the wire.

This review is being conducted in an usual level of detail, with every single line of spending assessed, according to the chancellor, on whether it represents value for money and meets the government’s priorities. Budget proposals have been scrutinised by so called “challenge panels” of independent experts.

It’s clear that health and defence will be winners in this process given pre-existing commitments to prioritise the NHS – with a boost of up to £30bn expected – and to increase defence spending.

On Sunday morning, the government press release trumpeted an impressive-sounding “£86bn boost” to research and development (R&D), with the Science and Technology Secretary Peter Kyle sent out on the morning media round to celebrate as record levels of investment.

We’re told this increased spending on the life sciences, advanced manufacturing and defence will lead to jobs and growth across the country, with every £1 in investment set to lead to a £7 economic return.

But the headline figure is misleading. It’s not £86bn in new funding. That £86bn has been calculated by adding together all R&D investment across government for the next three years, which will reach an annual figure of £22.5bn by 2029-30. The figure for this year was already set to be £20.4bn; so while it’s a definite uplift, much of that money was already allocated.

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Peter Kyle also highlighted plans for “the most we’ve ever spent per pupil in our school system”.

I understand the schools budget is to be boosted by £4.5bn. Again, this is clearly an uplift – but over a three-year period, that equates to just £1.5bn a year (compared with an existing budget of £63.7bn). It also has to cover the cost of extending free school meals, and the promised uplift in teachers’ pay.

In any process of prioritisation there are losers as well as winners.

We already know about planned cuts to the Department of Work and Pensions – but other unprotected departments like the Home Office and the Department of Communities and Local Government are braced for a real spending squeeze.

We’ve heard dire warnings about austerity 2.0, and the impact that would have on the government’s crime and policing priorities, its promises around housing and immigration, and on the budgets for cash-strapped local councils.

The chancellor wants to make it clear to the markets she’s sticking to her fiscal rules on balancing the books for day-to-day spending.

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But the decision to loosen the rules around borrowing to fund capital investment have given her greater room to manoeuvre in funding long-term infrastructure projects.

That’s why we’ve seen her travelling around the country this week to promote the £15.6bn she’s spending on regional transport projects.

The Treasury team clearly wants to focus on promoting the generosity of these kind of investments, and we’ll hear more in the coming days.

But there’s a real risk the story of this spending review will be about the departments which have lost out – and the promises which could slip as a result.