Winter Fuel payments to extend to pensioners on incomes of £35,000 or less
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.
The head of the UK’s biggest mortgage lender has said he expects two more interest rate cuts this year, making borrowing cheaper.
Chief executive of Lloyds Banking Group Charlie Nunn told Sky News he expected the Bank of England to make the cuts two more times before 2026, likely bringing the base interest rate to 3.75%.
Two cuts are currently anticipated by investors, the first of which is due to be a 0.25 percentage point reduction next month.
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The banking group owns Halifax and Bank of Scotland, making it the biggest provider of mortgages.
Mr Nunn also forecast house price growth of between 2 and 3%.
“We helped 34,000 first-time buyers in the first half [of the year] alone, 64,000 last year. And of course, it was driven by the stamp duty changes in Q1 [the first three months of the year]. So Q2 [the second three months] was a bit slower, but we continue to see real strength in customers wanting to buy homes and take mortgages. So we think that will continue,” he said.
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Expect two more rate cuts this year, says Lloyds boss
It comes as the bank reported higher profits than City of London analysts had expected.
Half-yearly profit at the lender reached £3.5bn as people borrowed and deposited more.
The bank has benefited from high interest rates, set at 4.25% by the Bank of England to control inflation, which have made borrowing more expensive for households and businesses.
Over the last six months, the difference between what Lloyds earns on loans and what it pays out rose.
Mr Nunn told Sky News the profits were due to increased market share in mortgages and small business lending, as well as productivity improvements.
Despite this, Mr Nunn warned the chancellor against raising taxes on financial services, saying it was one of the highest taxed in the world.
Chancellor Rachel Reeves is expected to announce tax rises in the autumn as her vow to bring down debt has come under pressure due to the rising cost of borrowing and government spending U-turns.
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