Chancellor makes ‘mistake’ with Winter Fuel Payment – but she has chance to make corrections

Published

10 months ago

September 1, 2024

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Liberal Democrat leader Sir Ed Davey calls it “the first big mistake this government has made”.

The decision by the new Labour Chancellor Rachel Reeves to axe the £300 Winter Fuel Payment for 10 million pensioners forever is probably the biggest domestic headache for Prime Minister Sir Keir Starmer as MPs return to Westminster from their summer holidays this week.

It may soon lead to the first big climbdown by the incoming government.

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In the first few weeks after winning July’s general election, Labour has used its honeymoon to blame the last Conservative government for the poor state of the nation and the dim prospects for recovery.

Ministers exposed two “black holes” – the first is the gap between planned annual expenditure and expected income and borrowing. A subject widely discussed by everyone except the leading politicians during the recent election campaign.

More dramatically, on 29 July Reeves accused the Conservatives of hiding a further £22bn shortfall in the current year’s finances.

Her response was to make “incredibly tough choices”, including limiting what had been a flat payment to all pensioners to only those on pensioner credit or other benefits.

This equates to just over a million of the total of more than 11 million who have been receiving the payments – those with incomes of £12,600 a year or less, a “very, very low” figure in the words of Martin Lewis, the personal finance expert.

At the same time as the cutbacks for the elderly, the chancellor announced she had found the cash to fully fund the above-inflation pay awards for the public sector and to buy off strikes by rail and doctors’ unions.

These payouts account for around half of the short-term black hole Reeves claimed she had been left by the Tories, according to the Institute for Fiscal Studies.

Reeves ‘caved meekly’

Impetuosity and inexperience lie behind the troublesome winter fuel announcement – for which no properly argued explanation, beyond regret, was offered.

Reeves appeared to have caved meekly to the Treasury’s traditional bean-counting smallness, which often looks better on the spreadsheet than in the real world.

For a start, if implemented as the government says it intends, it would not even save the relatively paltry £1.5bn intended.

Currently, 866,000 poor people, some 30% of those eligible, do not take up pension credit. The government says it plans a drive to encourage applications.

Were they all to be successful the Exchequer would be out of pocket, spending more not saving.

Chancellor’s easy pickings

A philosophical undertow in Starmer’s Labour also helps explain why pensioners were the first call for his chancellor’s easy pickings. Starmer does not declare “we are all in it together”; his concerns are more focused on “working people“.

Most pensioners, especially the oldest, do not work. Starmer says he prefers to spend the money on making the trains run and shorter NHS waiting lists – mainly to benefit the workforce who he is relying on to deliver growth.

There is also a perception that it is time to level out (“up” is not the right word in this context) because pensioners have done better than younger cohorts in recent decades.

The last Labour government made ending pensioner poverty a priority and successive governments have kept the triple lock in place for state pension increases.

As a result, the former Conservative cabinet minister David Willetts, who now heads the Resolution Foundation, reports that pensioner incomes have doubled while incomes for the rest have only gone up by half in the same time period.

The difficulty for Labour is that comparisons between the generations are only relative. And relative pensioner poverty has actually gone up from 13% in 2011-2012 to 16% in 2022-23.

Reeves has created a painful cliff edge by limiting winter fuel payments to those on an income of £230 a week.

Pensioners not where Labour gets votes

There are millions of pensioners just above that red line who are also struggling to get by. This winter that will be even harder because the energy regulator Ofgem has approved a 10% rise in the energy price cap, on average that means a £500 annual increase in bills.

Pensioners are not where Labour gets its votes. The party’s constituency is “working people”.

The Conservatives focused heavily and unsuccessfully on older voters in this year’s general election. As it turned out, a voter had to be aged 62 or over to be more likely to vote Conservative than Labour.

Nobody is Malthusian enough to say that it would be a good thing if pensioners die of cold, but the fact remains that the growing percentage of the population which is elderly is a major economic problem in developed countries, including Britain.

Until now, winter fuel payments (worth £300 to the over-80s and £200 to younger pensioners) were paid out automatically to all pensioners regardless of wealth.

Some poorer pensioners have also been eligible for a cost of living payment worth up to £300 and a one-off warm home discount of £150.

These payments should not be confused with the discretionary means-tested cold weather payments made by councils in the event of a sustained period of freezing temperatures.

Badly designed scheme

Starmer complained at his news conference last week that winter fuel payments are “not particularly well designed”. By which he meant that wealthier pensioners who do not need the money were getting it.

That is true, although it could be regarded as a tax allowance. Reeves has rushed into introducing another badly designed scheme which will have millions of victims.

Her speech had relatively little impact when she delivered it at the start of the summer holidays on 29 July. Now the news has sunk in, 450,000 people have signed an Age Concern petition against the plan.

Conservative MPs have tabled an early day motion against it, which could force the government to hold a vote. Meanwhile, mainstream loyalist MPs are expressing their concern in private.

Slump in government’s popularity

The generations are not taking sides against each other. Young people face much greater costs for higher education and are struggling to buy their own homes.

But, on average, there are also significant transfers of money down the generations as parents and grandparents do what they can to help out.

The government’s popularity has slumped in opinion polls. Only 23% approved of the government, compared to 51% who disapproved in YouGov’s survey last week. The fuel payment cut is opposed by all age groups.

Conservative politician Gavin Barwell gloated: “This is what happens if you aren’t straight with the people before polling day – and yes, the Conservatives weren’t either – and say you have to cut fuel payments for all but the poorest pensioners because there’s no money while offering public sector workers more generous pay deals.”

As her critics are pointing out, Reeves could have avoided controversy, and made the new system fairer, if she had simply said that from now on the payments would be taxable, as pensions already are. But she chose not to.

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Instead, she made a similar mistake to former Labour chancellor Gordon Brown, who, by the way, introduced the Winter Fuel Payment. Brown abolished the 10p rate in his last budget and failed to take account of the income cliff edges he was creating for lower earners.

His admitted “mistake” caused an outcry. It dogged Brown’s subsequent term as prime minister, while his chancellor Alistair Darling tried repeatedly to make up for it. And that was in a budget when Brown cut the basic rate of income tax. Reeves has no such plans.

The chancellor has a chance to make corrections. She could try and raise the cut-off threshold now.

It would be wiser to take a breath and to say now that she plans to give her plans further consideration in her budget, which is already scheduled on 30 October.

That would allow her to think again about her hasty and callous measure in the proper, broader, context of the economic situation in which citizens of all ages find themselves.

Politics

US-UK trade deal ‘done’, says Trump as he meets Starmer at G7

Published

4 hours ago

June 17, 2025

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US-UK trade deal 'done', says Trump as he meets Starmer at G7

The UK-US trade deal has been signed and is “done”, US President Donald Trump has said as he met Sir Keir Starmer at the G7 summit.

The US president told reporters: “We signed it, and it’s done. It’s a fair deal for both. It’ll produce a lot of jobs, a lot of income.”

As Mr Trump and his British counterpart exited a mountain lodge in the Canadian Rockies where the summit is being held, the US president held up a physical copy of the trade agreement to show reporters.

Several leaves of paper fell from the binding, and Mr Starmer quickly bent down to pick them up, saying: “A very important document.”

Sir Keir said the document “implements” the deal to cut tariffs on cars and aerospace, adding: “So this is a very good day for both of our countries – a real sign of strength.”

Mr Trump added that the UK was “very well protected” against any future tariffs, saying: “You know why? Because I like them”.

However, he did not say whether levies on British steel exports to the US would be set to 0%, saying “we’re gonna let you have that information in a little while”.

What exactly does trade deal being ‘done’ mean?

The government says the US “has committed” to removing tariffs (taxes on imported goods) on UK aerospace goods, such as engines and aircraft parts, which currently stand at 10%.

That is “expected to come into force by the end of the month”.

Tariffs on car imports will drop from 27.5% to 10%, the government says, which “saves car manufacturers hundreds of millions a year, and protects tens of thousands of jobs”.

The White House says there will be a quota of 100,000 cars eligible for import at that level each year.

But on steel, the story is a little more complicated.

The UK is the only country exempted from the global 50% tariff rate on steel – which means the UK rate remains at the original level of 25%.

That tariff was expected to be lifted entirely, but the government now says it will “continue to go further and make progress towards 0% tariffs on core steel products as agreed”.

The White House says the US will “promptly construct a quota at most-favoured-nation rates for steel and aluminium articles”.

Other key parts of the deal include import and export quotas for beef – and the government is keen to emphasise that “any US imports will need to meet UK food safety standards”.

There is no change to tariffs on pharmaceuticals for the moment, and the government says “work will continue to protect industry from any further tariffs imposed”.

The White House says they “committed to negotiate significantly preferential treatment outcomes”.

Mr Trump also praised Sir Keir as a “great” prime minister, adding: “We’ve been talking about this deal for six years, and he’s done what they haven’t been able to do.”

He added: “We’re very longtime partners and allies and friends and we’ve become friends in a short period of time.

“He’s slightly more liberal than me to put it mildly… but we get along.”

Sir Keir added that “we make it work”.

The US president appeared to mistakenly refer to a “trade agreement with the European Union” at one point as he stood alongside the British prime minister.

Mr Trump announced his “Liberation Day” tariffs on countries in April. At the time, he announced 10% “reciprocal” rates on all UK exports – as well as separately announced 25% levies on cars and steel.

In a joint televised phone call in May, Sir Keir and Mr Trump announced the UK and US had agreed on a trade deal – but added the details were being finalised.

Ahead of the G7 summit, the prime minister said he would meet Mr Trump for “one-on-one” talks, and added the agreement “really matters for the vital sectors that are safeguarded under our deal, and we’ve got to implement that”.

Politics

Abortion debate reignited as Sky poll reveals public’s view on decriminalisation ahead of Commons vote

Published

4 hours ago

June 17, 2025

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Abortion debate reignited as Sky poll reveals public's view on decriminalisation ahead of Commons vote

A small group have gathered in the main square in the centre of Birmingham, and it’s a real mix of people. There are older figures from the community, young students, as well as groups of friends and some families.

On closer inspection, you can make out candles and rosary beads, signalling it’s some kind of vigil. As hymns start to be sung, it’s revealed to be a gathering to protest against abortion.

Nearly 90% of this country is pro-choice, but a small, vocal minority is becoming more organised in the UK.

Energised by the Trump administration, young and old activists in the UK anti-abortion movement have become more motivated to get their message across.

And all this is happening just as abortion laws in the UK could be about to go through the most significant change in over 50 years.

Nearly three years on from the ruling reversing Roe v Wade – a landmark case that once made abortion legal in the US – the age-old abortion debate has become even more political in the UK.

A breakthrough moment came when Vice President JD Vance criticised the UK laws on abortion buffer zones – areas outside clinics where police are allowed to use their discretion to stop anyone harassing women entering abortion clinics.

Explained: What are the UK’s abortion laws?

One of the cases cited by the vice president was that of Isabel Vaughan-Spruce.

She’s a lifelong anti-abortion activist who has been handing out leaflets outside clinics for 20 years. Since buffer zones came into force, she now visits to silently pray once a week. In 2022, she was arrested outside an abortion clinic for silent prayer and taken to court, although the charges were later dropped.

She also received £13,000 in a civil claim against West Midlands Police, which did not admit liability.

“They actually asked me what I was doing, and I said, well, I’m just physically standing here. I might be praying in my head, but nothing out loud. And on that basis, they made an arrest. I was heavily searched, I was taken to the police station, locked in a police cell for hours before being questioned under caution. And then, eventually, I went to court.

“I believe that abortion centres are like the modern-day Calvary. This is where the innocent are being put to death. I might not be physically interacting with anybody or stopping anyone or talking to anyone, just to be there in prayer is really, really important from a spiritual perspective.”

For people like Ailish McEntee, any type of protest is a distraction, which she says is not wanted by the women who come to the clinic she works at in London. She’s hoping that this week MPs will go further on abortion laws and pass an amendment through the Commons to decriminalise abortion for anyone seeking an abortion up to 24 weeks.

“The law itself works very well for the majority of people, but for those individuals in those kind of really high-risk domestic abuse situations… they maybe can’t make it to a clinic, they might seek abortion care from those kind of unregulated providers.

“So this amendment would take away that decriminalisation of women themselves. And it’s a really strange part of the law that we have.

“I think particularly in recent years, with Roe v Wade overturning and Donald Trump winning the election again, I think it’s really pushed forward the anti-choice rhetoric that has always been there, but it’s absolutely ramping up.”

According to polling by Sky News and YouGov, 55% of people are in favour of the law changing to stop women being criminalised for their own abortion before 24 weeks.

Surprisingly though, 22% said they believe women should be investigated or imprisoned for abortion after 24 weeks.

Stella Creasy is one of the MPs laying down an amendment to try to decriminalise abortion.

“There’s no other health care provision that we see with a criminal foundation in this way and it has a very real practical consequence.

“We’ve seen some incredibly vulnerable women and girls who didn’t even know that they were pregnant who have late-term miscarriages finding themselves with police officers rather than counsellors at their hospital beds finding themselves under suspicion for months, if not years, and I just don’t think that’s where the British public are at.”

But Rachel is concerned by this amendment. She runs sessions at the UK arm of Rachel’s Vineyard – a faith-based organisation originally founded in the United States, dedicated to, in their words, “healing the trauma of abortion”. They frame abortion not as a medical procedure, but as a harm to mothers and fathers.

“With all sudden deaths, whether you are 80 years of age or you’re 26 weeks born, you know, out of the womb, and you’ve died, you’ve sadly died, we need to be able to investigate that. For us to have compassion, we need to have justice.”

In Northern Ireland, where the decriminalisation battle was won in 2019, I met Emma, who fought on the campaign at Alliance for Choice.

She says police searches were a daily routine for her, and since 2019, she has been able to continue helping women navigate abortion care without the threat of being investigated.

Orfhlaith Campbell should have been one of the lucky ones. She was able to seek a medical abortion at 23 weeks in Northern Ireland, two years after it had been decriminalised, but she says she had to fight to get the care she needed.

She was on the cusp of the medical time limit when she suffered a premature rupture of membranes, went into labour and was told she would likely develop sepsis.

“I would have died and my daughter was dying, I could feel her dying, and it was a compassionate choice. When we got the post-mortem after, the infection had went into her wee body too, and she had nuclear debris in her lungs. If she had survived at all, it would have been a very, very painful existence.

“So yes, I had to break through the stigma that had been ingrained in me in Northern Ireland. I had to break through legal fights and the barriers that were being put in place. But I was strong enough to know that that was compassionate and that healthcare was needed both for me and her.”

The UK is majority pro-choice, and our polling shows the majority are for decriminalising abortion.

But activists who are against abortion are energised by the changing landscape of the debate in the US.

As parliament sets to vote on two amendments on abortion laws this week and potentially pulls in one direction, activists will likely only get louder and become more effective at getting their message across.