The Treasury says restoring the winter fuel payments for most pensioners will cost around £1.25bn in England and Wales. It says:
The costs will be accounted for at the budget and incorporated into the next OBR forecast. The chancellor will take decisions on funding in the round at that forecast to ensure the government’s non-negotiable fiscal rules are met. This will not lead to permanent additional borrowing.
Paul Johnson, director of the Institute for Fiscal Studies, says ‘no extra borrowing’ means ‘higher taxes, or welfare cuts’.
The corollary of “this will not lead to permanent additional borrowing” is that it will lead to permanent additional taxes (or just possibly permanent cuts to other bits of welfare).
Faisal Islam, the BBC’s economics editor, is also arguing that today’s announcement shows that last year’s winter fuel payments cut could be seen as pointless. He has posted these on social media.
quite the u-turn…
the entire policy of limiting the WFA will now raise £450m a year… essentially everybody will get it and then those 2m with above £35k income will have it clawed back from HMRC…
Was it worth it? At the time when we were briefed, somewhat shocked, that the Chancellor was doing it, the rationale was that this was something that could be done “in year”…
… it did have the air of a policy that was done as a totem for the markets, that the Government could do very tough decisions, that previous administrations had shied away from…
A key problem, was that it was unclear that it would even save money net net. Eg Liz Kendall said to me that one of the benefits was to incentivise pension credit (£thousands) take up… but that would have meant it would not have raised much at all…
In a post on the BBC’s website, Chris Mason, its political editor, says many people in the Labour party see cutting the WFP last year as the government’s biggest mistake in its first year in office.
Robert Peston, ITV’s political editor, has posted a damning verdict on the government’s handling of the winter fuel payments issue on social media. Here is an extract.
So the u-turn only goes to prove the utter pointlessness of the original abolition last summer of the universal entitlement to it.
This initial £1.6bn saving – revised down to £1.3bn by the OBR – was supposedly essential to placate lenders to the British government, bond investors, who Reeves believed needed reassurance that she would fill the hole in the public finances she said she inherited from the previous Tory government.
But it was always a drop in the ocean of the government’s borrowing needs – and remains so, even after the £40bn of tax rises that she imposed in last autumn’s budget.
Or to put it another way, most economic forecasters believe today she is likely to need tax rises this coming autumn, just as they did a year ago. Yet a year ago, Reeves argued any unfunded spending commitment would be fiscal suicide, whereas today such an unfunded commitment is tickety boo.
In other words, she and the Treasury have achieved a rare – though not unique – distinction of alienating vast numbers of British voters for next-to-zero fiscal or economic benefit.
The SNP says the government should follow the winter fuel payments U-turn by reversing the two-child benefit cap. In a response to the Treasury announcement, Stephen Flynn, the SNP leader at Westminster, said:
The chancellor must now abandon her devastating cuts to disabled people – and scrap the two-child benefit cap.
This screeching U-turn was inevitable and lessons must be learnt from the damaging mess the Labour government caused by robbing pensioners of their winter fuel payments.
It must be swiftly followed by an end to all Labour party austerity cuts – scrapping the planned cuts to disability benefits and abolishing punitive welfare policies, including the Labour government’s two-child benefit cap and bedroom tax.
At 3.30pm there will be an urgent question in the Commons about “the United States government’s national security concerns regarding the proposed Chinese embassy development at Royal Mint Court”. The former Tory leader Iain Duncan Smith is asking the question, and a housing minister will reply.
Later, at about 4.15pm, Torsten Bell, the pensions minister, will make a statement about the winter fuel payments announccement.
Nigel Farage has claimed credit for the government’s winter fuel payments U-turn. But the government has not resinsted the payments for everyone, which is what Reform UK was asking for.
At the Downing Street lobby briefing the PM’s press secretary said there was a big difference between the two policies, because Reform UK’s was unfunded. She said:
We set out the policy detail now to ensure the change can be delivered ahead of winter and give pensioners certainty.
Everything this government does is fully funded.
Reform has floated tens of billions of pounds of unfunded tax cuts, they’ve suggested slashing government spending to 35% of GDP, which is equivalent to scrapping the entire NHS, defence, policing and criminal justice budgets combined.
Their fantasy economics would see the exact same consequence as working people suffered under Liz Truss and the Conservatives, and is why this government has totally rejected that approach and put fiscal responsibility at the forefront of every decision that we take.
Rachel Reeves, the chancellor, has rejected calls (see 12.18pm) to apologise for removing winter fuel payments from most pensioners last winter.
Asked in an interview with ITV News if she would apologise for causing “unnecessary anxiety and hardship”, Reeves replied:
The irresponsible thing to have done last year was to allow the public finances to carry on on an unsustainable footing.
That would have resulted in interest rates going up, costing families and pensioners more in mortgages and rents.
I’m always going to put stability in our economy first.
Here is the clip.
At one point the Treasury was concerned that, using the tax system to claw back winter fuel payments from wealthy pensioners could lead to the government trying to recoup the money from the estates of pensioners who died over the winter.
But today Downing Street has said this will not happen. At the morning lobby briefing the PM’s spokesperson said:
HMRC will not ask for repayment from a deceased PAYE (pay as you earn) customer if the only money owed was from a winter fuel payment.
The Treasury says restoring the winter fuel payments for most pensioners will cost around £1.25bn in England and Wales. It says:
The costs will be accounted for at the budget and incorporated into the next OBR forecast. The chancellor will take decisions on funding in the round at that forecast to ensure the government’s non-negotiable fiscal rules are met. This will not lead to permanent additional borrowing.
Paul Johnson, director of the Institute for Fiscal Studies, says ‘no extra borrowing’ means ‘higher taxes, or welfare cuts’.
The corollary of “this will not lead to permanent additional borrowing” is that it will lead to permanent additional taxes (or just possibly permanent cuts to other bits of welfare).
As the Treasury explains in its news release about the winter fuel payments proposal, although the government is basically restoring winter fuel payments (and clawing them back from the wealthy), it is changing the way payments are being delivered. It says:
Where the household is not getting an income related benefit, such as pension credit, a shared payment will be made – e.g. a couple, each under 80, not on pension credit will receive a payment of £100 each.
This reflects the fact that benefits are often paid on a household basis, but the tax system, which is being used to recoup the payments to wealthy people, looks at individual income.
In a post on social media, Paul Johnson, director of the Institute for Fiscal Studies thinktank, says this new arrangements is a bit “messy”. He explains.
WFP will now be paid at £100 to each member of a couple.
So rich pensioner couples, where one has say £100k and the other £30k, will still get £100.
If both members of couple have £36k then they get nothing.
Messy.
In his speech in Port Talbot Nigel Farage, the Reform UK leader, accused the government of timing its winter fuel payments to overshadow his speech. And, like the Tories and the Liberal Democrats (see 12.18pm), he also claimed that he had forced the U-turn.
I kept on saying all but the very wealthiest pensioners should get the winter fuel allowance, particularly as we have the most expensive energy costs in the world directly as a result, of course, of the fanatical embrace by both Conservative and Labour governments of net zero.
To illustrate his point, Farage waved a copy of the Daily Express which splashed on Farage’s views on this.
Farage said there was “no doubt” in his mind that his campaigning “made the political weather on this one”.
