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UK Prime Minister Rachel Reeves is to restore winter fuel payments to all pensioners for the year except the 2 million pensioners who earn more than £35,000, which costs the Treasury £1.25 billion.
Reeves announced the retreat ahead of this week’s spending review. She tried to win some positive headlines at the time she slammed the public service budget.
The prime minister was forced to make a U-turn due to backlash from Labour’s Drab in the UK’s local elections last month and subsequent party lawmakers in Westminster.
The revised plan will allow approximately 9 million pensioners to receive fuel payments this winter. This is worth £200 or £300.
Pension recipients with approximately 2 million years of taxable incomes exceeding £35,000 will also receive payments, but the money will be collected by HM Revenue & Customs.
Reeves’ U-turn left her with a total hole of £1.25 billion in finances by the end of the decade, compared to plans set in July last year.
The prime minister said Monday that the costs will be considered in the fall budget and will take steps to fill the gap in the finances. “This will not lead to permanent additional borrowings,” the Treasury said.
Many economists believe Reeves will be forced to raise taxes in the fall, especially as Labour lawmakers pressure her to reduce plans to cut welfare payments.
Under Reeves’ original plan, only those receiving pension credit would have continued to receive winter fuel payments. Approximately 10mn was set to lose the subsidy.
The revised plan clashes with around 2 million pensioners, and he is automatically paid before he automatically pays the grant, before collecting it through pay or self-assessment tax returns.
The Treasury argued that these 2MN pensioners “are well above the income levels of pensioners in poverty,” and that the £35,000 threshold is broadly lined with average revenue.
“Targeting winter fuel payments was a tough decision, but it was the right decision for the inheritance left by the previous government,” Reeves said.
“It’s also precisely so that we test this payment with targets and fairness to ensure that we are fair with our targets rather than regaining eligibility for everyone, including the wealthiest.”
The Treasury said the final scheme this winter will save £450 million compared to the original program, a universal benefit paid to all pensioners.
However, some experts have warned that U-turns could mean that the government will save very limited as the initial cuts last year spurred more pensioners to register with pension credit.
The new claim for pension credit was around £230 million after the government initially encouraged applications to offset the impact of the cuts.
Conservative leader Kemi Badenok said: “This humiliating U-turn will come as a slight comfort for pensioners who were forced to choose heating and diet last winter. The Prime Minister should apologise for his terrible judgment.”
Reform UK leader Nigel Farage has asked the government to reverse the cuts, but said his party can “submit credit” to U-turns. “I think we created political weather for this,” he told Welsh party supporters on Monday.
Additional Reports from Anna Gross in Port Talbot
