Winter fuel payments U-turn likely to lead to higher tax, or alternative benefit cuts, says IFS director
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).
Key events
-
Early evening summary
-
Spending review now ‘settled’, says No 10, after Home Office reaches agreement with Treasury
-
Bell says government ‘cannot carry on’ with current poverty levels for large families, as MP says 2-child benefit cap must go
-
Pensioners should be compensated for impact of last year’s WFPs cut, says National Pensioners Convention
-
Reform UK plans for Wales are ‘mirage’, putting jobs at risk, say Welsh Tories
-
Tories claim WFPs U-turn ‘most humiliating climbdown government has ever faced in its first year in office’
-
Pensions minister Torsten Bell says WFPs U-turn won’t lead to pensioners being drawn into tax system or self-assessment
-
Farage rejects claim he always ends up falling out with colleagues, and defends not yet having leader in Wales
-
Handling of Chinese embassy application in London becoming ‘walk of shame’ for Labour, says Iain Duncan Smith
-
SNP government says it is awaiting details of how Labour’s new WFP policy will affect Scotland
-
Farage accused of ‘fantasy politics’ after suggesting Reform UK might reopen mines and steel blast furnaces in Wales
-
New winter fuel payments policy ‘only marginally progressive’, says Resolution Foundation thinktank
-
No 10 accuses Reform UK of ‘fantasy economics’ as it rejects claim it has adopted Farage’s winter fuel payments policy
-
Reeves rejects calls to apologise for winter fuel payments cut last year
-
HMRC will not try to recover winter fuel payments from wealthy pensioners who die, No 10 says
-
Winter fuel payments U-turn likely to lead to higher tax, or alternative benefit cuts, says IFS director
-
Farage joins Tories and Lib Dems in claiming credit for getting goverment to U-turn on winter fuel payments
-
Badenoch claims winter fuel payments U-turn will be ‘scant comfort to pensioners’ and calls for apology from PM
-
More than 7m pensioners to gain as winter fuel payment restored for all with earnings below £35,000
-
More than £1bn has now been paid out in compensation to victims of Post Office Horizon IT scandal, government says
-
Zia Yusuf brushes aside claims he resigned as Reform UK chair over concerns about anti-Islam views in party
-
Mayor concerned about ‘anti-London’ slant in spending review, with Treasury expected to shelve some proposals for capital
-
Lib Dems renew call for families with caring needs to get named social worker
-
Starmer announces plan to use AI to speed up digitalisation of planning records, speeding up decisions
-
Minister says spending review will mark ‘end to austerity’, as Home Office yet to agree deal
Early evening summary
It wouldn’t even be in the top 100 of things that I would do with my £1.25bn if I wanted to act on poverty. Almost none of the people impacted by this will be in poverty. Most of them will be at least as well off as the average in the population.
We know that poverty is much worse among families with children than it is with pensioners, and of course the poorest pensioners are already getting this – they are covered through the pension credit system.
Johnson also said the net savings to the taxpayer would be “so small as to be barely visible.” But – crucially – he also admitted that the IFS does not have to stand for election.
For a full list of all the stories covered here today, scroll through the key events timeline at the top of the blog.
This is from Patrick Maguire from the Times on Nigel Farage’s speech today.
There was a blink-and-you’ll-miss-it flash of Blairism in Farage’s speech in Wales earlier: asking big employers to sponsor specialist vocational academies.
Photograph: WPA/Getty Images
Spending review now ‘settled’, says No 10, after Home Office reaches agreement with Treasury
The spending review is now settled, Downing Street told reporters this afternoon. This morning the Home Office was the one government department still holding out. (See 9.32am.) But Yvette Cooper, the home secretary, now seems to have resolved her differences with Rachel Reeves, the chancellor.
A No 10 spokesperson said:
The spending review is settled, we will be focused on investing in Britain’s renewal so that all working people are better off.
The first job of the government was to stabilise the British economy and the public finances, and now we move into a new chapter to deliver the promise and change.
The spending review will be announced on Wednesday.
Bell says government ‘cannot carry on’ with current poverty levels for large families, as MP says 2-child benefit cap must go
In the Commons Labour’s Rebecca Long-Bailey told Torsten Bell that, while she welcomed the winter fuel payments announcement, it was also important to lift children out of poverty. She asked if the government would do all it could to lift the two-child benefit cap as soon as possible.
In his reply, Bell implied the current rules would not continue for long. He said:
We’ve said clearly that all levers to reduce child poverty are on the table.
The child poverty strategy will be published in the autumn, but we’re not waiting for that. We’ve already seen action, as I said earlier on, free school meals. It’s another reason why we do need to see more support for energy bills, in particular for insulating homes, because if we look at who is struggling most, having to turn off their heating, it is actually younger families with children that are struggling with that.
So she’s absolutely right to raise this issue. It is one of the core purposes of this government. We cannot carry on with a situation where large families, huge percentages of them, are in poverty.
Back in the Commons Labour’s Polly Billington asked Torsten Bell just now to confirm that, even though opposition MPs are claiming Labour has now adopted their policy, that is not right – because the government will not be paying winter fuel payments to the rich.
Bell said that was true of the Liberal Democrats and Reform UK. They both favour paying winter fuel payments to millionaires, he said.
But he said he had “no idea” what the Conservative policy was.
The Tories criticised the winter fuel payments cut, but have not committed to reversing it in full. Kemi Badenoch has said she favours some sort of means testing for the benefit, to stop millionaires getting it, but she has not said in detail how she would do this.
Pensioners should be compensated for impact of last year’s WFPs cut, says National Pensioners Convention
The National Pensioners Convention, which represents pensioners, has welcomed the U-turn on the winter fuel payment – but also called for compensation for those affected by the cut last year.
Jan Shortt, general secretary of the NPC, said:
We welcome the change in direction by the Chancellor over the winter fuel payment for the coming winter. It is a victory for common sense and proves the government have finally listened to our voices.
However, there is still no recognition of the devastating impact the withdrawal of the winter fuel payment had on older people over December 2024 to February 2025.
Statistics show that older people were switching off appliances, rationing the use of energy, cutting down on food and other household bills after losing the payment. Many will now be in debt to their energy provider, with some taking out loans to pay bills at enormous interest.
We believe it is only fair that the government pay compensation for older people who were living in freezing conditions whilst MPs were claiming their energy costs for their second homes.
Reform UK plans for Wales are ‘mirage’, putting jobs at risk, say Welsh Tories
The Welsh Conservatives have described Nigel Farage’s proposals for Wales today (see 3pm) as a “mirage”. They posted these on social media.
Nigel Farage’s empty and uncosted promises are nothing more than a mirage.
The people of Port Talbot won’t be taken for fools.
The previous UK Conservative Government saved thousands of jobs at Port Talbot with a £500m package…
… to help the plant transition to an electric arc furnace, Reform is now sabotaging that plan and putting jobs at risk.
The Welsh Conservatives are the only party that offers a credible alternative to the failing Labour Government in Wales.
Plaid Cymru has said the government should follow its winter fuel payments U-turn with a further U-turn on welfare cuts. Liz Saville Roberts, Plaid’s leader at Westminster, said:
While [Rachel] Reeves’ U-turn is welcome, it’s clear that it was driven by polling, not principle. If the most vulnerable people were a true priority for Labour, they wouldn’t need public pressure to act and these cuts would never have been made in the first place.
If this UK government wants to deliver its promise of change, it must also go further and reverse the cruel cuts to welfare, including to Pip payments. Anything less will show this government is more interested in headlines than helping those who need it most.
Severin Carrell
Severin Carrell is the Guardian’s Scotland editor.
The Scottish government will get about £120m extra from the UK government as a result of the winter fuel payments U-turn for England and Wales, sources have indicated. (See 3.20pm.)
Tories claim WFPs U-turn ‘most humiliating climbdown government has ever faced in its first year in office’
Helen Whately, the shadow work and pensions secretary, is responding to Bell.
She says Bell has been sent to announce a humiliating U-turn. The government should apologise, she says.
She asks if it is fair for a pensioner married to a millionaire to get the money, while two pensioners on £36,000 each would not get it.
And she asks if the money will be recovered from the estates of pensioners who have died after claiming the WFP but not having it recouped through the tax system.
She ends by saying there are reports that the new policy could save just £50m.
In response, Bell says the policy will save £450m.
And he says HMRC will not try to recoup payments from pensioners after they die.
As for apologising, he says the Tories have still not apologise for the Liz Truss mini-budget.
UPDATE: Whately said:
I feel for [Bell] sent here today by his bosses to complete what must be the most humiliating climbdown a government has ever faced in its first year in office …
Today, he has been sent to end that courageous last stand and, unless it’s coming next, he has been sent without the one thing that pensioners up and down the country deserve – an apology.
Pensions minister Torsten Bell says WFPs U-turn won’t lead to pensioners being drawn into tax system or self-assessment
In the Commons Torsten Bell, the pensions minister, is making a statement about the new arrangements for winter fuel payments.
He says the money will be automatically recovered from pensioners earning more than £35,000 either through PAYE (the pay as you earn system) or self-assessment. He says pensioners will not be drawn into the tax system or into self-assessment just as a result of this.
And he says, to get the money, pensioners will not have to do anything, because it will be paid automatically.
The latest edition of the Guardian’s Politics Weekly UK podcast is out. It features Pippa Crerar and Kiran Stacey talking about the winter fuel payments U-turn and the spending review.
Farage rejects claim he always ends up falling out with colleagues, and defends not yet having leader in Wales
During his Q&A in Wales earlier Nigel Farage, the Reform UK leader, rejected the suggestion that the spat with Zia Yusuf last week showed that he was incapable of leading a team. A journalist put it him that he kept falling out with colleagues. But Farage claimed this was not true. He replied:
I think the evidence actually is very different. You’ll find the teams that work with me – many of them have been with me for over a decade. One or two that I worked with I worked with for 25 years …
I am someone that maintains long-term friendships, and I’ll do that.
But if ever anybody talks behind my back, or if anybody betrays that trust, then I’ll never speak to them again. Quite simple, and they should expect the same level of trust back from me.
Farage also claimed that problem was caused by people thinking they would make a better leader.
Inevitably, what you get are people who think they’re bigger and better than me, the parties will be better off run by somebody else than me. And that’s what leads to the public fallouts because they don’t like the result of it.
But Farage said the fallout with Zia Yusuf showed he could resolve disputes with colleagues
Was I annoyed with Zia on Thursday? I wasn’t exactly chuffed with what he had to say … But, you know what, people make mistakes. And he came back to me and honestly said, ‘Look, I’m really sorry.’ Have I forgiven him? It’s done, it’s behind us, and we move on.
Farage also defended Reform UK’s inability to say at this point who its candidate for first minister will be in next year’s Senedd elections. The party does not have a leader in Wales yet. Asked why not, he replied:
This party is evolving. It is a work in progress. We are building rapidly as we go. Figures will emerge over the course of the next few months, who, through merit, will no doubt be in a position where they can qualify to be our lead member. We are not at that point of evolution just yet.
Handling of Chinese embassy application in London becoming ‘walk of shame’ for Labour, says Iain Duncan Smith
Iain Duncan Smith, the former Tory leader, says the US government and the Dutch parliament have both expressed concerns about sensitive cables running under the site of the proposed Chinese embassy at Royal Mint Court.
The Chinese have a record of cutting cables, he says.
Rerouting cables would cost millions, he says.
He asks why the government previously denied the presence of cables under the site.
And Chinese media claims the Chinese government has been told the application will be approved.
He says the embassy plan is becoming a “walk of shame” for the government.
In response, Pennycook repeats his point about not being able to comment on this application.
On cables specifically, he says he cannot comment on national security issues.
And he says the government does not “recognise” the account of this given in a Sunday Times report yesterday.
In its splash, the Sunday Times said President Trump is urging Keir Starmer to block the report on national security grounds.
In the Commons Matthew Pennycook, the housing minister, is responding to the urgent question from Iain Duncan-Smith about the “the United States government’s national security concerns regarding the proposed Chinese embassy development at Royal Mint Court”.
He says the government respects the probity of the planning process. He says, because ministers have a role when applications are called in, he cannot comment in detail on any application.
But he says he will set out the process. This application will be decided by ministers, but the application is not yet with them.
An independent planning inspector looks at applications that come to ministers, and make indepedendent recommendations, he says.
He says an inquiry has already looked at this case.
He says the home and foreign secretaries made a joint submission to the inquiry.
Once the report from the inquiry is received, a planning minister will make a decision.
SNP government says it is awaiting details of how Labour’s new WFP policy will affect Scotland
Severin Carrell
Severin Carrell is the Guardian’s Scotland editor.
The Scottish government has complained that it still has little detail of how the substantial reversal of the winter fuel payment cut will affect its budgets, and asked for clarification.
Shirley-Anne Somerville, the Scottish social justice secretary, said:
I welcome any extension of eligibility by the UK government, but this is a U-turn the chancellor [Rachel Reeves] should have made a long time ago. But there is still no detail about how the chancellor intends to go about that. Unfortunately, it still sounds as if many pensioners will miss out.
We have once again not been consulted on the policy and its implications in Scotland and will scrutinise the proposals carefully when they are announced. I would therefore urge the UK government to ensure the Scottish government is fully apprised of the proposed changes as soon as possible.
Reeves’ decision only affects pensioners earning up to £35,000 in England and Wales. The payment has been devolved in Scotland for some time, but Scottish ministers had been slow to implement and award their first payments – despite its rhetoric about the UK government’s “betrayal” of pensioners.
It is unclear why Scottish ministers need to be consulted over a payment decision affecting England and Wales, about a policy which is devolved. The Scottish government also had a record Treasury grant this year, partly funded by cuts to this benefit – cash which enabled ministers in Edinburgh to restore the payment in full in Scotland.
However, the Treasury has not yet said how much money this change in England and Wales will generate for the Scottish and Northern Irish governments (devolved governments receive a proportional share of any increase in spending in England under the Barnett formula). That uplift will allow ministers in Edinburgh to spend more in politically advantageous policy areas.
UPDATE: The Scottish government will get about £120m extra from the UK government as a result of the winter fuel payments U-turn for England and Wales, sources have indicated.
Farage accused of ‘fantasy politics’ after suggesting Reform UK might reopen mines and steel blast furnaces in Wales
Nigel Farage, the Reform UK leader, was speaking about winter fuel payments at his event in Port Talbot (see 12.28pm), but the main point of his speech was to call for the reindustralisation of south Wales. In comments that had been well trailed in advance, he said that he wanted to reopen mines and reopen the blast furnaces at the Port Talbot steelworks.
In his speech he said:
Our ambition is to reindustrialise Wales.
We are going to be using more steel over the next few years than we probably ever used as we increase military spending and as we attempt a house building programme in Wales, and even more so in England, of massive proportionsj just to catch up with the population explosion over the last 20 years. We are going to need a lot of steel.
Our belief is we should be producing our own steel. Our belief is, for what use coal still has, we should produce our own coal …
I’m not saying let’s open up all the pits. What I am saying is there’s coal, specific types of coal, for certain uses that we still need in this country, and we certainly will need for the blast furnaces here, that we should produce ourselves rather than importing.
But, during the Q&A, a BBC reporter put it to Farage that industry sources saying reopening the blast furnaces at Port Talbot would be impossible. Asked about this, Farage conceded that reopening a blast furnace would be very difficult. A new one might be needed, he said.
He replied:
Once a blast furnace has been closed down, to actually reopen that particular blast furnace is very, very difficult. Nothing’s impossible, but it might be difficult. It might be easier to build a new one.
Could a Welsh government, Welsh devolved government, do it on its own? It would need some help from national government too, which is why I phrased all of this this morning very, very carefully into saying, not ‘we will do this once we’re in control in Cardiff’, [but] ‘this will be our ambition, we’d need a Westminster government to approve this as well’. Who knows, that might be us in time. And we’d need to work with companies as well. But, as an ambition, it’s the right one.
And, on mining, asked if there was any evidence that Welsh people want their children to go down mines again, given so many miners wanted their sons not to have to do these dangerous jobs, Farage replied:
If you offer people well-paid jobs, you would be surprised, many will take them, even though we’d all accept that mining is dangerous.
As WalesOnline reports, Welsh Labour have dismissed this as fantasy politics. A Welsh Labour spokesperson said:
Nigel Farage has no plans for steel – just a camera crew. You can’t restart a blast furnace with a press conference.
Nigel Farage says that hopefully they mightthey’ll bring back mining. The people of Wales will see through the false hope and false promises of a public-school boy from England who does not understand them and does not understand Wales.
His answer is to bring back the mines. The only thing Nigel Farage is trying to mine is votes from communities that have already gone through tough times. Nigel Farage has today brought his fantasy politics and magic money tree to Port Talbot. He’s gambling with real people’s livelihoods.
New winter fuel payments policy ‘only marginally progressive’, says Resolution Foundation thinktank
The Resolution Foundation, a thinktank focusing on the interests of low and middle earners, says the new winter fuel payments (WFPs) policy is “only marginally progressive”. In a briefing note it says:
According to DWP caseload data, in 2023-24 around 11.6 million pensioners received WFPs at a cost of around £2.2bn. Last winter (2024-25), around 1.3 million pensioners received WFPs at a cost of around £300 million. Next winter (2025-26), under these plans, around 9 million pensioners will receive WFPs at a cost of around £1.6bn.
The new scheme is only marginally progressive, with 57% pensioners gaining from the new policy in the bottom half of the income distribution, and the remaining 43% in the top half.
In tax/benefit policy terms, “progressive” means benefiting poorer people more than richer people.
Alex Clegg, an economist at the thinktank, said:
The new scheme for means-testing winter fuel payments means that that the number of pensioners receiving support will rise from 1.3 million last winter to around 9 million this winter, and not far off the 11.6 million who received winter fuel payments two winters ago when they were universal.
But this U-turn doesn’t represent a return to the status quo. The new means-test will create new complexity in the tax system, including a cliff-edge for those with around £35,000 of income. The reported savings of £450m will be reduced further by the cost of increased pension credit take-up as a result of the original policy, and the cost of administering the new means-test.
The real question is why it is now a priority to pay winter fuel payments to over three quarters of pensioners, with almost half of the new beneficiaries in the richest half of the population, when previously it was judged that only one-in-ten needed support.
