How Labour’s winter fuel raid on pensioners threatens to backfire

Chancellor’s decision to scrap retirees’ payments risks triggering £490m benefits bill

Labour’s decision to axe winter fuel payments for millions of pensioners could trigger a £490m benefits bill, effectively wiping out a third of the savings it is expected to bring in.
Rachel Reeves on Monday said winter fuel payments would be restricted to just those on pension credit from this winter in an attempt to raise £1.5bn to fix the nation’s finances.
Former pensions minister Sir Steve Webb warned the move could trigger a wave of pension credit applications – with 800,000 people who currently do not claim the benefit eligible, according to charity Age UK.
In 2019, claims rose by a quarter when the Government announced free TV licences for the over 75s would be restricted to just those on pension credit, according to the Office for Budget Responsibility.
Extra payments of pension credit to 200,000 people – one in four of those currently eligible who do not claim – would cost the Government £440m a year. This group would also be entitled to the winter fuel payment, costing another £50m.
If pension credit uptake is replicated as a result of changes to the winter fuel payment, the savings made by the move could be reduced by a third.
Currently one in three pensioners eligible for the benefit don’t claim it, according to Age UK, missing out on an average top up of £2,200 a year as a result.
Sir Steve said: “It is highly likely that this week’s announcement will lead to a flurry of new claims for pension credit. This is exactly what happened when entitlement to a free TV licence for the over 75s was restricted to those on benefit.  But a big surge in take-up could slash the savings from this measure.
“If just one in four of those currently missing out on their entitlement to pension credit now makes a claim this could cut the Chancellor’s savings by around one third. One consequence of this is that additional cuts might be required to make up for the shortfall”.
Sir Steve said the uptake in pension credit could be greater this time than following the TV licence policy change, as the latest announcement affects all pensioners and not just those aged 75,
In addition, the amount lost – typically between £200 and £300 – is greater than the cost of a TV licence in 2019 which was £154.50.
Further costs could be on the way if the Government sees through its planned integration of pension credit and housing benefit so that people who claim housing benefit but fail to claim pension credit would get both.
A government spokesman said: “This government is committed to pensioners: protecting the triple lock, keeping energy bills low through our Warm Homes Plan, and cutting NHS waiting lists – bringing real stability to people’s lives.
“We said we would be honest with the public and, given the dire state of the public finances we have inherited, this Government must take difficult decisions to fix the foundations of the economy.
“In these circumstances it is right that winter fuel payments are targeted at those in most need, and we will work with Local Authorities to boost the uptake of pension credit, reaching the many pensioners who could still benefit from this year’s winter fuel payments.”