Senior figures in Sir Keir Starmer’s circles have reportedly been discussing how to handle anger over the policy in the wake of last week’s election losses to Reform UK.
While a full reversal of the cut is not expected, Downing Street sources said they were considering whether to increase the threshold over which pensioners are no longer eligible for the allowance.
The Government is planning to come back for “stage two” this autumn, but in what ways could they change winter fuel payments, and how much would each potential change cost? Here, The i Paper takes a look.
Sir Steve Webb, former pensions minister and partner at LCP, said this could be a good option because it looks like much less of a climbdown than replacing it with something completely different.
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Rachael Griffin, personal tax expert at Quilter, said the exact cost of this adjustment would depend on the new threshold set and the number of additional claimants.
“Taking what would be a relatively small hit to Government coffers may be viewed as a necessary step to address the concerns of older people.”
Cuts to the winter fuel payment are thought to have played a key role in Nigel Farage’s Reform UK winning the Runcorn and Helsby by-election last week (Photo by OLI SCARFF/AFP via Getty Images)2. Restrict those on lower council tax bands
One example was the £150 council tax rebate paid in 2022/23, which was paid only to those living in homes in council tax bands A-D, the four bands for those living in the lowest value homes.
In the UK, out of 1.9 million pensioners living on a low income, around 1.6 million, or roughly four in five, are living in a property band A-D.
If this happened, winter fuel payments would continue to be made to around 8.3 million pensioners in total, Sir Steve said, and as a result, the savings would fall from around £1.4bn with the Government’s current policy to around £500m.
There is already a system in place where higher payments are made to older pensioners, and there are some other aspects of the system, such as free TV licences to over-75s on pension credit, where age is used as a proxy for greater need.
A previous LCP report said: “Although around 600,000 are aged 80 or over and perhaps might better fit the stereotype of spending more time at home with the heating on, the majority of poorer pensioners are not elderly.
4. Remove from higher-rate taxpayers, or subject it to tax
The state pension is subject to income tax, paid at 20 per cent above the £12,570 threshold, but winter fuel payments are not.
“In principle, in cases where there are two pensioners in a household, they could each be taxed on half of the total figure,” according to an LCP report.
Alice Haine, personal finance analyst at Bestinvest by Evelyn Partners, said: “If ensuring the wealthiest aren’t receiving the payment is the biggest motivation for the cut, then it could be withdrawn for higher-rate taxpayers, ensuring at least basic rate taxpayers receive the benefit in full.”
The DWP has been contacted for comment.
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