The chancellor, Rachel Reeves, is under fresh pressure this weekend over controversial plans to limit winter fuel allowance to the poorest pensioners, amid claims that it will cause “severe hardship” to millions of elderly people.
The Observer has learned that the country’s leading charity for older people, Age UK, has written to Reeves with a specific proposal it believes will be fairer and that would prevent around two million pensioners being deprived of a payment it says they badly need.
The UK chancellor revealed plans in July to introduce a means test for the winter fuel payment, where only those on pensions credit would qualify, as part of a push to plug what she said was a £22bn black hole in the public finances left by the previous Conservative administration.
But many Labour MPs have reported being bombarded with complaints from constituents furious at the plan, which was not in Labour’s election manifesto. Last week, on a visit to Scotland, Reeves was told by a group of anxious Labour backbenchers that they did not believe the plans were fair.
The issue is likely to be raised by both Labour and Tory MPs when parliament reconvenes after the summer recess on Monday.
In a letter to Reeves, Age UK has put forward a detailed plan suggesting that, rather than limiting winter fuel payments to those on pension credit, the allowance should also be paid to two million more pensioners – those on a range of other benefits including housing benefit, council tax support, attendance allowance and carers’ allowance.
Confirming the move, Caroline Abrahams, charity director at Age UK, said: “Age UK has written to the chancellor, explaining why we oppose the means-testing of winter fuel payment and asking her to take action to safeguard the estimated two million pensioners who, as things stand, are set to lose it and who will experience severe hardship as a result.
“We think that, if the policy is to be introduced at all, then it shouldn’t happen so quickly, and if it is to happen in the future, the pool of pensioners entitled to winter fuel payment needs to be made far wider. There are different options for how to achieve this, but there’s no time to do any of them – or to make a big difference to pension credit take-up either – in the few months left this year.
“It’s important to understand that by aligning the means-testing of the payment with pension credit, the government is removing it from all pensioners whose annual incomes are above about £11,500 if they are single and £17,500 if they are a couple.
“We accept that the state of the public finances means that people of all ages who can afford to contribute more should be asked to do so, but surely no one can reasonably suggest that a widow living on her state pension and a tiny occupational pension, taking her income to a meagre £13,000 a year, is someone who ought to be in that category. And yet this is the result of the government’s decision. They need to think again.”
Reeves says that she is having to take “tough” decisions – more of which she will reveal in her first budget on 30 October – to fill a £22bn financial black hole left by the previous Tory government.
Writing in today’s Observer, Reeves says that on entering the Treasury she was briefed by officials about the alarming state of government overspending and told drastic action was needed to keep the economy stable.
“That first month it was made clear to me that, unless I acted urgently, market confidence in the UK’s fiscal position could be seriously undermined. That would have meant higher debt, higher mortgages, and higher prices in the shops. I was not prepared to let that happen.”
She says she took difficult decisions, including cancelling road projects, reviewing the new hospitals programme and asking government departments to find savings, as well as limiting winter payments to all but the poorest pensioners.
She adds: “I know these are tough choices, especially on winter fuel. They were not the choices I wanted to make or expected to make, but they were the right choices to put our country on a firmer footing. Because by taking the tough decisions now to protect the public finances we can begin the process of change.”
Asked if ministers would consider adopting Age UK’s plan and perform a partial U-turn, a government spokesman said: “We are absolutely committed to supporting pensioners and giving them the dignity and security they deserve in retirement. That’s why, through our commitment to protect the triple lock, over 12 million pensioners will see their state pensions increase by almost £1,000 over the next five years.
“But given the dire state of the public finances we have inherited, it’s right that we target support to those who need it most while we take the difficult decisions needed to fix the foundations of our economy.
“Over a million pensioners will continue to receive the winter fuel payment and eligible pensioners will also be able to benefit from the £150 warm home discount scheme from October to help with their energy bills over winter.
“We are urging pensioners to come forward and check their eligibility for pension credit to ensure as many people in need as possible have access to this support.”
