Winter fuel payment U-turn in place this year, says chancellor

Changes to the winter fuel payment to allow more people to receive it will be in place this year, the chancellor has said.

Rachel Reeves said more people would qualify for the allowance “this winter”, however details of the changes and who will be eligible remain unclear.

Prime Minister Sir Keir Starmer has said he wanted to widen the threshold for winter fuel in a U-turn on one of his government’s first major policies, but failed to confirm on Wednesday how many would now get it.

The payment, worth up to £300 to help with energy bills during the coldest months, was paid only to those on pension credit last year, but the policy was widely blamed for Labour’s poor local election results.

It meant 10 million fewer pensioners received the money in 2024. There was particular concern among charities and some MPs about those whose income was slightly too high to qualify, but were hit by the loss of the payment as energy costs remained expensive.

Sir Keir did not confirm during Prime Minister’s Questions who would be eligible for the revised policy, having previously admitted in a recent BBC interview that clarity was needed as soon as possible.

“We will look, again, as I said two weeks ago, at the eligibility for winter fuel, and of course, we’ll set out how we pay for it,” when quizzed by Conservative Party leader Kemi Badenoch on how many of the 10 million pensioners who lost the allowance would get it back.

The questions came after Reeves said earlier that people “should be in no doubt that the means test will increase and more people will get winter fuel payment this winter”.

Badenoch said the Chancellor was “rushing her plans because she just realised when winter is”.

If the government waits until the Budget to announce the changes, it would be just before payments are typically made.

Eligible pensioners receive payments automatically in November or December. Under the short-lived current system, they are required to claim pension credit – which is a top-up to the state pension for those on low incomes.

In response to growing questions over the changes, Downing Street said it would provide “clarity” on how it would expand payments “as soon as we can”.

Earlier on Wednesday, pensions minister Torsten Bell said there would be no return to the previous system in which the payment was made to all 11.4 million pensioners.

“It’s not a good idea that we have a system paying a few hundreds of pounds to millionaires, and so we’re not going to be continuing with that,” he said.

Sir Keir told Parliament that the reason the government could expand the number of people receiving the payment was because Labour had “stabilised the economy”.

Reeves said the economy was now in a “better shape,” and that the government “had listened to the concerns people had about the level of the means test” in a speech in Greater Manchester announcing billions of pounds of investment in transport infrastructure in England.

But Daisy Cooper, treasury spokesperson for the Liberal Democrats, said pensioners deserved an apology from the government.

“This whole debacle has caused needless misery for millions of pensioners,” she said.

The decision to means-test the previously universal payment was one of the first announcements by the chancellor after Labour’s landslide election victory last year.

The practicalities of changing the system again are complicated. One option would be a system in which people on certain incomes can make a claim.

Clawing back a payment via the tax system for those on higher incomes is another possibility.

The government has yet to outline which mechanics it intends to use to enact its change of policy.

In Scotland, ministers have already outlined a different policy. Those in receipt of qualifying benefits like pension credit would get the payment as before, while others would get £100.

The funds – which are limited to one payment per household – will be paid through a new Scottish Parliament benefit, which will not be ready until late 2025.

The confirmation that more people will receive winter fuel payments this winter comes ahead of the UK government’s spending review, which will be announced on 11 June.

The review will outline day-to-day departmental budgets over the next three years and investment budgets over the next four.

Whitehall insiders have told the BBC they expect it will be “ugly”, and on Wednesday, Reeves said “not every department will get everything that they want next week”, suggesting she had turned down requests for funding from ministers.

Reeves’s position on ruling out borrowing for day-to-day spending and not raising taxes again has fuelled speculation that spending cuts will be made.

During PMQs, Sir Keir sidestepped calls to say whether he will scrap the two-child benefit cap.

The cap was introduced in 2015 by then-Conservative chancellor George Osborne and restricts child welfare payments to the first two children born to most families.