Rachel Reeves went nuclear on the winter fuel payment. And it blew up in her face.
The Chancellor decided she would show how tough she was by scrapping the popular benefit for 10million pensioners.
It was her first big decision – and it backfired spectacularly.
PM Keir Starmer felt the backlash during local elections, where voters repeatedly brought it up on the doorstep. He ordered Reeves to do a reverse ferret.
From this winter, around nine million pensioners will once again get help with energy bills, worth up to £300 per household.
But up to three million still won’t benefit because they earn too much. The cut-off point is £35,000 a year. They’ll receive the Winter Fuel Payment, but HMRC will claw it back through tax code adjustments.
It’s going to be horrendously complicated, with massive scope for errors.
Reeves originally hoped to save £1.4 billion, but at most she’ll save £450million. It could be less. And that has massive implications for the state pension triple lock.
Jon Greer, head of retirement policy at Quilter, said Reeves’s U-turn “underlines how politically and practically difficult it is to unpick long-standing universal benefits”.
He said Reeves wanted to appear fiscally responsible, but underestimated the administrative burden and strength of feeling among pensioners.
Greer is right. She enraged Labour voters and drove many into the arms of Nigel Farage’s Reform UK.
Starmer and Reeves have learned a hard lesson. “Removing support, even for retirees with more wealth, directly impacts people’s lives,” Greer said.
Ultimately, the Winter Fuel Payment is a trifle compared to the triple lock.
Introduced in 2011, the triple lock increases the state pension each year by the highest of earnings, inflation or 2.5%.
It was designed to drag millions of pensioners out of poverty, and has been tremendously successful.
In April, it gave pensioners a 4.1% pay rise, adding as much as £470 a year to the state pension. In April 2024, they got 8.5%. The year before, a thumping 10.1%.
Labour says pensioners will get £1,900 extra over the five years of this Parliament, purely thanks to the triple lock.
No wonder pensioners love it. The Treasury, however, hates it – because it costs a fortune.