Rachel Reeves’ winter fuel raid to raise £1.3bn less than hoped
Rachel Reeves’ fiscal agenda has been dealt another chilling blow with new data revealing savings from the winter fuel allowance will be lower than hoped after Labour’s row back.
The Chancellor’s winter fuel raid will raise £1.3bn less than originally planned before the government U-turned following a rebellion from backbenchers.
Just £227m is set to be saved from the cash grab on pensioners, as first reported by the Telegraph, falling far short of the Treasury’s original hopes of £1.5bn. This is due to a combination of the U-turn and rising pension credit.
New figures from the Department for Work and Pensions showed 181,100 retirees received pension credit last year, up 57,200 from 12 months prior.
The surge in pension credit has wiped out winter fuel savings as claimants are entitled to the fuel allowance.
Sir Steve Webb, partner at pension and investment firm LCP, told the Telegraph: “It is entirely welcome that more pensioners who are entitled to pension credit are now claiming what they are entitled to. But this surge in claims has put a further dent in the revenue from this ill-fated policy.”
Reeves’ fiscal blackhole
The fresh blow comes as economists debate how deep a black hole Rachel Reeves will be staring into come the Autumn Budget. The National Institute for Social and Economic Research has suggested the Chancellor may have to raise taxes to the tune of £50bn.
Along with winter fuel, the Labour government made a major U-turn on welfare reforms that Reeves had eyed to shed £5bn from government spending.
The policy backtracks, plus a £190bn splurge in the Spending Review, have helped erode the wafer-thin fiscal headroom Reeves left herself with at the Spring Statement in March.
According to the New Statesman, pensions minister Torsten Bell is set to play a leading role in Budget preparations.
Bell will reportedly take on more responsibility for economic policy later this year, seven months after he was lobbed from the backbenches into a ministerial role overseeing pensions and some Treasury work.