There is usually never a good time for any prime minister to announce a U-turn. In the case of the cuts to pensioners’ winter fuel payments, it has long been clear that a reversal could not come soon enough. Sir Keir Starmer’s surprise announcement at Prime Minister’s Questions was, therefore, highly welcome.
The recent thumping Labour received in the local elections, the loss of the Runcorn and and Helsby by-election, the electoral threat posed by Reform UK, and poor poll ratings seem finally to have forced a government rethink.
Any possible political benefit the government might conceivably enjoy from a display of firmness of purpose in the pursuit of fiscal probity is vastly overwhelmed by the political damage inflicted by the decision to means-test the previously popular and universal benefit.
As politicians of all parties have attested in recent months, the winter fuel payment was raised consistently on the doorstep during the recent round of elections, and the pollsters have identified it as both the most high-profile of the government’s policies – and the most hated. Although the very poorest of our older citizens were protected (if they could navigate the forms), some pensioners who were far from comfortable lost £300 at a critical time.
The nation sensed it was the wrong thing to do, and certainly not what they expected from Labour, and reacted accordingly. Rachel Reeves may or may not think herself as the Iron Chancellor, but she has had to bend to public opinion. She now needs, without delay, to make the details clear – when it changes, and who will be eligible.
For a variety of reasons, not least the simple measure of fairness, the change of mind by the government is extremely welcome – and, perhaps, a sign that Labour may be regaining the sure political touch it showed in opposition.
In truth, means-testing the winter fuel payment was an act of panic by the chancellor when she discovered the notorious £22bn “black hole” in the public finances soon after taking office last July. Prematurely ending the new government’s honeymoon, she took immediate action, including the cuts to the payment. She presented this as the fault of the Sunak administration – which may have been true, and perhaps she expected the public to vent their anger at her predecessor at the Treasury, Jeremy Hunt, for mismanaging the public finances. However, all chancellors have choices – and as this was Ms Reeves’s, she had to take accountability for it.
As a perverse way of raising the smallest amount of money for the maximum political damage, the move could hardly be faulted. In a full year, it would raise some £1.5bn, a tiny sum in a social security bill more than 15 times that amount, but it affected some 10 million older voters, and aroused intense public anger. Not so long after, it was spun that the prime minister himself, with hindsight, viewed the move as a mistake.
The presentational problem now is that Sir Keir’s unusual intervention during Prime Minister’s Questions to signal the shift in policy will raise expectations of a complete reversal, and that the universal payment of £300 will be restored later this year. Even though Sir Keir only committed to “more” – but not all – old age pensioners benefitting from the proposed changes, hopes will be high that the change of course will be fairly radical. Even if the rich are to be excluded from the payment, which would be relatively uncontroversial, it would serve the government ill if the new means-testing threshold were to be set at only a slightly higher level than at present.
Given that the decision has now been made, and given the small aggregate sums involved, the government would be wise to maximise the number of people who will have the payment restored. The continuing cost of living crisis and high energy bills, rising again this year, provide additional reasons and political cover for the chancellor to recover the situation. She should certainly clarify matters with a detailed statement as soon as possible. She doesn’t need another PR debacle, after all.
Ms Reeves might also take the opportunity to announce some sensible changes to the so-called tractor tax, such that genuine family farms can be protected by, for example, freezing any nominal inheritance tax liability until the agricultural land assets are disposed of.
Indeed, there are many other anomalies and injustices in the tax and benefits system that she and Liz Kendall, the work and pensions secretary, could rectify at little cost and to some useful political benefit.
For now, though, the partial U-turn adds to the impressive list of recent foreign policy achievements and suggests that after an occasionally disastrous start, the Starmer administration is growing in confidence – and getting things done properly.
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