Social Fund Winter Fuel Payment Regulations 2024

Debate between Lord Davies of Brixton and Lord Desai

Wednesday 11th September 2024 Lords Chamber

[Lord Davies of Brixton (Lab)]

My Lords, these regulations are a mistake and I want my concern on the record. I want to make it clear from the start that the financial mess inherited by our Government is a result of 14 years of austerity and financial mismanagement, and I reject any suggestion that public sector workers are benefiting at the expense of pensioners. That is simply a crude attempt to divide working people, and we should reject it as such. I will therefore vote against the cynical regret Motion from the Official Opposition, and I say to the noble Baroness, Lady Stedman-Scott, that she does herself no favours attaching her name to the Motion.

There are several key points I wish to make. First, even if the case for austerity measures were accepted, the cut in winter fuel payment was not a necessary element in the July package; it was a choice. Secondly, whatever steps are taken to increase the take-up of pension credit, millions of the poorest pensioners will still suffer from an increase in fuel poverty—Age UK came out yesterday with a figure of 2.5 million. Thirdly, the effect of the triple lock should not be double counted and, in any event, it will fail to offset the effect of the cut in the winter fuel payment over the lifetime of the current Parliament. I urge the Government, even at this late hour, to hold back on any change, pending full consultation on an alternative approach to tackling fuel poverty, while retaining the advantages of a universal benefit.

It is important to understand more about why the Government wanted to include the measure in the July package, despite its obvious political downside. Unlike other possible options, it achieved in-year savings and used an existing structure for means testing the benefit, rather than having to create a new structure. However, they failed to appreciate the two adverse consequences of using the pension credit means test. First, it has a ceiling that everyone agrees is far too low. Secondly, there is no form of marginal relief, as it is not relevant for the purposes of means testing pension credit.

In response, the Government—my Government—have attempted to head off the widespread opposition to the regulations. First, they have argued that the winter fuel payment had to be cut as part of the July package to make the figures balanced. Secondly, they have argued that the impact would be offset by increasing the take-up of pension credit and, thirdly, that the impact would be ameliorated by the existence of the triple lock on the state pension. All of these arguments, regrettably, fail.

First, the cut was not necessary, even as part of the July package. There is of course a debate to be had about the need for austerity, particularly as an instant response. However, even if the need for the July package were to be accepted, the question as to whether it had to include the cut in the winter fuel payment is a separate issue. Posed in those terms, it is obvious there is no a priori reason that it had to be a necessary element of the package. Whatever risks the Government faced, they were addressed by taking the package as a whole and not by its individual elements. Despite the Government’s protestations about tough choices, there is no avoiding the fact that it was, nevertheless, a choice, thereby raising concerns about their attitudes to universalism and pensioners in general.

The second issue is pension credit, which other speakers have addressed. We know that the increase in the take-up of pension credit will be limited. It is important to acknowledge what the Government are doing to increase the take-up of pension credit, but, regrettably, there is a long history of ineffective take-up campaigns for means-tested benefits, going back to the 1940s, for national assistance, and beyond. There is no evidence that we now know more than they did in the past about how to overcome the intractable problems arising from stigma, complexity and a lack of knowledge. I am sure other speakers will go into detail on that.

My third point is about the triple lock, which does not offset the impact of the cut in the winter fuel payment. The Government suggested—not today but in other commentaries—that the triple lock increases to the state pension over their term in office would

“outstrip any reduction in the winter fuel payment”.

Unfortunately, this is an obvious case of double counting. I have done the sums, and almost all the pension increases that will occur over the coming five years are required to protect pensioners against the impact of inflation. Pensioners cannot spend that money twice, covering both increases in the cost of living and at the same time replacing the winter fuel payment. The purpose of the triple lock is to protect pensioners against inflation, keep state pensions in line with general living standards and nudge the pension gently upwards. I have calculated that, based on the latest OBR assumptions, the impact of the triple lock, taken by itself, means that the new state pension and the basic state pension will be barely 1% higher than they would have been, even with the statutory minimum increases. This is less than the winter fuel payment, which pensioners are losing because of this measure.

In all the debates on the cut in the winter fuel payment, I am not aware of anyone arguing that there is no case for change. The winter fuel payment is and always was an anomalous benefit, particularly as it affects high earners. A payment that, in practice, recipients can choose to spend as they wish should always have been included in taxable income. The fact that it was not is a historical accident, arising from how and when it was introduced, rather than a clear policy decision.

I therefore agree with the 2015 Labour manifesto, which said:

“We will stop paying Winter Fuel Payments to the richest five per cent of pensioners”.


That was the right policy then, and something like it is the right policy now. In other words, those with the broadest shoulders should bear the burden of the cut, rather than the millions of the poorest pensioners who struggle to make ends meet. Given the case for change, the Government at this late stage should hold back on the cut to the winter fuel payment, pending a full consultation on an alternative approach to tackling fuel poverty while retaining the advantages of a universal benefit.

[Lord Desai (CB)]

My Lords, there seems to be rather a hurry to embrace economic rationality on the part of the new Government. We know what economic rationality always says: cutting income tax for the rich is good policy because that encourages growth, and cutting the benefits of the poor is good policy because that balances the budget. All through economics—the science that I teach—there has always been this root. The poor must be made to suffer because, as Malthus pointed out, if you give them more money, they will only breed more children. That is no good. Giving money to the poor is a loss, but give money to the rich and the rich will benefit.

I imagine that there is an idea that a big hole in the fiscal accounts was suddenly discovered. I do not think so: I think we all knew there was a fiscal hole. We have all been through the pandemic and through the last 15 years, when the economy has had a very low growth rate—in fact, practically no growth rate. We know all that. We also know the public accounts numbers that were available giving us the ratio of deficit to GDP. None of this was a surprise. If you want to really tackle the deficit, you need a 10-year horizon to do it. Do it rationally; do not do it quickly, do not do it in a haphazard fashion and do not just immediately say, “Oh, I have to make a very tough decision”. As soon as a politician says “tough decision”, you know the poor are going to suffer.