Winter Fuel Payment

Question

11:36:00

Asked by

To ask His Majesty’s Government what steps they are planning to take to change the entitlement to the Winter Fuel Payment.

My Lords, we are extending eligibility so that this winter, all pensioners with incomes up to and including £35,000 will benefit from the winter fuel payment. That means 9 million pensioners will now receive it—more than three-quarters of pensioners.

My Lords, since tabling this Question, we have had 40 minutes of exchanges on Tuesday. In fairness to the Minister, he addressed most of the questions, albeit at times provocatively. However, he did not answer the question from my noble friend Lord Hailsham, who asked why, when the Government needed to save money on the winter fuel allowance, they did not simply abolish it and then increase in November each individual’s entitlement to the state retirement pension by the same amount and recover it through the tax system. The Minister said: “That may be one option, but it is not the option we have chosen”.—[Official Report, 10/6/25; col. 1224.] Would that not have been simpler?

I am grateful to the noble Lord for the question. We have to remember the circumstances in which we found ourselves back in the autumn. We had to take many difficult and urgent decisions, because we needed to find in-year savings due to the £22 billion black hole in the public finances that we inherited. We had to come in and make urgent in-year decisions. We therefore had to put in place a system that was able to generate immediate savings. The system that the noble Lord describes was not able to generate those immediate savings. That is why we did what we did. We are now able to extend eligibility, as I have said. We are extending it so that this winter, all pensioners with incomes up to and including £35,000 will benefit from the winter fuel payment.

My Lords, the noble Lord asks whether there is a plan. Can the Minister confirm that there is a plan, and whether, if it does not work, they will again have another plan? Things change so much. Is there a reserve plan for when this plan does not work?

I am not sure I entirely followed the noble Lord’s question. We have set out clearly what the policy is. All pensioners with incomes up to and including £35,000 will benefit from the support, as will all those on pension credit and certain other income-related benefits. The payment of £200 per household, or £300 per household where there is someone over 80, will be made to all pensioner households in England and Wales. Individual pensioners with taxable income above £35,000 will have any winter fuel payment automatically recovered by HMRC without the need for them to take action.

My Lords, earlier this week, when the Prime Minister was explaining the rationale for the Government’s change on the winter fuel payment, he said that because the economy was now growing as a result of the Government’s policies, they were now able to make this change. Given the news yesterday that the economy is no longer growing, but actually shrank in April, would the Minister like to have another go at explaining the reason for the reversal of policy, and perhaps be honest about the fact that it was just incredibly unpopular and very ill-thought-through in the first place?

One thing that was ill-thought-through was the Liz Truss mini-Budget and the £22 billion black hole in the public finances, which is why we had to take the action that we did. It might be nice if the noble Lord took some responsibility for what we inherited. As I said already, when we came into office, we had to take a number of very difficult and urgent decisions to put the public finances back on a firm footing. That involved difficult decisions on welfare, on tax and on spending, and one of those was means-testing the winter fuel payment. We have listened to the concerns about the level of the means test and we are now able—all the while still means-testing the winter fuel payment, because that is the right thing to do—to extend eligibility so that this winter, all pensioners with incomes up to and including £35,000 will receive it.

My Lords, I start by wishing my noble friend the Minister best wishes for his birthday today. He has the special treat of an Urgent Question and a Statement on the spending review—what more could anyone ask for? I very much welcome the decision to reintroduce the winter fuel payment. In answer to the Question, my noble friend said that anyone with income above £35,000 would not receive the payment. There is one problem with that, in that some forms of income are not taxed. Someone with a substantial cash ISA—I understand that there is a Member on the Liberal Benches who has £1 million in his ISA; he has made no secret of it, and presumably receives a very substantial income—with a taxable income of less than £35,000, would presumably still receive the winter fuel allowance, or is some step going to be taken to avoid that problem?

I am grateful to my noble friend for his question and for his birthday wishes—that was very kind of him. Obviously, we had to achieve the right balance between a simple system to administer and getting the support to those who need it most. The system that we have come up with sticks with the existing rules of the tax system and, I think, achieves the right balance, as I described.

My Lords, like other Peers, I welcome this decision. The other day, I asked the Minister something to which he did not respond, and I wonder if I might ask it again. Is one of the lessons learned from this for the Government that, should they be making further cuts in spending, they might not look to vulnerable or disabled people.

I am grateful to the right reverend Prelate for his question. I am sure that all of us have lessons to learn in life. I believe that it is very important that we reform our welfare system; it is not working and it needs reform, and I think everyone agrees with that. We will do this on a principled basis—namely, that those who can work should work, that those who want to work should be supported so that they can do so, and that we protect those with the most severe disabilities who will never be able to work.

My Lords, as the Minister knows, I did not welcome this decision. Turning to principles, does he agree that cliff edges in the tax and benefits system are undesirable? Can he explain whether, when a pensioner’s income moves from £34,999 to £35,000, support will be tapered away, or whether £1 in extra income will result in a £300 loss of winter fuel allowance?

I am grateful to the noble Lord for his question. He knows much more about the tax and benefits system than I do, I suspect, having spent many more years working on it than me. The answer to his question is that it is the latter: it is up to and including £35,000, so it will be at £35,001 where that happens. At that point, they will lose the winter fuel payment in its entirety.

I am glad of the opportunity to wish the Minister a happy birthday from these Benches. We welcome the decision by the Government partially to reverse their decision on the winter fuel allowance. That will ensure that our oldest and most vulnerable citizens are better protected through the dark and cold of the winter months. However, when he answered questions before, the Minister did not adequately answer how this £1.25 billion reversal will be funded. Can he tell us today whether it will result in further tax rises, in departmental spending cuts or in increases in borrowing, and, if not, where the money will come from?

I am very grateful to the noble Baroness for her kind words. We are setting out these changes now to ensure that more pensioners are able to receive support this winter. That is important. As she knows, we have moved to just one fiscal event a year, so, as is now normal, these changes will be fully funded at the next fiscal event, which is the Budget in the autumn. This will ensure that final costings and funding decisions come alongside a full forecast from the OBR—something that the previous Government did not do—and we will ensure that the fiscal rules are met at all times.

My Lords, following the reference to those on these Benches and ISAs, I should perhaps declare to the House that I do not have £1 million in my ISA—I wish. The Minister said that all pensioners earning up to £35,000 would benefit from this. Where I live, in the Scottish Borders, he will be aware that there is a degree of uncertainty, because of the interaction with devolved responsibilities, and because the benefits and tax system is reserved. Can the Minister reassure those where I live, in the Scottish Borders, that they will indeed benefit from what the Government have announced?

The noble Lord knows that winter fuel payments are a devolved policy in Scotland. The Scottish Government will receive a mechanical uplift in their funding as a result of the change in England and Wales. The Minister for Pensions spoke to his counterpart in Scotland on the day that this policy was announced. We are very conscious of the need for sufficient lead-in time, and those discussions will continue.