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Sir Keir Starmer announced a U-turn on the government’s highly unpopular cuts to winter fuel payments for pensioners, as he faces calls from former premier Gordon Brown to spend £9bn on alleviating child poverty.
The prime minister and chancellor Rachel Reeves on Wednesday bowed to pressure from Labour MPs to reverse course on winter fuel payments after the party suffered a series of humiliating defeats in English local elections this month.
Meanwhile Brown called for an end to the two-child benefit cap — which would cost £3.5bn a year — as part of a £9bn plan to address child poverty, a cause shared by many Labour MPs. Government insiders said options to address the issue were being discussed.
With the public finances under severe strain, Reeves is struggling to comply with her fiscal rules and is heading for an autumn Budget in which she will be expected to spend more to help children and pensioners.
Tax rises of up to £4bn were proposed in a memorandum from deputy prime minister Angela Rayner’s office as an alternative to spending cuts ahead of Reeves’ Spring Statement in March. Starmer on Wednesday refused to rule out tax increases in the Budget.
Starmer announced the U-turn on winter fuel payments at Prime Minister’s Questions in the House of Commons, saying: “We want to ensure that as we go forward more pensioners are eligible.”
“We will look at that as part of a fiscal event,” he added, saying that he would look specifically at the threshold at which pensioners are eligible for the winter fuel payments to widen participation.
Conservative leader Kemi Badenoch demanded to know whether the changes would be in place ahead of winter and how pensioners who lost the benefit would have it reinstated.
The government has faced anger over its decision last July to axe £1.5bn in winter fuel payments for about 10mn pensioners. The benefit is worth either £200 or £300 a year.
Reeves announced the policy shortly after taking office, saying it was necessary to help fill a £22bn “black hole” in the public finances left by the previous Conservative government.
The cuts limited the winter fuel payments in England and Wales to pensioners who receive means-tested pensions credit — meaning it was removed from people with incomes over £11,800 a year or £18,000 for a couple.
Analysts said widening the eligibility for winter fuel payments would be a conundrum for officials, because there was no simple way to identify households with income just above the cut-off for pensions credit.
The government’s retreat on winter fuel payments contrasts with a determination by ministers to press ahead with cuts of £4.8bn to sickness and disability benefits.
Work and pensions secretary Liz Kendall said the current system was “not sustainable or fair”, although she was “listening carefully” to concerns.
Government insiders said if Starmer and Reeves put together a package to alleviate child poverty that would help them sell the cuts to welfare benefits. “That’s what the parliamentary party want,” said one.
However, one Labour MP said plans to reverse course on the winter fuel payments policy would fuel a campaign by backbenchers to persuade the government to row back on its disability benefit cuts.
“We know the numbers that are against the wider benefit cuts is well over 160,” the MP added.
Brown, in a speech on Wednesday, called for £9bn to be spent on relieving child poverty, partly funded by taxes on online gambling and banks.
He blamed previous Conservatives decisions and “the long tail of austerity” for the poverty.
Starmer’s government has so far resisted pressure to scrap the two-child benefit cap put in place by the previous Tory government.
Ministers are examining a number of options that would potentially reduce child poverty without having to scrap the two-child benefit cap entirely, according to government insiders.
Changes being looked at include exempting those aged under five from the cap. Others would involve exempting children with at least one parent in work as part of an effort to encourage more people into employment.
Alison Garnham, chief executive of the Child Poverty Action Group charity, said the two-child benefit cap was “the elephant in the room”.
