Reeves and Starmer should have been honest about their winter fuel allowance U-turn

The chancellor and the prime minister have finally bowed to the doorstep, the focus group and some totally unprincipled opposition from their small state opponents. But the decision to restore the winter fuel allowance to pensioners with a convoluted clawback to get it back through the tax system from those with higher incomes (though not from those with massive non-income producing assets), has been as badly handled as the initial decision to lower the winter fuel allowance threshold.

Anomalies abound, and the original policy has belatedly found some advocates as people point out that the government will be providing winter fuel cash to pensioners who are markedly better off than many of the working families whose taxes will pay for it. 
Thus far the government line is that the initial decision was right and justified by the fiscal demands of the time, and the U-turn is also right because a better-performing economy (remember Q1 when the UK fleetingly became the best performing economy in the G7) means the government can afford to restore it to the majority of pensioners while also footing the bill for the increased uptake of pension credit in response to the initial threshold reduction.  

Two bad decisions do not make a good one, and the episode has badly damaged trust in the political judgment of the leadership, while failing to save much, if any, money.  

The government failed to lay the groundwork for its initial decision

Pensioner benefits are not untouchable – but they are an area where the power of the grey lobby makes governments act by stealth. Successive government after all have allowed the winter fuel allowance to wither in real terms by never making it a priority for uprating.

One of the parts of the so-called ‘omnishambles’ budget of 2012 that survived was George Osborne’s abolition of the age allowance – that is, the higher personal allowance for pensioners – which he achieved through patience. It was not removed for current recipients but instead anyone reaching pension age in future would not get it, and so over time it has withered away. Since the Pensions Commission in the mid-2000s, the state pension age has risen for everyone – but always well into the future. The Major government took the decision to align the women’s age with men over a long period (then accelerated by Osborne) and this government has faced down calls for compensation by women who claim they were caught out, despite many Labour MPs having declared support from the luxury of the opposition benches. The free TV licence for over-75s has been curtailed by the government handing responsibility to the BBC – it now only goes to pensioner households where one member at least gets pension credit. And the decision by repeated governments (including this one) not to proceed with the Dilnot cap on social care costs has cost unlucky pensioners with large assets (or their heirs) huge amounts more than the winter fuel allowance.

The government’s problem with the winter fuel allowance was its visibility, compounded by three fundamental errors: the cut came out of the blue in a fiscal statement that seemed to single out pensioners for action and lacked any wider context; it took a benefit away from people during a winter when energy prices were still high; and it created a means test that looked too mean to many people – the income cut-off to claim pension credit is low and it is well known that a lot of eligible people are reluctant to claim. As we argued before, it should have been announced in a budget or as part of an uprating statement; and the government should have taken longer to work out how to help poor pensioners.

The U-turn could have been an opportunity to confront the public about hard choices

The government has shown it is willing to listen (bend or cave in) to public opinion, but it is pretending this it is a cost free choice because the economy is improving. Unless Rachel Reeves gets very lucky, this line will look unconvincing at best when she completes the U-turn at her next fiscal event.

Instead, Reeves and Starmer should have come clean. They should have been explicit about the initial rationale for their decision – but admitted that political pressure across the spectrum meant they were no longer prepared to tough it out. Then they should have spelt out the logistical problems with means testing and the costs and unfairnesses associated with different thresholds and made clear the consequences of retaining the WFA: either other taxpayers will have to pick up the bill or some other spending priority will miss out. Instead they have pretended that there is no price to pay.

The effect is to embolden their opponents on both sides of the House and further undermine confidence in British governments to see through meaningful cuts or difficult reforms.