Reeves Appeals for Labour Unity on UK Pensioner Benefit Cut

Ellen Milligan, Alex Wickham and Ailbhe Rea
·5-min read

(Bloomberg) -- Chancellor of the Exchequer Rachel Reeves appealed to Labour lawmakers to support her decision to remove a key benefit from most pensioners, as the government sought to minimize a threatened rebellion in Parliament on Tuesday.

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The House of Commons is set to vote on Reeves’ move to scrap winter fuel payments for about 10 million older Britons. The government expects dozens of Labour lawmakers to express opposition to the policy, mostly by abstaining, people familiar with the matter said before a meeting between the chancellor and the party’s Members of Parliament.

“I understand the decision that this government have made on winter fuel is a difficult decision,” Reeves told MPs at the gathering late Monday. “I’m not immune to the arguments that many in this room have made. We considered those when the decision was made.”

The stand-off is a significant moment ahead of Reeves’ budget on Oct. 30, when she is expected to announce a series of tax rises and spending cuts to shore up Britain’s fiscal outlook. While Prime Minister Keir Starmer’s 167-seat majority means he’s not in danger of losing the vote, the dissent places the premier in a bind: either proceed with a cut that’s caused widespread upset in his party, or take a blow to his authority by reversing course.

The reception from MPs on Monday suggests any rebellion will be muted. Two people present said only a handful raised concerns about the policy, but none were hostile. The large majority of MPs said they supported Reeves’ decision and stressed the need for unity, they said.

“There is a risk of letting panic obstruct” the principle that winter fuel payments should be targeted toward those who need it, Labour MP Josh Simons told Bloomberg ahead of the meeting. “We don’t evaluate the chancellor’s decisions from a comfy armchair, we make those decisions with her,” he said, calling for his colleagues to support the government.

‘Tough Decisions’

Reeves warned MPs that “there are more difficult decisions to come.” The chancellor has previously signaled looming tax rises — widely expected to focus on wealth levies such as capital gains and inheritance taxes. “I don’t say that because I relish it. I don’t, but it is a reflection of the inheritance that we face,” she said.

Starmer will echo her message in a speech to the Trade Union Congress on Tuesday, warning of more “tough decisions on the horizon” due to government’s economic inheritance. He and Reeves have no intention of backing down on winter fuel payments, according to people familiar with the matter who asked not to be named discussing internal government thinking.

Reeves’ spokesman told journalists on Monday that she doesn’t plan to introduce any measures designed to mitigate the impact of the policy ahead of the vote, beyond existing efforts to extend a household support fund and encourage more people to claim pension credit, which qualifies them to keep the benefit.

He blamed the need to means-test winter fuel payments — currently paid to all pensioners — on a £22 billion ($29 billion) black hole in the public finances that Labour says the previous Conservative government left them. Reeves estimates the move will save the Treasury around £1.4 billion a year.

One Labour aide said Downing Street saw it as necessary short-term pain that would allow the government the longer-term gain of being able to afford more generous spending at a later date. That approach is in line with what is seen as Number 10’s strategy of making unpopular fiscal decisions early on in the administration, way out from the next general election, before offering more voter-friendly policies closer to the next poll.

“We’re going to have to be unpopular: tough decisions are tough decisions,” Starmer told BBC TV on Sunday. “I’m absolutely convinced we will only deliver that change — I’m absolutely determined we will — if we do the difficult things now.”

Focus groups suggest most Britons were willing to accept the measure to help balance the books, the aide said. Public polling presents a mixed picture: In July, a YouGov survey found 47% supported the government’s position, with 38% opposing it. However, another YouGov poll in August suggested 59% of people did not back the policy.

If winter fuel payments are not removed, the government would have to look for even harsher cuts elsewhere in Britain’s rising benefits budget, another adviser warned. Pensioners have been relatively well-looked after by the state in recent years, compared to poorer working age Britons, they added, noting that the state pension is still set for an above-inflation rise next year.

The people declined to say whether Starmer would punish rebels by removing their right to sit as Labour Members of Parliament, as they did after a vote on child benefits in July. Six of the seven MPs suspended then, as well as a dozen sitting Labour MPs, have signed a non-binding motion calling on the government to postpone the move on winter fuel payments. There’s also concern over the move within government, Bloomberg previously reported.

Last week, Ed Balls, a former Labour shadow chancellor, said on his Political Currency podcast that Reeves needed an “escape route” to allow her to climb down, or else she risked the policy destabilizing the government.

In a sign of the disquiet behind the scenes, a government official said Home Office minister Diana Johnson misspoke when she told broadcasters on Monday morning that ministers were examining how to mitigate the cut.

Much of the internal criticism has centered on Reeves effectively boxing herself in on having to make spending cuts while in opposition. Before the election, she vowed not to raise national insurance, income tax or value-added tax — the Treasury’s three main revenue-raisers — in an effort to keep hold of middle-ground voters. While those commitments may have helped Labour win July’s election, they have limited her fiscal choices now she is in office.

Still, some in government are insistent that the pensioners’ fuel benefit was wasteful because it was universal and therefore received by wealthy people who didn’t necessarily need it. It is hard to defend a handout that even the King would be eligible for, one Labour MP loyal to Starmer said.

--With assistance from Joe Mayes.

(Updates with Labour MP comment and Starmer speech from sixth paragraph.)

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