Why Starmer had no choice but to U-turn on winter fuel payments

After months of ruling out a U-turn over the government’s controversial decision to means-test the pensioners’ winter fuel allowance, Keir Starmer confirmed a retreat at Prime Minister’s Questions today.

He said the government wants to ensure “more pensioners are eligible for winter fuel payments” and said it would look at the £11,500 income threshold at which they lose it. Ministers could decide to restore the allowance in full, but I suspect they will stick to their line that millionaires who don’t need it shouldn’t get it.

I’m told the chancellor instigated the rethink, belying her reputation for stubbornness – and that 10 Downing Street, after initial caution, is now coming round to the idea. Polls suggest an about-turn would be seen as strong rather than weak.

Why now? The main reason: the decision has become emblematic of the government – and voters hate it. Its potency lasted much longer than ministers expected when Reeves announced it last July and it was a big factor in Labour’s poor showing at this month’s local elections. I think there’s also an unstated reason. The Labour backbench revolt against the other cut which damaged the party at the elections – the £5bn cut to disability and sickness benefits – is growing and more than 100 potential rebels now have a chance of defeating the government.

A concession on winter fuel would be warmly welcomed by Labour MPs and help ministers survive the rebellion on disability payments. The rethink on winter fuel could come when Reeves unveils her government-wide spending review on 11 June – which, conveniently, could be just before the Commons votes on the benefit cuts.

Tweaking the winter fuel allowance – or even restoring it in full, at a cost of about £1.5bn – would be cheaper economically and politically than being defeated on the benefit cuts, which would blow a big hole in Reeves’s permanent struggle to meet her fiscal rules and send a bad signal to the financial markets. Although Reeves’s decision on winter fuel was designed to appeal to those markets, they would probably not be spooked by a partial retreat now, while a defeat over disability benefit cuts would raise doubts about the government’s ability to take tough decisions to balance the nation’s books.

Keir Starmer knows he needs to throw a bone to his unhappy backbenchers, notably the newbies who fear becoming one-term wonders. “Something has gotta give,” one party insider told me. There could be a separate concession on child poverty, with Labour MPs clamouring for the two-child benefit cap to be lifted. It’s unlikely to be abolished, but could be softened.

However, ministers are sticking to the controversial disability cuts. Today Liz Kendall, the work and pensions secretary, told the IPPR think tank that unless spending is focused on those with the greatest need, “the welfare state won’t be there for those who really need it in future”. While she said rebel Labour MPs were right to raise the issue, it was “not sustainable” to have 1,000 new awards of the personal independence payment a week, “the equivalent of adding a city the size of Leicester every year”. Kendall insisted her cuts are about reform – and getting people back into work – rather than saving money.

Yet the Resolution Foundation and Learning and Work Institute think tanks estimate fewer than half as many people (up to 100,000) will be helped into jobs by the government’s £1bn back-to-work programme as will fall into poverty after the cuts (250,000). The benefit losses will kick in before the jobs scheme and ministers do not want to publish their estimate of how many people will take up work. They should come clean before the Commons vote.

Doubts about Reeves’s strategy are not confined to the Labour backbenchers. There’s a heated debate inside the cabinet as negotiations over the spending review come to a head. Today, a leaked memo showed that Angela Rayner proposed up to £4bn of tax rises on the better-off ahead of the March spring statement to avoid the welfare cuts. The deputy prime minister is one of several ministers trying to protect their department from further cuts. Her allies fear a squeeze to her local authority and housing budgets would make it impossible to hit the government’s target to build 1.5 million homes in five years.

The chancellor did not act on Rayner’s proposals. But despite a little more optimism at the Treasury about the economy after it grew by 0.7 per cent in the first three months of this year, some of Rayner’s tax-raising ideas could well be back on the table when Reeves draws up her October Budget. That might win Rayner brownie points among Labour MPs for fighting the good fight – and among the grassroots members who will one day elect Starmer’s successor. Just saying (again)....