Winston Churchill believed that “the Americans can always be counted on to do the right thing, once all other possibilities have been exhausted”. The same, one minister tells me, is true of Rachel Reeves and winter fuel payments.
Two days before her first Spending Review (which I preview here), Reeves has announced that winter fuel payments will be restored to three-quarters of pensioners (or all those earning below £35,000). The Chancellor wants to use the event to tell a story of pro-growth investment and dispel accusations of austerity – hence this advance U-turn.
As I reported last August, plenty inside government always feared that the original £11,500 earnings threshold – above which the £200-£300 benefit was withdrawn – was too brutal. So it proved. MPs began referring to the policy as Labour’s “original sin” and it was blamed for the party’s dismal performance in the local elections and its defeat to Reform in the Runcorn by-election.
Though Reeves long defended the measure as an emblem of fiscal discipline, the Chancellor herself came to conclude that it was untenable (cabinet colleagues such as Ed Miliband and Liz Kendall had doubts from the start).
Reeves is now making the argument that some new Labour MPs wanted her to deliver from the start: that it is “fair” to withdraw the benefit from the “wealthiest” pensioners (two million earn over £35,000). Such a framing could have opened up a conversation around generational inequality but the policy was instead justified narrowly as a response to the Conservatives’ “£22bn black hole” or an offering to the bond vigilantes.
Even now, some inside government fear that an opportunity has been missed to make a values-based argument. Here, for instance, is how Gordon Brown explained his U-turn over the abolition of the 10p income tax rate in 2008. “It really hurt that suddenly people felt I wasn’t on the side of people on middle and modest incomes – because on the side of hard-working families is the only place I’ve ever wanted to be,” he said. “And from now on it’s the only place I ever will be.”
But Reeves avoided such a moral narrative today, leaving Labour open to the charge that it has merely U-turned out of political expediency. In recent weeks she and Starmer have also sought to tie the move to an improving economy – growth of 0.7 per cent in the first quarter – yet this creates an additional headache: renewed pressure to reverse other measures (such as the health and disability benefit cuts) even as debt continues to rise.
The winter fuel episode ultimately left Labour looking both unfair and weak, a deadly combination for any government. For Reeves, the test is whether she can now escape from her own history and use this moment to reset her Chancellorship.
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