Winter fuel was Labour’s defining mistake

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Good morning. It’s the second most wonderful time of the year, when I look back at what I got wrong over the past year. Today, some thoughts on the winter fuel allowance.

How not to change pensioner benefits

Here is a non-exhaustive list of things I compared the Labour government’s initial decision to means test the winter fuel allowance to: New Labour cutting lone parent benefit in 1997, the coalition government removing child benefit from higher-earning households, and Geoffrey Howe’s first Budget. My point was that new governments do controversial things at the start of the parliament and go on to to walk them off. So I thought means testing the winter fuel allowance was the right thing to do politically.

(This is even true of governments which do go on to lose elections: the main themes of the 1997, 2010 or 2024 general elections did not have a lot to do with the Budgets of 1992, 2005 or 2020. Indeed, the Budget of 2020 essentially became a dead letter as it was delivered due to the Covid-19 pandemic.)

I also thought there was a good policy argument for means testing the winter fuel payments. Given the constraints on the British state, a universal additional benefit to pensioners — that becomes ever less generous in real terms every year — is not what you would include if designing the British welfare state from first principles in 2025.

A year on, it is safe to say that this was a very bad call! Following the May elections and a backlash against the government’s attempt to means test the winter fuel allowance, Labour retreated on the policy, restoring winter fuel payments to all but 2mn pensioners with incomes of more than £35,000. These have turned out to be administration-defining events. Means testing winter fuel dealt a blow to the government’s popularity from which it has yet to recover, and U-turning on it has damaged the government’s credibility on making “tough decisions” with its backbenchers.

It has turned out to be the worst kind of policy mistake, one in which you suffer damage both for starting it and for stopping it. (I’m reminded of Winston Churchill’s remark about the Suez crisis, that “I would never have dared, and if I had dared, I would never have dared stop.”) The government is weaker in the country because it tried to means test the winter fuel allowance and weaker in parliament because it has created a perception that the government retreats under pressure, which means the government faces more pressure to retreat, which means it retreats more often, and so on.

It may be that the government recovers but I think even in that scenario, the damage is far more akin to, say, the 2012 Budget, which put David Cameron’s government on its back for a year, significantly reduced his room to manoeuvre around his party and shaped that parliament politically in many ways.

Part of the point of this exercise is to fill out the quiet time between Christmas and the new year but the other, more important part is for me to learn things! I think the big lesson here is that “spending on pensioners can be tinkered with, but only with great care”.

Threatening to change pensioner benefits helped Theresa May lose her majority in 2017. It has damaged this government. There is one big example of a government changing pensioner benefits: equalising the age at which men and women receive the state pension. This was a controversial change, it has attracted a large amount of adverse political comment, but it has happened and the governments that implemented it have been re-elected. You can do things such as changing the triple lock to a double lock or means testing winter fuel allowance, but you have to make an argument for them and you are better off doing them slowly. You can’t avoid damage if you do it very quickly.

Now try this

I had a lovely Christmas break and I hope you all did too. Something I forgot to include in my Christmas music recommendations was Craig Charles’s wonderful programme on BBC 6 Music, which is always good fun.

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