In this blog, Director Theo Bertram sets out why the government shouldn't give into pressure against its decision to means-test the Winter Fuel Payment. Though the measure was introduced by the last Labour government, the circumstances are very different and do not warrant a universal payment.
When the last Labour government introduced the Winter Fuel Payment (WFP) in 1997, more pensioners were in poverty than today – both in absolute terms and also as a proportion of society. In that context, with a strongly growing economy, a universal payment made sense. It was simple and effective, and the proportion of wealthier pensioners who did not need the support was relatively small – smaller than it is today.
In 2024, the crisis we face is very different and the case for a universal cash handout to pensioners is much weaker. First, we are in worse financial straits than 1997. Second, pensioner incomes have outstripped the incomes of working families, so that the proportion of pensioners in poverty is now lower than the proportion of working families. Third, pensioners are forecast to get an additional £400 in their state pension this year, and the proportion of pensioners in absolute poverty is forecast to fall, while the proportion of those of working age is forecast to rise, especially for those with children. Handing over cash to Rod Stewart and Tony Blair makes no sense when the country is strapped for cash and it is families, especially those with children, who are most likely to be in freezing homes this winter.
The case being made against means-testing the WFP is two-fold. The first argument is that many pensioners who are eligible for the pension credit have not claimed it, and yet they need to claim pension credit to qualify for the winter fuel payment. This is a strong argument for increasing take up of pension credit but it is not an argument against means-testing the winter fuel payment.
The second argument is that the threshold is in the wrong place and those just above the threshold for pension credit will be most at risk. This is a reasonable argument but those making it then need to propose where the threshold should be and why.
There is a third argument against just means-testing the WFP, which is that it should be scrapped altogether and the money redirected to an expanded Warm Homes Discount instead. As SMF’s own Sam Robinson and John Asthana Gibson have argued, it and could be funded by scrapping WFP altogether.
Finally, the underlying problems are long term and systemic, not short run and quick fix. Five million households are in negative budget, according to Citizens Advice. That means their income is lower than their housing, energy and food costs. The way to solve that at root cause is not through tinkering with benefits but to grow the economy and increase wages; build more affordable housing to lower the price to income ratio of buying or renting a home; and to massively increase our ability to generate our own cheap energy. We may not typically think of these as anti-poverty goals but if Labour can actually deliver those flagship promises they will do more to tackle poverty for the long term than anything else.
