One of Keir Starmer’s first mistakes in office was to remove the winter fuel allowance from all pensioners other than those in receipt of pension credit. His latest big error is performing a U-turn and telling us that the government is, after all, looking at loosening the eligibility criteria, so that many more pensioners will qualify for the money next winter.
Starmer’s explanation for his U-turn during Prime Minister’s Questions was bizarre
How can both these things be true? Because the former was a political error, the latter an economic one. The optics of removing the winter fuel allowance at a time when millions of public sector workers were receiving large pay rises was terrible. It looked as if Starmer was declaring intergenerational war – as indeed many young left-wing activists would love him to do. Yet doesn’t mean that the cut should be reversed now. By doing so Starmer is signalling that he has no backbone. If you don’t like one of his policies you need only make a loud enough noise and it will be reversed. How is the government going to effect any of the other cuts to public spending which also need to be made?
Starmer’s explanation for his U-turn during Prime Minister’s Questions was bizarre. ‘I made it clear in my earlier answer that as the economy improves we want to take measures that will impact on people’s lives,’ he said. In other words, we’ve got more money now than we had last July when the withdrawal of winter fuel allowance was announced, so it is only fair that we give some back to pensioners.
Except that the government does not have more money than it had last July; on the contrary, the state of the public finances has grown more acute. The OBR’s latest forecast for the deficit for the financial year just ended is £151.9 billion. That is £14 billion higher than the OBR had been predicting just a month earlier. Nor, by any stretch of the imagination is the economy growing more strongly than it was last summer. The first two quarters of 2024 saw growth of 0.9 per cent and 0.5 per cent. Growth then dipped to 0 per cent, then 0.1 per cent and then 0.7 per cent in the following three quarters.
Starmer’s U-turn is purely political. He realises that the winter fuel cut hurt his party’s vote in the local elections and he has panicked. Having done so it is going to be very hard for him not to backtrack on other unpopular cuts, too. What is the betting that the government’s reforms to Personal Independence Payments will be next for the chop? That may help to stem the government’s declining popularity, yet it merely puts off the day when there will need to be a serious reckoning with the government’s burgeoning deficit – and the longer that reckoning is put off, the more serious the reckoning will have to be. Were Starmer and Reeves serious about fiscal responsibility, not only would they have cut back the winter fuel payment, they would have called time on the triple lock, too.
By always ratcheting up pensions even when average earnings are in retreat, the triple lock is, along with the mushrooming of other welfare spending, condemning Britain to national bankruptcy. We saw in the early 1990s, and again in 2008-09 and with Covid, any government which runs a deficit when the economy is growing is doomed the moment that growth stalls. It looks as if we are going to have to learn that painful lesson all over again.
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