Rachel Reeves Puts Pensions at Risk Instead of Protecting Them, You Won’t Believe What She Did
Chancellor Rachel Reeves has made several mistakes, starting with her decision to cut the Winter Fuel Payment for 10 million pensioners.
Her goal was to save £1.4 billion annually and prove to financial markets she was serious about managing the UK’s finances, even at a political cost. However, the money saved from cutting this benefit has been overshadowed by her poor handling of the economy.
If Reeves had managed things better, she could have kept the Winter Fuel Payment and still met her financial rules. In fact, she might have even increased it to £1,800 a year. But her decision to encourage pensioners to claim means-tested Pension Credit reduced the expected savings.
Pension Credit claims not only restored the Winter Fuel Payment for many but also provided an average of £3,900 in extra state benefits per year. The increase in claims cost the Treasury £246 million, cutting the actual savings from the Winter Fuel Payment to about £1.15 billion.
That amount is small compared to the losses caused by her other actions. She raised taxes on businesses by £40 billion, scared the public with budget threats, and borrowed an additional £30 billion after changing her own fiscal rules.
These moves left the UK’s finances vulnerable, with only £10 billion in “fiscal headroom.” Rising gilt yields, due to a lack of investor confidence in her decisions, have wiped out this buffer, potentially adding £10 billion annually to the cost of debt interest—money that comes from taxpayers.
For comparison, the original Winter Fuel Payment cost around £2 billion annually. If Reeves hadn’t lost control of the economy, she could have increased the payment to £1,200 for most pensioners and to £1,800 for those over 80, while still staying within her budget.
The decision to scrap the Winter Fuel Payment also caused hardship for two million low-income pensioners who didn’t qualify for Pension Credit, leaving them to struggle in cold homes. Labour’s own calculations estimate this decision led to 4,000 additional deaths.
Reeves’s mistakes have cost the UK far more than she initially saved, damaging Labour’s early popularity and leaving taxpayers to cover the consequences.
