Keir Starmer has announced a partial U-turn that would make more pensioners eligible for winter fuel payments as government figures opened the door to more tweaks to controversial policies.
After a major backlash against one of the most unpopular measures announced by the Labour government, the prime minister indicated he would look again at the £11,500 threshold over which pensioners are no longer eligible for the allowance.
Downing Street said the change was a result of an improved economic landscape, with sources saying ministers could revisit policies including the two-child benefit cap or health and disability cuts if the economy continued to improve.
“We’re open to adapting policy as the circumstances allow. So when there’s an opportunity to make people better off, which is our central purpose, then we’re going to take it,” a government source said.
However, No 10 was unable to confirm whether the winter fuel U-turn would come into effect by this winter if announced in the autumn budget – or how many of the approximately 10 million pensioners who lost it would have it restored.
The reversal comes despite Downing Street ruling out making changes to winter fuel payments after the Guardian revealed that it was rethinking the cut amid anxiety at the top of government that the policy could wreak serious electoral damage.
Senior Labour figures are hoping the partial U-turn, along with measures to curb child poverty to be announced at the spending review, will help to head off a growing backbench rebellion over the government’s £5bn welfare cuts next month.
Ministers are planning to announce a package of up to £750m to tackle child poverty at the spending review in June, the Guardian understands, although the final figure is yet to be agreed.
This is expected to focus on measures to tackle the root causes of poverty such as work, housing and education. It could include expanding free breakfast clubs, broadening eligibility for free school meals or raising the amount paid to families in child benefit.
Starmer has insisted to his team that the option of tweaking the two-child limit for universal credit, or even scrapping it entirely, should remain on the table. Any decision on this is likely to be taken “down the line”, a government figure said.
“The prime minister and chancellor are resolute in their determination to tackle child poverty and the spending review next month will be about making a down payment on that promise,” a No 10 source said.
“This isn’t about fiddling around the edges but radical reform and investment in the places that can make a difference to a child’s life chances.”
The decision to means test the previously universal winter fuel payment was one of the first announcements by the chancellor, Rachel Reeves, after Labour’s landslide election victory last year and has been widely blamed for the party’s collapsing public support.
Party activists said the decision to axe £1.5bn in winter fuel payments last July, limiting them to either £200 or £300 a year to pensioners in England and Wales who receive means-tested pensions credit, came up repeatedly on the doorstep during this month’s local elections.
“I recognise that people are still feeling the pressure of the cost of living crisis, including pensioners, as the economy improves,” Starmer told MPs at prime minister’s questions on Wednesday.
“We want to make sure people feel those improvements as their lives go forward. That is why we want to ensure that as we go forward, more pensioners are eligible for winter fuel payments.”
The government has insisted the policy was necessary to help stabilise the public finances, allowing the improvements in the economic picture that Starmer said could result in the partial reversal of the measure.
“As the economy improves, we want to take measures that will impact on people’s lives, and therefore we will look at the threshold, but that will have to be part of the fiscal event,” he added.
Ed Davey, the Liberal Democrat leader, said: “The world’s longest U-turn continues. The prime minister has announced the ‘concepts of a plan’ that have come far too late for the millions of pensioners forced to freeze in their own homes over the winter.
“The least those people deserve is an apology for this punitive policy and a serious proposal from the prime minister on how he will begin to pick up the pieces from his government’s disastrous decision. Not vague words that will take months to materialise into something meaningful.”
Finding a mechanism to widen eligibility for the payment will cause headaches in Whitehall after the decision to link it to the pension credit threshold. Officials fear that simply increasing the pension credit threshold would increase take-up of that benefit, wiping out any potential savings.
Officials said work was starting immediately on how to introduce changes at the autumn budget as they ruled out a full reversal. A more likely option would be creating a new threshold specifically for winter fuel that would allow households not on pension credit to qualify.
Raising it 20% above the pension credit threshold would cost about £100m and make about 400,000 more families eligible for winter fuel payments, according to the Resolution Foundation. Or the entitlement could be expanded to those who get disability or housing benefits.
The Conservative leader, Kemi Badenoch, said she would like to see pensioners on £11,000 to £15,000 a year getting winter fuel payments but that it would be “too late” if ministers wait until the autumn budget to set out the details as they would lose this year’s entitlement.
Meanwhile, Liz Kendall, the welfare secretary, insisted she will press ahead with measures to cut the benefits bill despite pressure from MPs, adding that she would listen to concerns but that the system needs to change.
