Labour’s Chancellor is clawing back a claimed £22bn budget overspend – by cutting winter fuel payments for the elderly. Is this attack on pensioners the best Rachel Reeves could do?

In a statement today (Monday, July 29, 2024), Reeves said the former Conservative government’s day-to-day spending plans in fact varied greatly from what it had claimed, with a series of unfunded commitments made in the knowledge that no public money was available to pay for it.

This included a £6.4 billion overspend on the asylum system – including the Rwanda plan that itself cost £700 million according to Reeves’s own claim. This scheme was obviously for the chop – as we had been expecting ever since Reeves announced her shock at its cost.

Also being cut are an A303 road tunnel under Stonehenge and the A27 Arundel bypass – and £85 million plans to restore aging railway lines (“Restoring Our Railways”) will be “paused”. Apparently another £1bn worth of transport projects are unfunded and Transport Secretary Louise Haigh will review them.

And Reeves has cancelled the public sale of the remainder of the government’s NatWest stock; instead it will be sold privately in 2025. Why? It makes sense if this method brings in more money, but is the identity of the buyer an embarrassment to Labour? What possible reason could there be for that?

In a sideswipe at former prime minister Rishi Sunak, Reeves killed his legacy – the Advanced British Standard educational qualification that aimed to bring together academic and technical qualifications for students aged 16 to 19 in a baccalaureate-style reform. This was expected to cost billions of pounds in future years but the Chancellor said Sunak had not put aside a single penny to pay for it.

And Boris Johnson’s baby – his claim that he would build 40 new hospitals by 2030 – is also under review after Reeves said only one new project unveiled under this banner has opened to patients and only six have begun their main construction activity.

Adult social care has been hammered yet again – this time with the Chancellor announcing that there will be no reform of charges for providing it because it “will not be possible”.

And universal winter fuel payments – paid to all pensioners – will end. From this year onwards, only those receiving Pension Credit or other means-tested benefits will receive them. This is expected to save £1.4 billion and Age UK has called it a “social injustice”.

More than 11 million people receive these payments at the moment and most will now lose them. But most pensioners are Conservative voters so it is possible that Reeves thought this decision was a political risk worth taking.

To cover the shortfall, Reeves said, she was asking all government departments to find £3 billion of savings on their current spending projections, plus two per cent savings on “back-office” costs.

In other words: more austerity.

Reeves also announced the date of the autumn Budget – October 30 – to be accompanied by a full fiscal and economic forecast from the Office for Budget Responsibility. This announcement comes with new restraints and requirements including a duty for the Treasury to share detailed departmental spending plans with the OBR and for spending reviews to have at least a two-year time horizon.

In the same statement, though, Reeves confirmed that she would be offering higher-than-expected pay rises to public sector workers, including a 22 per cent increase for junior doctors, six per cent for armed forces personnel, 5.5 per cent for other NHS workers and teachers, five per cent for prison service workers and 4.75 per cent for the police.

The cost of these pay rises is said to be £9.4 billion, with two-thirds coming from central government and the rest from departmental savings.

This gave the Tories an opportunity to attack. They could have claimed that Labour was making cuts in order to pay for over-generous wage settlements. But instead, shadow chancellor Jeremy Hunt harped back to his old line that the government is softening us all up for tax rises.

But Reeves’s line on the legacy of the last government was strong.

She said their economic legacy was “unforgivable” and they had given “false hope” to Britain, promising roads that would never be built, public transport that would never arrive and hospitals that would never treat a single patient: “They spent like there was no tomorrow because they knew someone else would pick up the bill.”

And she said the worst part was that the Tories campaigned on a platform to do it all over again.

But there is no getting around the fact that the new Labour government is saying it will not do things that it promised to do – and pensioners won’t be the only ones who see this as a betrayal.

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