Universal Pensioner Benefits: Post Budget Update

 

 

Now that the dust is starting to settle after Reeves’ so-called ‘Halloween Nightmare’ budget, let’s take a look at what actually happened to pensioner benefits…and what we might expect to happen in future.

We all know about the loss of the Winter Fuel Payment for the majority of pensioners – you would have had to have been living on Mars for the last 3 months not to. Starmer is not yet out of the woods on that one, although it’s unlikely he will give way without an adverse judgement in the courts, and he will doubtless fight to defeat any attempt to force an about-turn, since the loss of face involved would be too great for him to bear, both politically and personally. The overwhelming adverse reaction to the move, and in particular to the way it was announced and justified, will have been noted, however, and I think this has probably been responsible for restraint on any further cuts – so far.….

It remains to be seen whether we will ever get universal WF payments back – if the courts find against the government, at the very least they will be obliged to carry out a retrospective formal review of potential consequences, which in the light of the Age Concern findings, would be pretty damning. This would make it difficult to justify not reinstating the benefit. Any such ‘enforced’ review by #10 will also be the subject of intense scrutiny and any attempt to whitewash the results will be pounced upon by critics.

In the event, a compromise solution may emerge, involving a more generous means test; this would however have major resourcing implications for DWP, who would need to design, implement and verify a completely new assessment method from scratch. The cost of this operation might well exceed the savings in not restoring the benefit universally.  None of this is likely to happen before 3Q25 at the earliest, given the tortuous nature of any legal process in this country, and the inevitable appeals the Government lawyers will institute to try and delay things. We may eventually find that a compromise is presented in the form of a temporary reinstatement in the 2025 autumn statement from '26 onwards, particularly if the predicted temporary uplift in GDP in '25 to '27 actually looks like it's actually happening. Starmer and Reeves may by that time be willing to settle for the 2 year's worth of savings that DWP will already have chalked up.

Are government likely to means test any of the other benefits at risk in the future ?

Reeves herself has said she would "..not like to deliver another budget such as this one". That said, the OBR’s dismal forecasts of future expenditure during the lifetime of this parliament more or less guarantee more tax rises and spending cuts, despite Labour protests to the contrary. The IFS also paint a gloomy picture of the economy and its long term prospects.

The reason behind all this despondency is the realisation (and not before time !) that, as a rapidly aging and relatively unhealthy, but still growing, population with poor productivity and a historically stagnating economy, we are essentially living beyond our means, and have done for some time. We are by no means alone in this – similar demographic and health challenges can be seen in many '1st world' western European nations. We do, however, seem to suffer from particularly low economic productivity in UK, partly due to lack of investment in new technology (see recent article on how this has happened and why it's important). 

Sadly, at present there appears to be little prospect of achieving the level of growth required to ‘buy ourselves out’ of this dilemma, so in the medium term at least, we will have to be prepared to part with more of our income to fund ‘big government’ and pay the bills. (We may, of course decide to revert to ‘smaller’ government, with a more realistic strategy of managed decline, in 5 years time, once the current ‘experiment’ with Labour tax-and-spend comes to an end). 

Can we predict where will any new treasury ‘cash grabs’ will fall ?

Business has certainly taken a major hit in this budget, including a particularly vicious surprise attack on family farms by removing their exemption from IHT for all agricultural assets above £1M. Since most viable farms have values significantly above this level, and rely on a tax-free handover of assets to the next generation to survive, the move is likely to make many existing small family-run farms economically non-viable at the next death. This will force land sales, drive experienced and productive farmers off the land and decimate our farming industry. We will then be even more dependent on foreign imports, at a time when the geopolitical situation is steadily worsening. If anything, our approach to securing home food production should be mirroring our obsession with achieving net zero and energy self-sufficiency. The fact that the opposite seems to be the case shows a worrying naivete. 

The downstream implications of the attack on business generally will resonate throughout the economy for at least the next year, so that a ‘hands off business’ approach will be the most likely strategy adopted in the next budget.

It’s probable therefore that revenue-raising in the next round is likely to be focused on personal taxation / welfare, in order to counter the accusations already rife that Labour is ‘anti-business’.  Reeves will still be hemmed in to an extent by manifesto promises on the major revenue generating taxes i.e. employee NI, income tax (IT) and VAT, but she could still legitimately lower IT thresholds; this would undoubtedly be ‘called foul’, though,  since it would effectively raise the tax burden for ‘working people’. By Autumn 2025, though, we will be thoroughly inured to Labour’s broken promises, so there is likely to be less of a push-back if Reeves does break manifesto commitments.

Benefits are a softer target and therefore likely to take the brunt of any further ‘remedial’ income-generating measures. All three of our remaining universal pensioner benefits are therefore still at risk i.e. English Concession bus passes, over-60s prescription charge waiver and the single-person council tax reduction. The bus pass has already received some ‘protection’ from the current transport minister, who has promised to maintain the English concession ‘while she is still in post’.  The devolved home nation governments are likely to maintain their own arrangements, which would make it more difficult for Starmer to overrule the current minister and renege on this promise.

Any concession on working age benefits is also unlikely, with the 2-child cap remaining firmly in place. An attack on sickness benefit and disability claimants is also already in Labour’s sights as a way to reduce the burgeoning working age benefits bill. We should not rule out some form of means testing for the State Pension itself, although this would probably be a last resort, given the legal implications.

It would thus be dangerous to assume that any or all of the remaining pensioner benefits are ‘safe’ going forward, however many assurances we might get from Labour ‘staff’. The best  thing we can do at this stage is to keep their ‘feet to the fire’ by badgering our MPs, campaigning and petitioning,  and looking out for any sign of a ‘volt face’. On present performance, the leadership are likely to try to ‘slip in’ such changes when they think the electorate isn’t watching….We certainly are, though, and will continue to do so…..like hawks !

First published 2.11.24