Universal Pensioner Benefits: Post Budget Update

 Editor's note: Please see the recent update at the end of this text for analysis of the Winter Fuel reversal announcement in in June 2025, and its implications.....

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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. Although he obviously thinks it's 'done and dusted', 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...at least in part. 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, probably involving a direct link with the HMRC system. 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 from '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. 

What is becoming apparent, not least to the leadership, is that this issue isn't going away, and will keep coming back to haunt them until it is resolved to the satisfaction of interested parties (i.e. the majority of the electorate....).

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 nevertheless 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. This is partly due to union-driven retention of outdated and inefficient working practices, and the 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 increasingly ‘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 after the current owners die off. 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, in today's increasingly uncertain world, our efforts to secure home food production should be prioritised over our desire to achieve net zero and energy self-sufficiency. The fact that the opposite seems to be the case shows a worrying naivete. Climate change will, after all, take a lot longer to bring our society to its knees than starvation. The USA under Trump has no intention of relenting on fossil fuel extraction, and the Chinese are still building new coal-fired power stations 'like there's no tomorrow', so why should we make all the running ?

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’ (whoever they are!). 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 is forced to raise Income tax and NI rates, and thereby breaks manifesto commitments. Despite the injuries she has inflicted on many in the past months through her policies, one has to feel some sympathy for Reeves - she is clearly 'being set up to take the fall' by Starmer, who will blame any future financial failings on her decisions alone, having himself been the ultimate architect of them.

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 limited ‘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 also likely to maintain their own arrangements, which would make it more difficult for Starmer to overrule the current minister and renege on her 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 !

 Update 11.6.25: Well, who'd have thought it....Starmer's 'flagship' pensioner put-down, the Winter Fuel payment withdrawal, bites the dust...or does it ? 

As predicted, the pressure on the leadership to limit the persistent and often very vocal damage, notably from their own back benchers, became just too great. The sad thing for Labour as a party, and for those pensioners who spent the winter shivering (and in some cases, sadly dying - esimates of the excess deaths as a result of the measure weigh in at around 5,000) is that it could all have been avoided. I've provided a detailed loook at the financial losses and gains in another blog and I won't rehash them here. What is more important is the loss of popularity and respect amongst the electorate, and not just the pensioner age group, who will never again be able to trust Labour to look after their interests. 

What is perhaps most galling is the complete lack of penitence...Starmer predictably has been tight-lipped, and clearly wants his chancellor to 'take the flak'. Reeves framed her response to the legitimate question 'Why on earth did you do it?' in terms of an acute need to save money on taking office due to the 'Tory Black Hole' which has now been relieved by better economic figures. 

This is both inaccurate an highly disingenuous, and shows a complete lack of respect for the intelligence of the electorate. The recent economic figures are, not to put too fine a point on it, dire. The statistics for April just announced show that the economy actually contracted, with little sign of any possibility of improvement, now that the full effect of Reeves NI hikes are really biting on employers. The 'blip' in February was clearly an anomaly, but Reeves is obviously hoping that the fabled economic growth expected later in the parliament will bail her out. Unfortunately for her, she is living in 'cloud cuckoo land' with this expectation, given the massive increases in debt the longer term capital expenditure she's just announced in the spending review will bring, and its inevitable effects on UK borrowing costs.

From a political point of view, Starmer's refusal to reverse the Winter Fuel debacle completely by lifting means testing still leaves him trailing the other two main challengers in that both Reform and the Tories have promised to remove means testing altogether. We still have over 1 million better-off pensioners smarting over the insult, (and the inconvenience of any tax claw-back by HMRC) and vowing revenge at the ballot box whenever they get the opportunity. Those who were fortunate enough to get their benefit back are unlikely to forget the cold hard winter they've just experienced; pensioners have long memories and are likely still to remember it vividly when it comes to the 2029 poll.

Will they dare to interfere with any of our other pensioner benefits ? Quite possibly...

There's no indication of anything immediate in the spending review, but means testing seems to be the order of the day, and Reeves may well attempt to apply the measures they introduce for clawing back Winter fuel payments via the tax system to other benefits such as free prescription charges and bus passes. More fun for HMRC then....just when they've been tasked to raise more revenue by chase tax avoiders. 

Labour still have disability benefits in their sights, although increasing discontent from their back-benchers may yet stave this off. The 2-child Universal Credit cap's days are probably also numbered for the same reason.

Have they really learnt their lesson ? - time will tell whether they really do have a political 'death wish' for the party.

You could really make it up, could you ?

First published 2.11.24

Revised 13.6.25