Universal Pensioner Benefits: Pre-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 June 2025, and its implications for the future of universal pensioner benefits.....You may also be interested in a more recent update on the recent rumours that Reeves may introduce means testing for the State Pension itself in this November's budget....

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Now that the dust has well and truly settled after Reeves’ so-called ‘Halloween Nightmare’ budget in October 2024, and its consequences have fully fitered through to the economy at large, 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 last summer – you would have had to have been living on Mars for the last year not to. Although Starmer obviously thinks it's 'done and dusted', he is not yet out of the woods on that one; although he reluctantly caved in to the threat of defeat from his back benchers, he refused to restore the universal benefit completely, merely introducing a means test in order to 'safe face'. The loss of leadership credibility involved in a complete climbdown would have been 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 to pensioner benefits – so far.….

It remains to be seen whether we will ever get universal WF payments back – the courts chickened-out on finding against the government on the initial challenge regarding insufficient consultation, so no legal help there. A Reform government might also be tempted to leave things as they were, preferring to reduce taxes rather than restore lost benefits.

The expensive 'fudge' of introducing a means test on WFP will have major resourcing implications for both HMRC and DWP, who would need to design, jointly implement and verify a completely new assessment method from scratch, probably involving a direct link between the two IT systems. The cost of this operation may well exceed the savings in not restoring the benefit universally.  This must ideally also happen by November 2025, when the first payments are due to be sent out. I've looked at the practicalities of this in more detail in another blog for those who would like to look at the logistic nightmare that may well be to come.

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....pensioners have younger concerned relatives!). It is also raising concerns among his increasingly 'unruly' back-bencher contingent, which could cause him even greater pain later...

Given their proven unfavourable attitude to pensioners generally, are government likely to means test any of their 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. Only the IMF have held out an 'olive branch to UK fortunes' by suggesting UK may be one of the fastest growing economies in the G7 (at 1.3% for both this year and next this isn't exactly mindblowing, and IMF also issued a warning at the same time about 'persistent sticky higher inflation' than the others in the G7.)

The reason behind all this despondency is the realisation (and not before time !) that, as a rapidly aging and relatively unhealthy,  population with poor productivity and a historically stagnating economy, we are essentially living beyond our means, and have been doing so for some time. Unfortunately, the UK population is also still growing due to continued unrestrained immigration, and this wholly unnecessary expansion will place a further burden on public services and the exchequer in future years.

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 trend has been exacerbated by 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 Labour's penchant for increasingly ‘big government’...and pay our own bills. 

We may, of course, eventually decide to revert to ‘smaller’ and less resource-hungry government, with a more realistic strategy of managed decline, rather than the current 'growth or bust'. Sadly this only looks likely to happen in 2029, since the current ‘experiment’ with Labour tax-and-spend we let ourselves in for in 2024 is set to last until then, thanks to the Cameron reforms on fixed term parliaments, and the ridiculously large majority we managed to give Labour in 2024. 

Hopefully by May 2029 we will all have learnt from our mistakes. We will need to accept that the scale of growth proposed for the economy by 'Starmer & Co.' in their 2024 manifesto was 'but a pipe-dream', and we need to be more realistic about accepting 'managed decline' as the only way forward. 

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

Business certainly took a major hit in the 2024 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 in a particularly lean period, the move is likely to make many existing small family-run farms economically non-viable after the current generation of 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. Sadly, and rather worryingly, this does't seem to worry UK.Gov in the slightest.

If anything, in today's increasingly uncertain world, our efforts to secure home food production and defend our borders 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 or the loss of our hard-won freedoms. 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 Reeves' concerted attack on business last year have   resonated throughout the economy throught the last year; although industry is hoping for a ‘hands off business’ approach. Reeves' 2025 budget is likely to be as great a debacle, given her sizeable 'black hole', her obsession with obeying her own fiscal rules and Starmer's equally damaging one of promoting the interests of 'the workers' and the public sector at the expense of everyone else.

It’s probable therefore that revenue-raising in the next round is likely to be focused on personal taxation and welfare, in order to try 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, increase Capital Gains tax to bring it in line with income tax, and extend the freeze on IT thresholds without breaking these. 

She may however be desperate enough for more financial headroom to 'go the whole hog' and decide to abandon the manifesto promises altogether and raise one or more of the 'big 3' taxes. This would undoubtedly be ‘called foul’, though,  since it would effectively raise the tax burden for the ‘working people’ (whoever they are nowadays!). By now, though, most of us are 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/or personal 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 - although she clearly buys into Starmer's doctrines, 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 of course been the ultimate architect of them. Keep a lookout for the customary declaration of 'full confidence' by the PM in his Chancellor...when it comes, political oblivion will be only days away.....

Benefits generally are a 'softer' target and therefore likely to take the brunt of any further remedial income-generating measures. We've already seen an attempt to cut working age benefits and the rebuff promptly administered by back-benchers. Thus all three of our remaining universal pensioner benefits are arguably still at increased 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 last transport minister, who promised to maintain the English concession ‘while she was still in post’. Sadly she fell victim to Starmer's well established habit of axing female ministers (no less than 4 of them to date), having declared 'full confidence' in her but a few days earlier. 

Bus passes are perhaps the least vulnerable of the 3 - the devolved home nation governments are likely to maintain their own arrangements on bus passes whatever Westminster dictates for England, which would make it more difficult for Starmer to renege on the prevous minister's promise. He would also face strong opposition from many Labour-controlled Local Authorities who actually administer and control the English Concession scheme. 

Recent announcements of support for increase in bus service provision would also make any interference more difficult to justify. The single person council tax reduction, although LA controlled would be an easier target, and could be 'parcelled up' with a more extensive reform of the Council tax and property taxation generally. Prescription concessions would also be an easier target from a practical point of view, since they are NHS administered, and would face less opposition from the general population. Scrapping this benefit for the over-60s, or means testing it, would put Westminster even further out of line with the devolved governments, since they generally favour free prescriptions across the board.

Any further concessions on working age benefits are also unlikely, although there are hints that the 2-child cap on Universal Credit payments could be lifted as a flagship measure to show Starmer is 'on the side of families'. An attack on sickness benefit and disability claimants is still in the pipeline, although only for those still to apply. Any change would be closely watched by back benchers and pounced upon if too severe.  Given the tight overall budget, we should expect cuts to apply elsewhere, and 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 yet another ‘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

Revised 13.10.25