I'm totally against universal benefits, but Labour's wrong about winter fuel payments

As Labour delegates gather in Liverpool, the mood will be more muted than it should be. The reason can be largely summed up in three words – winter fuel payments. It is difficult to understand why an incoming government has allowed its early image to be defined in this way when so many are looking for positivity and hope.

These are early days and it is not too late to think again. Where better to ‘fess up than in Liverpool? On the face of it, I tick all the boxes for an enthusiastic supporter of the policy. I have no difficulty believing in the £22 billion “black hole” which the Starmer government inherited on top of an already dismal fiscal outlook.

The Tories knew for many months they were on the way out so why would they not have set minefields in retreat? Unfunded promises are obvious devices which were cheerfully deployed by demob-happy Tories and Labour now has to deal with. I accept that and am ready for the “tough decisions”.

Poor paying for politicians to buy votes

Second, I have long been a committed non-believer in the “progressive” claims on behalf of universalism; an argument with particular pertinence in Scotland. Within the context of limited resources, giving financial benefits to people who do not need them is inevitably at the expense of those who do. So poverty gaps never close while better-off votes are bought.

Third, the winter fuel payment has long been among the most egregious examples of why universalism is a con on the poor. A £200 handout to everyone over 70 and £300 to over-80s may sound like the soul of generosity but makes no sense in terms of the claimed objectives.

This is inherently recognised in the fact that, for 20 years, it has never been linked to inflation. If it had been, it would now be worth £370 and £550 respectively – considerably more useful for those who need support while still pretty marginal for the 27 per cent of pensioners who live in millionaire households.

SNP universalism

The case for reform is unanswerable, as confirmed in stark terms by the Scottish Government’s Poverty and Inequality Commission which described the existing benefit as “extraordinarily poorly targeted as regards addressing poverty”. Since the benefit has been devolved, the Scottish Government has been planning its replacement.

It is now spared the difficulty of deciding between the pleas of its anti-poverty advisers and its own “universalist” instincts by pleading there is no choice but to “mirror” the UK position because there will be no Barnett consequentials to do anything more. It may be disingenuous but why would they not grab at a politically useful, free gift?

So if reform is right in principle, where does the position adopted by Chancellor Rachel Reeves go wrong? Basically, it is because of the haste with which it was announced and the failure to consider the implications, either fiscal or political. A “saving” that depends on 880,000 old people not claiming the Pension Credit they are entitled to has a dubious ethical basis.

Why the urgency?

Beyond that, there is the credibility test. It is possible to believe in the £22 billion black hole but equally disbelieve the claim, three weeks into office, that the most urgent and necessary means of addressing it was by taking winter fuel payments away from many elderly people who do need them as well as millions who do not.

A commitment to early reform within a package of measures would have been fine. It would have been welcomed by anti-poverty campaigners while presenting little political difficulty since nobody can seriously defend the “extraordinarily poor” targeting of what exists. The rest of the black hole will be addressed after due consideration via the October budget. Why not this?

It remains a mystery why this policy decision was deemed so urgent it could not await that wider context. Was it a bee concealed in Ms Reeves’ bonnet which she was, quite reasonably, determined to address as soon as she crossed the Treasury threshold, but then decided to go the whole hog? Or was she ambushed by Treasury officials who have been trying to get rid of the universal handout for years, because of its inefficiency?

An awesome task

The worst option is that it was adopted as some sort of virility test which 420 Labour MPs, most of them hardly in the door, were required to pass. It has forced them to defend something which very few have been persuaded is actually necessary, in the crude and hasty form it was presented. On their behalf alone, there would be no shame in finding grounds to think again.

Politically, the effect of the winter fuel payments decision has been predictable – which makes it surprising that nobody in Labour’s high command thought it worthy of a little more contemplation. Apart from anything else, it has overshadowed all the positive actions and signals of change that the incoming government has initiated, which surely was not the intention.

Labour has been out of government for 14 years and faces an awesome task with limited collective experience to draw on. A degree of naivete is understandable and political mistakes are forgettable, so long as they are dealt with before firm impressions set in.

Ms Reeves should perhaps look back to the circumstances in which winter fuel payments were set at current levels. In 1999, Gordon Brown had dropped the ball by allowing a formula to decree that the state pension should increase by a derisory 75p a week. He picked it up not only by greatly increasing winter fuel payments but introducing progressive changes which pensioners have benefited from ever since.

That is a little bit of history worth learning from. The current danger is that this affair becomes not only damaging in the short term but defining for much longer. A pause for thought is required.