Lib Dem Deputy Leader Daisy Cooper has been talking about the Lib Dems’ efforts to halt the Government’s plans to cut Winter Fuel Allowance for all but the very poorest pensioners.
While the party has no objection to some restrictions being made for wealthier pensioners who don’t need it, we feel that the cut-off, at Pension Credit level, is too harsh and will lead to vulnerable pensioners suffering this Winter.
Daisy told LBC:
“What people have been saying to me is that they’re very scared because it’s a very sudden change.
“If it’s a cold winter, we’ll have older people shivering in their homes, and that’s unacceptable.”
📻 Me talking to @LBCNews on proposed cuts to the #WinterFuelAllowance pic.twitter.com/UhklDQiGL0
— Daisy Cooper MP 🔶 (@libdemdaisy) September 2, 2024
Daisy Cooper has also written to Lucy Powell MP, the Leader of the House of Commons, demanding that MPs be given a vote this week on the Government’s proposal.
In her letter, Daisy warns that failing to hold a debate and vote on the issue would risk “damaging public trust in politics” especially given the policy wasn’t included in the Labour manifesto at the election and is now set to go through with “minimal parliamentary scrutiny.”
The letter adds that there are just two weeks to go to protect pensioners from the cut before it comes into force on 16th September.
We tabled a motion backed by all 72 of our MPs to block the government’s proposals through a debate and vote in Parliament.
Daisy said:
Over the past few weeks we have heard from countless pensioners worried about whether they’ll be able to heat their homes this winter.
To push these cuts through without any other measures to mitigate the impact on millions of poorer pensioners, and with minimal parliamentary scrutiny, risks damaging the public’s trust in politics and putting the most vulnerable at risk.
We all appreciate the damage that the Conservative Party did to the public finances and the size of the challenges in front of us, but this is a step in the wrong direction and the proposed cuts must be scrutinised properly.
The government must give MPs the chance to debate better solutions, vote on their cuts to the Winter Fuel Allowance and prevent millions of the most vulnerable in our society from losing out.
Here is Daisy’s letter in full:
Dear Leader of the House,
I am writing to you regarding the government’s proposal to withdraw the Winter Fuel Payment from millions of pensioners, and to urge you to give MPs a debate and vote on this issue in the coming week.
These changes mean 10 million pensioners are set to lose the £300 payment this winter, at a time when energy bills are set to increase due to the increase in the energy price cap. Of these, the charity Age UK has warned that two million will find paying their energy bills a real stretch and will be seriously hit by this cut.
In addition, according to the Government’s own figures, 800,000 of the lowest-income pensioners are eligible for Pension Credit but do not claim it, meaning they will lose their Winter Fuel Payments.
The Liberal Democrats recognise that the government faces difficult choices given the appalling mess left by the Conservative Party.
We also recognise that whilst there are some wealthier pensioners who don’t need the help and would readily say so, restricting eligibility so tightly has given rise to concerns that too many pensioners living in poverty will fall between the cracks.
Therefore, given the significant impact the withdrawal of the Winter Fuel Payment will have, we believe it is vital MPs are given the opportunity for a proper debate and a vote before these changes come into force. That is why Liberal Democrat MPs have tabled a prayer motion to annul this change and ensure Parliament is given a debate and a vote.
A major change like this for millions of pensioners, including many in poverty, should not be forced through with minimal parliamentary scrutiny. MPs must be given a chance to represent the views of their constituents and to propose alternative choices.
I am particularly concerned that given this policy was not included in the Labour Party’s manifesto, and therefore lacks a democratic mandate, failure to grant a vote would risk damaging public trust in the government and in politics more widely. This would risk compounding the damage to faith in our political system caused by years of chaos and broken promises under the previous Conservative government.
There are now just two weeks to go until the legislation underpinning this change comes into force on Monday 16th September. I would urge you to give MPs a debate and a vote before it is too late.
Yours sincerely,
Daisy Cooper
* Caron Lindsay is Editor of Liberal Democrat Voice and blogs at Caron's Musings
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19 Comments
If Daisy is arguing that there should be a higher cut off, doesn’t that create the problem that a higher cut off would require a separate means test, thereby adding more bureaucracy and expense. Setting the cut off at the same point as eligibility for pension credit avoids this problem – which presumably is why the Government has done it that way.
Simply tax the benefit but keep it universal.
I agree with Mark.
I am troubled by how many (not Carol) seem to be taking this as a “Lib Dems want to tax and spend” campaign.
When taxes and national borrowing are both historically high and there is a gaping political hole in the radical centre that seems entirely the wrong message to send.
It was Covid that put the allowance up to £600 from £200.
Simple solution go back to the £200 figure introduced by Labour, what 15 years ago, no doubt had Covid not happened that is where it would be now.
That would offer some support and savings at the same time.
I agree with Mark and Tristan that taxing the benefit would be the simplest way of doing things. Another option would be to remove the benefit just from those in the higher tax bracket.
@Kevin Hawkins
“Another option would be to remove the benefit just from those in the higher tax bracket.”
Doesn’t that add complexity to individuals’ tax calculations? How much might that cost?
I also think taxing the benefit is the simplest approach.
@Nonconformistradical
I agree, as we’ve seen with Child Benefit, once a universal benefit which everyone understood and could readily calculate what they would receive, now…
The KISS approach would maintain the universality but make it a taxable benefit. That way the DWP only needs to know who receives a pension and so make the payment and inform HMRC, with the recipient’s taxes being adjusted in the usual way.
I think I agree that the simplest approach is to tax it. However, here I plead my ignorance, someone suggested to me the other day that because the income tax threshold hasn’t been raised we could be introducing another tripwire as making the benefit taxable would push those on the edge into paying tax?
I agree all universal benefits should be taxable just as the OAP currently is. A small adjustment to Pension Credit could compensate for those who just get caught out by personal allowance not keeping track with inflation – only £60 for the £300 WFA.
But it is all tinkering and KISS would demand no allowances and a UBI and all income taxable to replace all this complexity (could also stop all the vat exceptions, make all consumption vatable and compensate within the UBI!)
@Chris Lewcock re 4th Sep ’24 – 8:35am
“because the income tax threshold hasn’t been raised we could be introducing another tripwire as making the benefit taxable”
So that’s a change which needs to be reversed PDQ. It spreads the pain around a lot of people who can’t necessarily afford to pay it instead of putting the burden on those who can afford to pay for fancy tax experts to find all the possible loopholes for them to avoid paying more.
@Chris Lewcock – The “tripwire”
The raising of the thresholds is one matter another is the “tripwire”, namely the impact of stepping over the threshold.
I think too much is made of this (the act of stepping over the income tax threshold) with many wanting to imply income tax is regressive and thus people will reduce what they are already taking home as opposed to reducing the proportion of any increase they get to keep. I’ve had people (graduates !) having similar misconceptions about becoming a higher-rate taxpayer.
Obviously, with taxable benefits , there is a side effect, hence we could raise an untaxed £300 winter fuel benefit to £375 taxable benefit and the majority of people would still be receiving £300 net; but taking into account the smoke and mirrors of political announcements, we could present it to the media as a substantial increase in the (gross) benefit…
Given how poorly targeted the allowance was, what the government has done makes sense. No reason to not tax it but that wouldn’t remove 80% of the cost, which is the reason for removing it. The state pension has increased way more. For once I agree with Reeves. Opposing the government for the sake of it loses the party respect
@Russell…
Someone on pension credit – £218 will get the WFA….Someone who’s only income is the state pension – £221 gets nothing …£3 more and you get nothing..They must be wondering why did I bother with all those national insurance credits ..
If I understood correctly what Joe Bourke was saying last week, the reason Rachel Reeves is short of money (supposedly!) and so a need to make cuts which include the removal of the WFA, is that there is a £40bn interest bill to pay on Reserve accounts at the BoE. This is due to the decision of monetary committee of the BoE to keep interest rates at the relatively high level of 5% even though inflation is only 2.2%.
So if interest rates were set at the current level of inflation there would be a saving of £22.4bn. This seems curiously close to Reeves’ claimed figure of a £22bn “black hole”. Is this just a coincidence?
So it’s important to understand the rationale behind the desire to keep interest rates high and the need to cover any interest payments made by the BoE on their reserve accounts.
The argument against simply allowing the BoE to create the money to pay the interest bill is that it’s potentially inflationary. However, the monetarists argue that a rise in interest rates is deflationary. So, if it is deflationary why would creating the money to pay the interest bill be inflationary?
On the other hand, if an increase in interest rates is inflationary, why raise them in the first place?
@ @Kevin
“I agree with Mark and Tristan that taxing the benefit would be the simplest way of doing things. Another option would be to remove the benefit just from those in the higher tax bracket.”
Would it?
Rachel Reeves wants to remove the benefit from all pensioners who earn more than about £12k p.a. Anyone who is on £13k p.a. isn’t paying much income tax anyway. They certainly aren’t paying anything at all at the higher rate.
So we can’t accuse Rachel of making things over-complicated. She wants all pensioners who are earning £12k pa to do without their usual £300 WFA and her way is probably the simplest way to do it.
She’s not interested in any discussion about how we can make it fairer and remove the WFA from those who genuinely don’t need it. If she were we could of course have that discussion.
Peter Martin,
the Bank of England sets out its rationale for using interest rates to target inflation (or pushing back against a debt deflation as was the case for the prior 13 years from 2008 to 2021) on its website Inflation was not caused by people spending too much. So why will higher interest rates work?
The economic theory behind interest rate policy is the The natural rate of interest
In normal conditions you would expect savers to be able to get around 2% on savings to match the target rate of inflation i.e. approximately what is paid on a bank deposit account now.
Inflation appears where spending in excess of supply capacity in concentrated (inelastic supply) and where positive feedback loops generate a buying frenzy. That excess spending is typically generated by bank credit creation during a property and financial assets boom that eventually works its way through to the real economy in the form of higher rents and consumer prices.
Interest rates are not the only means of targetting inflation. The Wilson government in the 1960s restricted mortgage lending and both the Wilson & Heath governments and the Nixon US administration in 1971 introduced wage and price controls that proved very difficult to maintain. Raising taxes on income or consumption when people are experiencing a cost of living crisis is politically unpaltable for a government seeking reelection. Hence, the reliance on independent central banks and interest rates since the 1990s to control inflation.
Whether the BofE creates interest-bearing reserves or issues bonds to meet deficits makes little difference. It is still creating debt on which interest has to be paid (ultimately by taxpayers) either way and No, higher rates are not (very) inflationary
@ Joe,
So you do agree that there would be no “black hole” and so no need for WFA cuts but for interest rates being so high?
The monetarist theory isn’t that higher interest rates aren’t *very* inflationary. It is that they aren’t inflationary at all. In other words they are deflationary. Mind you some of us have our doubts about that. There are contradictions in the monetarists own arguments. The way to best regulate the economy is through the taxation system and fiscal adjustments.
At the moment inflation is 2.2%, close to target, and the economy is sluggish and even heading into recession. Bankruptcies levels are higher than they were in 2008. There’s no need for tax rises and spending cuts just yet. Reeves looks set to crash the economy.
https://bmmagazine.co.uk/news/uk-insolvencies-surpass-financial-crisis-levels-as-interest-rates-squeeze-businesses/
Peter Martin,
I don’t think interest cost projections will have changed dramatically from earlier budget projections and it would be hard to argue that this has neccesitated spending cuts when the BofE has just reduced rates.
The cuts to the winter allowance are a very odd choice for a Labour chancellor when she has many other options to make her sums add up.
i am aware of the spike in bankruptcies particularly in the retail and hospitality sectors with many being associated with unaffordable rents, business rates and borrowing costs.
Perhaps more troubling though is the shadow banking sector that was a big part of the 2008 banking cisis Britain’s next financial crash is coming. This time it won’t be the banks. These financial institutions could well crash the econony before the ink is dry on Rachel Reeves budget.
“During the post-crisis decade of low interest rates, when oodles of money flowed around the system, nonbanks gorged on cheap debt to fuel returns for investors. Amid the changing economic backdrop of higher rates and tighter money, central bankers fear they are now vulnerable”.
@ Joe,
I agree with you that this is something Rachel Reeves would have known about.
Those of us who are critical of an over reliance on interest rate adjustments aka known as “New Keynesianism” or “Monetarism” have been warning about this for at least the last 16 years.
Lowering interest rates to speed up the economy creates lots of private debt. Raising interest rates to slow it down and so reduce inflation creates a high level of private debt which increases the chances of an economic crash.
The 2008 crash followed the US Fed’s decision to raise interest rates. Other central banks followed suit of course.
It’s nothing new historically. There has been a general pattern of recessions following sharp increases in interest rates.
https://fred.stlouisfed.org/series/FEDFUNDS