The five key issues from chancellor's winter fuel payment U-turn

9 June 2025, 20:44 | Updated: 9 June 2025, 22:32

There are considerable problems with the winter fuel payment U-turn, but perhaps the political argument in favour outweighs them all?

First, Rachel Reeves has executed the plan without working out how to pay for it.

This, for an iron chancellor, is a wound that opponents won't let her forget. A summer of speculation about tax rises is not a summer anyone looks forward to.

Politics latest: Treasury minister challenged over reason for U-turn

Second, the fig leaf that she and Treasury ministers are using is an improvement in economic conditions.

If you were being polite, you'd say this is contested.

The OBR halved growth this year and the OECD downgraded UK forecasts, albeit only by a little, last week.

The claim that interest rates are coming down ignores that their descent is slower because of government decisions of the last six months.

Third, the question immediately becomes, what next?

Why not personal independent payments (PIP) and the two-child benefit cap?

At this stage, it would feel like a climbdown if they did not back down over those.

But then, what will the markets - already policing this closely - make of it, and could they punish the government?

Fourth, this is aggravating divisions in the Parliamentary Labour Party: the soft left Compass group and ministers like Torsten Bell pushing bigger spending arguments.

Those MPs in Tory-facing seats who rely on arguments that Labour can be trusted with the public finances are worried.