Treasury has tried to push previous chancellors to means-test winter fuel allowance

It is often said there is never anything new in politics. And for old hands in Whitehall, there is nothing new about the Treasury’s sights being set on the winter fuel allowance.

The difference this time is that the arguments about the merits of means-testing the winter fuel allowance are playing out in the front pages of national newspapers and among jittery Labour MPs who face a crunch vote on Tuesday.

Those arguments happen every year – but they previously took place behind closed doors in the Treasury, the policy having been offered up to multiple Tory chancellors who have ultimately rejected it as a way of saving money.

Treasury insiders say that on this occasion, Rachel Reeves – in her first week in the job as chancellor – was presented with details of the hole in the public finances with a prepared series of options to plug the gap, which included £1.5bn from means-testing the winter fuel allowance.

It is a well-rehearsed routine. One former Treasury chief secretary recounts how officials would present him with a list of options for savings and clearly steer him towards their preference for where the axe would fall.

“They’d say, ‘here’s option A’, and when you asked for an option B or even C there would be lots of head-shaking and muttering and you’d have to really push them,” he said.

For some more experienced Labour MPs and ministers, the fact that Reeves made the decision so quickly is unsettling. For them, it is less about the material effect of the policy – there are strong arguments to be made about whether it is really fair to give the allowance to millionaires – but more about the decision-making process. The policy was not in the manifesto and Labour MPs have had no time to make the argument to their constituents.

“I think we have a right to a proper explanation from No 10 and the Treasury exactly why we have decided to adopt this policy which has been repeatedly rejected,” one MP grumbled this week.

Reeves is likely to have been well aware that the winter fuel allowance was often offered up to new chancellors as a way of making savings. It has been suggested to at least three Tory chancellors though, of course, a Conservative chancellor who depends more heavily on the votes of pensioners is more likely to see the downsides.

“If the chancellor ever asks for savings, they usually offer means-testing up. We never selected it, due to the cliff-edge for relatively low-income pensioners,” one former Treasury adviser said. “Also, any [government] savings would be at risk if more people simply start claiming pension credit.”

Another former Whitehall official confirmed that a succession of Tory chancellors had rejected the measure when it had been prepared by officials in the Treasury at previous budgets.

“It’s something officials often offered up but when we were in No 10 we always shot it down immediately. When one of those proposals leaked last year, [Keir] Starmer went very hard on the attack over it and made all sorts of accusations,” they said.

“Whenever a new minister comes in, the system always tries to slip their favourites past them. I’m sure there’s a load of things like that which HMT [Treasury] officials want to do – and are using Reeves’s narrative to slip into budgets. The civil service as an institution has all sorts of pressures and incentives that drive this sort of action.”

“It’s a staple Treasury go-to,” a third former Whitehall source said.

Another old hand at the Treasury, the former shadow chancellor Ed Balls, predicted this week that Reeves may ultimately need an escape route. “I think she will have been given a list of things and told she has to do one of them, and I think she’s probably, in retrospect, quite annoyed at the Treasury for pushing her into an immediate decision like this,” he told his Political Currency podcast.

But there seems no signs of any movement – or even regret – from Reeves or Starmer, though some ministers predict that mitigations like an extension of the warm homes discount might find their way into the budget.

Ultimately there is a principle at stake, too – a widespread breezy belief among Labour MPs that the dark talk around the autumn budget may not materialise and is partly expectation management.

That is wishful thinking, No 10 sources insist, promising that the parlous state of the public finances really does mean that the budget in October will need to be far more painful than many in Westminster have yet got to grips with.

That could well mean that there are other non-means-tested benefits in the Treasury’s sights – and battles that are even harder to fight.