UK faced economic crash if winter fuel payment was not axed, Powell says

The UK could have faced a run on the pound and an economic crash if Rachel Reeves had not axed winter fuel payments for millions of pensioners to fill a black hole in the public finances, Commons Leader Lucy Powell said.

Ms Reeves and Sir Keir Starmer have faced criticism from opponents, campaigners and some of their own MPs over the decision to means-test the payments worth up to £300.

But Ms Powell said there was “no alternative” and the decision was needed to avoid an economic catastrophe.

“This is one of those very difficult decisions we had to take,” she told Times Radio.

“But we have faced this huge additional black hole for this current financial year, borrowing higher than anybody understood.

“If we hadn’t taken some of these tough decisions we could have seen a run on the pound, interest rates going up and crashing the economy.

“It’s something we were left with no alternative but to do.”

On LBC Radio she insisted Labour’s approach was not the same as George Osborne-style austerity.

She said it was a “very different” approach to former Tory chancellor Mr Osborne’s decision “to dramatically reduce the size and the reach of the state, the welfare state”.

Ms Powell said: “What we’ve been left with is a huge legacy of overspend.

“They’ve overspent on the asylum system to the tune of nearly £7 billion, they knew that the public sector pay deals that were sitting on their desk before the election would be honoured by them or any incoming government, and they hadn’t set aside any money.

“The reserves have gone to nothing, so we’re having to add up the current year that we’re in and the forthcoming years, that is very different from making a big choice to reduce the size of the state by billions and billions of pounds as that previous government did.”

From this winter, the fuel payments will be restricted to the poorest pensioners, those who are on pension credit. The Government has launched a campaign to encourage those eligible for the benefit to claim it.

According to the Department for Work and Pensions (DWP) around 880,000 eligible pensioners are missing out on pension credit, which on average amounts to £3,900 a year.

Ms Reeves said: “The £22 billion black hole inherited from the previous governments means we are having to take tough decisions now to fix the foundations of our economy – including making the winter fuel payments available to those most at need.

“(A total of) 1.3 million pensioners are already going to get help with fuel bills this year because they’re claiming pension credit – but thousands more are eligible.

“So, if you know someone who could get pension credit and help with their fuel bills, now is the time to help them apply for pension credit.”

Pensioners whose weekly income is below £218.15 for a single person or £332.95 for a couple are being urged to use the DWP’s online calculator to determine their eligibility for payments.

People with a severe disability, carers and those who are responsible for a child or a young person who lives with them could receive additional money, the Government said.

Pension credit can also include extra amounts for certain housing costs, such as ground rent or service charges.

The Tories accused Labour ministers of peddling “ridiculous fantasies” about the state of the finances.

Shadow Treasury chief secretary Laura Trott said: “This simply shows how desperate the new Labour government is to run from responsibility for the tax rises they always planned but hid from the public during the election.

“After handing billions in inflation-busting pay rises to their union paymasters, no-one believes Labour’s chicken little strategy.

“They should stop trying to deceive the public with ridiculous fantasies and instead have the courage to let parliament debate cuts to winter fuel payments for the sake of those pensioners who will lose out thanks to the decisions of this government.”