A cut to pensioners’ winter fuel payments risks saving hundreds of millions of dollars less than expected, in a fresh blow to attempts to cut the deficit in the UK’s finances, Rachel Reeves has been warned.
The Chancellor and Treasury team are already re-examining parts of the plan to crack down on non-dom tax status due to concerns it may not raise any money.
However, Observer The £1.4bn projected savings from its highly controversial cut to winter fuel payments are also in doubt, analysis suggests.
Reeves has had to fight a fierce rearguard action to defend the cut, which is expected to cut payments to more than 10 million pensioners in England and Wales.
This winter, only those who receive retirement loans will be eligible for payment. The Chancellor told the Labor Party conference last week that he would not shy away from tough decisions to repair the public finances. The party leadership later lost the union motion calling on the government to reverse the measure.
But a new analysis suggests that a surge in claims for pension credits since the cut was announced means savings could be significantly lower than the Treasury expected. In just eight weeks, applications increased by 152%.
Analysis based on official government data shows that 45,000 additional claims for pension credit have already been made since the measure was announced.
Research from Policy in Practice, a consultancy that works with local authorities to alert eligible pensioners to their financial support entitlements, suggests the extra amount the Treasury expects to spend on pension credit could happen as soon as this week.
Looking at current trends, the analysis suggests there could be 158,000 more claims than expected by the pension credit deadline at the end of December, leading to additional costs of £246 million.
But the total cost could be £700 million more than expected, as claiming pension credit also provides a range of other benefits to these beneficiaries.
Any reduction in savings from winter fuel cuts will make Reeves’ task ahead of the Oct. 30 budget even more difficult; It is expected to involve a series of politically unacceptable decisions already seen as necessary to raise cash.
“It’s great news that more retirees are getting the financial support they need,” said Deven Ghelani, director of Policy in Practice. “Increasing the income of some of the country’s poorest senior citizens could have broader benefits, providing much-needed relief during a cost-of-living crisis. We faced unprecedented demand. “Whilst this means the change is unlikely to save as much money as the Treasury had hoped, it has meant a life-changing increase in income for hundreds of thousands of pensioners living in poverty.”
A source from the Treasury said they did not know the figures. A government spokesman said: “We want people to get the benefits they are entitled to, which is why the government is working hard to increase pension credit uptake. We are committed to supporting retirees; Millions of people are set to see their state pensions increase by £1,700 this parliament thanks to our triple lock pledge.
“However, given the difficult state of public finances we inherited, it is right that we target support to those who need it most.”
Guard Last week, fears were raised that the Office for Budget Responsibility (OBR), which oversees public spending, could conclude that non-dom restrictions would fail to raise any money as a result of the super-rich leaving the UK. It is not expected that the plans will be abandoned completely.
Labor had hoped to raise a further £2.6bn over the course of parliament by closing non-dom loopholes, including £1bn in the first year of the changes.
The news comes ahead of a politically fraught budget that will mark the first stages of a new Labor government. Treasury officials are scrambling to find savings. While Reeves made clear this would include tax increases, he ruled out increases in the headline rates of income tax, national insurance and VAT.
Relating to: Sources say Reeves may change fiscal rules to allow more capital spending
Loopholes in inheritance tax, which are often exploited by the rich, are also among the measures being considered to be addressed. Capping agricultural and business aid could also save £1.4bn a year. A Treasury spokesman said they would not comment on speculation.
However, Reeves will try to express his statement as an investment budget. This could include reforming fiscal rules to allow more public borrowing, as well as measures to encourage more private financing of Britain’s ailing infrastructure.
Loosening the way debt is measured to take more account of assets created for the government by public investment has long been a popular idea among some economists. Reeves told the Labor Party conference that “it is time for the Treasury to move from simply calculating the costs of investment in our economy to also recognizing the benefits.”
Any change would lead to accusations that the Conservatives are breaking a campaign promise not to change fiscal rules. “It is difficult to avoid the suspicion that the government is attracted not by any theoretical advantage of a change in the debt rule but by the fact that it would allow significantly more borrowing for investment,” the Institute for Fiscal Studies said in a statement last week. he said. .
City sources said there was a willingness to invest in British projects including new roads, schools and hospitals. But investors are pushing for a new body to oversee a new wave of public-private deals to avoid the acrimony, expensive legal processes and bad publicity of the private finance initiative launched by the New Labor government after 1997.