How Rachel Reeves could avoid scrapping Winter Fuel Payment for millions of pensioners

Nigel Nelson and Rachel Reeves in pictures

Nigel Nelson has suggested some interventions open to Rachel Reeves, which could see her avoid means-testing the Winter Fuel Payment

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Nigel Nelson

By Nigel Nelson


Published: 28/08/2024

- 12:47

Updated: 28/08/2024

- 14:30

Nigel Nelson is Senior Political Commentator at GB News

When Keir Starmer warned the October 30 budget will be “painful” I wanted a journalist present to ask the PM to quantify this on the numeric pain rating scale from 0 - 10 which doctors use.

A zero means no pain and anything between one and three is mild. Moderate pain kicks in between four and six and becomes severe at seven. If you hit 10 it’s the worst possible and you’re likely to be in such agony you’re on the ceiling with your teeth clamped round a rafter.


We already knew some pain was on the way. For equity fund managers it was on the moderate side with their profits taxed as income rather than at the lower capital gains rate of 28 per cent - a hike of between 12 and 17 per cent.

This group doesn’t make anything, other than money out of other people’s money. So public sympathy at their bedside will be minimal.

The £565million raised has already been earmarked - £410million on 8,500 new mental health staff and the remainder on legal aid to fight deadly cockups by the state (infected blood scandal survivors come to mind).

There will be another £30million so overseas military veterans who have served four years in Britain’s armed forces get free visas to come here (Gurkhas come to mind).

Rachel Reeves in House of Commons

Chancellor Rachel Reeves warned they had found a £22billion black hole in the nation's finances last month

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The £1.5billion from charging fee-paying schools VAT and business rates has also been spent on 6,500 extra public sector teachers, more than 3,000 new nurseries, and mental health support in every school.

If the Institute for Fiscal Studies is right, this should not result in too much pain for children already in private education. Fees have soared 20 per cent in real-terms since 2010 and 55 per cent since 2003 but the proportion of parents who can still afford them has stayed stable at seven per cent.

Reducing tax avoidance and closing non-dom tax loopholes raises another £5.2billion to be spent on 40,000 more NHS operations a week and doubling the number of hospital CT and MRI scanners.

While this might hurt wealthy foreigners, it will ease the pain for a lot of patients. And non-doms are so rich they have a high pain threshold anyway. This will also pay for free breakfast clubs in all primaries.

Nor are many people likely to care that overseas buyers of flats and houses in Britain will have to pay an extra one per cent in stamp duty, enabling Angela Rayner to hire 300 more planning officers.

But that does not explain how Chancellor Rachel Reeves will plug the extra £22billion black hole she has suddenly found in the nation’s finances. So let’s look at the surgical interventions open to her.

Scrapping winter fuel allowance for all but the poorest pensioners will save her £1.4billion this year and £1.5billion next. Public sector cuts add another £6billion - but that’s already gone out the door on pay settlements so we can discount that.

Abandoning sending migrants to Rwanda saves another £2.2billion over two years. And cancelling a tunnel under Stonehenge adds £785million.

Only another £16.1billion to go.

Capital gains tax is charged at 10 per cent on assets and 18 per cent on property for basic rate payers and 20 per cent and 24 per cent for higher income taxpayers. Aligning these with income tax bands would raise £5.2billion.

There is no CGT charge if you die. Abolishing that would raise £2.3billion. Only another £8.6billion to go.

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Inheritance tax is not a huge revenue raiser as only five in 100 estates pay it. At most there’s a £1.6billion saving by, say, including pensions. We’re now down to £7billion.

Which brings us on to pensions tax relief. According to the Fabian Society, there’s £10billion up for grabs if changes were introduced to hit the better off such as making it a flat rate allowance for all. That puts Ms Reeves £3billion in credit.

Enough to give back the winter fuel allowance.

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