The government’s recent reversal of winter fuel payment cuts has sparked scrutiny of its fiscal strategy and spending commitments.

BBC Verify examines the key figures.

Following the 2024 general election, the Department for Work and Pensions projected 10.8 million pensioners in England and Wales would be eligible for winter fuel payments (£200 or £300 per household) in 2024-25.

To curtail spending, the government initially restricted payments to pension credit recipients (aimed at low-income pensioners), reducing the number of beneficiaries to 1.5 million.

Facing public backlash, the government reinstated payments for all pensioners in 2025-26, with a clawback mechanism for earners above £35,000. This resulted in approximately 9 million pensioners being eligible, largely reversing the initial policy’s impact.

The government estimated the initial winter fuel payment system would cost £1.9bn in 2024-25. The first reform was projected to save £1.4bn (rising to £1.5bn in 2025-26), reducing costs to £0.5bn.

The latest revision estimates costs at £1.25bn— a £450m saving compared to universal eligibility. This saving, yet to be OBR-certified, represents only a third of the initial £1.5bn target. Some analysts believe the net saving could be even lower.

Labour’s initial reform limited payments to pension credit recipients. A subsequent government campaign encouraged eligible non-claimants to apply. Data shows nearly 60,000 additional claims, costing an estimated £234m annually (based on an average annual cost of £3,900 per claim, as calculated by former Lib Dem pensions minister Steve Webb).

This additional cost could offset half of the claimed £450m savings. The initial £1.5bn saving was crucial to stabilizing public finances and was factored into OBR budget calculations. The reduced saving of £450m (or potentially less) creates at least a £1bn shortfall.

The Treasury plans to address this in the Autumn 2025 Budget, stating it “will not lead to permanent additional borrowing.” Without increased GDP growth or tax revenue forecasts, this implies tax increases or further spending cuts.

While £1bn is relatively small compared to the overall £1,347bn projected spending and £129bn borrowing for 2025-26 (per OBR), significant savings from working-age welfare reforms (£4.8bn annually by 2029-30, per OBR) are at risk. Reversing or diluting these reforms would significantly impact the Chancellor’s ability to meet fiscal rules— particularly the aim of balancing the day-to-day budget by 2029-30, given the limited £9.9bn projected headroom (March 2025 OBR).

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The government’s recent reversal of winter fuel payment cuts has sparked scrutiny of its fiscal strategy and spending commitments.

BBC Verify examines the key figures.

Prior to the 2024 general election, the Department for Work and Pensions projected that 10.8 million pensioners in England and Wales would be eligible for winter fuel payments in 2024-25. These payments range from £200 to £300 per household.

Initially, the new government, aiming for fiscal savings, limited eligibility to pension credit recipients (a low-income pensioner benefit), reducing the number of recipients to 1.5 million.

Following public criticism, the government reversed course. From 2025-26, all pensioners will receive the payment, with a clawback mechanism for those earning above £35,000 annually. This measure is expected to affect approximately 9 million pensioners.

This largely negates the initial policy’s impact on recipient numbers.

The government estimated the inherited winter fuel payment system’s cost at £1.9bn in 2024-25. The initial reform was projected to cut this to £0.5bn (with projected savings rising to £1.5bn annually by 2025-26).

However, the latest revision now places the estimated cost at £1.25bn—a £450m saving compared to universal eligibility, a figure yet to be certified by the Office for Budget Responsibility (OBR).

This represents only a third of the original £1.5bn savings target, with some analysts suggesting the actual net savings could be even lower.

Under Labour’s initial plan, only pension credit recipients received payments. Last year, a government campaign encouraged unclaimed pension credit applications resulting in almost 60,000 additional awards. Given the average annual cost of a pension credit claim is £3,900, this adds approximately £234m to government expenditure, offsetting roughly half of the claimed £450m savings from the winter fuel changes.

The Chancellor’s initial £1.5bn annual savings target was crucial for stabilizing public finances and factored into OBR budget calculations. The revised savings of £450m (or possibly less) creates at least a £1bn shortfall.

The Treasury will address this in the Autumn 2025 Budget, stating it won’t lead to increased borrowing. Absent increased GDP growth or tax revenue forecasts, bridging this gap necessitates either tax increases or spending cuts.

However, £1bn is relatively small within the context of overall public finances: the OBR projects £1,347bn in government spending and £129bn in borrowing for 2025-26. Furthermore, projected savings from working-age welfare reforms are significantly larger than those from winter fuel payment changes.

The OBR projects £4.8bn annual savings by 2029-30 from changes to personal independence payments and universal credit incapacity benefits. Reversing these reforms would pose a far greater fiscal challenge for the Chancellor, impacting her commitment to balancing the day-to-day budget by 2029-30.

In March 2025, she had only £9.9bn of headroom against this target, a minimal margin considering the scale of government spending and borrowing. Reversing welfare cuts could eliminate half of this.

Economists anticipate further erosion of this headroom in the Autumn Budget due to downgraded growth forecasts and increased government borrowing costs.

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