‘Iron chancellor’ Rachel Reeves faces an early challenge to her authority over winter fuel payments

I hope he enjoyed it while it lasted. From being promisingly positive when he moved into Number 10, Sir Keir Starmer’s personal ratings have soured into the unpleasantly negative. Disapproval of the government as a whole is also sharply up. The surprise is that anyone’s surprised that the Labour honeymoon has been so short.
It was an Anyone But The Conservatives election back in July. Labour won it by being the most preferred of the Anyones and secured its victory with a mammoth parliamentary majority because its campaign was very well targeted and support was efficiently distributed. But it was already clear on results night that the Starmer landslide was a freakish one. Labour’s vote share was just 34%, the lowest since 1945 for any party winning a parliamentary majority. Factoring in the turnout, the proportion of the adult population who crossed the Labour box was a measly 1 in 5. So it is not accurate to say that the country has already fallen out of love with Labour; the country was never in love with Labour in the first place.
The state of the realm is the other bit of the explanation for why the government is not generating a feelgood mood. You do not have to be a genius at politics to be thought a good government when the economy is rollicking along and there is lots of dosh to spend on keeping the electorate happy. That’s playing politics with the game’s difficulty-level set on easy. Labour has come to power with growth anaemic, it is grappling with a rotten inheritance from its predecessors and money is tight. That’s much, much harder.
So it is another non-surprise that the first significant policy squall, one that is accompanied by growing unease in the cabinet and mounting unrest on the backbenches, concerns cash. Specifically, the raid on winter fuel payments for pensioners in England and Wales by announcing that they’ll be restricted only to those who are on pension credit and denied to the 10 million aged 66 or over who are not.
One of the reasons that this furore has become potent is that left, right and centre can all find reasons to oppose the cut. Adopting a hitherto concealed persona as a champion of the poor, Rishi Sunak drew a little blood at the most recent prime minister’s questions by demanding where was the justice in giving a pay rise of almost £10,000 to well-remunerated train drivers and removing the fuel support for low-income pensioners living on just £13,000 a year. Tory MPs, who don’t have much to smile about these days, enjoyed themselves, baying “Shame!”. Sir Ed Davey was the more piercing when the Lib Dem leader showcased a real-life example of what it would mean for the family finances of a carer whose income was just a few hundred pounds above the cut-off for continuing to qualify for the payment. Sir Ed received an unrebarbative response from Sir Keir. His emollient tone to his fellow knight had me wondering whether the prime minister is already preparing himself to move in the direction of a compromise.
It is not the opposition of the Tories, the Lib Dems and the SNP that bothers a government with a juggernaut majority. It is the mood among Labour MPs that is being anxiously monitored by their whips. While the prime minister mounted the customary justification for this measure (the Tories left us in a mess), the MPs sitting behind him were rather quiet. Dissent about this is not confined to the continuity Corbynites. I come across mainstream Labour MPs, the kind whose default position is to want to be loyal to the government and supportive when it has to take tough decisions, who report that they’ve had deluges of protesting emails and letters. New Labour MPs, unaccustomed as they are to the slings and arrows of outraged voters, tend to be more shaken than veteran ones.
There’s worry about a bleak winter of relentless media stories about poorer pensioners having to choose between eating and heating. At the time of writing, 13 Labour MPs have put their names to a motion lambasting the government for introducing the change without any prior consultation or an impact assessment. If that were the sum total of the discontented, the government wouldn’t have much to fear. But the signatories to that motion are the tip of an iceberg of dismay on the Labour benches.
First, because this came out of the blue. You weren’t paying close enough attention during the election campaign if you didn’t spot that Rachel Reeves was eyeing up some increases on taxes related to wealth to try to balance the books. But there was no hint that she had her sights on the winter fuel payment. It is only since the election that it has been clocked that a commitment to protect the payment, made in the four previous Labour manifestos, was absent from the one put to the country this summer. Treasury sources adamantly deny that this proves that they were covertly planning the cut all along, but they can’t prove their innocence. Second, pensioners are a substantial chunk of the electorate with some well-organised and vocal charities who lobby on their behalf. Third, pensioner poverty has long been a core concern for many Labour people. Few Labour MPs have an issue with taking the fuel payment away from the kind of wealthy folk who like to make smug jokes that they use it to buy their Christmas champagne. A lot of Labour MPs do very much have an issue with depriving low-income pensioners who struggle to pay their energy bills.
On top of which, there is widespread bafflement about why the Treasury alighted on this particular cut to benefits. The saving to the exchequer will be around £1.5bn, not a trivial sum, but only about a hundredth of the total spend on pensioner benefits in the last financial year. Some ministers question whether the gain to the exchequer can be worth the political pain for the government. There’s no peril that Downing Street is going to lose this week’s binding Commons vote on the issue. Rather, the danger is of a sour victory obtained by whipping reluctant Labour MPs into the government lobby in a way which depletes political capital and drains goodwill both among them and voters for a relatively small sum.
Many now think that we are heading towards some kind of U-turn, probably not immediately, but more likely when Ms Reeves unveils the budget at the end of October. The question then becomes how a retreat can be conducted without weakening the authority of the chancellor and the prime minister. They both put “fiscal responsibility” at the heart of how they sold Labour at the election. Sir Keir has relentlessly pitched himself as sternly unflinching when it comes to “painful” decisions. Ms Reeves has put being seen as an “iron chancellor” at the core of her personal brand. “If you are not going to find £1.5bn from here, you are going to have to find it from somewhere else,” warns one of her people.
Allies of the chancellor argue that there’s no respect to be had from voters by looking like a pushover who buckles under pressure. They contend that the way to earn long-term approval is to demonstrate that you can make hard decisions even when they are unpopular. There is a deep, and not unfounded, anxiety that a complete retreat would sap the chancellor’s credibility. So she will not want to back down from this early challenge to her authority.
Some of the suggested mitigations are not terribly attractive. To the criticism that the change will be especially harsh on the 880,000 pensioner households who are eligible for, but do not claim, pension credit, ministers say they will run a campaign to encourage more of them to do so. If the campaign is a flop, that problem won’t be solved. If it succeeds, it will crimp the savings from ending the universality of the payment. Others suggest that it should continue to be paid to all pensioners, but become taxable. That has the merit of sounding fair. From Ms Reeves’s point of view, it has the demerit of saving the exchequer much less money.
She won’t cancel the cut. My hunch is that she will eventually make a partial retreat which assuages the impact on the group about whom Labour MPs are most bothered: pensioners who don’t qualify or claim the credit and for whom this change will mean hardship. Then she and the prime minister will have to figure out how to make the U-turn elegant rather than embarrassing.