Winter fuel payment: 9m pensioners set to receive benefit this year after Rachel Reeves U-turn

Those with an income above this threshold will also receive the payment, but it will then be reclaimed from them in tax.

Despite the U-turn, the Chancellor continued to insist that her original decision, to cut the benefit from all except those on pension credit, was the “right decision”.

She said: “Targeting winter fuel payments was a tough decision but the right decision because of the inheritance we had been left by the previous government.

“It is also right that we continue to means test this payment so that it is targeted and fair, rather than restoring eligibility to everyone including the wealthiest.

“But we have now acted to expand the eligibility of the winter fuel payment so no pensioner on a lower income will miss out.

“This will mean over three-quarters of pensioners receiving the payment in England and Wales later this winter.”

To be eligible for the winter fuel allowance, a person will need to have reached state pension age by the week starting September 15 this year.

Pensioners who do not want to receive the payment will be able to opt out, according to the Treasury.

The decision to limit the winter fuel payment to only those who claimed pension credit was one of Labour’s first acts in Government, aimed at balancing what was described as a £22bn “black hole” in the public finances.

This meant the number of pensioners receiving the payment was reduced by around 10m, from 11.4m to 1.5m.

But Sir Keir Starmer announced there would be a partial U-turn on the policy in May, after it contributed to Labour’s drubbing in the local elections.

Both Doncaster Mayor Ros Jones and long-standing Barnsley Council leader Coun Sir Stephen Houghton urged changes, after Labour lost its majority on the council in Doncaster to Reform.

While York Central MP Rachael Maskell urged the Government to reassess the value of the payment with rising energy prices.

The Labour MP said: “While determined to cut energy bills in this Parliament and decarbonise energy to lower cost renewable energy, the relative value of the winter fuel payments has fallen significantly since its introduction and so many pensioners may still find themselves in fuel poverty despite getting the winter fuel payment this winter.”

The Treasury claims the new arrangement will cost £1.25bn in England and Wales, while means-testing winter fuel will save the taxpayer £450m.

Some two million pensioners who earn more than £35,000 will see their winter fuel payments clawed back via the taxman, the Treasury estimated.

However, HMRC will not try to recover the winter fuel payment from people who have died, Downing Street added.

Kemi Badenoch, Leader of the Opposition, claimed the Prime Minister had “scrambled to clear up a mess of his own making”.

The Conservative leader added: “I repeatedly challenged him to reverse his callous decision to withdraw winter fuel payments, and every time Starmer arrogantly dismissed my criticisms.

“This humiliating U-turn will come as scant comfort to the pensioners forced to choose between heating and eating last winter. The Prime Minister should now apologise for his terrible judgment.”

Liberal Democrat Leader Sir Ed Davey said: “Finally the Chancellor has listened to the Liberal Democrats and the tireless campaigners in realising how disastrous this policy was, but the misery it has caused cannot be overstated.

“Countless pensioners were forced to choose between heating and eating all whilst the Government buried its head in the sand for months on end, ignoring those who were really suffering.

“We will now study the detail of this proposal closely to make sure those who need support actually get that support. The pain they went through this winter cannot be for nothing.”