by Rachel Reeves has been warned that she is at risk of saving hundreds of millions less than expected because of her cut to pensioners’ winter fuel payments, in a new blow to her efforts to close British finances.
The Chancellor and his Treasury team are already re-examining parts of a plan to crack down on non-home tax status due to concerns it will not raise any money.
However, the Observer analysis was seen which suggested that the estimated £1.4bn savings from her highly controversial cut to winter fuel payments are also in doubt.
Reeves had to fight a fierce rearguard action to defend the cut, which was expected to take payments from more than 10 million pensioners in England and Wales.
Only those in receipt of pension credit will be entitled to the payment this winter. The chancellor told the Labor conference last week that she would not take tough decisions to repair the public finances. The party leadership subsequently lost a union motion asking the government to reverse the move.
But new analysis suggests that a rise in pension credit claims since the cut was announced means any savings could be much lower than the Exchequer had hoped. In just eight weeks, requests have increased by 152%.
Analysis based on official government data suggests there have already been 45,000 additional pension credit claims since the measure was unveiled.
Research from Policy in Practice, a consultancy that works with local authorities to inform eligible pensioners of their rights to financial support, suggests that the extra amount the Exchequer had hoped to spend on pension credit could be hit as soon as this week.
On current trends, the analysis suggests there could be 158,000 more claims than expected by the pension credit deadline in late December, at a cost of an extra £246m.
However, because claiming pension credit will open up another set of benefits for those claimants, the total costs could be up to £700m more than expected.
Any reduction in savings from winter fuel cuts will make Reeves’ task even more difficult ahead of the budget on October 30, which is expected to include a series of already politically unacceptable decisions deemed necessary to to raise money.
“It’s great news that more retirees are getting the financial support they need,” said Deven Ghelani, director of Policy in Practice. “The increased income could have wider benefits for some of the country’s poorest citizens, providing much-needed relief during a cost-of-living crisis. We have seen unprecedented demand. “While this means the change is unlikely to save as much money as hoped, it has delivered a life-changing boost to incomes for hundreds of thousands of pensioners living in poverty.”
A Treasury source said they did not recognize 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 the take-up of pension credit. We are committed to supporting pensioners – with millions set to receive a £1,700 rise in their state pension this parliament through our commitment to the triple lock.
“However, given the poor state of public finances we have inherited, it is right that we focus support on those who need it most.”
The Guardian Fears were revealed last week that the Office for Budget Responsibility (OBR), the public spending watchdog, could conclude that its inflated non-doms would not raise any money as a result of the super-rich leaving the UK. . It is not expected that the plans will be completely abandoned.
Labor had hoped to raise an extra £2.6bn during the parliament by closing non-family loopholes, including £1bn in the first year of the changes.
The news comes ahead of a politically fraught budget which is set to define the first steps of the new Labor government. Treasury officials are scrambling to find savings. Reeves made it clear that it will include tax increases, ruling out increases in the main rates of income tax, national insurance and VAT.
Related: Reeves could change fiscal rules to allow more capital spending, sources say
Among the measures thought to be under consideration are inheritance tax loopholes, which are often used by the wealthy. Capping agricultural and business relief could also save £1.4bn a year. A spokesman for the Treasury said they would not comment on the speculation.
Reeves will try to refer to his statement as an investment budget, however. It could include a reworking of fiscal rules to allow more public borrowing, along with measures to encourage private funding for Britain’s ailing infrastructure.
It has long been an idea among some economists to soften the way debt is measured, to take more into account the assets created for the state through public investment. Reeves told the Labor conference it was “time for the Treasury to move on from counting the costs of investment in our economy to also recognizing the benefits”.
Any change will lead to accusations from the Tories that she is breaking a promise not to change the fiscal rules made during the election campaign. “It is difficult to avoid the suspicion that the government is not attracted by any theoretical advantage of a change in the debt rule, but because it would allow much more borrowing for investment,” said the Institute of Fiscal Study last week. .
City sources said there was a desire 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 controversy, costly legal action and bad publicity of the private finance initiative launched by the New Labor government after 1997.
