Politics latest: Chancellor unveils huge cuts - as new policies not in manifesto 'appear from nowhere' (2024)

One of today's surprise announcements from the chancellor was that the winter fuel payment will now be means tested.

Age UK chief Caroline Abrahams says more than 800,000 older people on low incomes - less than £218.25 a week for single pensioners and under £332.95 for couples - will now lose out.

And there are about a million pensioners who are £50 above the poverty line who will now no longer be able to claim the payment.

She adds that people who have a slightly higher incomes but live in inefficient homes or need warmer ambient temperatures for health reasons will also lose out.

Ms Abrahams says: "It is well established that pensioners tend to do everything possible to avoid going into debt, so if they are worried about their future energy bills, we know their likely response will be to ration their fuel use and economise by reducing their spending on other essentials.

"This proposed policy change is therefore certain to result in more older people experiencing a horrible 'eating or heating' dilemma."

Consumer champion Martin Lewis has hit out at the government scrapping winter fuel payments for those not in receipt of benefits.

The measure is one of a raft announced by new chancellor Rachel Reeves in response to what Labour says is a previously unknown about £20bn black hole in the public finances.

Lewis has responded by pointing out energy prices will rise this winter - and says one group will be hit hardest now...

"The Energy Price Cap is likely to rise 10% this October and stay high across the winter, leaving most energy bills nearly double those pre-crisis, at levels unaffordable for millions.

"While there's an argument for ending its universality due to tight national finances, it's being squeezed to too narrow a group – just those on benefits and pension credit."

You can find more consumer reaction to the chancellor's announcements over in the Money blog:

With the announcement of an average 22% pay rise for junior doctors, it is unsurprising that other unions now want to try to get more money for their members.

Unite has just released a statement to this extent.

The union said: "It's imperative to ensure that we are not dividing NHS workers and creating even greater differentials between different groups."

It suggests the likes of ambulance workers to biomedical scientists should also now be eligible for a new deal.

"We cannot have a situation where restorative pay awards are offered to some and not to all," it added.

One of the contested figures from today is Rachel Reeves's assertion there was a £22bn "black hole" in the government finances.

Jeremy Hunt, the last chancellor, says this is "spurious" and Ms Reeves had access to the Office for Budget Responsibility books that would have told her all she needed to know before entering government.

But a letter from the OBR appears to side with Ms Reeves's version of events.

Richard Hughes, the chair of the OBR, wrote to the Treasury Select Committee to say they were only made aware of £21.9bn of spending pressures for the 2024-25 financial year last week.

This means they were not told about it by the last government which enacted the plans.

Mr Hughes says "this would constitute one of the largest year-ahead overspends" outside of COVID years.

Consequently, he has launched a review into how government spending reports are prepared.

One of the measures announced by the chancellor was that private school fees will be subject to 20% VAT from 1 January 2025.

Labour pledged during the general election to bring in the measure in order to raise funds for state education.

Interestingly, it will also apply to any fees paid from today for the term starting in January 2025 onwards.

This is an attempt to stop parents avoiding the tax by paying for future fees upfront.

By Paul Kelso, business correspondent

Rachel Reeves said she would not back off "difficult" choices and, in her first major intervention as chancellor, was as good as her word - announcing spending cuts that will make some of her own MPs wince.

Almost 10 million pensioners will no longer receive the winter fuel allowance, as Ms Reeves saves £1.4bn by moving to means testing of the benefit.

Currently, anyone of pension age, around 11.4 million people, receives £200 regardless of income, and £300 if they are over 80.

That will shrink to around 1.5 million as only those who receive pension credits remain eligible - a bracing cut in a world in which energy prices remain almost twice as high as they were before the war in Ukraine.

Social care reform also takes a hit, with long-delayed reforms finally killed stone dead more than a decade after Sir Andrew Dillnot first presented them to David Cameron.

Scheduled to come in next year and capping social care costs to £100,000, at a cost to the Treasury of more than £1bn, the chancellor says they were never funded or affordable, and will be replaced by alternative reforms that are both.

A big black hole - but chancellor adds to it with choice of her own

These, and all the other cuts announced today from the Stonehenge tunnel to the Rwanda scheme, are to reduce unbudgeted cost pressures the chancellor says she cannot have foreseen.

They bring the total pressure down from £21.9bn to £16.4bn, a figure that will be addressed in the budget and spending review that follow in the autumn.

But far the largest component of this is public sector pay, a £9.4bn cost that arises by virtue of a clear choice by Ms Reeves to accept the recommendations of pay review bodies.

The alternative to above-inflation pay rises, the chancellor will say, would be further industrial action and costs to the NHS that have pushed up spending in the first place.

But it remains a choice, so expect it to be the frontline in the political debate over whether Ms Reeves can credibly claim not to have known about the cost pressures she is today acting to address.

Surprise!

That's the overriding theme of the public spending announcements the chancellor has made this afternoon, according to ourdeputy political editor Sam Coates.

While Rachel Reeves was aiming to "tell the public her inheritance was worse than expected", it also saw her announce "a lot of things not in the Labour manifesto" less than a month after the election.

This includes scrapping the Tory plan for 40 new hospitals, cutting the winter fuel payments for some pensioners, and making changes to ministerial severance pay in a bid to cut government spending.

"New policies that have appeared as if from nowhere," says Sam.

The challenge now is to "justify them to the British public".

"This is about things they have decided to do today, and they're explaining why they needed to do it without any notice," he says.

"The question is does that work with voters."

One of the changes revealed by the chancellor today was to scrap the proposed social care reforms announced a number of years ago.

The Tories had delayed reforms on the cost of adult social care, which would have capped costs for those in need at £86,000. Ms Reeves said these plans were unaffordable.

Speaking to Sky News, Institute for Fiscal Studies director Paul Johnson says he is "depressed" by this reversal.

He says the reforms recommended by Andrew Dillnot in 2012 have been going "round and round in circles" since.

Mr Johnson says it looks like it is now going to be axed.

"I'm very, very sad that we are back to square one on how we're funding social care and leaving people still at risk of losing all of their assets to fund their own social care," he says.

The reforms would have capped the amount people could spend on care to prevent bankruptcy or selling homes.

Jeremy Hunt, the former chancellor, is now responding on behalf of the Conservatives.

Ms Reeves' speech trashed much of his legacy and accused his party of massively mismanaging the country's finances.

A visibly angry Mr Hunt tells the House of Commons: "Today [the chancellor] will fool absolutely no one with a shameless attempt to lay the grounds for tax rises."

Angry Hunt dismisses Reeves's 'rubbish'

Ms Reeves seemed to hint there were tax decisions coming down the road in the budget.

The shadow chancellor says Ms Reeves had privileged access to Treasury civil servants from January, and could have discovered the £20bn "black hole" which has "magically emerged" then.

He defends his record as chancellor, saying inflation is half what it was in 2010, unemployment is nearly half too, and there are more jobs than anywhere else in Europe.

Ms Reeves responds by suggesting Mr Hunt should instead have apologised for the Tories' economic record, prompting her predecessor to shake his head and repeatedly say "rubbish".