PM blocked plans to means-test winter fuel aid for over-60s

 

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David Cameron blocked plans to cut the winter fuel payments for better-off pensioners in the Budget, i has learned. Some Conservative MPs believe that means-testing the £2.1bn fuel payments given to the over-60s would have been less controversial than George Osborne's surprise decision to freeze the special tax allowances for pensioners – dubbed a "granny tax".

It is believed that the Treasury, as well as Iain Duncan Smith, right, the Work and Pensions Secretary, and the Liberal Democrats, were prepared to consider curbing winter fuel payments, worth £200 a year for a household with someone over 60 and £300 for one with someone aged over 80.

Options included making the payments taxable, or scrapping them for pensioners who have enough income to pay tax. However, the Prime Minister was reluctant to change the fuel allowances because he would have broken a pledge he made during the 2010 election campaign.

He said then: "[Labour] are going around scaring pensioners, telling you that the Conservatives are going to cut the winter fuel allowance, cut pension credit and end free bus travel and TV licences for over-75s. You must not believe them. I can promise you – these are lies, lies, lies. You have my word. If we win the election, we will protect all of these things."

Some ministers believe Mr Cameron could argue that means-testing fuel payments would not break his pledges because they would still be "protected" for the people who need them. Winter fuel handouts are widely seen as an example of "middle-class welfare" that should not be maintained when the Government is making cuts.

Yesterday ministers tried to fight back after the "granny tax" dominated the post-Budget headlines. Mr Osborne said that, overall, pensioners would benefit from the Government's "triple lock", which means the basic state pension increases by inflation or earnings – whichever is higher. It will rise by a record £5.30 a week next month.

The Chancellor said the age-related allowances for pensioners would have been overtaken by future increases in the personal allowance for other people, and that scrapping them would simplify the tax system.

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