UK restores winter fuel payments to millions of pensioners in major U-turn

LONDON (Reuters) -Britain will make winter fuel payments to millions of older people this winter, in a major U-turn of deeply unpopular cuts after months of political pressure on Prime Minister Keir Starmer.

After taking office last July Starmer's Labour government cut winter fuel payments for all but the poorest pensioners in England and Wales as part of wider spending reductions which it said were necessary to fix a hole in the public finances left by the previous Conservative administration.

The reversal announced on Monday will restore those payments to 9 million pensioners, excluding only 2 million who earn above 35,000 pounds ($47,495) from the 200-300 pounds subsidy for heating bills in the colder months.

Starmer and finance minister Rachel Reeves had faced opposition from dozens of Labour lawmakers on the initial cuts and they were cited as one factor in the party losing ground to Nigel Farage's right-wing Reform UK party in recent local elections. Reform also leads opinion polls nationally.

Reeves said it was right to continue excluding wealthier pensioners from the payment, and that last year's "difficult decisions" had been justified.

"Because of those decisions, our public finances are now in a better position, which means that this year we're able to pay the winter fuel payment to more pensioners," she told reporters.

The U-turn will cost the government 1.25 billion pounds and means-testing of the payment will save around 450 million pounds. The move would not lead to permanent additional borrowing, with funding details to be set out at a budget later this year, the Treasury said.

Speaking at a press conference in Wales, Farage said the reversal showed Labour's policy was being driven by his campaigning.

"The Labour government are in absolute state of blind panic, they are not quite sure what to do," he said. "Reform are leading now much of their agenda."

Starmer signaled last month that he would reverse the cuts.

The cuts had meant that around 85% of pensioner households that received the payments lost the benefit, according to the Institute for Fiscal Studies think tank.

($1 = 0.7369 pounds)

(Reporting by Sachin Ravikumar; Additional reporting by Andrew MacAskill; editing by William James)