• Reeves has announced that the government is accepting public sector pay review recommendations in full. The awards include 5.5% for teachers, 6% for members of the armed forces, 5% for prison officers, 6% for judges and 5% for senior civil servants.

We are going to close this blog now but you can read our report on today’s announcement from the chancellor here:

Up to 2m pensioners who need winter fuel payment will lose it under Reeves’s plan, Age UK says

Andrew Sparrow

Here is the statement mentioned in the press conference from Age UK on the decision to cut the winter fuel payment. Caroline Abrahams, director of the charity, said:

We strongly oppose the means-testing of Winter Fuel Payment (WFP) because our initial estimate is that as many as two million pensioners who badly need the money to stay warm this winter will not receive it and will be in trouble as a result – yet at the other end of the spectrum well-off older people will scarcely notice the difference – a social injustice.

A big reason for this disastrous outcome is that more than one in three pensioners entitled to Pension Credit, the qualifying benefit for WFP under this proposal, don’t receive it, a proportion that’s been roughly constant for many years. More than 800,000 older people living on very low incomes – under £218.25 a week for single pensioners and under £332.95 for couples – who are already missing out of the Pension Credit they are entitled to get to boost their incomes, will now lose the WFP that helps them to pay their fuel bills.

In addition, there are also about a million pensioners whose weekly incomes are less than £50 per week above the poverty line, who will also be hit hard by the loss of the Payment. Older people in this group often tell us they really struggle financially; the proposed change will make it even harder for them to afford to stay warm when it gets chilly.

Finally, there is a third group who will find it extremely difficult to heat their homes adequately this winter as a result of the proposed change: older people whose incomes are a little higher though still limited, but who live in energy inefficient homes and/or who are seriously unwell and need to keep the thermostat turned up high in order to protect their health.

My colleague Vicky Graham is taking over now.

The two most prominent public spending thinktanks have now published their responses to the Rachel Reeves statement.

The Institute for Fiscal Studies says Reeves was entitled to feel aggrieved, because some of the details of the spending inheritance were “shocking”. Paul Johnson, its director, says:

Rachel Reeves is within her rights to feel somewhat aggrieved. It was always clear and obvious that the spending plans she inherited were incompatible with Labour’s ambitions for public services, and that more cash would be required eventually. But the extent of the in-year funding pressures does genuinely appear to be greater than could be discerned from the outside, which only adds to the scale of the problem …

Nonetheless, some of the specifics are indeed shocking, and raise some difficult questions for the last government. If the scale of these overspends and spending pressures was apparent in the spring – and in lots of cases, there’s no reason to suppose otherwise – then it is hard to understand why they weren’t made clear or dealt with in the spring budget. Jeremy Hunt’s £10bn cut to national insurance looks ever less defensible. On asylum costs, the decision to effectively stop processing claimants, and to budget virtually nothing for the resultant costs of housing them, looks like very poor policy making. The new chancellor is right to be cross.

And the Resolution Foundation says this announcement will make the budget in the autumn even more difficult. It says:

Today’s assessment looked only at spending pressures in the current year, but many of these, including the extra spending on public sector pay (£9.4bn), will continue throughout this parliament. As a result, even after today’s new cuts to public spending, the foundation notes that the chancellor faces a huge challenge to bring down public sector debt without cutting unprotected departmental spending by more than the £18bn a year already pencilled in to the government finances – or adding to the £23bn a year tax rises announced by the previous government that have not yet come into force.

The chancellor’s challenge in the autumn budget will become even more severe if she wishes to maintain even modest fiscal buffers – or if bad news about the growth or interest rates materialise in the Office for Budget Responsibility’s (OBR’s) autumn budget forecasts. If the OBR was to mark down its forecast for trend productivity growth by just 0.2 percentage points, it would blow a further £17bn hole in the public finances.

The foundation warns that, when delivering the autumn budget, the government must continue to prioritise its growth ‘mission’ and focus on increasing living standards. Today’s announcements included cuts to some transport investment and £1.5bn cuts to winter fuel payments. If this approach was repeated at the Autumn Budget, this would both hamper growth, and damage living standards.

In the Commons Sarah Olney, the Liberal Democrat Treasury spokesperson, focused mainly on criticising the last Tory government in her response to Rachel Reeves. She said:

The outgoing Conservative government will go down in the history books as one of the most damaging administrations our country has seen and today’s statement has thrown that picture into even more stark relief.

It wasn’t just their catastrophic mini budget, we saw a vicious cycle of stagnation and recession driven by years of chaos and uncertainty.

Over the last parliament we saw the Conservative Party raise taxes on hardworking households again and again just to pay for its own mistakes.

But Pete Wishart, the SNP’s deputy leader at Westminster, told MPs that cutting winter fuel payments felt like Tory austerity. He said:

Everybody and their granny knew that there would be a multibillion pound black hole, only the chancellor seemed to be deaf and blind to the situation, but we knew she was going to be here explaining the sheer scale of it.”

Isn’t it the case that cutting winter fuel payments to all pensioners seems and feels like Tory austerity? And what discussions has she had with the Scottish government? Because she will know obviously that this is a devolved responsibility.