Winter fuel payments for pensioners: who loses out from Labour's shift?

Shadow Chancellor Ed Balls announced the end of Labour's commitment to universal winter fuel payments for pensioners this morning during his speech on the economy.

"At a time when the public services that pensioners and others rely on are under strain, it can no longer be a priority to continue paying the winter fuel allowance to the wealthiest pensioners".

600,000 pensioners would be affected if this happened today, and the saving to the public purse would amount to about £100 million.

These numbers are estimates produced by the Department for Work and Pensions (DWP). In February last year the Pensions Minister Steve Webb gave a written answer in Parliament confirming that in 2011/12 600,000 pensioners receiving the allowance paid higher rates of tax (40% and, then, 50%). Many pensioners are receiving more than £42,000 a year. By comparison, the average UK salary for full-time workers is £26,500.

Last month another question was posed to the Minister on the subject. The DWP estimated £100 million would be saved from restricting the payments from higher rate (40%) taxpayers, and around £5 million from additional rate (now 45%) recipients.

Nick Robinson said on the Today programme earlier that £100 million is, if you're the Chancellor, 'a little bit like a fiver dropped on the floor of the treasury'.

The total amount spent on Winter Fuel Payments in 2011/12 was £2.2 billion. Total benefit spending that year was £158 billion. A saving of £100 million is small in comparison with the total budget deficit which stands at £120 billion.