Chancellor Rachel Reeves says delaying winter fuel payment cut 'not an option'

ITV News Business Editor Joel Hill pressed Rachel Reeves on why the winter fuel payment changes needed to happen so quickly

The UK economy flatlined in July for a second consecutive month.

Labour won the election in July on a promise to kickstart growth and revive living standards. The latest data from the Office For National Statistics shows it will take time to deliver on this pledge.

In the three months to July, the economy grew by 0.5% - which ordinarily would be

something to celebrate but much of the recent growth we have experienced has been driven by government consumption rather than consumer spending or business investment.

And that is about to change because, as the government keeps reminding us, the Budget on October 30 will involve a combination of tax rises and spending cuts.

Rachel Reeves was at a technical college in Silverstone today, trumpeting Amazon’s decision to invest £8 billion building data centres in the UK.

"If we can bring investment to Britain, [it will mean] more good jobs, paying decent wages and living standards improving for working people across our great country," the chancellor told me.

Increasing business investment will help to deliver stronger growth and it’s perfectly reasonable to be hopeful about the future but in the short-term Rachel Reeves will be making difficult and unpopular decisions because, while Labour’s economic inheritance isn’t dire, the public finances are in a terrible state.

The decision, taken in July, to axe winter fuel payments for 10 million pensioners has already caused the government problems, although in yesterday’s vote, the rebellion by Labour MPs was limited.

The chancellor told ITV News this cut needs to be made before this winter.

"Taking no action in July wasn’t an option," Reeves insists. "We had to get a grip on the public finances."

There’s widespread agreement that means-testing winter fuel payments is a sensible way to save money. The question is why the rush?

Waiting a year would have given the government more time to register vulnerable people for pensioner credit and to better ensure that those who need financial support don’t end up struggling.

And the saving of £1.5 billion a year, is tiny. Annually, the government spends more than £120 billion on the state pension.

It’s very hard to imagine there would have been a market backlash or a run on the pound had the chancellor decided to delay withdrawing this support from pensioners.

The economic case may not look urgent but Reeves maintains that it is and she denies the decision to cut winter fuel was motivated by politics - a desire to score political points at the expense of the Tories.

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"The black hole is not some years into the future, it is this financial year," she insists.

Labour has come into office, discovered the public finances are in a worse state than they expected and, so far, they’ve addressed the problem exclusively by hitting pensioners.

Some pensioners worry they will be also affected by potential changes to inheritance tax and capital gains in the Budget in October.

And the chancellor doesn’t rule out targeting pensioners again.

"There are more difficult decisions to come because of the state of the state of the public finances," Reeves said "but I am determined that pensioners incomes continue to increase."

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