BRIEFING PAPER CBP-6019, 5 November 2019 Winter Fuel Payments By Djuna Thurley, Rod McInnes, Steven Kennedy update Inside: 1. Introduction 2. Purpose of the Winter Fuel Payment 3. Eligibility 4. Winter Fuel Payment rates 5. Payment abroad 6. Early Winter Fuel payments for “off-gas grid” households 7. Criticisms of the Winter Fuel Payment 8. Options for reform www.parliament.uk/commons-library | intranet.parliament.uk/commons-library | [email protected] | @commonslibrary Number 6019, 5 November 2019 2 Contents Summary 3 1. Introduction 4 1.1 Overview 4 1.2 Statistics 5 1.3 Devolution 6 2. Purpose of the Winter Fuel Payment 7 3. Eligibility 8 4. Winter Fuel Payment rates 9 5. Payment abroad 12 5.1 Introduction of the ‘temperature link’ 13 6. Early Winter Fuel payments for “off-gas grid” households 16 7. Criticisms of the Winter Fuel Payment 18 8. Options for reform 26 8.1 Means-testing 26 8.2 Make the Winter Fuel Payment taxable 27 8.3 Withdraw from higher income pensioners 27 Cover page image copyright: Gas Flame by Thomas. Licensed under CC BY 2.0 / image cropped. 3 Winter Fuel Payments update Summary The Winter Fuel Payment is a tax-free annual payment to help older people pay their winter heating bills. Most payments are made automatically between November and December. Individuals usually get a Winter Fuel Payment automatically if they get the State Pension or certain other benefits. The “standard” rates are £200 per eligible household where the oldest person is under 80, and £300 for households containing a person aged 80 or over. To be eligible for a Winter Fuel Payment, a person must have reached the relevant age threshold before the end of the “qualifying week” (for this year, 16 to 22 September 2019). The relevant age is the State Pension age, which means that to receive a payment this winter (2019/2020), a person must have been born on or before 5 April 1954. Further information on the rules, details of the payment arrangements for this winter and claim forms are available at the GOV.UK website. Some have argued that the Winter Fuel Payment and other “universal benefits” for older people can no longer be justified, in light of the deficit and benefit cuts facing non-retired households. Whether it should continue to be universal has been an issue at past elections. Background to the scheme can be found in Commons Library briefing SN/SP/599, Winter Fuel Payments, which covers the policy up to 2005. For the rules applying to people in care homes and in receipt of certain benefits, see Library Briefing Paper SN-01475 Winter Fuel Payments: people in residential care (November 2013). The Winter Fuel Payments scheme is entirely separate from the Cold Weather Payments scheme, under which recipients of certain benefits receive automatic payments of £25 a week during periods of very cold weather – see Commons Library briefing CBP-8254 (April 2018). Library briefing CBP-6163, Help with energy bills, (March 2019) gives information on other sources of financial and practical help with domestic energy bills, and also outlines current policy developments. Number 6019, 5 November 2019 4 1. Introduction 1.1 Overview Winter Fuel Payments were introduced in 1997 to help older people meet the costs of heating their homes in winter. They are paid as a tax- free lump sum each winter. As set out in Box 1 below, the amount of Winter Fuel Payment paid varies according to household circumstances in the “qualifying week” - 17 to 23 September 2018, for winter 2018/19:1 Box 1: Winter Fuel Payment rates, 2019-20 Circumstance Born between 23 Born on or before 22 September 1939 and 5 September 1939 April 1954 You qualify and live alone (or none of the £200 £300 people you live with qualify) You qualify and live with someone under £100 £200 80 who also qualifies You qualify and live with someone 80 or £100 £150 over who also qualifies You qualify, live in a care home and don’t £100 £150 get certain benefits If you get certain benefits Your payment may be different if you or your partner get one of the following benefits: Pension Credit; income-based Jobseekers Allowance; income-based Employment and Support Allowance; Income Support. Circumstance Born between 23 Born on or before 22 September 1939 and 5 September 1939 April 1954 You qualify, get one of the benefits and £200 £300 live alone (or none of the people you live with qualify) You qualify and live with someone who £200 – only one of you £300 – only one of you also gets one of the benefits will get the payment will get the payment You qualify, live in a care home and get Nil Nil one of the benefits For more on the background to a nil amount being payable to people living in care homes and in receipt of certain benefits, see Library Briefing Paper SN-01475 Winter Fuel Payments: people in residential care (November 2013). 1 Source: GOV.UK, Winter Fuel Payment: What you’ll get 5 Winter Fuel Payments update 1.2 Statistics 11.57 million individuals received a Winter Fuel Payment from the DWP for the winter of 2018/19. Of these, 11.53 million lived in Great Britain and a further 40,170 claimants resided in the EEA or Switzerland.2 The table below shows the number of recipients and total expenditure since 1999/2000, with official forecasts to 2023/24. Winter Fuel Payment caseload and expenditure Caseload (number of individual recipients) Expenditure All of whom - resident in: Nominal Real terms cases Great Britain EEA & Switz. (cash) (2019/20 Total Total Women Men Total terms prices) '000s '000s '000s '000s '000s £ million £ million 1999/00 10,084 10,084 6,241 3,843 - 759 1,126 2000/01 11,106 11,106 6,313 4,793 - 1,749 2,537 2001/02 11,202 11,202 6,310 4,892 - 1,681 2,413 2002/03 11,356 11,348 6,350 4,998 8 1,705 2,389 2003/04 11,486 11,468 6,388 5,080 18 1,916 2,629 2004/05 11,430 11,401 6,285 5,116 29 1,962 2,623 2005/06 11,555 11,515 6,319 5,196 40 1,982 2,581 2006/07 11,750 11,703 5,308 6,395 48 2,015 2,549 2007/08 12,123 12,069 6,569 5,500 54 2,070 2,555 2008/09 12,421 12,357 6,698 5,659 64 2,701 3,245 2009/10 12,681 12,610 6,811 5,799 71 2,735 3,240 2010/11 12,783 12,710 6,854 5,855 73 2,759 3,210 2011/12 12,686 12,612 6,796 5,814 74 2,149 2,467 2012/13 12,683 12,562 6,767 5,795 121 2,144 2,413 2013/14 12,585 12,446 6,705 5,741 139 2,140 2,365 2014/15 12,489 12,349 6,672 5,677 140 2,117 2,310 2015/16 12,215 12,172 6,603 5,569 42 2,074 2,245 2016/17 12,025 11,984 6,502 5,482 42 2,049 2,169 2017/18 11,808 11,767 6,359 5,408 41 2,023 2,100 2018/19 11,569 11,529 6,208 5,321 40 1,986 2,026 2019/20 (a) 11,214 1,962 1,962 2020/21 11,238 1,944 1,908 2021/22 11,413 1,968 1,896 2022/23 11,609 2,005 1,894 2023/24 11,816 2,047 1,896 Source: DWP Winter Fuel Payment statistics, various editions (a) 2019/20 onwards are DWP forecasts from Benefit Expenditure and Caseload Tables 2019 The number of recipients in each Parliamentary constituency and local authority in Great Britain in 2018/19 is available on Gov.uk via this link. The number of Winter Fuel Payment recipients reached a peak of 12.78 million in 2010/11 and has fallen by 1.21 million since then. This 2 DWP, Winter Fuel Payment: official statistics winter 2018 to 2019, September 2019. Number 6019, 5 November 2019 6 decline is the result of the qualifying age for Winter Fuel Payments rising since 2010 in line with the rising State Pension age for women. This effect is forecast to lead to a further fall in the number of Winter Fuel Payment recipients in 2019/20, to 11.21 million. The State Pension age is scheduled to reach 66 just before the 2020/21 winter season and will remain at 66 until the winter of 2025/26 inclusive. During this period of stabilisation of the qualifying age, the number of recipients is forecast to gradually rise, reaching 11.82 million by 2023/24. Total DWP expenditure on Winter Fuel Payments is currently running at around £2 billion a year and is forecast to remain at around this level in cash terms until at least 2023/24. Expenditure is set to continue gradually falling in real (inflation-adjusted) terms, as the payment amounts are not uprated in line with inflation. 1.3 Devolution Northern Ireland Northern Ireland has its own separate Winter Fuel Payments which operates on an identical basis to the DWP scheme in Great Britain. 299,387 people in 220,399 households in Northern Ireland benefited from a Winter Fuel Payment in 2017/18, and the total spend was around £52.2 million.3 Scotland The Scotland Act 2016 gave the Scottish Government power over certain benefits, including Winter Fuel Payments.