Fuel allowance furore has made life terribly tricky for the Treasury
Decision making in the Treasury is an unenviable task, and the winter fuel payments row just made it harder, writes James Nation
Following on from the reported troubles in Number 10, many commentators are gravitating towards the view that the guiding force of this government is the Chancellor, backed by the power of the Treasury. With the Budget on 30 October and the Spending Review in the Spring now set to herald so much of what the government will do, this view is understandable. But it is worth contemplating another perspective. This is that the political fall-out from the decision to means-test the winter fuel allowance, which Labour members yesterday opposed in a non-binding vote, has blotted the
Treasury’s copybook.
There are two points to make about what the reaction to the winter fuel allowance policy signals to Whitehall. The first concerns what it reveals about Treasury decision making. I saw during the pandemic how agile and impressive the Treasury can be, particularly with big financial levers that it controls through HMRC. When it comes to other areas of government spending, sometimes advice can go to Treasury ministers that doesn’t reflect delivery constraints or the reality of implementation.
This is for the simple reason that the departments responsible often aren’t consulted. So, ministers may have assumed that it would be possible to set the cut-off for means-testing at a higher bar. Yet a conversation with DWP would have revealed that this would be, at best, very complicated and costly and, at worst, not possible. This – plus the far more important point of not wanting to penalise poor pensioners – is why successive Chancellors and their political teams have said ‘no thanks’ to means-testing the allowance. The fall-out is costly, with ministers pushing for further uptake of pension credit, which risks wiping out any savings.
The second point is the likely behaviour of Number 10 and secretaries of state in response. Not wanting a similar political furore again, Number 10 may well bring in more personnel with Treasury experience. They will ask for more oversight of key decisions ahead of the Budget. Departments will take their chances, sensing greater Number 10 interest.
The Chancellor has said that the Budget will only set out spending totals for 2025/26. But many departments will tell their secretary of state to strike now, exploiting the Chancellor’s promise of a ‘Budget for investment’ and a possible change to the fiscal rules. Want to see 1.5m homes delivered in time for the next election? Well, the Deputy Prime Minister will argue that this requires a multi-year affordable homes programme to be set out before the Spring. Briefing around the interest of some key Number 10 figures in filling potholes will embolden the transport secretary to push to preserve the roads funding settlement set out by the previous administration. Both the defence and health secretaries will argue strongly on political and evidential grounds for further top-ups to their budgets this year.
There are no easy cards to play here. Moving bodies like GB Energy off the government’s balance sheet requires convincing the Office for National Statistics that there will be no government oversight or control. That seems unlikely to chime with Ed Miliband. And even with looser fiscal rules, the government will still have to take difficult choices to maintain credibility on the approach to public debt.
But the backdrop is harder when, as a result of the fuel allowance decision, there is likely to be more internal pressure on the Treasury political team and their ability to show dexterity in the months ahead. Power comes with great scrutiny, but that scrutiny – and, indeed, the stakes – is perhaps greater than it might otherwise have needed to be.
James Nation is the former deputy director of the No 10 Policy Unit