The UK Government has ruffled some feathers recently as the new incoming Labour Party have decided to stop issuing universal winter fuel allowances for pensioners. The payments which offer assistance with paying heating bills during winter time used to be given to all pensioners, and will now only go to those on the lowest incomes. The justification is that those on middling and higher levels of income do not need it, so this could save costs.

However, I suspect that the government is setting themselves up for failure on this. Winter fuel payments need to be made, regardless of who shares in the cost, and this goes to energy companies. If we get a warm winter, the cost is lower. If we get a particularly cold winter, then the cost is higher.

If it is left entirely pensioners to pay then even those who, on average might be able to pay easily, might struggle if we have an especially bad winter. This could leave them in a much worse position financially. The winter fuel payments are a safety net against this. And it’s not a case where the government could easily issue a rebate if it becomes apparent come spring time that people are struggling, because pensioners that get cold in winter die, or develop health conditions which has an impact on the cost of healthcare.

But even if there is a mild winter, this could have a big economic impact. Pensioners spend money. In winter, they will go on shopping trips, they will patronise commerce, they will buy gifts and travel for the holidays. Much like most other age groups. Until now they have been able to plan for this, accounting for fuel payments. With the risk of losing these payments, pensioners may be on the whole more reticent to engage in that kind of economic activity, which would result in businesses losing money. And what money they have available in savings to spend will go to energy companies rather than being spread around the economy more widely. This could damage economic productivity during winter, which is one time of year that many businesses rely on.

I think that the government has made a real mistake here, but they won’t realise that for a few months, and by then it will be too late to act.