What should the Government prioritise when tackling its welfare trilemma?

U-turn if you want to – a sensible culture of government allows politicians to reverse their mistakes. But also U-turn with care. With too many swerves, leaders lose their grip on the wheel. Ultimately, you have to know where you are heading or you will get lost.

The Labour Government is simultaneously under pressure to retreat on all three of its biggest decisions on benefits. The first two concern actions – means-testing pensioners’ winter-fuel payments and cutting disability payments – while the third concerns inaction: the failure to axe George Osborne’s two-child limit. Reversing all three would cost close to £10 billion and risk a real sense the Government cannot deliver the hard decisions needed to prudently manage the public finances. Amid straitened public finances, even more than usual, to govern is to choose. Unfortunately, the Prime Minister gave a first clear sign of where he intends to buckle on Wednesday – and seems set on the wrong choice.

The noise and the pressure on the three issues is in inverse proportion to their impact on living standards. The panic has been most frenzied on winter fuel payments, and this is where the PM has now sounded a partial retreat. But the case for restoring universal payments is weak. When Gordon Brown introduced them in 1997, three-in-ten pensioners were in poverty. Since then, pensioner poverty has halved, and seniors are today less likely to be in poverty than the wider population and half as likely as children. This is a remarkable achievement, and a success that recent Governments of all political persuasions can take credit for. We should celebrate, but also wake up to the very different social policy challenges that flow from this success.

Since 2010, ongoing increases in the state pension have helped senior households gain £900 annually, while working-age families claiming benefits have been hit for £1,500. Even over this last year, when the pension rise was partly offset by the restricted fuel payments, seniors still came out net winners. The upshot is that working-age households are today almost twice as likely to be living in fuel stress than those of pensionable age.

That’s not to say that all pensioners can easily absorb the loss of Winter Fuel Payments. Indeed, some poor pensioners are missing out because they don’t claim Pension Credit. This should inform how the Government delivers its U-turn – targeting the additional payments at those in receipt of other benefits – such as Housing Benefit and disability benefits. This would benefit around 1.3 million families, at a cost of around £300 million.

The far bigger cuts are around ill-health and disability. More than 100 Labour MPs are reported to have written to the Chief Whip airing concern ahead of a June vote. Sadly, the concentrated nature of the pain may ultimately make the politics easier to withstand here. The three million losers number is only a third of those hit by the winter fuel decision, and yet the impact on them is much more profound. The three-quarters of claimants with arthritis who would fail the Government’s new eligibility criteria for disability benefits face losing £4,500 a year (on average). For the typical recipient, this would be a loss of a fifth of all their income.

The Chancellor vouches that she is “absolutely certain” that with more moves into work she can avoid “pushing people into poverty.” Resolution Foundation analysis suggests up to 105,000 claimants could find work. While welcome, this is not going to offset the hit from the cuts, which the Government’s own figures show will push 250,000 into poverty. If, miraculously, the extra jobs were exclusively taken by those most vulnerable to sinking below the breadline, more than half the rise in poverty would still happen. More realistically, if the new jobs were spread across all losers, only 3 per cent of them would find work. Most likely the employment effects will be no more than a rounding error for the poverty impacts.

Still, the Government is not wrong to seek reform of health and disability benefits. While total non-pensioner benefits are under control – expected to fall from 4.8 to 4.7 per cent of GDP over this Parliament – the specific trends in health-related benefits are unsustainable. Spending on disability benefits is forecast to grow by £20bn in real terms over the decade since the pandemic, more than can be explained just by an ageing workforce. Alighting on an issue doesn’t mean the Government has found a good solution – particularly in an area where efforts to save have often underdelivered. Much more careful changes are needed. As a first step, the Government could increase available employment support sooner, give claimants reasonable notice for any loss of entitlement, and urgently ensure the assessment process is fit for purpose before using it to determine winners and losers.

Finally, the Labour manifesto promised an ambitious strategy to reduce child poverty. But it has inherited a projected outlook of it rising to a record high of 4.8 million children by the end of the Parliament. The two-child limit means that families on Universal Credit receive no additional benefits for newly born third and subsequent children. Applying to children born after 2017, this may be a Conservative cut, but it is nonetheless one that bites on ever-more children each year. Breaking the link between the number of mouths a family has to feed and the support it receives is simply inconsistent with real ambition on child poverty. Axing the limit would lift 470,000 children out of poverty for £3.5 billion. In one fell swoop, this would take poorer Britain most of the distance from a projected fall to rising living standards over this Parliament.

It is precisely a year since his predecessor stood in the Downing Street rain and called an election. Amid the singularly dry spring of 2025, Keir Starmer finds himself deluged in a trio of rows over benefits. The gap in voter turnout between the youngest and the oldest voters may be more than 30 points, but the outlook for living standards is worst for the youngest. As the forecasts stand, families containing children and disabled people are both in line for rising poverty, with children especially hard hit. Pensioner poverty, by contrast, is set to continue to fall. If the destination is higher living standards for all, the one truly bold and progressive choice would be to focus fiscal firepower on those who can’t vote – yet.