Ms Reeves also opened the door to billions of pounds of additional tax rises this autumn when she delivers her maiden Budget on Oct 30. She hinted that pensioners could face more pain.
Ms Reeves reiterated that she would not raise taxes on “working people”, which she defined as “somebody who goes out to work for their income”
She told reporters: “We plan to stick by what was in our manifesto and we will not balance the books on the backs of hardworking people and hardworking taxpayers.”
The winter fuel allowance was first introduced by Labour in 1997 when Gordon Brown was chancellor.
Charities condemned Ms Reeves’ decision warning that 2m pensioners on low incomes would be hit hardest. The changes to winter fuel payments will come into effect from November.
Age UK estimates that more than 800,000 older people living on very low incomes – under £218.25 a week for single pensioners and under £332.95 for couples – are already missing out on pension credit. They will now lose money that currently helps to pay their energy bills.
It also said 1m pensioners, whose weekly incomes are less than £50 above the poverty line, will also be hit hard by the loss of the payment.
Caroline Abrahams, the charity director at Age UK, warned that millions of pensioners would face a “horrible ‘eating or heating’ dilemma.”
Challenged at a press conference on whether she was “picking on pensioners”, Ms Reeves said “in the circumstances I found myself in these are the fair and right decisions”.
Ms Reeves’ move is expected to hit the majority of pensioners and save £1.4bn this year and £1.5bn next year. It means only 1.5m households will receive the payments going forward.
She also announced Labour would ditch social care reforms recommended by economist Sir Andrew Dilnot more than a decade ago.
Under reforms first proposed by Boris Johnson when he was prime minister, councils would have been forced to implement a lifetime cap of £86,000 on care costs from October next year, while the threshold at which older people would become responsible for paying their care costs themselves would be raised from £23,250 to £100,000.
“It will not be possible to take forward these charging reforms,” said Ms Reeves, which she estimated would save £1bn a year.
The King’s Fund has previously estimated that the reforms would have brought up to 50,000 more people into the state-funding system. Scrapping them will increase the chance of people having to sell their homes to fund care. Labour has pledged to introduce a National Care Service in government.
Paul Johnson at the Institute for Fiscal Studies said he was “depressed” by Labour abandoning the social care cap as the think tank added it was “difficult to discern what Labour’s proposed National Care Service will entail beyond an aim for better terms and conditions for staff.”
Autumn tax rises
A 20-page document published by the Treasury said: “This is a significant down payment but these decisions alone will not be sufficient”. This suggests Ms Reeves is preparing the ground for a series of tax rises in the autumn, which could include more pain for pensioners or hikes to inheritance tax.”
The announcement drew immediate backlash from former chancellor Jeremy Hunt who described Labour’s planned Budget tax rises as the “biggest betrayal in history by a new chancellor” as he accused Labour of bowing to pressure from trade unions and saying: “here’s the money, thanks for your support”.
He said: “She has caved into the unions on pay, left welfare reform out of the King’s Speech, soft-pedalled on our productivity programme and that is a choice, not a necessity.
“Over 50 times in the election they told us they had no plans to raise taxes. Now in a u-turn that will forever shame this Labour Government, she is laying the ground to break her word. And when she does, her first budget will become the biggest betrayal in history by a new Chancellor – and working families will never forgive her.”
Labour will also bring forward a pledge to introduce VAT on private school fees from Jan 1 and stop people from making early down payments to avoid the extra 20pc tax charge from Monday. She also launched a five-week consultation on plans to close a tax “loophole” used by fund managers in the private equity industry and announced plans to end tax breaks for non-doms from next April.
Ms Reeves claimed pressures on Whitehall day-to-day budgets were £21.9bn higher than previously thought.
The Chancellor blamed this on a ballooning bill to deal with asylum claims and illegal immigration of £6.4bn this year alone.
The Treasury also said extra spending on the NHS, Ukraine funding and maintaining roads and railways has also put extra pressure on the public finances.
Labour will also end the Rwanda scheme, cancel road and rail projects, cut spending on consultants and ordered departments to trim spending ahead of the October Budget.
