Labour faces demands to come clean about compensation for women hit by state pension age increases, following warnings that payments threaten to blow a £10 billion hole in Rachel Reeves’s tax-raising Budget. Helen Whately, Shadow Secretary of State for Work and Pensions, said: “Parliament has been told nothing, the public has been told nothing, three-and-a-half million women are being left in the dark.”
The Chancellor’s Budget last month raised taxes by £26 billion, partly to pay for increases in welfare spending but also to increase her so-called “headroom”, the money set aside for unexpected costs, from £10 billion to £22 billion. However, this plan is already threatened with collapse after Ministers agreed to look again at paying compensation for women who say they were treated unfairly by changes to the state pension age.
A court hearing last week was due to consider whether the Women Against State Pension Inequality (Waspi) campaign should be allowed to press ahead a with a judicial review into the Government’s refusal to provide compensation. But it was cancelled at the last minute, after Ministers agreed to reconsider the decision.
The Government has previously admitted that compensation could cost more than £10 billion.
Ms Whately said: “Ministers have signed an agreement that could blow a £10 billion hole in the public finances, halving Reeves’ fiscal headroom, and they have done it in total silence.
“This is a mess entirely of the Government’s making.”
She said Labour figures including Prime Minister Sir Keir Starmer and Chancellor Rachel Reeves campaigned alongside WASPI women when they were in opposition “and helped build expectations they are now struggling to meet.
“Those promises collide with the hard reality of a multibillion-pound bill, and ministers owe the country an explanation.”
The Department for Work and Pensions insists no decision has been made on whether compensation will be paid.
Independent experts such as the Institute for Fiscal Studies had urged the Chancellor to increase her “headroom”, warning that the previous £10 billion sum kept in reserve amounted to a tiny proportion of the Government’s total budget.
The Waspi campaign claims that increases to the state pension age for women were not properly communicated, and a report by the Parliamentary and Health Service Ombudsman recommended that the Government should pay compensation. But this was rejected by Ministers and Liz Kendall, the Work and Pensions Secretary at the time, said in December 2024: “Given the great majority of women knew that the State Pension Age was increasing, the Government does not believe paying a flat rate to all women – at a cost of up to £10.5 billion – would be a fair or proportionate use of taxpayers’ money.”
Last week the Waspi campaign said it was dropping its judicial review after reaching an agreement with the government, but details have not been published.
A Department for Work and Pensions spokesperson said: “Last month we committed to retake the decision and as set out, we will do so within 3 months.
“This should not be taken as an indication that Government will necessarily decide that it should award financial compensation.”
