Britain will make winter fuel payments to millions of older people this winter, in a major U-turn of deeply unpopular cuts after months of political pressure on Prime Minister Keir Starmer.

After taking office in July Starmer's Labour government cut winter fuel payments for all but the poorest pensioners in England and Wales as part of wider spending reductions that it said were necessary to fix a hole in the public finances left by the previous Conservative administration.

The reversal will restore those payments to 9 million pensioners, excluding only 2 million who earn above £35,000 (US$47,495) from the £200-300 subsidy for heating bills in the colder months.

Starmer and British Chancellor Rachel Reeves had faced opposition from dozens of Labour MPs on the initial cuts and they were cited as one factor in the party losing ground to Nigel Farage's right-wing Reform UK party in recent local elections. Reform also leads opinion polls nationally.

Reeves said it was right to continue excluding wealthier pensioners from the payment, and that last year's "difficult decisions" had been justified.

"Because of those decisions, our public finances are now in a better position, which means that this year we're able to pay the winter fuel payment to more pensioners," she said.

The U-turn will cost the government £1.25 billion and means-testing of the payment will save around £450 million. The move would not lead to permanent additional borrowing, with funding details to be set out at a budget later this year, the Treasury said.

Speaking at a press conference in Wales, Farage said the reversal showed Labour's policy was being driven by his campaigning.

"The Labour government are in absolute state of blind panic, they are not quite sure what to do," he said. 

"Reform are leading now much of their agenda."

Starmer signaled last month that he would reverse the cuts.

The cuts had meant that around 85 per cent of pensioner households that received the payments lost the benefit, according to the Institute for Fiscal Studies think tank.

xt forecast of the independent Office for Budget Responsibility, the government said.