A Parliamentary investigation into fuel poverty is to investigate £12 million a year of winter fuel payments made to British pensioners living abroad.

Michael Jack, chairman of the Select Committee for Environment, Food and Rural Affairs, said the issue had emerged as a “key” area of concern in their inquiry.

He said: “For many pensioners in the UK at the moment the winter fuel payment is the difference between turning on the heating or not. With the sharp rise in fuel bills we wish to check the deployment of this benefit and how effective it is.

“It certainly seems very unusual that this remains a universal benefit, payable to every pensioner at 60 and is not even means-tested.”

The select committee is expected to make recommendations about possible changes to the winter fuel payment scheme in a report to Ed Miliband, Energy and Climate Change Secretary, in the new year.

Under official rules the £200 winter fuel allowance is paid to anyone living in Britain on their 60th birthday on a state pension, even if that person intends to retire or spend winter months in wamer countries. The payments rise to more than £300 for the over-80s. There is not even a requirement for the money to be used for heating bills.

The payment is only made if British citizens move to one of the 29 countries in the European Economic Area. It is part of the European Union portable allowances scheme and cash is paid into overseas bank accounts.

It does not apply to anyone moving to Commonwealth countries such as Australia, New Zealand or Canada, who have their pension and fuel payments frozen once they leave Britain.

A coalition of pensioners’ groups is lobbying for these payments to some 50,000 Britons living abroad to be switched to help those at home struggling to pay bills to combat the cold.

The Fuel Poverty Advisory Group (FPAG) claims that gas and electricity bills in Cyprus, for example, which enjoys some 300 days of sunshine a year, are £500 cheaper than in Britain.

Derek Lickorish, chairman of the group, is angry about the inequity of the payments and is to speak against them when he gives evidence to the MPs’ inquiry on Monday.

“We are urging the Government to review its policy. Many of these countries do not even get cold in the winter months yet the payments are automatic. And many of the pensioners who receive this cash are higher rate taxpayers - the wealthy - and they have less need for them.”

He added: “Obviously there will always be extreme circumstances in which some pensioners living abroad will be in need of funds for winter fuel but there is an overwhelming case for the payments to be better targetted.”

Matthew Elliott, chief executive of the Taxpayers’ Alliance, called for these payments to expatriates to be scrapped immediately.

“It is ludicrous that people on the Costa del Sol are getting winter fuel payments,” he said. “These benefits are meant to help hard-up pensioners in Britain get through the winter, so they shouldn’t be paid to expats. It beggars belief that the taxpayer is forking out for all these people living it up overseas, who are taking us all for a ride.”

Pensioner couples such as Jim and Hilary Ross, of Rochester, Kent, have seen their own fuel bills rocket an extra £360 a year.

This has effectively cancelled out the winter fuel payment sending them into fuel poverty. Any household spending 10 per cent or more of its income on gas and electricity is defined as fuel poor.

Mrs Ross said: “The winter fuel payments do not help us as much as they could - they should be means-tested because clearly pensioners living in Cyprus or Spain are not going to be as cold as us. It just doesn’t seem fair.”

Any change will have to win the backing of Gordon Brown. The issue is a cross-departmental matter between Ed Miliband responsible for energy and James Purnell, Work and Pensions Secretary, whose staff make the payments to pensioners.

A spokesman for the Department of Work and Pensions said: “It is a universal benefit. The majority of people receiving the payment need and appreciate the financial assistance. There are strict eligibility rules and people must be 60 to qualify. It cannot be claimed by anyone aged 58 or 59 who takes early retirement and goes to live abroad. It is also only paid to former UK residents living in the European Economic Area or Switzerland if they qualified for it before leaving the UK.”

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