Rachel Reeves is scrambling to ease the growing backlash over slashing winter fuel payments insisting she did not ‘want’ to cut the handouts.

The Chancellor claimed the government had no choice about axing the payments for millions as she urged those on low incomes to sign up for pension credit.

The benefit is worth up to £3,900 a year on average, but estimates suggest up to 880,000 people are currently missing out.

Anyone in receipt of pension credit will retain the right to a winter fuel payment.

The campaign comes with Ms Reeves facing anger from many Labour MPs over her decision to cut winter fuel payments from about 10million pensioners to help deal with a £22 billion ‘black hole’ allegedly left by the Tories.

Commons Leader Lucy Powell suggested in interviews this morning that if the government had not acted in July to stabilise the finances there could have been a run on the pound or another spike in interest rates.

But Charity Age UK has written to the Chancellor pleading for an alternative policy to stop around two million hard-up pensioners being deprived of the handouts.

Ms Reeves stood by her earlier decision to restrict the payments but urged pensioners and their families to check their right to pension credit.

She said: ‘The £22 billion blackhole inherited from the previous governments means we are having to take tough decisions now to fix the foundations of our economy – including making the Winter Fuel Payments available to those most at need.

‘1.3million pensioners are already going to get help with fuel bills this year because they’re claiming pension credit – but thousands more are eligible.’

Writing in the Observer, Ms Reeves claimed that she was ‘protecting the most vulnerable pensioners’ by means testing the winter fuel payment.

‘I know these are tough choices, especially on winter fuel,’ she acknowledged. ‘They were not the choices I wanted to make or expected to make, but they were the right choices to put our country on a firmer footing.’

Ms Powell told Times Radio this morning: ‘This is one of those very difficult decisions we had to take.

‘But we have faced this huge additional black hole for this current financial year, borrowing higher than anybody understood.

‘If we hadn’t taken some of these tough decisions we could have seen a run on the pound, interest rates going up and crashing the economy.

‘It’s something we were left with no alternative but to do.’

Age UK has called for pensioners on a wider range of benefits – such as housing benefit, council tax support, attendance allowance and carers’ allowance – to get winter fuel payments.

Director Caroline Abrahams told the Observer: ‘Age UK has written to the chancellor, explaining why we oppose the means-testing of winter fuel payment and asking her to take action to safeguard the estimated two million pensioners who, as things stand, are set to lose it and who will experience severe hardship as a result.

‘We think that, if the policy is to be introduced at all, then it shouldn’t happen so quickly, and if it is to happen in the future, the pool of pensioners entitled to winter fuel payment needs to be made far wider. There are different options for how to achieve this, but there’s no time to do any of them – or to make a big difference to pension credit take-up either – in the few months left this year.

‘It’s important to understand that by aligning the means-testing of the payment with pension credit, the government is removing it from all pensioners whose annual incomes are above about £11,500 if they are single and £17,500 if they are a couple.

‘We accept that the state of the public finances means that people of all ages who can afford to contribute more should be asked to do so, but surely no one can reasonably suggest that a widow living on her state pension and a tiny occupational pension, taking her income to a meagre £13,000 a year, is someone who ought to be in that category. And yet this is the result of the government’s decision. They need to think again.’

Work and Pensions Secretary Liz Kendall said: ‘Thousands of pensioners are missing out on pension credit worth on average £3,900 per year.

‘That needs to change. It’s easier than ever to check if you are eligible, including with our online calculator, and if your circumstances have changed since the last time you looked – I urge you to check again.

‘Friends, families and neighbours can also encourage their loved ones to apply, so that they are not missing out on this vital benefit.’

The DWP added that pensioners whose weekly income was below £218.15 for a single person or £332.95 for a couple should check to see if they are eligible for the credit worth £3,900 a year on average, using the DWP’s online calculator.

People with a severe disability, carers and those who are responsible for a child or young person who lives with them could get more.