The Chancellor's £200 bonus for pensioners to help them pay their council tax bills coupled with free bus passes were hailed by Labour MPs as the "winning ticket" for the general election.
Gordon Brown also saidthe elderly would no longer have their pensions reduced by hospital charges if they stayed in hospital for more than a year.
Mr Brown's attempts to match the Tories in appealing to pensioners reflect the importance of the "grey vote". The elderly are more likely to vote in the election than the young.
There will again be a £200 winter fuel allowance, rising to £300 for the over-80s.
At the same time the pension credit will be increased by 13 per cent over the next three years to ensure a minimum pensioner income of £119 a week by March 2008. The basic state pension for the next year will be £82.05 for a single person and £131.21 for a couple, while the guaranteed minimum incomes will be £109.45 and £167.05 respectively.
The pre-Budget report last year promised a £50 discount on council tax. The decision to pay a £200 discount will cost £800m a year and the free bus passes will cost a further £400m. The Lyons report on reforming the council tax, to be published after the election, will also promise further reductions for poorer pensioners, by linking council tax more to the ability to pay.
However, the gloss quickly came off the Chancellor's package for pensioners when it was discovered in the small print of the Treasury documents that the bus passes would be free only for off-peak travel.
One Labour MP said: "They already have free off-peak travel in Nottingham for pensioners and they are known as the 'twirlies' - because they are constantly being told they are 'too early' to travel free."
Pensioners' groups lined up to accuse the Chancellor of handing out means-tested election gimmicks without offering a big rise in the state pension. Yesterday local authorities started sending out council tax bills of up to £2,000 which will dwarf the discounts.
Michael Howard, the Conservative leader, said the Chancellor had failed to match the Tory pledge to cut pensioners' council tax bills by up to £500. David Willetts, the shadow Pensions Secretary, said: "Gordon Brown failed to say that this help is only for one year. It is only paid in 2005-06, which just happens to be election year."
Charles Kennedy, the Liberal Democrat leader, said: "The Chancellor still has done nothing to fundamentally fix pensioner poverty. We are still in a situation in which two in five pensioners eligible for pensions credit do not claim it.
"There is now an urgent need to introduce a Citizen's Pension that ends the discrimination against women and ends means-testing for the oldest pensioners."
Mervyn Kohler, of Help the Aged, accused Mr Brown of producing a "cash bribe" for the elderly which failed to meet their real needs. He said policies had been skewed towards means-tested benefits which were inefficient at reaching those most in need, and unpopular because people had to "plead poverty" to claim them.
The National Pensioners Convention president, Rodney Bickerstaffe, said many OAPs would be disappointed that Mr Brown did not substantially raise the basic state pension, restore the link with earnings, end means-testing or do anything to widen women's entitlement to pensions.
Mr Bickerstaffe acknowledged that the £200 council tax refund would be popular but expressed disappointment at its one-year limit. "The Government will have to do more to end the unfairness of a tax that has no relationship to an individual's income," he said.
The Association of Retired and Persons Over 50 called for radical reform. "Nothing has been done to reduce the stigma of means-testing or the less than satisfactory take-up of pension credit," said a spokesman.
Gordon Lishman, director-general of Age Concern England, said: "The reality is that two million pensioners are still in poverty and these measures do not solve the root cause of the problem. The basic state pension is disgracefully low and small annual increases are not good enough.
"The Government must increase the basic state pension to at least £109 per week and move away from mass means-testing," Mr Lishman added.