Pensions: Most pensioners will feel the benefit

Nearly 600,000 pensioners will no longer have to pay income tax. The personal allowance for all single people aged 65 to 74 will increase by £270, to £7,550, or £7,690 for those aged 75 or over. Pensioner couples will see their allowances go up by slightly less.

The effect is that no pensioner living alone on an income of £145 a week or less will pay any income tax. That leaves 43 per cent of all pensioners as taxpayers. The Chancellor also announced that the pension credit guarantee will rise in line with wages, from the present level of £114 a week to £130 in 2009. It will also be made cheaper for householders to add a "granny flat" to their homes to keep families together. Mr Brown plans to cut VAT on home alterations for the elderly from 17.5 per cent to 5 per cent, the lowest permitted under EU law.

But he came under immediate fire for failing to address some of the most severe problems faced by the poorest, such as rising fuel and council tax bills.

Mervyn Kohler, of Help the Aged, described the Budget as a missed opportunity. He said: "We have heard more self-congratulation about the economy and growth, but little about high fuel costs, soaring council tax bills and dwindling local services which older people rely on. The basic state pension continues to be overwhelmed by the rise in essential costs and pensioner poverty persists after a decade of Gordon Brown's tenure in 11 Downing Street.

"The speech contained nothing new on tackling fuel poverty nor any increase in winter fuel payments to offset rises in energy costs - this inaction will consign many older people to yet more scrimping and saving.

Gordon Lishman, Age Concern's director general, called it "a stop-gap Budget". He added: "The Chancellor has ignored the needs of some of the poorest older people, largely the 2.1 million who aren't claiming pension credit. Many pensioners will feel very frustrated, particularly with yet more council tax and water bill rises around the corner."

Janet Morrison, chief executive of the charity Independent Age said: "The Chancellor has delivered a final Budget which brings little relief to the two million pensioners existing below the poverty line. Whilst we welcome the piecemeal concessions he offers, they do not go far enough to address the fundamental needs of older people."

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