The compromise, hammered out in traditional old Labour secrecy, involved 83-year-old Jack Jones, ex-general secretary of the transport union, and the power broker during Harold Wilson's governments.
Barbara (now Lady) Castle, former Labour cabinet minister, has led the fight to restore the link between pensions and earnings; the party leadership has blocked it on the grounds of cost. The clash had threatened a bitter debate at this week's conference. But now Mr Jones, Britain's other leading pensions campaigner and old adversary of Lady Castle's from the 1960s, has accepted New Labour's proposal for a standing commission on pensions to advise a Tony Blair government.
The deal, brokered by Gordon Brown, the Shadow Chancellor, was finally hammered out in a frantic series of telephone calls yesterday and will go before Labour's National Executive Committee this morning.
Earlier, senior Shadow Cabinet ministers had pressed for a package of measures to ease the reception of Harriet Harman, Shadow Secretary of State for Social Security, this week. They included speeding up the time taken to deliver cold weather payments to pensioners (they currently kick in only after seven days of sub-zero temperatures), cheaper TV licences, an increased Christmas bonus and concessionary taxi fares.
Mr Jones had been involved in talks with Labour leaders for at least two weeks. He met Ms Harman on 19 September, and they agreed to "continue dialogue". Ms Harman vetoed Lady Castle's demand that Labour restore the link between pensions and earnings, instead of prices, on the grounds that it would cost pounds 5bn.
A national executive statement, certain to be approved on Wednesday, promises to examine proposals from the pensioners' convention and reaffirms the ban on manifesto commitments to extra public spending. It says that measures to improve the position of pensioners will be looked at "in the light of public finances at the time".
In an interview in today's Independent on Sunday, Mr Brown re-emphasised that tough line, promising a Labour government would allow no new spending. Mr Brown said his message to ministers would be: "Save first. Save before you spend. There has to be a rigorous examination of the priorities of public expenditure."
This meant, Mr Brown added, "departmental ministers taking their budgets and having to justify any additional spending they may want to make by savings they can make elsewhere".
In this and other respects, Labour is now preparing for government. Mr Blair will this week put his party on election alert arguing that, if the party's discipline can hold, the Tories electoral fate can be sealed, perhaps before the end of the year. The Labour leader believes the Tories' latest row over Europe has dealt them a huge blow. The Government also faces a potentially devastating series of revelations in Neil Hamilton MP's forthcoming libel action against the Guardian.
Mr Blair told a Young Labour rally yesterday afternoon: "John Major is said to want an election in November. He might well yet get one. Not because he suddenly senses the chance to win. But because he has no choice. His government is disintegrating. The next two weeks could well see it off."
In his leader's speech on Tuesday, Mr Blair will call on Britons to "reaffirm their vows to society and to each other", and echo the late President Kennedy by stressing what individuals can give to society as well as take from it.
Further reports, page 10 Castle profile, page 17
Leading article, page 18
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