Brown bows to pressure over pensions

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Gordon Brown will announce a bumper increase in the basic state pension in the next two months to try to quell the widespread anger over the 75p-a-week rise this April.

Gordon Brown will announce a bumper increase in the basic state pension in the next two months to try to quell the widespread anger over the 75p-a-week rise this April.

The Chancellor will bow to intense cabinet pressure, led by Tony Blair, by including a generous package of measures to help all Britain's 11 million pensioners in his draft Budget statement due in November.

Although no final decision has been taken, Mr Brown could raise the £67.50-a-week basic pension by as much as £5 for a single person next April, with the £107.90 now paid to a couple rising by about £8 a week. If the increase was limited to inflation, the payments would rise by about £2 and £3 a week respectively. A further inflation-plus rise could follow in 2002.

Mr Brown hinted at his concessions yesterday in a fighting speech to the Labour Party conference in Brighton, which was warmly received by delegates who rallied behind the Government after its sudden slide in the opinion polls.

The Chancellor's aides denied he had made a U-turn, saying he had always intended to introduce generous transitional arrangements for all old folk before a new pensioner credit took effect in 2003. The scheme will direct help at low-income and middle-income pensioners but not benefit the top third.

Mr Blair is believed to have pressed for a big rise in the basic pension to repair the damage caused by the 75p increase in April, when the rise was limited to the inflation rate. "It was a Treasury decision and we have a paid a heavy price for it; something had to give," one cabinet minister said last night.

Mr Brown's hint of an across-the-board increase was welcomed by trade unions and may enable the Labour leadership to avoid a damaging defeat over pensions tomorrow.

He took a tougher line on demands for a cut in petrol duties, which some ministers are demanding after this month's protests. "This national debate is too important to be decided by those who shout the loudest or push the hardest," he said.

Mr Blair is expected to adopt a similar line when he addresses the conference this afternoon in what will be the most important speech of his life so far as he tries to win back the trust of voters who have deserted Labour.

The Prime Minister will admit that the Government has taken "a knock" and say that he shares people's wish for it to move further and faster. But he will declare: "For me, the large majority was never a reason to do the job quickly but to it properly. The journey is long term; the choices are hard."

He will say the Tory recovery in the polls provides the opportunity for "fight over the direction of Britain", and a choice between investment in public services under Labour and tax cuts under the Tories.

Talks were continuing between union leaders and ministers in Brighton last night. But the unions said they would not withdraw their motions calling for the state pension to rise in line with earnings until they received further clarification of Mr Brown's speech.

John Edmonds, leader of the GMB general union, said he was still trying to see through the "smoke and mirrors" of the speech. "But if he is offering a genuine increase in the basic rate, this will go a long way to addressing the need and concerns of Britain's pensioners."

Bill Morris, general secretary of the Transport and General Workers' Union, said Mr Brown's affirmation that the basic state pension "is now and will remain the foundation of everything we do" could be the basis of a peace formula.

Passions boiled over when Jeff Rooker, the pensions minister, was booed and jeered by pensioners as he arrived at a rally of campaigners demanding the restoration of the link between earnings and pensions. He ran the gauntlet of more than 300 senior citizens packed into a fringe meeting in Brighton.

After differences among ministers over pensions and petrol prices threatened to overshadow the conference, John Monks, the TUC general secretary, called for an end to the back-biting and demanded "discipline, self restraint and maturity from the leadership".

He told another fringe meeting: "We want to make sure the leadership of the Government don't get bogged down in personality or other conflicts, which can only detract from the great course they have set us."