Brown forced into U-turn over pensions

Plan to introduce £100-a-week minimum income to stave off union revolt at Labour Party conference
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Ministers are drawing up plans to guarantee Britain's 11 million pensioners an income of £100 week in an attempt to head off a growing party revolt.

Ministers are drawing up plans to guarantee Britain's 11 million pensioners an income of £100 week in an attempt to head off a growing party revolt.

Gordon Brown, the Chancellor, and Alistair Darling, Secretary of State for Social Security, have held private talks this week with trade union leaders in an effort to prevent them inflicting defeat on the Labour leadership at the party's annual conference in Brighton in two weeks' time. The bulk of the pension rises will be implemented if Labour wins a second term.

Unions and party activists are threatening to table an emergency motion demanding that the basic state pension be raised each year in line with earnings rather than prices. Their anger over Labour's refusal to restore the link with wages, ended by Margaret Thatcher in 1980, boiled over after the much-criticised 75p-a-week pensions rise in April. This took it to £67.50 for a single person.

Mr Brown had been due to announce new measures to help pensioners in his draft Budget in November. But he plans to foreshadow his Commons statement by disclosing a three-point plan before the issue is debated at the party conference.

The first element will be an above-inflation rise in the basic state pension paid to all retired people regardless of their means. Treasury forecasts show that it is due to rise by £2.20 a week in April, in line with the inflation figure for September to be announced next month, which is expected to be 3.2 per cent. No final decision has been taken, but the rise could be as much as £3.

The second part of the package will be a significant increase in the Government's minimum income guarantee (MIG), which tops up the basic pension to £78.45 a week if people do not have a private pension or savings of £8,000.

The third part will be the introduction after the general election of a new pensioners' credit to help those living just above the poverty line, who do not qualify for the MIG butare struggling to make ends meet on modest occupational pensions.

Taken together, ministers believe the measures should ensure all pensioners an income of at least £100 a week by the end of the next Parliament. This would exceed the £90 a week which Age Concern calculates pensioners need to meet basic requirements - a benchmark endorsed last month by the all-party Commons Social Security Committee.

A senior Labour source said the party conference debate was "concentrating minds". She said: "There is a desire to take the steam out of the issue."

Negotiations over the package will continue behind the scenes at the annual TUC conference in Glasgow next week, which Mr Brown will address on Tuesday, the day before the conference debates pensions.

When Labour Party members gather in Brighton, a powerful alliance will demand more generous treatment for pensioners, including Rodney Bickerstaffe, who will succeed Jack Jones as the head the National Pensioners Convention after standing down as leader of the Unison public service union, Baroness Castle of Blackburn, the former cabinet minister; Bill Morris, leader of the Transport and General Workers' Union and John Edmonds, who heads the GMB general union.

Mr Morris said the case for restoring the link with earnings was "unanswerable".

He told New Statesman magazine: "The Government has misunderstood the psychology of politics here. If it spent twice as much as last year, spraying the money around on different schemes, pensioners will still get a sense of grievance unless itrestores the link."

Pressure on the Government increased this week when both the Tories and the Liberals unveiled pre-manifesto pledges to boost the basic pension substantially. Labour MPs have warned ministers that the issue is damaging the party's standing and must be tackled urgently.

Ministers hope their package will placate critics, even though they will refuse to promise to raise the basic pension in line with earnings. They will tell the Labour conference that £6.5m has been spent on pensioners since the 1997 election, £2m more than if the earnings link had been restored.

Ministers insist their policy directs help towards the most needy and that, on average, pensioners have an income of £132 a week when occupational schemes are taken into account.