PRE-BUDGET REPORT: Benefits - Every viewer over the age of 75 will get a free television licence

THREE MILLION pensioners aged over 75 are to get free television licences from next autumn, the Chancellor, Gordon Brown, said yesterday. Labour MPs cheered the announcement, but there were warnings that the move could sour because the pounds 300m cost of providing the licences will come out of the social security budget.

Every pensioner aged over 75 will be granted a licence - worth pounds 101 a year - regardless of income. The Chancellor's aides defended the decision not to extend the gesture to include poorer, younger pensioners.

The move will mean some of the elderly hereditary peerspensioned off this week from the Lords may qualify.

A Treasury source said: "The Chancellor and the Prime Minister looked hard at what could be afforded and what would be the right thing to do, and decided that it should go to the most elderly pensioners."

The decision will also raise suspicions that by excluding the most elderly pensioners from paying, the Government could be paving the way for an increase in TV licence fees instead of introducing the proposed pounds 24 digital levy on top of the normal colour licence for those with digital boxes.

The Chancellor also revealed that the winter fuel payment of pounds 100 will become permanent and will be paid before Christmas.

A spokesman for William Hague, the Conservative leader, said: "Gordon Brown's Christmas package for pensioners is starting to unravel. He is taking from one deserving group to pay to another."

Alistair Darling, the Secretary of State for Social Security, said that from next April most National Insurance benefits would rise by 1.1 per cent, and most income-related benefits would rise under a different formula by 1.6 per cent.

Some benefits will rise by more than the usual rates. The minimum income guarantee will rise in line with earnings, from pounds 75 a week to pounds 78.45 for a single pensioner and from pounds 116.60 to pounds 121.95 for couples. Income support child allowance for children under 11 will rise by pounds 5.10 a week more than the usual rate, to pounds 26.20. The income support family premium will rise by more than the usual amount, from pounds 13.90 to pounds 14.25.

Child benefit will go up from pounds 14.40 to pounds 15 a week for the eldest child and from pounds 9.60 to pounds 10 for subsequent children.

Child benefit for lone parents will rise from pounds 17.10 to pounds 17.55 a week. Child benefit will be topped up by a new means-tested benefit after the next general election under the Government's plans to halve child poverty within the next decade.

The Chancellor plans to introduce an integrated child credit (ICC), worth pounds 40 a week for the first child and means-tested. The ICC would bring together the different strands of existing support for children: the working families tax credit, income support and the children's tax credit.

The Treasury made clear that the long-term plans would not mean the abolition of child benefit as a universal payment.

A senior Treasury source said: "The new benefit would absorb three existing means-tested benefits, not child benefit, which will be kept. The Chancellor is quite clear that ending or replacing child benefit is not a good idea."

But the new credit could still achieve Mr Brown's long-term goal of giving more money to the poor, if child benefit was not increased in line with inflation after the election and the new, means-tested ICC was raised instead.

The integrated benefit would be paid directly to the main carer of families in and out of work; and it would be complemented by an employment tax credit paid through the wage packet to working households with and without children. Mr Brown announced in his spring Budget he would not tax child benefit. The Government believes persuading mothers into paid work is the best way to tackle child poverty.