Brown hands out £4.3bn in attempt to pacify fuel protesters and pensioners

Gordon Brown announced a £4.3bn giveaway yesterday aimed at fuel protesters and pensioners as he sought to put Labour on course for a general election victory next May.

Gordon Brown announced a £4.3bn giveaway yesterday aimed at fuel protesters and pensioners as he sought to put Labour on course for a general election victory next May.

The Chancellor's draft Budget included a raft of measures worth £2.25bn for hauliers and ordinary motorists, which he justified on environmental grounds. He gave £1.8bn to pensioners from next April in an attempt to placate their anger at this year's 75p a week rise in the basic pension.

Mr Brown, whose package was warmly welcomed by Labour MPs, also used the Treasury's improving finances to announce more money for school repairs and families with children. He insisted he had stuck firmly to his prudent economic strategy.

His concessions to the fuel protesters who almost brought Britain to a standstill in September went further than the Government's tough rhetoric had suggested and reflected its determination to head off a new protest next week.

Although he stopped short of the 26p-a-litre cut in petrol prices demanded by the People's Fuel Lobby, Mr Brown said his measures meant a 4p a litre cut for motorists and 8p a litre for hauliers.

Fuel campaigners will meet today to decide their response. Last night they appeared divided over whether they should stage their convoy from Jarrow to London next week. But David Handley, the group's chairman, said there would be a mass protest in London on Tuesday as planned.

Fuel duty will be frozen next April, and Mr Brown in effect managed a cut in fuel prices without describing it as one. He hopes all ordinary motorists will switch to a new "clean and green" unleaded petrol by next year and said the duty paid on it would be 3p a litre lowerr than unleaded fuel from next March. The duty on lead replacement fuel and diesel will also be reduced. Hauliers will benefit from a shake-up of vehicle excise duty, which will cut it for lorries by up to £2,000. Farmers will no longer pay road tax on their tractors and other agricultural vehicles.

Drivers of 5.4 million more cars, those with engines between 1200cc and 1500cc, won an immediate £55 cut in their annual road tax. Mr Brown responded to the mounting clamour to help old people without bowing to demands to raise the basic pension by the rate of earnings instead of prices.

The basic pension for a single person will rise by £5 a week in April and by £3 more the year after. For a couple, it will rise by £8 and £4.80 a week respectively.

The Chancellor said the £150 winter fuel payment to be sent out next week will be raised to £200. He also promised to raise the minimum income guarantee, which tops up the income of pensioners without other income, would rise to £92.15 next year and £100 by 2003.

Help the Aged said pensioners would be "reassured but not satisfied" with the increases and some campaigners said he should have gone further.

The Tories called the package a "post-Budget report" to put right the mistakes Mr Brown had made in his Budget this March. They put on hold their proposal to cut petrol duty by 3p a litre but immediately promised to trump Labour's pension rises by raising the basic pension by up to £11.60 a week.

The Tories said the fine print of the pre-Budget report showed the tax burden would rise by a further £2bn this year, a charge dismissed by Labour.

The scale of the Chancellor's handouts to pensioners and hauliers is unlikely to alarm the Bank of England, economists said. The monetary policy committee is expected to leave rates at 6 per cent today.