Pension rise to be no more than £4 a week

Ministers provoked a new row with pensioners' groups and trade unions yesterday by playing down hopes that the basic state pension will rise by £5 a week in April.

Ministers provoked a new row with pensioners' groups and trade unions yesterday by playing down hopes that the basic state pension will rise by £5 a week in April.

Gordon Brown, the Chancellor, is reluctant to devote a large part of next year's £2.4bn increase in the social security budget to an across-the-board rise in the £67.50 a week pension. He wants to devote a sizeable slice to helping the poorest pensioners, which could limit the rise to £3.50 to £4 a week.

A rise of £5 a week for a single pensioner and £8 for couples would cost about £1.5bn, leaving less for the poorest pensioners and other payments.

Although rises of £5 and £8 a week were predicted after Mr Brown promised help for all pensioners at last month's Labour Party conference, the Treasury said last night it was not responsible for such speculation, which was "very premature".

Alistair Darling, the Secretary of State for Social Security, hinted strongly yesterday that the Government would target the two million elderly poor as well as providing an above-inflation rise in the basic state pension. "The only way in which you can help pensioners whose incomes are so low is to direct more help to them in the first instance," Mr Darling said.

Andrew Dilnot, director of the Institute for Fiscal Studies, said: "If what matters is reducing pensioner poverty, then the basic state pension is a less and less effective tool."

Figures yesterday showed that the headline inflation rate had trebled in the past year, climbing to 3.3 per cent in September. That will trigger a minimum increase in the basic state pension of £2.25 a week for a single person and £3.60 for a couple. But Mr Brown is certain to want go further in an attempt to cool the anger over the 75p a week rise in April this year, based on the inflation figure of September last year.

Rodney Bickerstaffe, who is to head the pensioners' lobby, called for a "major increase" of more than £5 a week.

John Edmonds, general secretary of the GMB union, said: "£5 and £8 a week is the minimum that is required to erase the stain of last year's 75p rise."

Mr Brown's decision will be revealed in his draft Budget, expected on 31 October. Although it has been brought forward from November, Treasury sources denied the aim was to beat the 13 November deadline set by the fuel protesters.

The Chancellor is likely to announce help with fuel costs for hauliers and farmers but reject calls for a cut in petrol duty for all motorists. But drivers with smaller engines could pay less in vehicle excise duty.

The upturn in inflation caused concern among economists, who said it meant there was a chance of a further rise in interest rates. The Bank of England's Monetary Policy Committee has left the cost of borrowing unchanged since February, but its vote has been split for the past four months.