Fuel prices give pensioners a boost

Pensioners are demanding more from Brown

By BBC News Online's political correspondent Nick Assinder

Two big issues have hammered Labour over the past few weeks - fuel prices and pensions.

The first saw the government faced with its greatest crisis yet as hauliers blockaded fuel depots and brought the country to a grinding halt in protest at rising prices.

The second saw the Labour leadership defeated at its annual conference by union bosses demanding a restoration of the link between pensions and earnings.

So there is a certain symmetry in the fact that, thanks to the escalating cost of petrol, Britain's pensioners will get a bigger than expected increase next year.

Ever since the Tory government abandoned the link between pensions and earnings, the annual uprating has been tied to the previous September's inflation figure.

Last year inflation was under control, so pensioners got a controversial 75p a week.

Big rise

This September, thanks to the rocketing price of oil, inflation rose above the level forecast, ensuring a single pensioner will get an extra £2.25 a week.

It is an increase the Chancellor had not foreseen and, despite looking like good news, hands him a fresh problem.

In the face of mounting anger over last year's rise - and a union-led demand for restoration of the earnings link - he has already pledged to give pensioners a big rise next year.

He has persistently refused to give precise details, insisting he will make announcements in the usual way in his budget statements. But he was clearly preparing to appear generous.

After his party conference speech there were hints that he could be prepared to offer a single pensioner an extra £5 a week.

But the inflation figure has now upped the stakes. If he still wants to look like the pensioners' friend he will have to come up with even more money.

'Dig deeper'

Pensioners groups have already piled on the pressure insisting Mr Brown will have to do much more for them to ensure they can keep pace with the cost of living.

And Unison boss Rodney Bickerstaffe, who led the conference revolt, warned that Mr Brown may have to dig even deeper if he is to win back the pensioner vote.

"I think the Chancellor has got to do a lot better than that in the next few weeks.

"Other parties have talked about £5 increases and the like. I would think it has got to be in excess of that," he said.

What is certain is that Mr Brown will not restore the link with average earnings.

But he is now facing a real problem over how to find the massive amounts of money needed to increase the average pension over and above the level already dictated by inflation.