£200 winter payment for old

Britain's pensioners are to be given £200 each winter until the next election as part of a government drive that will cost taxpayers more than £8 billion.

The Chancellor, Gordon Brown, will announce in his pre-Budget report on Tuesday that all of Britain's pensioners can rely on the money until the next election, probably 2005.

The move will be one of the main focuses of Brown's set- piece speech to the Commons, which lays out the 'broad themes' of the Government's approach to public spending.

The speech is also likely to propose rapidly increasing funds for the health service, schools and tackling poverty in Britain and abroad. Brown has told colleagues that it will show that the Government is putting public services first, even if that means running a larger short-term deficit.
He will also announce increased tax credits for families with children and highlight the 'baby bond' scheme which will give all families a nest egg of around £500 at the birth of a baby. The money will be invested until the child reaches 18, when it could be spent on further education or buying a house.

The Government hopes the winter payment move will lay to rest last year's row over the 75p increase in the basic pension which nearly led to a humiliating defeat for the Labour leadership at the party conference in the autumn. Tony Blair admitted the pension increase, described as 'miserly' by critics, was the last Government's biggest political misjudgment.

The new scheme, put together by Brown and the Minister for Work and Pensions, Alistair Darling, will mean that every November Britain's 8.5 million pensioners will receive the payment.

Officials hope that the money will go some way to off-setting the effect of low interest rates on older people's savings. They also believe that it will allow a consumer boost just before the Christmas shopping season.

'Receiving a tax-free £200 payment weeks before Christmas makes a real difference to pensioners who used to spend the winter months worrying about their bills and choosing between eating and heating,' a Labour source said.

Brown is likely to use the Pre-Budget report to downgrade the projections for Britain's economic growth because of the world economic slump.

He will say the Government will run a short-term deficit to fund the increases in public spending but will insist he is remaining within the Treasury's 'golden rules' of only borrowing for investment.

A report tomorrow by the Organisation for Economic Co-operation and Development will say that Britain is much better placed than other Western economies to withstand the economic uncertainty since 11 September.

The Chancellor, whose own first baby is due just before next spring's Budget, will also unveil a new range of measures to tackle child poverty.