Hague changes his mind over pensioners' payment choice

William Hague yesterday performed a spectacular u-turn when he abandoned a flagship Conservative policy that would roll the basic state pension and other "gimmicks", such as free television licences, into one payment.

Amid fears that Labour will run a general election scare campaign against the Tory plans, central office announced that pensioners would be free to choose how they received their payments.

Pensioners would still be allowed to collect their weekly basic state pensions and receive separate payments for other benefits, such as the winter fuel allowance. Or they could have a consolidated payment, in which everything was rolled into one cheque.

The u-turn came as the Tories made a renewed bid for the "grey" vote yesterday by announcing an extra £100m for pensioners. David Willetts, shadow social security secretary, said an extra 750,000 pensioners would receive free television licenses and winter fuel payments. These included pensioners in nursing homes, those who did not have a television and would receive a cash equivalent television and those who lived abroad.

Central office said the extra cash would not have any impact on Mr Hague's tax and spending plans, because the £100m would come from savings to the working families tax credit announced on Thursday, when Mr Willetts said he would save £100m by denying the credit, which tops up the pay off the less well off and middle income earners, to higher rate tax payers.

He denied that the Tories were rewarding privileged groups. "We will pay a consolidated pension to 220,000 pensioners on income support in residential and nursing homes who are among the very poorest in the country. It also benefits 100,000 pensioners who cannot benefit from the free TV licence because they do not own a TV."

Tory sources denied that their plan to drop a universal payment for the pension and benefits was a u-turn. "We have revised the policy after listening to pensioners," a source said. "This is more like an s-bend."

He added: "Labour ran a very potent scare tactic during the last campaign - which was a lie - that we would scrap the basic pension. We have decided to pre-empt them.They will no doubt have to pulp a lot of leaflets at Millbank."

Labour last night claimed the Tories' changes to the working families tax credit would add an average £150 a year to the tax bill of 116,000 families.

Andrew Smith, chief secretary to the Treasury, said: "Far from being confined to 'more affluent families', this tax rise will affect thousands of hard working families."