Our first priority is to tackle pensioner poverty.

Gordon Brown

In a speech at the London School of Economics he said the government wanted to make sure that "pensioners are not penalised for their thrift".

He said the government wanted to tackle pensioner poverty and would try to help those "with modest occupational pensions and small savings".

The shadow chancellor Michael Portillo said the government was merely announcing and reannouncing minor measures that did little to support the elderly.

We are determined to reward pensioners for their thrift and savings

Gordon Brown

Mr Brown's speech was seen as a first move by the government to shore up support following Labour's recent poor showing in local elections.

The Pensioners Credit is designed to help people in retirement who have modest savings and who have found they have too much money to qualify for benefits but not enough to live comfortably.

Poverty trap

Before Mr Brown gave his speech he told the BBC: "We intend to take pensioners out of poverty. One million pensioners are now up to �20 a week better off since we came to power.

"The Pensioners Credit would take into account the income of pensioners and say that even those who have modest occupational pensions, who don't qualify for benefits at the moment, should receive a credit through the tax system.

"That means we take more pensioners out of tax and also that those pensioners who have lost out on benefits in the past can receive more.

'Patchwork quilt'

But former Labour cabinet minister Baroness Castle criticised the chancellor.

She said: "He's got a kind of ferocious dedication to destroying state insurance."

She called on the government to introduce a wider-ranging policy on pensions.

"This is the kind of patchwork quilt we have been complaining about," she said.

"There ought to be a comprehensive pensions policy philosophy. Instead of which, we get a bit one year, now we get another bit this year and we're promised a third bit next year."

Liberal Democrat social security spokesman Steve Webb said the credit would create "more complexity" for pensioners.

"Increasing the state pension by a decent amount, with larger increases for older pensioners would lift many pensioners beyond needing to have their savings examined for means-tested benefits," he said.

"This would tackle the problem in a much simpler way."

Long-term vision

The last few decades teach us to reject ... flawed quick fixes rather than taking the tough decisions to achieve our long-term economic and social objectives.

Gordon Brown

Mr Brown also used the James Meade memorial lecture at the London School of Economics to announce a crackdown on income tax evasion and benefit fraud, and to trail a lecture he will deliver next week at the Child Poverty Action Group.

Mr Brown said he would announce new measures "to fight the war against child poverty".

But the main thrust of the Chancellor's speech was his insistence that the government had discard the policies of the "old left and old right".

He said that the past few decades had taught the government to avoid "flawed quick fixes" and focus on economic stability instead.

Tax burden

In his interview with the BBC, the Chancellor dismissed a report by accountants Ernst & Young - due for publication on Thursday - which is reported to state that the tax burden on British households is at its highest level for two decades.

The report - based on Inland Revenue figures - is also said to have found that the proportion of tax falling on higher earners is rising.

But Mr Brown rejected both suggestions, saying: "This is simply not true.

"The tax burden between this year and next year is actually falling. That is the fact."