Gordon Brown's pension plans will be watched closely

He says the minimum income guarantee (MIG), the means-tested top-up designed to lift the incomes of the poorest pensioners, is fairer than an across the board increase.

Free television licences and winter fuel payments have also been trumpeted as New Labour's better alternative to a basic rise.

Few in Labour or pensioners' action groups agreed.

The all-party, Labour-dominated Commons social security committee recommended an immediate increase in the basic state pension to �90 for a single pensioner.

Charities like Help the Aged and Age Concern cite similar figures. They also want an end to means testing, which they say stops as many as 700,000 over-65s from claiming their entitlement.

Link to earnings

In defiance of ministers' appeals, when in September delegates to Labour's party conference gathered in Brighton this September they voted to restore the link between the nation's pensions and its earnings.

Prime Minister Tony Blair and the chancellor insist this is not an option, arguing that though the country could afford the maintain the link for the next few years, costs would massively escalate further down the line when the size of the elderly population increases.

Dame Barbara wants the link to earnings restored

The earnings link was introduced in the 1970s under then-social security secretary Barbara Castle, only to be scrapped by Margaret Thatcher once the Conservatives came to power at the end of the decade.

Barbara (now Baroness) Castle was one of the most vociferous critics of the 75p increase at Labour conference this autumn. And even Lady Thatcher has criticised the rise, saying older people should not be means-tested for their pensions and dismissing the government policy as "a downright fraud".

Anxious to appease

With the general election expected next year Labour is anxious to appease pensioners, who form a formidable proportion of the electorate.

There are 11m people in the UK over the age of 54 - either receiving the pension or due to do so in the near future.

Not only to they represent a third of the electorate, they are one of the groups most likely to vote in elections. In some of Britain's most marginal seats they account for 41% of voters.

A MORI poll in September found seven in 10 of this group were dissatisfied with the government.

In Brighton, facing angry demands from Labour's grassroots, trade union leaders and his own government colleagues, Gordon Brown signalled that extra money would be made available - though he declined to spell out any details.

The Conservatives want him to increase the basic pension by �10 a week - a rise that would be paid for by scrapping special payments like the winter fuel allowance. Such a move would put very little extra money into the pockets of pensioners, but it would simplify the often complex benefits system.

The Liberal Democrat leadership defeated a motion at their own annual conference this year to restore the earnings link. Instead, the party committed itself to straightforwardly boosting the basic pension by at least �5 a week.

Whatever the chancellor unveils in his pre-Budget report, he and his ministerial colleagues know that following the political disaster of the 75p rise, New Labour has serious ground to make up in winning back the grey vote it managed to capture in 1997.