Those aged 75 and over will receive free licences from next autumn, Chancellor Gordon Brown said in his pre-Budget statement.

Minutes later Social Security Secretary Alistair Darling confirmed that pensions for next year would rise by just 1.1%, despite warnings that pensioners would suffer if the government based them on low inflation figures.

Pressure group Age Concern expressed anger at the announcements.

Director general Sally Greengross said: "While we welcome the concessions made to pensioners by the chancellor we are certain Britain's pensioners would rather have had a decent pension increase in their pockets.

"Today's increase of just 75p is derisory and will do nothing to ease the plight of those pensioners living in poverty.

"While we welcome the increase in pensioner income support in line with average male earnings, the fact remains up to 760,000 entitled pensioners are not claiming this money."

Her words were echoed by shadow social security David Willetts, who said the measures exposed "a complete absence of a strategy for dealing with pensioner poverty".

He added: "How many more pensioners will be means-tested as a result of the changes."

'Fair deal for pensioners'

Social Security secretary Alistair Darling defended the measures which he said meant that the country's oldest, poorest pensioners, would be �500 a year better off since Labour came to power.

He also announced plans to increase the minimum income guarantee from April to �78.45 for single pensioners and �121.95 for couples.

He said: "This is real help for those in real need."

A BBC spokesman welcomed the news on television licence fees.

He said: "We welcome this imaginative and innovative approach to a long-standing issue.