Tories would slash benefits for pensions

Tory plans to fund large increases in the state pensions by cutting billions from Britain's social security budget were lambasted by the Government yesterday as ministers claimed their opponents' "sums don't add up".

Paul Boateng, the Chief Secretary to the Treasury, hit out after David Willetts, the Shadow Work and Pensions Secretary, outlined the detailed funding of his party's policy for the first time.

The Conservatives announced last autumn that they would fight the next general election with a promise to link pensions to earnings rather than prices.

The policy, which would restore the link cut by Margaret Thatcher 25 years ago, would mean an extra £7 a week for a single person and £11 a week for a couple by 2009.

However, the party was criticised after it admitted at the time that it could not say how the £5bn scheme would be funded beyond one Parliament.

Mr Willetts revealed yesterday that as well as the £2.5bn saved from scrapping means-tested benefits, a further £2.5bn would come from cuts to the social security budget, phasing out of pension rebates and the scrapping of the second state pension.

Just half a per cent cut in the £125bn social security budget would be needed to make significant savings, he said. Phasing out rebates would save £44bn over four years. The programme of savings would apply every four years indefinitely.

But the Treasury pointed out that rising pensioner numbers would mean that restoring the earnings link would leave future Governments with an unaffordable pensions liability. The Tory figures were based on only current pensioner numbers and did not take into account the cumulative effect of the policy.

Mr Boateng said: "The Tories' figures just don't add up. They have still not identified where they would find a single penny and David Willetts' policies would only help the wealthiest pensioners at the expense of the poor.