Neasa MacErlean: So what will you buy with an extra £13.69 a year?

Neasa MacErlean: So what will you buy with an extra £13.69 a year?

People on the basic state pension will be starting to wonder how much better off they will be next year after increases in involuntary outgoings, such as council tax. The answer - based on calculations I worked out on the back of a council tax bill - is £13.69 over 2006/07.

This would pay for a single peak-time train journey from London to East Malling in Kent with a coffee thrown in. Or, if you want to spread the cash out over the year, you have 26p a throw to use at a National Rail public lavatory on a weekly basis and still have 6p left each visit.

No one knows what the actual figures will be, although, as reported in Grey Matters before, we strongly expect the full basic state pension to rise £2.21 a week from £82.05 to £84.04 in April. I have set against this the likely increases in council tax, electricity, gas, water, sewerage and television licence fees.

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Please don't feel sorry for yourselves as you read this. When the Liberal Democrats did a similar exercise last autumn, they found that most pensioners would actually be worse off in the current financial year. Regional rises (which I have not been able to build into my sums) were such that pensioners in only a small number of locations were better off when all the arithmetic was done.

Pensioners in Clackmannanshire were the envy of the country because they were on course for, as the Lib Dems put it, 'a massive 15p a week'. My figures assume 13 per cent increases in gas bills (slightly smaller than Scottish & Southern Energy's 1 January rise); 12 per cent on electricity (the same as Scottish & Southern's 1 January rise); council tax increases of 7.2 per cent (the average annual increase over the past decade); the expected 4 per cent rise on the TV licence; and next April's average water and sewerage rise (which regulator Ofwat expects to be about 6.5 per cent).

The Lib Dem shadow spokesman on Work and Pensions, David Laws, says: 'We have a basic state pension that is £27 a week below the poverty line and year after year it falls further behind. I cannot believe that Lord Turner's Pensions Commission will not call on the government for an end to this policy when they make their final report at the end of the month.

'If the figures make people feel frustrated now, imagine how much more miserly the pension will be in 20 years or so. It will be totally incapable of providing an adequate income in retirement. Having to claim means-tested benefits will become the norm for the vast majority.'

We will get a better indication in Gordon Brown's pre-Budget report next month as to whether these relatively good forecasts will become reality. The crucial issue is how much money he is prepared to throw at local authorities to bribe them into keeping council tax increases at an average level of 4.1 per cent. Last year's lowest increase for a decade was achieved only after the Chancellor thrust £3.5 billion into local government coffers.

One way or another, many pensioners will be forced to cut budgets.There are various means of cutting back - such as changing electricity and gas suppliers or opting for a water meter. The average water and sewerage bill is now £250 a year, so savings will not be huge, but Ofwat believes that 'nearly everyone living on their own' - and many couples- can save cash by metering.

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