A Labour MP has called for the VAT rise to be deferred, claiming that older people on lower incomes will be left £8 billion worse off once the state pension is linked to earnings next year.

Chancellor George Osborne announced the 2.5% VAT rise in his first Budget, a move that Labour MP John Robertson claims will laden older people with billions of debt until 2015.

Pensions Minister Steve Webb was urged by Mr Robertson at Commons question time to persuade the Chancellor to defer the VAT rise that will be introduced in January 2011.

Mr Robertson, MP for Glasgow North West, said: "That earnings link will not help older people as of January when they start to pay their VAT. It amounts to nearly £8 billion over the life of the Parliament."

He asked Mr Webb: "When are you going to stick by your promise with your party during the general election that you would fight any VAT rise?

"What are you going to do to protect those who through no fault of their own are left with these enormous debts thanks to your Government?"

Mr Webb said: "I am not sure whether you are aware that the Office for Budget Responsibility estimated that since the election the size of the country's structural deficit is £12 billion larger than was thought at the time of the election.

"I don't know where you would have found that £12 billion from.

"In terms of pensions, not only will we restore the earnings link but in April 2011 the full value of the cash increase in the state pension will go through to the poorest pensioners on pension credits."

Find out more about pension credits and Pension Advice from Age UK.

The Government should seize the historic opportunity to scrap the Default Retirement Age on a wave of public support and consensus across generations, says Age UK, revealing almost two thirds of adults want ministers to abolish forced retirement immediately¹.

Ahead of the emergency Budget, a new survey commissioned by the Charity shows 65 per cent of the public think the Government should scrap forced retirement law immediately. The findings also show even more widespread opposition to the principle of the legislation, with seven in ten people believing employers should not be allowed to force people to retire just because they have reached a certain age.

A month after the Coalition pledged to ‘phase out’ the Default Retirement Age, Age UK is calling on the Government to ‘end speculation and confusion’ among employers and workers alike by clearly stating forced retirement legislation will be abolished entirely and setting a date for it in the Budget.

Under the current law, tens of thousands of workers were forced to retire in 2009 causing an estimated loss of £3.5bn in economic output at a time when every pound is needed to boost public finances, the Charity claims.

The new findings reveal strong consensus across generations on this issue.  Defying the myth of older workers creating job-blocking at the expense of younger job-seekers, 75 per cent of people aged 25-44 think employers shouldn’t be allowed to forced people to retire because of their age.

Michelle Mitchell, Charity Director of Age UK, said: “The Default Retirement Age is a hugely unpopular law which is well past its sell-by date.  The Budget offers ministers the opportunity to say loud and clear when they are going to abolish it.

“Forcing people in later life out of the labour market when they want to work, save for their pensions and pay taxes is nonsense. It makes a mockery of the government's plans to help people work longer.

“A clear commitment to scrapping forced retirement next April is needed to end speculation and confusion among employers and employees alike. It would show how the government was making 'freedom and fairness' a reality for many people in later life who are denied that opportunity.”

Notes to Editor

1.        ICM poll for Age UK. ICM Research interviewed a random sample of 1011 adults aged 18+ by telephone between 9 and 10 June 2010.  Surveys were conducted across Great Britain and the results have been weighted to the profile of all adults.

2.      Age UK is the new force combining Age Concern and Help the Aged. The Age UK family includes Age Scotland, Age Cymru and Age NI.

Find out more about pensions and forced retirement from Age UK.