Gordon Brown was last night under intense pressure to dip into his swelling cash reserves to top up next spring's state pension increase, after it emerged that the rise will amount to just 75p.
September's inflation figure, to which the pension rise is tied, was yesterday revealed to have been only 1.1%. Unless the chancellor acts, the increase will be the lowest since the annual upratings began.
Pensioner groups reminded ministers that Labour had promised in its manifesto that "all pensioners should share fairly in the increasing prosperity of the nation."
Mervyn Kohler, head of public affairs at the charity Help the Aged, said: "An increase of this kind would just be unacceptable. We have got to find something better."
The government has rejected calls to revert to the pre-1980 system of increasing pensions in line with increases in average earnings, currently running at 4.6%. It argues that it is better to retain the prices link and direct extra help at poorer older people.
Under this approach, Labour has introduced a minimum income "guarantee" of £75 a week for pensioners who depend on the state pension and are eligible for an income support benefit supplement. But this supplement has to be claimed and up to 700,000 pensioners fail to do so.
On the basis of the September inflation figure, the lowest since July 1963, the weekly pension for a single person will rise by 75p to £67.50 next April. A couple's pension will go up by £1.20 to £107.90.
As ministers have said that they intend to raise the minimum income guarantee in line with earnings, there is the prospect of an £11 gap opening between the basic pension - which Labour's manifesto said would be "retained as the foundation of pension provision" - and the guarantee.
The 1.1% rise will apply to most contributory benefits, including incapacity benefit and widow's pension. Means-tested benefits could rise by even smaller amounts, as the formula for determining their increase is based on inflation less certain housing costs.
City analysts believe the benefit increase could look even worse next year, when inflation is likely to have risen as a consequence of more expensive home loans and the abolition of mortgage interest tax relief.
Baroness Castle, the veteran Labour pensions campaigner, accused the government of doing "just what the Tories did" in allowing the relative value of the contributory state pension to decline steadily.
"It's putting people who have contributed all their working lives - they have to, by law - into a sort of unfair category," she told BBC Radio.
The treasury will not restore the earnings link across the board. But there is no shortage of funds for a pensions top-up by other means: a 2.5% increase is budgeted for in social security spending next year and Frank Field, the former welfare reform minister, says there is an £8bn surplus on the national insurance account.
Mr Brown, who has already authorised a £100 winter fuel payment for pensioners, could increase their £10 Christmas bonus or announce a further one-off grant if he is reluctant to depart from the prices-linked pension rise.
Jack Jones, president of the National Pensioners' Convention, said last night: "Next year's rise will be peanuts ... and pensioners will fall further behind the rest of society."