Recipients of the highest military and civilian honours for bravery are to be given a £10,000-a-year thank you from the nation, the Chancellor George Osborne has announced ahead of today's Budget.
The cost of the yearly tax-free payment to those awarded the Victoria Cross (VC) and George Cross (GC) will be met using £3 million worth of fines levied on bankers.
Recipients have traditionally received a small annuity, which was last year worth just over £2,000.
The Chancellor will confirm the rise in the Commons when he gives his first Budget since the Tory's election victory in May.
The VC is awarded - often posthumously - to members of the Armed Forces for valour in the face of the enemy.
The GC, the civilian equivalent, was created by King George VI in 1940 to award civilians who demonstrated courage during the Blitz.
There are currently 10 living holders of the VC and 20 of the GC.
Mr Osborne described them as "some of the true heroes of British life".
Major Peter Norton, the chairman of the VC and GC Association, said his members were very grateful for the "incredibly generous support".
Among those attending a reception in Downing Street last night to mark the announcement was Aberdeenshire-born , who was awarded the GC after being shot three times while protecting Princess Anne from a kidnap attempt.
Meanwhile, the Chancellor is expected to announce heavy cuts to working age benefits and tax credits as part of a drive to shave £12 bn from the annual welfare Bill.
Reports last night suggested however, that the cuts could be slightly less severe than expected, with the £12bn deadline extended by a year.
Nicola Sturgeon yesterday warned against the move, claiming 500,000 children in families in Scotland which receive tax credits could lose out.
The welfare cap - the most any one household can receive in benefits annually - will be slashed from £26,000 to around £20,000 outside London, and £23,000 within the English capital.
New curbs on housing benefit for under-25s are also expected.
There is speculation that a quick-fire sale of the Royal Bank of Scotland will be announced, with the Government reportedly planning to sell half its stake within two years.
The Tories are also expected to deliver on a long-term pledge to slash inheritance tax.
The move, which will benefit the better off, will end the levy on family homes up to a value of £1 million.
The long-term manifesto commitment was blocked by the Liberal Democrats in the last Government.
The BBC will be made responsible for issuing free TV licences to over-75s, previously the remit of the DWP. It is likely to cost the broadcaster around £700m a year.
Mr Osborne has also confirmed he will create savings worth £250m by ending subsidies for "high earners" living in council houses. It will affect those with a household income of £30,000 outside London.
Around 30m will be spent to speed up finding adoptive parents for children in care in England, while shops south of the border are likely to be able to stay open for longer on Sundays under plans to devolve powers over trading hours to major towns and cities.
A clampdown is also expected on wealthy individuals claiming 'non-domicile' status.
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