yggdrasil (and others): that £10 payment dates back to the time of the Edward Heath government of the early 1970s. It was introduced as a way of helping those living on meagre state pensions or certain other benefits to meet the cost of celebrating Christmas at a time of rising inflation. I think, at the time it was introduced, the value was more than a week's pension payment so it was worth having.
Not wanting to be seen as Scrooges by not paying out the same bonus the following year, the government - and all subsequent governments - let the annual payout continue.
I suspect they now can't afford to increase the amount to something more realistic but equally don't want the PR storm that would result from scrapping it.