Brown faces backlash over pensions battle

Brown faces backlash over pensions battle

Gordon Brown came under furious criticism last night for ignoring warnings that a controversial tax change would hurt millions of pensioners. The Tories said the affair showed he was not fit to become Prime Minister.

The storm broke when documents obtained under the Freedom of Information Act revealed that the Chancellor's officials had warned him that the change included in his first Budget, in 1997, would leave a 'big hole' in pension funds and cost pensioners billions of pounds. The poorest would be hit the hardest, the advice said.

Pensions campaigners rounded on Brown, accusing him of knowingly contributing to the closure of final-salary schemes and undermining the 'retirement security' of pensioners.

The sharpest criticism came from opposition politicians. Conservative leader David Cameron said Brown's abolition of dividend tax credit for pension funds had amounted to a 'stealth tax aimed to hit those who have worked hard and saved for their future'. His failure to offer 'a hint of an apology' was 'just another bungled attempt to spin his way out of trouble and bury bad news,' he said.

The shadow Work and Pensions Secretary, Philip Hammond, called for an independent inquiry to be held. Saying that the released papers showed that Brown 'knew all along' about the dangers of the change, he said: 'This display of contempt for Britain's pensioners, present and future, and his reluctance to admit the truth, once again calls into question.....continued below

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Gordon Brown's fitness for the highest office.'

The Treasury minister Ed Balls, who was Brown's senior economic adviser at the time of the 1997 change, rejected the tide of criticism and said the confidential documents were being quoted out of context. He said the documents, published after a two-year fight over their release, in fact suggested that in the longer term the policy change would benefit pension funds and investment opportunities in the economy.'

'It was made clear in the papers that pensions funds would be the gainers in the future, that the claims this would leave a hole in the finances were unrealistic,' he said. 'The reason was, as is made clear in the papers, there were very substantial pension fund surpluses at the time.'

Balls also insisted that the decision was taken on the basis of civil servants' advice and simply amounted to an extension of constraints on dividend tax credit begun under the Tory Chancellor Norman Lamont in 1993. Cameron was an aide to Lamont at the time.

The furore came as new figures revealed that the country's poorest pensioners failed to collect a total of nearly £2.5bn in pension credits last year. The figure underlined the difficulties faced by government initiatives to reform income support for the elderly. Many are either unaware they are entitled to pension credits or confused by the labyrinthine benefits system regarding access to the money, campaigners said.

'We are talking about the eldest, frailest, most isolated people in society. People who are in bad health and fearful. They don't think they qualify for entitlements and, even if they do, the forms are not simple. They get put off,' said Mervyn Kohler of Help the Aged, who added that up to 1.5 million people could be affected.

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