Brown 'railroaded' £5bn pension raid claims Blair guru

Pensions raid: Gordon Brown originally wanted even more from Britain's pension companies
13 April 2012

Gordon Brown railroaded through a damaging £5 billion-a-year raid on pension funds against all advice, Tony Blair's former chief economic adviser claimed yesterday.

Derek Scott's incendiary intervention came as business chiefs lined up to accuse the Treasury of spin over claims they lobbied for a new pensions tax.

In an interview with the Daily Mail, Mr Scott said the Chancellor's key lieutenant, City minister Ed Balls, had been "very foolish" to claim that the Confederation of British Industry had pressed for the change.

He also suggested the row would fuel "an issue of character" about Mr Brown as he prepares to take over from the Prime Minister.

Mr Scott was one of the Mr Blair's closest advisers between 1997 and 2003. His remarks will stoke continuing controversy over Mr Brown's decision to abolish tax relief on share dividends in 1997.

A damaging row has been raging since last week when documents were released showing officials warned the move could wipe £75 billion from pension fund values.

Mr Scott's comments will also heighten concern in the Brown camp that Mr Blair's supporters are launching a last-gasp attempt to derail his succession as Prime Minister.

Last night the Treasury hit back at Mr Scott, claiming he "never made a serious contribution to any discussion about economic policy".

But the growing furore is threatening to overshadow today's crucial joint launch of Labour's local election campaign by the Chancellor and the Prime Minister.

Pressure grew after Mr Balls, who is tipped for a key job in a Brown government, said at the weekend that the CBI had lobbied for the change while Labour was in opposition.

Its then director-general Adair Turner insisted yesterday the claim was "completely untrue".

He told BBC Radio 4's World at One: "Let's be absolutely clear - the CBI never lobbied for an end to tax relief at any time whatsoever in 1996 or 1997.

"When the policy came out I wrote a letter (to the Treasury) saying I disagreed."

Lord Turner said it was possible-an "individual member" of the CBI board expressed a different opinion, but it was never CBI policy.

He also revealed the Treasury gave the CBI a private assurance two years ago that it would not suggest it had been in favour.

Current CBI director-general Richard Lambert said the organisation had privately warned the Chancellor it was "not a good idea".

"There was a misjudgment by the Chancellor," he said.

Mr Scott, meanwhile, said he had been against a tax raid on pension funds from the start.

"I didn't think it was a very sensible thing to take money out of pension funds. The idea that you help by taking £5 billion a year out struck me as bizarre.

"I think the Prime Minister saw the merits of my argument, but he didn't feel sufficiently strong at that time to overrule his Chancellor. With hindsight, as everyone has seen, it wasn't a good thing."

Mr Scott said the timing of the row was particularly damaging for Mr Brown, coming soon after his Budget was attacked as a "con trick".

"Clearly, this comes at a difficult moment," he said. "I think the perception of the Budget was that it wasn't quite as he presented it just adds to that.

"All the emphasis was on the 2p off tax at a later date. But what people are now realising is that the abolition of the 10p starting rate and other mean that a lot of people are potentially quite a bit worse off.

"It feeds into an issue of character. The feeling is things have been done in a way so that people didn't notice it at the time. That is potentially quite damaging."

Of Mr Balls's claim that the CBI had lobbied for reform, Mr Scott said: "It was quite clearly a very foolish thing to say.

"When you're in a hole, stop digging. Accusing people of saying something they didn't is fairly obviously inadvisable."

Mr Balls insisted he had indeed been "pressed" by senior CBI members to abolish the pension credit in 1996.

But he said the key decisions taken in the following year's Budget had been based on the Government's own views on how to promote long-term business investment, which had increased by 50 per cent over the subsequent ten years.

Shadow Chancellor George Osborne said: "No support for Brown's error of judgment has ever existed - this is desperate bully-boy tactics. After a decade of elaborate spin and misinformation, now Brown and Balls are on their own."

The Treasury dismissed Mr Scott's attack and also rejected claims the Chancellor first planned to take £8 billion a year from pension funds.

"No-one has the slightest idea where that figure has come from," said one source close to Mr Brown.

"As for Derek Scott, if he had had his way we would now be in the euro. He was not in the room when Tony Blair and Gordon Brown had any discussions about the pensions issue."

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