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Tories call for pensions inquiry Tories call for pensions inquiry
(1 day later)
The chancellor is facing calls from the Tories for an inquiry into the pensions gap after claims that he ignored warnings of a funding shortfall.The chancellor is facing calls from the Tories for an inquiry into the pensions gap after claims that he ignored warnings of a funding shortfall.
Confidential Treasury papers have shown he was told in advance of scrapping dividend tax in July 1997 that it could wipe £75bn from pension fund values. Confidential Treasury papers have shown he was told in advance that scrapping dividend tax credits in July 1997 could wipe £75bn from pension fund values.
The Conservatives said Gordon Brown had shown contempt for pensioners.The Conservatives said Gordon Brown had shown contempt for pensioners.
But Treasury minister Ed Balls said Mr Brown had scrapped the credits on the "best advice" of civil servants.But Treasury minister Ed Balls said Mr Brown had scrapped the credits on the "best advice" of civil servants.
Tories have called for an independent inquiry by the Government Actuary and want a statement to MPs from the chancellor.Tories have called for an independent inquiry by the Government Actuary and want a statement to MPs from the chancellor.
The extent of disregard he has shown towards pensioners, past and present, is unbelievable Shadow work and pensions secretary Philip HammondThe extent of disregard he has shown towards pensioners, past and present, is unbelievable Shadow work and pensions secretary Philip Hammond
"The chancellor has effectively concealed information surrounding these plans from Parliament for the last ten years," shadow work and pensions secretary Philip Hammond said."The chancellor has effectively concealed information surrounding these plans from Parliament for the last ten years," shadow work and pensions secretary Philip Hammond said.
"The extent of disregard he has shown towards pensioners, past and present, is unbelievable."The extent of disregard he has shown towards pensioners, past and present, is unbelievable.
"The chancellor's been telling us for the last ten years these tax changes didn't have a negative effect on pensions funds. The documents now prove this is not true.""The chancellor's been telling us for the last ten years these tax changes didn't have a negative effect on pensions funds. The documents now prove this is not true."
Liberal Democrat Treasury spokesman Vince Cable accused the chancellor of doing "lasting harm" to pensions.Liberal Democrat Treasury spokesman Vince Cable accused the chancellor of doing "lasting harm" to pensions.
"It is absolutely clear that not only did these tax changes cause a great deal of damage to private and occupational pension funds, but that the damage was premeditated," he said."It is absolutely clear that not only did these tax changes cause a great deal of damage to private and occupational pension funds, but that the damage was premeditated," he said.
Official adviceOfficial advice
The documents were released after the Treasury withdrew an appeal against a freedom of information ruling from the Times newspaper, who had asked for the figures.The documents were released after the Treasury withdrew an appeal against a freedom of information ruling from the Times newspaper, who had asked for the figures.
The papers include advice from officials prior to the chancellor's decision to scrap tax relief on pension funds in 1997.The papers include advice from officials prior to the chancellor's decision to scrap tax relief on pension funds in 1997.
One document, from the Inland Revenue to the chancellor, concludes: "So, the general message is that the big employer pension schemes will be able to cope at some cost to employers.One document, from the Inland Revenue to the chancellor, concludes: "So, the general message is that the big employer pension schemes will be able to cope at some cost to employers.
What these papers show is that from the early 1990s, the Treasury recognised that dividend tax credits were an anomaly in the tax system Treasury spokesperson Read the Treasury documentsWhat these papers show is that from the early 1990s, the Treasury recognised that dividend tax credits were an anomaly in the tax system Treasury spokesperson Read the Treasury documents
"But members of money purchase schemes would all be potential losers."But members of money purchase schemes would all be potential losers.
"Outside the pension field there will be small but vocal losers among the holders of tax exempt life insurance policies sold by friendly societies.""Outside the pension field there will be small but vocal losers among the holders of tax exempt life insurance policies sold by friendly societies."
Later, it adds: "We agree that abolishing tax credits would make a big hole in pensions scheme finances."Later, it adds: "We agree that abolishing tax credits would make a big hole in pensions scheme finances."
A separate Financial Institutions Division paper suggests that the pension schemes "should be able to cope" after the reform but warns that there are "risks".A separate Financial Institutions Division paper suggests that the pension schemes "should be able to cope" after the reform but warns that there are "risks".
'Extremely damning''Extremely damning'
It adds that future pension benefits would be reduced, share prices could fall by up to 20% and those on low incomes would be worst affected.It adds that future pension benefits would be reduced, share prices could fall by up to 20% and those on low incomes would be worst affected.
BBC personal finance reporter Richard Scott said the documents made "pretty nasty reading for Gordon Brown", adding: "They are going to be extremely damning for him."BBC personal finance reporter Richard Scott said the documents made "pretty nasty reading for Gordon Brown", adding: "They are going to be extremely damning for him."
But Mr Balls, the Economic Secretary to the Treasury, told BBC Radio 4's Today programme: "We decided on the basis of civil service advice to go ahead because this was the best thing for the long-term investment of the UK economy."But Mr Balls, the Economic Secretary to the Treasury, told BBC Radio 4's Today programme: "We decided on the basis of civil service advice to go ahead because this was the best thing for the long-term investment of the UK economy."
"The suggestion that the decisions were made not on the basis of the best civil service advice... is not true," Mr Balls, a long-time ally of the chancellor, added."The suggestion that the decisions were made not on the basis of the best civil service advice... is not true," Mr Balls, a long-time ally of the chancellor, added.
A Treasury spokesman blamed pension schemes' recent funding problems on the dotcom crash, pension holidays in the 1980s and 1990s and a rise in life expectancy.A Treasury spokesman blamed pension schemes' recent funding problems on the dotcom crash, pension holidays in the 1980s and 1990s and a rise in life expectancy.