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Last Updated: Tuesday, 3 April 2007, 16:02 GMT 17:02 UK
Brown defends pensions decision
Chancellor Gordon Brown
Mr Brown was warned by Treasury officials about the pension plans
Chancellor Gordon Brown has insisted his change to pension tax rules 10 years ago was the "right decision".

Mr Brown said the change, which raised 5bn a year from pension funds, had been a key one to ensure the UK economy had been strong for the past decade.

He was speaking at a Scottish campaign event where the decision was also backed by Prime Minister Tony Blair.

The Conservatives say Mr Brown took the decision despite advice saying that it would cause a 75bn hole in pensions.

'Best advice'

It has been seen as one of a number of factors - alongside the dotcom crash, firms taking pensions holidays and longer life expectancy - which has led to the large-scale closure of final-salary pension schemes.

The current row over the tax decision taken a decade ago was sparked by files released following Freedom of Information requests showing officials had warned of the effects of abolishing dividend tax credits.

One from the Inland Revenue, obtained by the Times newspaper, says: "We agree that abolishing tax credits would make a big hole in pensions scheme finances."

It was the right decision for investment. It was the right investment for our pensions and the right decision for our economy
Gordon Brown

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".

The row escalated on Monday when the Confederation of British Industry reacted angrily to a Treasury minister's claim it had lobbied for the tax change - which was to scrap the dividend tax credit.

Mr Brown, when asked on Tuesday about the dispute with the CBI, said the tax change was his alone, and was taken on the "best advice that I had".

He said that he would "take the same decision again", adding: "I've attempted to take the right decisions, no matter how inconvenient and difficult they might be."

Mr Brown said the decisions he took had ensured the long-term strength of the economy which benefited everyone, including pensioners.


The benefits of a strong economy for pensioners, he said, included the winter fuel allowance, the pensions credit and the planned relinking of the state pension to earnings.

"It was the right decision for investment. It was the right investment for our pensions and the right decision for our economy," he said.

It doesn't allow us to say he destroyed the pension system
Evan Davis
BBC economics editor

Mr Blair added: "All these decisions are difficult... People say to us 'Look, here are the pros of the argument and here are the cons of the argument...

"The decision that was taken was manifestly in the right interests of the economy."

Shadow pensions secretary Philip Hammond said Mr Brown's defence was not good enough.

Apology plea

"We mustn't let Gordon Brown divert attention from the fact that this was a 100bn tax raid on Britain's pension funds, done at the expense of the dreams and hopes of a comfortable retirement of millions of ordinary people.

"To just bat that away, and say 'Oh well it was all all right because it was in the interests of the broader investment strategy of the economy' will just not do.

"People want to hear an apology, or at the very least an expression of regret."

At the launch of the Lib Dem English local elections campaign, Sir Menzies Campbell said he welcomed the fact Mr Brown had taken responsibility for the decision.

He said he now hoped Mr Brown "will take responsibility" for putting right the "crisis" in pensions which has developed over the past decade.

The row with the CBI came after Treasury minister Ed Balls claimed Mr Brown was lobbied by the CBI in favour of the tax changes in 1996.

But Lord Turner, the CBI's director general at the time, said this was "completely untrue".

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