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Last Updated: Monday, 2 April 2007, 12:28 GMT 13:28 UK
Treasury pension claim 'untrue'
Chancellor Gordon Brown
Mr Brown was warned by Treasury officials about the pension plans

Lord Turner has called Treasury claims he or anyone else speaking for the CBI lobbied for Gordon Brown's 1997 pension tax changes "completely untrue".

Treasury minister Ed Balls had claimed Chancellor Gordon Brown was lobbied by the business group in 1996, when Lord Turner was the director-general.

Lord Turner's denial to the BBC came as current CBI boss Richard Lambert said the Treasury was indulging in "spin".

It follows Tory claims Mr Brown ignored warnings over the tax change's impact.

They say papers released under Freedom of Information laws show that Mr Brown was warned by Treasury officials that abolishing dividend tax relief in July 1997 could wipe 75bn from pension fund values.

'Definitely not'

But his then adviser, the current Treasury minister Ed Balls, said: "The suggestion that the decisions were made not on the basis of the best civil service advice... is not true."

He added, on BBC Radio 4's Today on Saturday: "In 1996 the CBI said to us:'You haven't gone far enough, you have to act in a decisive way in the long-term interests of British companies and British investors'."

This is a convenient bit of spin by the Treasury
Richard Lambert
Current CBI boss

But Lord Turner told the BBC: "Over the years there has been a claim by Ed Balls and Gordon that one member at the CBI Presidents' Committee said he thought it was a good idea... I have no record of this."

It was "definitely not me", he said, adding: "At no stage was this official policy of the CBI, at no stage did anyone with authority to speak for the CBI say that was our policy.

"At the 1997 election we expressed doubt - before the Budget."

Lord Turner also said the CBI had been given an assurance by the Treasury two years ago that it would not repeat the claim the business group had wanted the tax relief to be scrapped.

Norman Lamont

Mr Lambert, the current CBI director-general told Monday's Financial Times the group had made clear it always opposed the change, saying: "This is a convenient bit of spin by the Treasury."

But responding to the CBI, Mr Balls issued a statement later on Monday insisting it was true that "senior CBI members pressed us on this issue in 1996".

He added: "The decisions we took in Budget 1997 were based not on any external representations, but on considered advice, and on the judgement we made on what was necessary to promote long-term business investment in the UK."

The scrapping of the tax relief on share dividends raised 5bn a year for the Treasury and has been partially blamed for firms closing final salary pension schemes.

Norman had done a bit, but it was wise not to do any more... it is obvious when we look back
Ken Clarke
Ex-Tory chancellor

But 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.

Prime Minister Tony Blair defended the chancellor, saying it had been a tough decision, but one Mr Blair still backed.

And Mr Balls pointed out that then Conservative Chancellor Norman Lamont had cut the dividend tax credit from 25% to 20% in 1993.

Mr Lamont's successor, and Mr Brown's predecessor, as chancellor, Ken Clarke, told the BBC on Monday he had rejected scrapping the dividend because he thought the "downside far outweighed the upside because of the damage it would do to pension funds".

"Norman had done a bit, but it was wise not to do any more... it is obvious when we look back that it was a very bad decision, [Mr Brown's] judgement was wrong," he added.

Downing Street

The Conservatives have said they will demand a Commons debate on the issue when MPs return after their Easter holiday.

Shadow chancellor George Osborne said: "It's time Gordon Brown faced the music for the damage he's done to British pensions."

But Work and Pensions Secretary John Hutton told ITV's Sunday Edition: "If they think it's such a bad policy, maybe we'll hear a pledge from them to reverse these tax changes - and so far there's been a deafening silence."

Liberal Democrat economics spokesman Vince Cable said: "Gordon Brown's desire to increase taxes through the back door rather than being honest has resulted in a great deal of damage to private and occupational pension funds.

"We said at the time that taxes should be raised openly and honestly."

The timing of the row over the 1997 decision is politically significant because Mr Brown is the overwhelming favourite to succeed Tony Blair when the prime minister stands down over the next few months.

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