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Treasury rejects attack on Brown Treasury rejects attack on Brown
(about 4 hours later)
The Treasury has dismissed as "abject nonsense" claims that Gordon Brown ignored warnings about his first budget creating a £75bn gap in pension funds. The Treasury has dismissed as "abject nonsense" claims that Gordon Brown ignored warnings about his first Budget creating a £75bn gap in pension funds.
Files released under the Freedom of Information Act show officials warned of the effects of abolishing dividend tax credits - the Times claims. Files released under the Freedom of Information Act show officials warned of the effects of abolishing dividend tax credits, the Times says.
The Conservatives said Mr Brown had shown contempt for pensioners.The Conservatives said Mr Brown had shown contempt for pensioners.
But the Treasury insisted the documents proved that Mr Brown had been right to scrap the credits. But the Treasury insisted the documents proved Mr Brown had been right to scrap the credits.
LosersLosers
The papers, released following requests from the paper, include advice from officials prior to the chancellor's decision to scrap tax relief on pension funds in 1997.The papers, released following requests from the paper, 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 warned 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".
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.
'Beggars belief''Beggars belief'
Shadow work and pensions secretary Philip Hammond said the documents show that Mr Brown had been "conning the country". 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."
Shadow work and pensions secretary Philip Hammond said they showed Mr Brown had been "conning the country".
He added: "It beggars belief that in the face of those clear warnings, Gordon Brown went ahead with the move that has devastated British pensions and has contributed to the collapse of the savings rate."He added: "It beggars belief that in the face of those clear warnings, Gordon Brown went ahead with the move that has devastated British pensions and has contributed to the collapse of the savings rate."
A Treasury spokesperson blamed pension schemes' recent funding problems on the dotcom crash, pension holidays in the 1980s and 1990s and a rise in life expectancy. 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.
The spokesperson continued: "The Times' analysis is abject nonsense and a complete travesty of the information they have received. He continued: "The Times' analysis is abject nonsense and a complete travesty of the information they have received.
"What these papers show is that from the early 1990s, the Treasury recognised that dividend tax credits were an anomaly in the tax system which distorted business decisions and discouraged long-term investment. "What these papers show is that, from the early 1990s, the Treasury recognised that dividend tax credits were an anomaly in the tax system which distorted business decisions and discouraged long-term investment.
"They show that we were right to complete the phasing out of dividend tax credits in 1997, coupled with the reductions in corporation tax which have created the conditions for a 50 per cent increase in business investment over the last ten years. "They show that we were right to complete the phasing out of dividend tax credits in 1997, coupled with the reductions in corporation tax which have created the conditions for a 50% increase in business investment over the last 10 years.
"They show that we were right in the decisions we recommended, and that we never advised against them.""They show that we were right in the decisions we recommended, and that we never advised against them."
The documents were produced following the Treasury's withdrawal of an appeal against the Information Commissioner's ruling that they should be released.The documents were produced following the Treasury's withdrawal of an appeal against the Information Commissioner's ruling that they should be released.