 Tuesday, 10th April 2007
Brown’s pensions raid
- Gordon Brown has betrayed British pensioners.
- He has robbed them of security in retirement through his £100 billion stealth tax raid on their pension funds.
- He ignored civil servants’ advice and has destroyed what was one of world’s best pension systems.
- Today, people want an apology, not a cover-up. And they’re wondering, ‘How can we trust Mr Brown to be Prime Minister?’
Robert Key said:
"Gordon Brown’s smoke and mirrors are shattering at last. It is hard to imagine Treasury officials getting mixed up in this murky politics. It is a measure of the rotten state of this government that even they did not blow the whistle. It all puts a large dent in the credibility of the man with the clunking fist."
Brown’s Broken Promise
Gordon Brown came to power promising:
'I can give this pledge – fairness to the pensioners under Labour' (Gordon Brown, Labour Party Conference speech, 2 October 1996).
But instead, he has betrayed Britain’s pensioners with his biggest con trick of all – a multi-billion pound stealth tax on pension funds that has robbed people of their security in retirement.
Brown’s £100 billion pensions stealth tax
- Secret policy papers revealed. Previously secret policy papers, finally released to The Times under the Freedom of Information Act after a two-year battle, have revealed that Gordon Brown knew along about the damage that the 1997 tax changes could cause to pension schemes.
- Treasury officials advised the Chancellor that:
1. The tax change would cause a massive shortfall in pension funds. The Treasury officials said that the tax would ‘cause a shortfall in existing assets of up to £75 billion’ and that ‘employers would have to contribute about an extra £10 billion a year for the next 10 to 15 years to get pension scheme funding back on track’. The advisers concluded: ‘We agree that abolishing pension tax credits would make a big hole in pension scheme finances….the loss of tax credits would cost pension providers about £4 billion a year, growing over time with future dividends’ (HMT/Inland Revenue Policy Papers, 15 May-27 May 1997).
2. Poorer pensioners would be hit hardest. ‘The change would therefore lead to a reduction in pension benefits to the lower paid…Quite clearly any loss of pension could be difficult for someone with a small income to cope with’ (ibid.).
3. Bad news for those about to retire. The officials added that: ‘Everyone in a money purchase scheme is a potential loser’ and ‘those who are about to retire (or who have just retired) would be worst affected’ (ibid.). The officials said that, at the time, there were eight million people in money purchase schemes.
Brown’s Con Trick
Gordon Brown tried to con people into thinking his changes would not undermine their security in retirement:
- In July 1997, when challenged by Conservatives that the tax changes to pension funds would have a devastating impact, Gordon Brown reassured people: 'Pensioners, in my view, will not lose out over this in the way that people are suggesting' (BBC 1 Breakfast News, 3 July 1997).
- The same morning he said: 'We are not raiding pensions - that is just ridiculous' (GMTV, 3 July 1997). He went on to dismiss claims that his changes would mean people having to make higher contributions to pension funds as 'nonsense'.
- Alistair Darling, then Chief Secretary to the Treasury, stood alongside Gordon Brown at a press briefing and said: 'There is no question that in the long term and the medium term it will be good for companies and it will be good for pensioners' (Press Association, 3 July 1997).
Clumsy cover-up to protect Brown’s leadership bid
- Burying bad news. The Treasury’s policy papers were released late in the evening of Friday, 30 March, after Parliament had risen for its Easter recess. It had previously seemed likely that the papers would be released in May, following an appeal hearing at the Information Tribunal. But this would be the worst possible time for Gordon Brown - just when he will be launching his bid to become Prime Minister (ifaonline.com, March 2007).
- False claims. Shadow Economic Secretary, Ed Balls, claimed that the tax changes were ‘the best thing for the long-term investment of the UK economy’ (Scotland on Sunday, 1 April 2007). But the Government’s own policy papers state that: ‘the view of the economists is that overall the reform would be broadly neutral in terms of the amount of investment’ (Company Taxation policy paper, 22 May 1997).
Brown wanted £8 billion a year – but Blair blocked him
- Gordon Brown reportedly wanted to raid a staggering £8 billion a year from British pension funds – but Tony Blair refused to allow it and said that the amount taken out of pension funds had ‘got to come down’ (The Evening Standard, 2 April 2007).
Criticism from experts
- CBI. Back in 1997, Adair Turner, then Director General of the CBI, said: ‘The Budget also includes a welcome reduction in both the mainstream and smaller firm rates of corporation tax. But the benefit of this is likely to be more than offset by the abolition of dividend tax credit payments and by planned changes to the imputation tax system. This may increase the cost to business of funding employee pensions and may reduce funds for investment’ (Response to 1997 Budget, CBI).
- Institute of Directors. Tim Melville-Ross, former Director-General of the Institute of Directors, said: ‘Removing tax credits on dividends will hit pension funds. This will increase burdens for employers and employees’ (The Times, 3 July 1997).
- The Parliamentary Ombudsman commented in a recent report, ‘I consider that it is evident that this decision [abolishing tax credits] had the effect of reducing the income available to all pension schemes every year’ (Trusting in the Pensions Promise, March 2006).
- Independent Experts’ Views. Donald Duval, Chief Actuary at Aon Consulting, said: ‘It probably had a bigger impact than many people realize…it cost pension funds many billions. It gave the message that…Gordon Brown was happy to see final salary schemes disappear’ (Financial Times, 2 April 2007).
Conservatives rejected the idea
- When former Conservative Chancellor, Kenneth Clarke, was in office, he said he received representations to abolish the tax credit – but refused to do so because of the damage it would do to pension schemes.
- Speaking on the Today Programme, Mr Clarke said: ‘You still have to look at the downside which is you are going to take several billion pounds out of pension funds which is what Gordon was after. This is one of the worst decisions that Gordon Brown made and it has done a lot of damage to pensioners, not just their pension funds’ (BBC Today Programme, 2 April 2007).
Conservatives call for a debate
The Conservatives are to hold a special debate in the House of Commons after the recess to ensure Gordon Brown personally explains his actions and subsequent denials surrounding his decision in 1997.
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