Originally posted by BrianH@Apr 3 2007, 01:03 PM
The resurrection of the actions taken in the 1997 budget, the timing of which to coincide with a change in the Labour party's leadership and Murdoch's apparent change back as to which party he supports, is hardly coincidental, is great for the cut and thrust of daily politics but as a fiscal issue it is of minor importance.
As I read elsewhere, the major influences on the pension funds are all global forces and to keep harping on about the loss of a solitary tax break is like a passenger on the Titanic getting miffed about losing a card game: there are rather bigger issues to worry about.
Well, lets wait and see if this is all of minor importance, Brian. It seems that this £50 billion pension black hole may still be the undoing of Gordon Brown and his crooked government. Bearing in mind, this "raid" was actually government policy and not due to any global economic conditions over which nobody has any control.
I am sure there will be more to come out about this in the coming weeks and months.
I have just found this article in The Independent that was published today, which makes rather interesting reading. Well, it did to me anyway
and I do take on board that I am the one that needs lessons in economics and probably pensions as well. :brows:
Special adviser warned Brown's raid on pensions was 'crackers'
By Colin Brown, Deputy Political Editor
Published: 03 April 2007
Tony Blair was warned by his own special adviser on the economy that Gordon Brown's £5bn-a-year raid on pension funds was "crackers" and should be opposed. The row over the abolition of a tax break on pensions funds - which has raised doubts over Mr Brown's fitness to run the country - is likely to overshadow the launch of Labour's local government election campaign today by Mr Blair and Mr Brown.
Treasury papers released after MPs had gone on their Easter break showed the Chancellor's senior civil servants warned that his plan to abolish dividend tax credits for pension funds would cut the value of shares, threaten the closure of more final salary schemes and raise public spending.
However, it has now emerged that the Downing Street policy adviser on the economy, Derek Scott, also opposed the policy but, like the Treasury officials, his advice was cast aside.
He said last night that Mr Blair decided not to oppose the plan for Mr Brown's first Budget because he did not want a knock-down fight with the Chancellor.
"I thought it was a crackers thing to do," said Mr Scott, a private economics consultant. "The policy came out of the Treasury and I thought it was a mad thing to do and said so at the time. The idea that it helps investment by hitting pension funds is ludicrous.
"There was not a detailed discussion in a rational way between the Treasury and No. 10. It is something that we became aware of and I opposed it very strongly but Tony Blair didn't want to overrule Gordon. He didn't want to fight Gordon on it. I said it was not sensible thing to do but it was early on in the Parliament and Tony said that if Gordon wants to do this, I don't want to stand in his way."
He added: "We didn't get papers but some of the Treasury officials were grown-ups and were quite happy to talk to me."
Mr Brown faced fresh embarrassment yesterday when Adair Turner, the former head of the CBI, angrily contradicted claims by the Chancellor's allies that the CBI had lobbied for the abolition of dividend tax credits for pension funds and other companies.
Lord Turner was so furious he broke into his Easter holiday abroad to refute the claims by Ed Balls, Mr Brown's key adviser at the time and now one of the Treasury ministers.
"At no time whatsoever did the CBI support the policy of removing the dividend tax credit," Lord Turner said. "At no time in 1996 or 1997 was CBI support for a change in dividend tax credit rules expressed in any of these fashions. And when the change was introduced in the 1997 Budget, I wrote to the Chancellor expressing our disagreement."
Mr Scott supported the CBI version of events, saying: "It doesn't sound very likely. It wasn't a very desirable thing for the CBI."
Mr Balls insisted he was right, saying "senior CBI members pressed us on this issue in 1996, including at a meeting of the CBI President's Committee".
George Osborne, the shadow Chancellor, said Mr Balls and Mr Brown "have been caught red-handed trying to claim support for one of the worst decisions ever made by a British Chancellor." Michael Fallon, a Tory member of the Commons Treasury select committee, said it was "10 times worse than Black Wednesday" under the Tories when Britain lost billions in a vain attempt to prop up sterling.
The Prime Minister's official spokesman said: "It was a tough decision but the Prime Minister fully backed the Chancellor's decision."
It was also wrongly claimed that Mr Blair had forced Mr Brown to reduce the impact of the raid on pensions from £8bn to £5bn. Mr Scott said the reports confused the abolition of the tax break on pension funds with the £5bn windfall profits tax on the privatised utilities that the Chancellor also made in his first Budget.
The main players
* The Unknown Senior Civil Servant who warned Gordon Brown his raid on pension funds would hit. The papers released under the Freedom of Information Act do not identify the person but the permanent secretary then was Terry Burns. He was moved out a year later with a peerage and advised the Government on its fox-hunting ban.
* Ed Balls was Gordon Brown's chief economic adviser. He was credited with the phrase, "neoclassical endogenous growth theory", which led to his boss being ridiculed by Michael Heseltine, saying "It's not Brown, it's Balls."
* Geoffrey Robinson, a former Treasury minister, a key member of the Brown circle, owns a flat in Park Lane where the Brown camp did much of their planning for the 1997 Budget. In his autobiography, he reveals they expected the raid on pensions would be "explosive" and confirms that the CBI were supportive of wider corporate tax reforms.
* Derek Scott was the economic adviser to Tony Blair from 1997 to 2003. His job was to alert Blair to Treasury manoeuvres but the Brown camp tried to keep him out of the loop.
* Adair Turner, the former director-general of the CBI, was given a peerage and was recruited by Mr Brown for a major pension review but was regarded as closer to No 10 than No 11.The controversial tax credits
* The Chancellor abolished dividend tax credits on pension funds in 1997 to raise money.
Before the Budget, an 8p net dividend would have carried a 2p tax credit, giving a 10p gross dividend. By abolishing the tax credit, the yield for institutional funds across the entire market fell by 20 per cent. Few people outside the City understood the change and hardly any MPs protested. But Whitehall papers produced under Freedom of Information show that Mr Brown was warned by his officials that there would be dire consequences.
They warned it would wipe £50bn off the value of funds, shares could drop by up to 20 per cent and public sector pensions would need topping up.
It is claimed hundreds of thousands of people are worse off. Among those likely to escape the worst are MPs, whosepensions were safeguarded against a drop in value at the taxpayers' expense. 
