PRIME Minister Tony Blair yesterday stepped in to defend his under-fire Chancellor Gordon Brown over his decade-old pension tax reforms.
The Prime Minister insisted the decision over the reforms had been taken by the whole Government.
And he told BBC Radio Scotland: “I fully supported the decision then. I believe it was the right decision then and the right decision now.”
The outcry was sparked at the weekend when documents were released proving Mr Brown was warned before his July 1997 Budget that the move could wipe billions from pension fund assets.
Tories have challenged the Chancellor to account to MPs for the abolition of the dividend tax credit and are calling for an independent inquiry into its impact on pension funds.
They have used the issue to question his suitability to take over at 10 Downing Street when Mr Blair steps down this year – amid mounting pressure for a heavyweight challenger to take him on.
On Monday the CBI – which had attacked the tax move as a “misjudgement” – denied claims by a close Brown ally that it had pressed for the change to be made at the time.
Its head at that time, Lord Turner, said the suggestions from Treasury Minister Ed Balls were “completely untrue”.
Mr Blair said some of the coverage over the past 48 hours had been “over the top”.
Speaking on the Good Morning Scotland programme, he said: “This was a decision taken in 1997 and, incidentally, taken by the whole of the Government.”
The Prime Minister said decisions taken at that time had helped the economy. He insisted: “What the Chancellor did at the same time, however, was cut the level of corporation tax and he stabilised the economy because we needed to stabilise the economy.”
He added: “The result of the decision in 1997, why it was right, is that it did boost investment and, in part also, not simply because of that decision but because of the way that Gordon has run the economy, we’ve had the strongest economic growth of any country in the world. That’s the single most important thing for pensions.”
Simon Sibthorp, a director at Liverpool stockbrokers Blankstone Sington, said that together with other factors, Mr Brown’s change has had a “severe” impact on pensions in the long term.
He added: “The timing of his decision coincided with record life expectancy, historically low annuity rates, and poor stock-market conditions.
“The effect overall was therefore severe, and blighted the pension industry and also employers offering final salary schemes. Many employers either abandoned or closed to new members such schemes, as the cost of providing them became prohibitive.
“Whilst pension advice has to be given on an individual basis, some are turning to alternatives. The lack of certainty in retirement has seen many who had contracted out of SERPS contract back in, so as to qualify for a State Retirement Pension.
“Others have sought alternative arrangements, especially SIPPS, where having greater control of the pension fund and much more flexibility on retirement, has made this the fastest growing pension product.
“To most, however, there are few real alternative ways of saving for retirement, and we can only hope that more flexibility will prevail in future.”
Jonathan Owen, manager at Liverpool property company Sutton Kersh Commercial, said many people were now turning to commercial property as an alternative long-term investment.
“We have found that more and more people are turning to commercial property as a form of investment,” he said.
“The main factors are that equities markets are still quite volatile and although they have picked up over last year or so, there is still a degree of uncertainty and with salary based pension schemes getting such a bad press, we find more people are putting money in their pension fund via property.
“Retail property in particular has become very popular, more than any other property as a commercial investment as people feel quite comfortable with it – it’s a familiar concept to them.”
tonymcdonough
