Tories turn up the heat on Brown over pensions raid 'spin'

The Chancellor found himself dragged into a damaging row about spin and how he handled one of the most far-reaching decisions of his decade at the Treasury.

The Tories called for an inquiry by Parliament's financial watchdog into how Mr Brown used his first Budget in 1997 to raise £5billion a year from retirement funds.

They seized on the release of confidential Treasury memos detailing official

concerns about the abolition of dividend tax credit.

Mr Brown has steadfastly refused to concede that the move triggered the long-running crisis over pension schemes.

But the documents detail for the first time how officials warned of possible damaging consequences to the industry, the stock market and those on low incomes.

The measure has gone down as one of Mr Brown's most notorious 'stealth taxes' because it took several years for its full impact to emerge.

The Treasury pointed out that the documents do not record civil servants advising Mr Brown not to proceed with his plan, although some sections have been left blank.

The final recommendations of officials have not been released, except for one suggestion that the change should be phased in - which Mr Brown ignored.

Shadow Chancellor George

Osborne accused Mr Brown of trying to 'bury bad news' after the confidential papers were published without notice on Friday night.

He stepped up calls for an investigation by the National Audit Office, and pressed the Treasury to open its books.

Tory leader David Cameron said: 'A stealth tax aimed to hit those who have worked hard and saved for their future was pushed through, and then, when the full scale of his failure is finally revealed, there is not a hint of an apology.

'There is just another bungled attempt to spin his way out of trouble and bury bad news.'

There were claims that the memos were made public because the Treasury realised its two-year legal battle with Freedom of Information campaigners over them would culminate in a final tribunal hearing and verdict at a time when the Chancellor is likely to be campaigning for the Labour leadership.

But his allies insisted the decision to put the documents on the Treasury website on Friday while MPs were away and Mr Brown was on a visit to Afghanistan was a matter for lawyers and officials.

Mr Osborne announced plans to hold a Commons debate on the Chancellor's refusal to discuss the implications of his policy.

He said: 'It is time Gordon Brown faced the music for the damage he's done to British pensions.

'We now know he was told all along about the devastating impact his tax would have on hardpressed savers.

'Now he will face the dilemma: Does he turn up and account for himself on floor of the House of Commons where he must tell the truth or does he run and hide? Has Gordon Brown got the courage to defend his own disastrous policy?' Tory work and pensions spokesman Philip Hammond said: 'Gordon Brown has shattered millions of dreams of hard-working people who toil all their lives for a decent retirement.

'The documents he sneaked out late on Friday night show this was no accident, Gordon Brown knew the consequences of his actions.

'The wormy way he released these documents shows that, despite his claims to be protecting the process of Government, his only concern is his political career.'

Dr Ros Altmann, a former adviser to Mr Blair on pensions, said: 'The Chancellor will go down in history as the one who destroyed our pensions system.

'He just ignores what he doesn't want to hear, then tries to cover up the consequences. People are finally starting to rumble Mr Brown and it serves him right.'

Derek Scott, Tony Blair's former economic adviser, said the Prime Minister had not been kept informed about the decision to target pensions. 'It was a mad thing to do,' he said.

But Work and Pensions Secretary John Hutton defended the pensions policy, saying: 'The Tories want to make some mischief with this. That's perfectly understandable.

'If they think it's such a bad policy, maybe we'll hear a pledge from them to reverse these tax changes.

'But no one looking at this should be in any doubt at all. These reforms to the tax credit system were not the reason why many pension schemes suffered a deficit in the late Nineties.'

He insisted the pension scheme problems had been caused by a stock market collapse and the fact that people are living longer.