Brown was warned over tax grab

The disclosure that the Chancellor was warned the abolition of the dividend tax credit could leave a "big hole" in pension funds was seized on by Tory leader David Cameron.

The war of words followed the publication of confidential advice provided to Mr Brown within weeks of Labour coming to power in 1997.

The documents - suddenly released after a two-year freedom of information battle - showed the Chancellor was told his proposal could cost pension savers billions of pounds. The move was subsequently announced to Parliament in Mr Brown's July 1997 Budget.

Mr Cameron said the Chancellor had tried to "bury" the papers after they were released on a Friday afternoon while the Commons was in recess.

"The crisis that has been created in our pensions system - after he ignored official warnings - is typical of his approach," he 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. Instead there is just another bungled attempt to spin his way out of trouble and bury bad news."

But Economic secretary Ed Balls accused the Tory leader of playing "opportunistic games".

"David Cameron's words once again show his spineless lack of principle and his talent for rank hypocrisy," he said.

Mr Cameron had been Norman Lamont's special adviser when the former Tory chancellor made the first inroads into the dividend tax credit in 1993, Labour pointed out.

Work and Pensions Secretary John Hutton said he believed the Tories were mischief-making. "If they think it's such a bad policy, maybe we'll hear a pledge from them to reverse these tax changes and so far there's been deafening silence," he told ITV1's The Sunday Edition. "They are not going to reverse these tax changes."