The biggest lies have a tendency to come back and haunt you when you least want them to – particularly if you‘re a politician. Still, they never seem to learn.
One of Gordon Brown’s first acts as Chancellor was to rob everyone’s pension funds blind to the tune of about £5bn a year. Now, as that would have compounded up over the years, he’s probably cost us around £100bn, some experts reckon.
It’s shocking. It was shocking when it happened way back in 1997, and it’s still shocking now. £100bn – that’s £100,000,000,000.00. That’s enough to give every man, woman and child in the UK around £1,650 each.
What’s really shocking about it though, is that despite magazines like MoneyWeek, and plenty of other newspapers and broadcasters mentioning it at regular intervals, it hasn’t really ever seemed to make a dent in the public consciousness.
Well, not until now, at least…
Some steadfast work by The Times, abetted by the government’s own Freedom of Information Act – which at the moment, it is effectively trying to repeal – means that we all now know that Gordon Brown knew exactly what he was doing when he decided to scrap the dividend tax credit.
Among other things, he was warned that it would hurt the lower paid, that it would mean a rise in public spending to top up local authority pension schemes and that it would cost pension providers £4bn a year – a surprisingly good estimate, as it turned out. You can read the whole thing in black and white here, if you’re so inclined – https://www.hm-treasury.gov.uk/about/information/foi_disclosures/2007/foi_dividendtaxcredits_2007.cfm
What we want to know is – why is this a surprise? The broad consequences of this change were obvious – if you remove a tax relief on pensions, then that means less money will go into pensions. And that means pensioners will lose out.
So of course Mr Brown knew what he was doing – the trouble is, he never admitted it. And he still won’t.
Since the news came out at the weekend, there’s been a series of widely-ridiculed further attempts by the Brown camp – led primarily by his right-hand man, Ed Balls – to try to dismiss the story, by blaming everyone from their own civil servants to the CBI.
It seems they can’t tell the truth even when their future careers depend upon it – this hole is only getting bigger day by day, but still they keep digging.
The truth is, the pattern for the Chancellor’s time in the Treasury was set out from the very start. In 1997, he wanted to raise money without anyone finding out that he’d raised taxes. He hunted for an area that was confusing and boring enough for most people to dismiss out of hand – and pensions ticked all the right boxes.
They weren’t sure that they would get away with it. The documents released show that one big worry of many of those consulted on the changes was that the stock market would plunge on the day of the Budget announcement – but it didn’t. And in the days, months and years following, despite constant references in the press to the £5bn a year pensions, raid the Chancellor must have thought that he’d pulled the wool over enough people’s eyes.
And he’s been pulling the same trick at every Budget ever since – his 2p ‘cut’ in income tax was just the latest piece of sleight of hand, one of which he must have been especially proud.
But now that the public‘s eyes have finally been opened, they‘re starting to realise why this particular style of governance is bad news. If Mr Brown had made it clear what the consequences of his pensions raid would be, then perhaps we’d have started adding more money to our pension funds to compensate – sure, it’s unlikely, but we all do the right thing with hindsight.
As it stands, people feel that they weren’t given a fair chance. And now all the pension funding woes – even those that the Government isn’t directly responsible for – will be laid squarely at Mr Brown’s door, just as he’s desperately close to his ultimate goal of becoming prime minister.
You could call it poetic justice – but of course, Mr Brown could retire tomorrow and he’d still have a gold-plated pension fund far in advance of what most working in the private sector will ever see. It’d have been far better if he’d been rumbled a decade ago – but better late than never.
Ironically enough, we have a pensions web chat scheduled for this afternoon at 1pm, with Hyman Wolanski, head of pensions at Alliance Trust. If you‘d like to take part, or just watch and get some advice on how to repair some of the damage that Gordon did, click here for more details: /file/22407/pensions-webchat.html
Turning to the stock markets…
In London, the FTSE 100 ended the day marginally higher having recovered from an intra-day slump. The blue-chip index added 7 points to close at 6,315,with private equity bid target Experian leading the risers. However, miners were out of favour as metals prices headed south. For a full market report, see: London market close.
On the Continent, the Paris CAC-40 ended the day 11 points higher, at 5,645, whilst the German DAX-30 closed 20 points higher, at 6,937.
Across the Atlantic, US stocks also closed slightly higher as a flurry of deals offset a weak manufacturing report. The Dow Jones closed 28 points higher, at 12,382. The tech-heavy Nasdaq was a fraction of a point higher, at 2,422. And the broader S&P 500 ended the day 3 points higher at 1,424.
In Asia, the Nikkei gained 215 points as investors went bargain-hunting, and ended the session at 17,244.
Crude oil was 36c lower, at $65.58, this morning and Brent spot was at $68.60 in London.
Spot gold had risen to $664.70 today. Silver, meanwhile, was at $13.28/oz.
And in London this morning, publisher Bloomsbury reported its first drop in annual profit in 12 years as sales over the Christmas period came in below targets. However, the Harry Potter publisher expects ‘significant profit improvement this year’ as it prepares for the publication of the final book in the series and makes further acquisitions in Germany and the US. Bloomsbury’s shares had risen by as much as 1.8% in early trading.
And our two recommended articles for today…
Beware the pitfalls of foreign property
– The whole buy-abroad boom has been predicated on one single promise: you cannot lose with property. But the truth is very different, says Merryn Somerset Webb. To find out how to stop your dream of a house by the Med from turning into a nightmare, see: Beware the pitfalls of foreign property
How to profit from gold mining M&A
– As gold prices trend higher, miners are racing to re-stock their depleted reserves – and that’s likely to mean a surge of bids for mining juniors. To find out who (or rather, what) Adrian Ash believes is most likely to benefit, read: How to profit from gold mining M&A