Some dirt may have finally stuck to the Teflon Chancellor. He has been forced to reveal advice given him about the effect that the removal of advance corporation tax credits on company dividends would have on occupational pensions.
The Inland Revenue’s said it could lead to a shortfall in existing assets of £75bn and warned it would affect less well paid pensioners most.
Of course, the Chancellor received warnings from outside Government about the impact of the change but that is not the point.
The Revenue advised Brown, a Chancellor new to Government, about what impact the tax change might have. But the Revenue’s tax collectors and Treasury advisers did not say Brown should not go ahead.
Reading between the lines, the documents said business and the pension industry would cope despite the turmoil. But Brown pressed ahead with the change, leaving his motives and judgement under intense scrutiny.
He is being labelled incompetent or intensely cynical for pursuing such a potentially damaging policy. Kinder critics might suggest that at the time no one could have realised the damage that pension contribution holidays had done nor how bearish the stockmarket was about to become. It was only one factor in a trend that could not have been anticipated in its entirety.
But the Tories, in particular, have the bit between their teeth, understanding that this is the closest thing where pensions and politics are concerned to a smoking gun.
A story often dismissed as one for the too difficult pile is now front-page news and not just in newspapers traditionally hostile to Brown. Journalists, if they once struggled to get across what ACT was all about, do not seem to be having too much of a problem now in describing a pension raid.
The press have been fired up by the fact that the Treasury tried not to reveal the information, even appealing against the original freedom of information request from The Times.
In Brown’s defence, the change had been suggested previously and not just by Arthur Andersen, then Labour’s favourite consultancy, although it was one of the main advocates.
The Conservative Government had actually already cut the credit to some extent in 1993. But the Tories had looked at scrapping the credit altogether and decided not to.
It was felt that some pain on pensions might be necessary to remove what was regarded as a distortion in the tax system and, along with changes to corporation tax, would ensure more longterm investment by British business.
However Treasury ministers’ claims over the weekend that the CBI asked for the change have been rebutted by the employers’ organisation.
At the time, it still proved a very controversial step, although initially much of political flak came from Age Concern and other charities protesting as the credit was phased out of pensioners’ Isa savings plans.
The meltdown in occupational pension plans and the move to cut benefits and phase out defined benefit was not the stuff of common debate despite the best efforts of William Hague and others who could not make the charges stick in the years when Labour seemed unbeatable.
For those who struggle to remember the actual context of the decision, it came in Gordon Brown’s first Budget in 1997. New Labour had undertaken not to put up income taxes. As far as economic election promises it was one of Labour’s “newest” policies.
But it boxed in a centre-left Government that was convinced that public services and infrastructure had not received adequate investment.
It was in many ways representative of just how Margaret Thatcher had won the political and economic arguments but it left Labour unable to raise income tax despite clearly believing that the tax take was too low.
Most would say this must surely be what tempted the Chancellor to make the raid.
Here was a Government with an instinct for redistribution facing demands to save the health service and education.
So perhaps it was a simply an act of redistribution.
But this policy from the early days of the Labour administration has come back to throw one of the most heavyweight politicians off balance.
Blairites anxious to damage the Chancellor and hoping for a credible opposition candidate to emerge for Labour’s leadership battle must be enjoying the headlines. It still remains pretty much unimaginable that Environment Secretary David Miliband, Charles Clarke or another Labour figure will stop the Chancellor claiming the prize.
It is much more likely that the issue helps David Cameron and Shadow Chancellor George Osborne as they try to present Brown as a stealthtaxing Chancellor.
Most argue that Brown will prove a much more formidable opponent when he has the full power of Prime Ministership at his disposal.
But this is still a massive weapon for the Tories. It casts doubt on Brown’s political instincts though he must have expected such advice would never be revealed.
He needed to raise revenue somehow and decided he needed to get some money off the middle classes and invested in helping the poor. But in by-passing the usual tax levers and presenting it as a reform of the corporate taxation system, he set two very damaging precedents for the Labour Government.
The first was that the Government would not be frank about its tax policies.
The second, and arguably the most worrying for readers here, was that pensions and infliction of pain on the existing private pension system would not worry Government policy makers and certainly not the Chancellor.
Such a vein of thought runs through all manner of Government actions from its cavalier treatment of policyholders in collapsed schemes to its carelessness in creating an NPSS which could damage saving levels.
It also informs the failure to see the private sector as anything other than a whipping boy. In short, it suggests the middle class or better-off working classes can look after themselves while Brown helps the poorest.
Yet the failure to debate the issues is one of the biggest problems in savings, pensions and welfare policies. Brown has not had to defend his actions on the ACT changes, nor on the treatment of ASW and other pensioners. He has not had to say properly how hitting what are perceived to be the middle classes in the world of pensions and savings has helped the poorest.
Maybe it has worked, maybe not. Brown has not really faced questions on this. In a close-run election, he may have to. Most in financial services and especially in pensions would wish to speed the Chancellor’s passage to hell in a handcart.
If the Tories can get the arguments right and portray a stealthy vindictive and reckless Chancellor, it may well be pensions that help to make that happen.