Sir, There are three points I would like to highlight on the issue of Gordon Brown’s changes to the dividend tax credit regime in 1997.

First, while the “double taxation of dividends” does create distortions in corporate finance, double-taxation or near-double-taxation is quite common around the world, reflecting the difficulty of implementing single taxation of dividends. Few British investors would like to return to the quixotic days of the old advance corporation tax (ACT) regime.

Secondly, despite double taxation, stockmarket swings and pension payment holidays, total pension fund assets have kept pace with the growth of the economy since 1997.

Thirdly, it is impossible to judge whether the change was worthwhile without considering the benefits to the public finances. Without the “prudent” management of the public finances in the first new Labour administration, interest rates would have been higher; there would have been no increases in the real value of the basic state pension; and the later expansion of spending on education and health would have been impossible.

GAVIN CAMERON, Fellow in Economics Lady Margaret Hall, Oxford

Sir, You report that Mr Brown knew he was going to seriously damage private pension funds by scrapping tax relief on dividends.

Mr Brown hopes to become Prime Minister soon, receiving a salary of £128,174. He will become entitled to a half-salary pension, which is non-contributory.

He will not have to wait 30 years or more to accrue this because it is payable the day a prime minister leaves office, unless he or she then takes up another paid parliamentary post.

And of course the pension has widow-and-dependants cover and is on top of the contributory pension he will receive on his MP’s salary, which is currently £60,675.

If Mr Brown had any decency, given the damage his policies have caused to millions of people, he would announce now that he intends to renounce this excessively generous pension arrangement.

KEITH MORRIS, Stroud, Glos

Sir, Apart from the important issue of whether Gordon Brown defied pensions advice from his civil servants on his abolition of Advance Corporation Tax credits for pension funds in July 1997, he made another fundamental mistake.

At the time, and contrary to usual practice, there was no pre-Budget consultation with the pensions industry. This was shortsighted when such a complex technical change could lead to so many long-term ramifications. Pension finances were strained even in 1997 (remember Maxwell?) and while many schemes were in surplus, 10 per cent of pension funds did not meet the minimum funding requirement (a measure of solvency) in 1997.

In effect, this unfortunate change by Mr Brown was taxation without representation. In July and August 1997 I gave warning of the severe repercussions to come and there was very strong feeling across the industry at the time.

While longevity, stock market performance, the burden of bearing all the financial risk and regulatory factors have sadly caused many employers to abandon final-salary schemes, the abolition of ACT credits for pension funds by the Treasury was a reckless mistake.

It ignored industry experts as well as the strategy of the then Department of Social Security to increase pensions take-up. We are suffering the long-term consequences of a rash and impulsive decision to tax (some £50 billion) by stealth.

STEPHANIE HAWTHORNE, Editor, Pensions World

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