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March 31, 2007

Hmmm. I Was Wrong.

Yes, I know, that'll be a huge surprise to everyone. Gordon Brown's disembowelling of the pensions system was not to fund the Welfare to Work scheme:

This tax cut is the first component of this Budget's investment strategy. The second is a structural reform that will also encourage investment. The present system of tax credits encourages companies to pay out dividends rather than reinvest their profits. This cannot be the best way of encouraging investment for the long term as was acknowledged by the last Government.

Many pension funds are in substantial surplus and at present many companies are enjoying pension holidays, so this is the right time to undertake a long-needed reform. So, with immediate effect, I propose to abolish tax credits paid to pension funds and companies.

That was his justification. Welfare to Work was funded by the windfall tax on the privatized companies.

Puzzling justification though really, isn't it? I want to increase investment so I'll lower the returns to saving, meaning that there is less capital to invest. No wonder it all went pie shaped.

March 31, 2007 in Your Tax Money at Work | Permalink

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Comments

"...and at present many companies are enjoying pension holidays, so this is the right time to undertake a long-needed reform"

And the Tories set them up as a sitting duck by instigating contribution holidays - so although Brown certainly carries a share of the blame for the crisis, by no means does he carry it all.

Did they (the politicians, actuaries and fund managers) think equities were really going to keep rising forever?

Posted by: Martin | Mar 31, 2007 12:32:46 PM

Tim wrote:

"Puzzling justification though really, isn't it? I want to increase investment so I'll lower the returns to saving, meaning that there is less capital to invest. No wonder it all went pie shaped."

More importantly, it means there is less incentive to invest.

Posted by: HJHJ | Mar 31, 2007 9:22:56 PM