Brown blamed for pensions crisis

A FORMER Labour minister with close links to Downing Street has warned that taxes will have to rise to fill the pensions black hole.

John Denham accused the Treasury of undermining the occupational pension system as he tore into Gordon Brown's seven-year reign as Chancellor.

There was speculation that the intervention by Denham, who resigned as pensions minister over the Iraq war, was prompted by Downing Street.

The suggestions fuelled claims that Prime Minister Tony Blair is trying to force a showdown with the Chancellor on the issue.

The former minister is considered an 'outrider' for the Prime Minister, a backbencher who can be enlisted to promote his views in the media and the party.

The outspoken comments came in an interview on Channel Four News. Denham called on Brown to accept that taxes and National Insurance will have to rise to prevent pensioners from sliding into poverty because of the £57bn shortfall.

The Chancellor was also accused of sabotaging this week's publication of the Turner Report on pensions by ruling out tax rises before the document had even appeared.

'The Treasury dominates pensions and doesn't really understand pensions,' Denham said.

'The evidence is in Turner's report. The Treasury has always done the sort of things that will reduce the provision of occupational pensions and now we have ended up with a real problem.'

The Prime Minister's advisers fear that the crisis, especially the collapse of final salary company pension schemes, could be electorally damaging.

Speaking at a summit in Budapest, Blair tried to make clear that more money for the State pension would have to come from savings elsewhere.

However, Denham appeared to be paving the way for an eventual Government U-turn when he said that taxes would have to go up to preserve the value of state payouts for the pensioners of the future.

'This is a critical point,' he said. 'All political parties have got to say that part of the answer is increased tax and National Insurance. Yes, we will have to work longer, yes we will have to save more, but part of the answer is tax. The Chancellor has to do it.'

Denham said Turner had urged politicians not to rule out any options before his report had been properly debated.

'Well, the report hadn't even left the presses and tax rises were ruled out by the Chancellor,' said the former minister.

'The Tories are saying also you don't need tax rises, we can do it all through Government savings.

'So one of Turner's key proposals and one that makes most sense to most people has already died in the political quicksands.'

Tory Treasury spokesman George Osborne said: 'Labour's pension policy is falling apart at the seams. We have got a former pensions minister who is very close to Number 10 saying Gordon Brown's policy is all wrong.'

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