Tony Blair was warned by his own special adviser on the economy that Gordon Brown's £5bn-a-year raid on pension funds was "crackers" and should be opposed, reports the Independent .
The row over the abolition of a tax break on pensions funds - which has raised doubts over Mr Brown's fitness to run the country - is likely to overshadow the launch of Labour's local government election campaign today by Mr Blair and Mr Brown.
Treasury papers released after MPs had gone on their Easter break showed the Chancellor's senior civil servants warned that his plan to abolish dividend tax credits for pension funds would cut the value of shares, threaten the closure of more final salary schemes and raise public spending.
However, it has now emerged that the Downing Street policy adviser on the economy, Derek Scott, also opposed the policy but, like the Treasury officials, his advice was cast aside.
THE THREAT OF another rise in interest rates this week mounted on Monday after figures showed homeowners cashing in on soaring house prices to fund consumer spending alongside buoyant conditions in the manufacturing sector, according to the Times.
With the Bank of England’s Monetary Policy Committee due to begin its latest two-day meeting on Wednesday, the MPC’s hawks were given fresh ammunition to push for a new rate rise by a further acceleration in so-called “mortgage equity withdrawal”.
The value of extra borrowing extracted by Britons through remortgaging backed by rising property values jumped in the final quarter of last year (Q4) to its highest as a proportion of after-tax incomes since the middle of 2004.
Equity withdrawal in the quarter rose sharply to £14.6bn, from £12.2bn in the previous three months. As a share of after-tax incomes, the cash raised in this way climbed to 6.7% in Q4, from 5.5% in the previous quarter and a low of 3.1% in early 2005. This remained well below peaks of about 9% reached in 2003.
ANALYSTS HAVE SOUNDED the alarm over the state of household finances, issuing a warning of potential recession after it emerged that families' savings are falling for the first time since the late 1980s, according to the Telegraph.
The alert coincided with figures from the Bank of England showing that families are borrowing yet more against the value of their homes, as their appetite for debt returns.
Experts at Dresdner Kleinwort said its analysis of recently-released government figures showed that households are now dipping into savings to fund current spending for the first time since 1989.
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