Consultants this week said that Chancellor Gordon Brown's tax raid on pension dividends had slowed growth and risked making UK firms less competitive around the world.
Millions of pounds that could have been invested in developing businesses or in research and development have instead gone into making up the shortfall created when Brown scrapped tax relief on dividends paid into pension funds in 1997.'I am very angry with Gordon Brown. He has contributed enormously to a situation which threatens UK consultancies' competitiveness around the world,' said the head of a major consultancy.Gordon Brown has damaged us. He took money from the pension schemes and we have had to put more in. That's money that could have been used elsewhere,' said another senior consultant. 'The tax has certainly affected growth,' he added.The tax has contributed to an estimated £800M pension deficit among UK consultancies, along with new accounting rules that require companies to recalculate likely pension payouts based on people living longer.Consultants running final salary schemes have been forced to increase their investment in the plans by 20% a year over the past 10 years and many have axed them in favour of defined contribution schemes.