Blair and Brown lock horns over pensions

Tony Blair and Gordon Brown are at odds over pensions reform, with the Chancellor accused of trying to "sabotage" a government-ordered inquiry that reports next week.

Mr Brown is worried that a commission chaired by Lord Turner of Ecchinswell has exceeded its brief by producing a package of specific proposals, rather than an analysis of Britain's pensions crisis and a menu of options from which the Government would choose.

The Chancellor is also said to regard a key plank of the Turner report as "unaffordable and unsustainable" - a plan to increase the basic state pension in line with average earnings rather than prices, which rise more slowly. Lord Turner wants to pay for that by raising the age at which the state pension becomes payable from 65 to 67.

Mr Brown has written to Lord Turner, questioning the long-term arithmetic on which his report is based. He said that the Government was committed only to raising the means-tested pensions credit for poor pensioners in line with earnings until 2008 and not beyond that date.

There is tension between Mr Blair and Mr Brown over how quickly the Government should act after the Turner commission reports next Wednesday. The Prime Minister wants key decisions taken before he stands down, but the Chancellor - the overwhelming front-runner to succeed him - wants to delay legislation until after the next election.

Mr Blair quashed speculation that the Government would shelve the report. He told a press conference: "The very reason we have asked for this report to be done is that we know the present situation has to change. I can assure you that we want to take this report, consider it very carefully and use that as a basis for future discussion to get the right pension provision for the country."

Allies of Mr Brown insisted his views had been misrepresented and blamed Labour rivals who were mischievously trying to paint him as "anti-reform". They insisted he did not want to shelve Lord Turner's proposals but that he wanted to ensure the Government made the right decisions.

Last night Mr Brown tried to defuse the row, thanking Lord Turner for his work and saying his report would usher in an important debate about the future of pensions. He told the Institute of Directors: "The issue is not reform versus the status quo; there must be continuing reform. The issue is how we achieve the right reforms - reforms which are sustainable, fair and affordable."

He added: "When tackling all long-term pressures from pensions and welfare to the public services, we will spend only what we can afford, maintain all our fiscal disciplines, consistently meeting our fiscal rules."

John Hutton, the Work and Pensions Secretary, who plans to issue a White Paper on pensions as early as next spring, called on "everyone in the Government" to support a "grown-up debate" on the Turner report and said he would speak "on behalf of the Government" when he responded to it next Wednesday.

George Osborne, the shadow Chancellor, said: "To sabotage the Turner report in this way is disgraceful. Why has the Government promised a serious, grown-up debate on the future of pension provision only for the Chancellor to throw his toys out of the pram in this way? It is extraordinarily arrogant of Gordon Brown to try to shut down the much-needed public debate on a crisis of his own making before it has begun."

Ed Balls, the Labour MP and former chief economic adviser to Mr Brown, said the Chancellor would not be throwing out the "whole thing", but said the Government had consistently taken the view that the cost of a rise in pensions linked to earnings would be "very large". He said: "It is much better to target resources on the poorer pensioners while helping all pensioners. It is fair but it has also got to be affordable."