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Chancellor Gordon Brown finds himself embroiled in further controversy this morning as the row over his 1997 decision to scrap the dividend tax credit goes on.

Over the weekend the favourite to succeed prime minister Tony Blair as Labour leader was hit by allegations from the Times newspaper that he carried out the decision against the advice of other government officials.

Analysts have said the failures of pension funds in the last decade reflect the arguments of those Mr Brown reportedly ignored in 1997: that the lower paid and those retiring immediately would be hit hard and that pension providers would lose out by £4 billion a year.

Now business leader Richard Lambert, director general of the Confederation of British Industry (CBI), has rejected the Treasury's claim that his organisation supported the chancellor.

"This is a convenient bit of spin by the Treasury. There is no record of any kind that we lobbied for [tax relief cuts], and there is no record because we objected strenuously to the policy," Mr Lambert told the Times newspaper.

Mr Brown has come under strenuous criticism from the Conservatives on the dividend tax credit issue. Philip Hammond, shadow secretary for work and pensions, said his decision to go ahead with the scheme despite the concerns of colleagues "shows what priority he gives to pensioners".

But ministers have backed the chancellor's decision, saying it was the right one to make on the basis of all the advice available to him at the time.