Gordon Brown's decision to scrap dividend tax credit in his first Budget has been defended by a Treasury official amid criticism from charities and the Conservatives.
The Times claims to have documents requested under the Freedom of Information Act which show that other government officials warned Mr Brown against the move.
Such documents warn the chancellor that the lower paid and those retiring immediately would be hit hard and that pension providers would lose out by £4 billion a year.
Philip Hammond, shadow secretary for work and pensions, said Mr Brown's decision to go ahead with the scheme despite the concerns of colleagues "shows what priority he gives to pensioners".
Outrage has also been voiced by charities and pressure groups. Speaking to the Times, Help the Aged spokesperson Mervyn Kohler said: "This is staggering. There is a strong feeling among pensioners that they have been let down by this government and this information will only reinforce that perception."
Yet Ed Balls, economic secretary to the Treasury and a key ally of the chancellor, has defended Mr Brown's decision and slammed the newspaper's report.
Speaking on the Today programme, Mr Balls said the analysis carried out by the Times was "abject nonsense and a complete travesty of the information they have received".
He added: "We decided on the basis of civil service advice to go ahead because this was the best thing for the long-term investment of the UK economy."
"The suggestion that the decisions were made not on the basis of the best civil service advice... is not true."