In 1997 Britain's pensions were in good shape. Unlike other EU nations whose pensions depended on extravagant promises drawn upon future taxpayers, British pensions were mostly funded. Our pension funds, invested and growing for their future recipients, were larger than those of all other EU nations added together. A diminishing proportion of those nearing retirement depended on the basic state pension; most others had an occupational or personal pension, or savings which included the popular personal equity plans (PEPs) and Tex exempt special savings accounts (TESSAs).

All of this has changed in seven years. In his first budget Gordon Brown taxed pension funds an extra £5bn a year. He sought admiration for the first of his 'stealth' taxes, but it meant that he took money from pensioners to spend on his priorities instead of allowing those who had saved it to spend it on their own. It was the first of many ways in which he made saving less attractive. He abolished the popular PEPs and TESSAs and introduced the over-regulated, unattractive, and unsuccessful Individual Savings Accounts (ISAs) in their place.

He made means-testing the basis of state retirement payments, so that those who had secured assets and income for their retirement were penalized, while spendthrifts were rewarded. The three-year trough in equity prices was made worse in Britain by a series of measures which hit business profits and therefore stock prices. Additional regulations and taxes combined to depress UK shares, and with them the value of pension funds.

There is now a shortfall between pension assets and liabilities. In the private sector this might be redressed by years of growth, careful asset management, and an easing of depredation by government. In the public sector, still characterized by unfunded promises unrelated to savings, the gap is immense. If properly accounted, it would raise the ratio of government debt from 33% of GDP to 85%.

Instead of funds for their retirement, people have paid for extra bureaucrats and government spending increases which have been largely dissipated in increased public sector inflation - not a good trade. Now we probably have to abolish means testing, and raise the basic state pension and the retirement age. Ultimately saving has to be made more attractive by protecting it from government. But after seven years of government folly, a skeptical public may take some convincing.