It is not the state's role to dictate to us how much we should save for old age

Gordon Brown has carried all before him since his triumphant Budget last month. But there is a shadow on the Chancellor's horizon, where the sky is dark with chickens coming home to roost. In his first Budget, five years ago, his cleverest stealth tax of all was to cut the tax privileges of pension funds.

It was brilliant. It would have been hugely unpopular at any other time. If he had given advance warning of it, the vested interests mobilised against it would have been overwhelming. Nevertheless, it was absolutely right to reduce this distortion in the tax system, and it could only be done just after Labour's emphatic election victory.

Five years later, however, the effects are being felt. Company after company is closing its final-salary pension scheme to newcomers. In truth, the 1997 tax change is only a part of the explanation. Stock-market returns have been weak for the past two years, which has squeezed pension funds anyway, while companies, always under pressure to cut costs, see their contributions to pension funds as an easy target.

It makes economic sense to shift the emphasis from final-salary schemes, which pay out a pension determined by your salary, to schemes which reflect more closely the amounts of money paid in. Traditional company schemes are inflexible and discourage people from moving jobs.

Politically, however, there is a price to pay when the losers can identify themselves and the gainers are diffuse.

That is even more the case when the rest of this Government's pensions policy is in such confusion. Although old people depending on the state pension eventually had significant extra help, it comes in the form of means-tested top-ups which are not always taken up, or gimmicks such as free television licences. Meanwhile, the stakeholder pension, trumpeted as the great reform which would allow those of middle to low incomes to build up a personal pension, has failed to bring forth a new generation of savers. For most people, the benefits are too small and too distant to overcome the image problems created for personal pensions by the mis-selling and Equitable Life disasters.

It is no surprise, therefore, that the idea that Frank Field first thought of – namely compelling people to save for their retirement – has resurfaced at the heart of government. Mr Field, grandiosely titled minister for welfare reform, was sacked when Tony Blair realised his cumbersome scheme was too redistributive. Still, the principle of compulsion remains attractive to a Prime Minister and a Chancellor desperate to avoid having the taxpayer of the future pick up the bill for this generation's failure to provide for itself.

Attractive, but wrong. There are sound reasons for providing tax incentives to encourage people to save, although they should be as simple as possible and should not discriminate between different forms of saving. That is why Mr Brown's abolition of pension-fund tax relief in 1997 was welcome – it reduced the bias towards pensions over other forms of saving.

However, there is a world of difference between incentives and compulsion. It is not for the state to dictate to individuals how they should plan their lives. It can point out that state incomes for the elderly are niggardly and unreliable. It can regulate the pensions industry better. But a compulsory pension contribution is simply a tax, and, if it forces people to pay into private-sector funds, that only adds to the political risks to the Government from a market which can go down as well as up.

Mr Blair should be persuaded, once again, to drop Mr Field's bright idea.