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False Tory outrage at fat-cat pubic sector benefits is a crude sleight of hand to divert voters' attention from the real wealth gap

Indignation at "gold-plated" public sector pensions is the latest wave in the Conservative campaign to create a groundswell of support for spending cuts and shrinking the size of the state. Rightwing thinktanks, encouraged by David Cameron and even by the sainted Vince Cable in the Mail on Sunday, have just produced a series of reports attacking public-sector pensions. It is a deft diversion from the real fat-cat pensions of Fred Goodwin (now reduced to £342,500 a year) and his ilk on to the rather more modest pensions of nurses, teachers and care workers: the average public employee pension is £7,000.

It's a well-timed assault, as private-sector employees still lucky enough to have an occupational pension open their statements and reel at seeing how very much less than expected they will get, with anything from a third to a half knocked off by the crash. Who should they blame? The bankers who bust the economy? Boardrooms who help themselves to vast pay, bonuses and pensions while closing company schemes for everyone else? No, the Tory hue and cry is turning them against public sector workers. If ever there were a deliberate creation of the politics of envy, this is it.

Rightwing thinktank reports have produced shock-horror numbers. Best was the British-North American Committee, which hit last week's news with this: "UK public sector pension liabilities now 85% of GDP." Good grief! Does that leave the rest of us just 15% to live on while the fat-cat retired dinner ladies, ward clerks and binmen live the life of Riley? It is, of course, a nonsense number, a statistical prestidigitation done by adding all public sector pension liabilities for those now retired to a life-time obligation to every existing state employee. Roll up all the money and describe it as a debt owed in one year and you get silly numbers. It's like taking all your mortgage and all the interest you will pay over its course, and comparing that total debt with one year's income. It will look wildly unaffordable.

The true figure is quite high, but rather less alarming. Public pensions cost 1.4% of GDP; and that will rise to 2% in 2027 and fall back below 2% thereafter. There is no inexorable upward trajectory. It may need adjustment, such as raising the pension age. As Adair Turner suggested this week, this needs to be done faster for everyone: we need to work longer. But dragging down public sector pensions won't do anything to help those who have no private pension, or a much reduced one. Cutting public sector pensions would not save the state much either: many are low earners so what they lost on pension they would claim through pension credit.

The real problem is the devastation of private pensions. Company pensions have faced rising costs as people have lived longer: each year of life costs pension funds 3% more. Share values have not risen as fast as expected, while funding requirements were tightened by the Conservatives after the Robert Maxwell scandal. In the 1960s, 8 million private employees had occupational pensions; now it's only 2 million.

What contributed to their mass closure was a culture change in the City as companies chased share price values to the exclusion of all else. A decent scheme used to be the norm for any respectable firm: many managers had not realised they could be ditched. But after the Big Bang, to have a good pension scheme was seen by City analysts as a sign of weak management, risking predatory takeover. So it happened that a country growing 30% richer every decade suddenly decided it could not or would not afford company pensions any longer. Last week's Telegraph leader repeated the refrain that the "primary reason" for the closure of private pensions was Gordon Brown's "raid" on pension dividends, but compared with the above factors and the stockmarket's collapse, that £5bn a year was a bit-player.

The Turner commission has led to a new compulsory scheme where all employers will have to contribute 3% of pay into a pension while employees pay 4%. It's a good start, but needs ratcheting up. In remaining private schemes employers pay an average of 10%, while public sector employers contribute 20% for better pensions.

Is that 20% too much, or is the private sector paying too little? A handful of headline-grabbing fat-cat public pensions for MPs, judges and a few others could be trimmed: as Michael Martin's £1.4m pension hit the news, MPs wisely voted to freeze their own pensions last week. But the great majority of the cost of public pensions goes to the modestly paid, more of them women, which is why the average is just £7,000 a year. Any meaningful cut would push many back into pensioner poverty. Yet a cut is what David Cameron rashly proposed last year. "We've got to end the apartheid in pensions," he told businessmen. The next day Conservative headquarters panicked and backtracked, fearing for public sector votes. But public employees have been warned.

The real pensions apartheid is not between public and private, but between the wealthy and the rest. Every taxpayer contributes heftily to the pensions of the rich, and half of tax relief goes to the top 10% of earners. A quarter goes to the less than 1% who earn more than £150,000. At last, along with the 50% tax band, incomes of more than £150,000 will from next year only get tax relief at 20%, not 40%. It was greeted with vociferous rage and the usual threats to leave the country, along with protests by the the very same wealthy people at the cost of modest public sector pensions. Tax relief still needs rebalancing to make sure most state encouragement to save goes to those with least.

Labour has a goodish pensions record – though you might not know it, as yet another report this week from the OECD put the UK bottom when comparing basic state pensions. Our basic was worth 26% of average earnings in 1979, but when the Conservatives decoupled it from earnings, it fell to 16%. But that's misleading: nearly half of pensioners are eligible for Labour's pension credit. Add in winter fuel allowance, housing and council tax benefit and free buses, and UK pensioners shoot up the league.

The state pension is due to be relinked to earnings in 2012 – though if the Conservatives are in power, will they do it? Labour's new compulsory pensions for all employers will be a long-lasting legacy, and not appreciated for years. The Conservatives seem to be heading in the opposite direction.

More than 40 per cent of investors refused to back Tesco's proposed changes to its share option scheme at the grocer's annual meeting in Glasgow yesterday.