It's time for a new Beveridge Seventy years ago this week, Sir William Beveridge submitted his report Social Insurance and Allied Services to Sir William Jowitt, Paymaster General in Churchill's wartime Cabinet. This formed the basis of the welfare state and shaped our public services. Since then, Britain's demographic landscape has been transformed; our ageing population becoming the single greatest challenge that we face. Over the next few decades, the current welfare state will become unsustainable. We need to come to terms with the fact that the universal welfare state is over: a radical refounding of the relationship between the individual and the state is necessary. A Free Enterprise Group report, A New Beveridge, recommends a return to the principles laid out in the original document. Principles of contribution, personal responsibility and an incentive to find work rather than claim benefits. The report diverges from Beveridge's original plan, acknowledging the fact that Beveridge never projected spending past 1965. Had he anticipated the significant rises in life expectancy and population, it seems likely that his report might have been more conservative in some areas. At the heart of the challenge is the need to better understand the welfare state itself. In 2010/11 53.4 per cent of households received more in benefits (both direct and indirect) than they paid in taxes, compared to 43.8 per cent in 2000/1 and 43.1 per cent in 1979. It does not make economic or political sense for the welfare state and our public services to be funded by an ever-decreasing number of people. The adage that "a democracy can only exist until the majority discovers that it can vote itself largesse out of the public treasury" is all too true: it is hardly surprising that government spending continues to increase when fewer and fewer voters see its effect on their payslip. The government should set a new target - a Net Contribution Index - with the goal of bringing the percentage of net beneficiaries down to at least the level of a decade ago. We also need to make tough choices when it comes to restoring the contributory principle. Those who have paid more into the system should see more favourable treatment when they require its help. People over 25 without a contribution record should be obliged to join the Work Programme or an alternative welfare-to-work scheme within three months of beginning to claim - but a record of contribution should delay this requirement incrementally. And for those who claim without any record of contribution, we should be firmer still. For individuals aged under 25 who have not yet paid National Insurance contributions for a certain period, perhaps five years, unemployment benefit should be in the form of a repayable loan. An unemployed teenager would still receive the same amount of cash as now, for example, but they would be expected to repay the value once in work. A New Beveridge calculates that this could recoup the government over £1.3 billion a year. Even if someone were unfortunate enough to be out of work for the entire seven years between 18 and 25, the total sum repayable would be £20,475- considerably less than the tuition fees loan, repayable by many of his or her peers. This would also create an additional incentive to take on paid work. Tougher still are the challenges resulting from an ageing population. A New Beveridge recommends looking again at benefits for the wealthiest pensioners after 2015, but also at how we can simultaneously reward those who do the right thing and save for their future. The Free Enterprise Group has already proposed the introduction of Care ISAs that would work like a regular ISA, except that the maximum investment could be far larger, to the value of a cap on care costs as recommended in the Dilnot Report. Politicians should be unapologetic about the need to cut the cost of the welfare state, and re-establish it as the safety net that Beveridge intended. One of the privileges of living in Britain is that we can afford to support those in need. But this support must be matched by individual responsibility and a strong sense of fiscal responsibility. Welfare reform is seldom straightforward, particularly in times of austerity. But here again, we can take advice from Beveridge: "But to suppose that the difficulties cannot be overcome, that power of readjustment has deserted the British people, that technical advance has ended or can end, that the British of the future must be permanently poor because they will have spent their fathers' savings, is defeatism without reason and against reason." Chris Skidmore is MP for Kingswood, and a member of the Free Enterprise Group.