A moment of truth on the welfare state But it is the vast, comprehensive payments structure into which we are all eventually drawn, however great our private means, that is becoming untenable. Steve Webb, the pensions minister, jumped right in this week: early retirement in the public sector would soon be out of the question, the pension age will increase with life expectancy, and pensioners will have to expect to use their savings to pay for elderly care. With an ageing population, he said, the sums just don't add up. And Nick Clegg, of all people, actually suggested that any political party "committing not to touch a single hair on the head of benefits for the most affluent people... will be found out." This transformed the function of welfare: it would not be simply a government policy of saving people from destitution when they fell on hard times. It was to be a national unifying programme that would bind all members of society into a network of interdependence. Everybody would benefit, so everybody would have a stake in the programme. The corollary of this notion that everyone should get something from the welfare state - however much he earned - was that everyone should pay into it. So the rich would get ever-increasing state pensions and all the perks that went with them, while the low paid would have to pay tax and contributions at an ever-higher level. This was supposed to reinforce a sense of social solidarity (as the EU calls it) and communal responsibility. In fact, it has had precisely the opposite effect. Before the Second World War, a married man with a family earning the national average wage paid no income tax, nor was there any state welfare system for supplementing low wages. Would anyone like to suggest that solidarity and mutual responsibility in working-class communities is stronger now than it was then? Not only has the sense of community been undermined by the belief that only the state is obliged to respond to need, but the welfare system has become a divisive force, creating resentments between those who are thought to be overly dependent on it and those who are trying not to be. It is precisely those resentments that the Tories are likely to benefit from politically. Perversely, increasing taxation on the low paid has helped to pauperise them, thus making it more likely that they will need help from the state in the form of tax credits or housing benefits. What ministers are finally coming round to saying - almost in so many words - is that not everyone should partake of the welfare state however rich they are, and not everyone should have to pay for it however poor they are. Indeed, Coalition policy is moving, albeit in baby steps, in this direction: taking more of the low paid out of tax and at least breathing the possibility of - someday, maybe - removing the more absurd universal benefits from wealthy pensioners. It is something of a mystery, given their timidity over this issue, why the Tories chose to plunge right in with the least justifiable universal benefit cut: the removal of child benefit from higher-earning families. Child benefit was introduced to replace the old child tax allowance because - back in the day - only the affluent paid income tax and so only they got any advantage. Now that virtually everybody has to pay some income tax, the child tax break could be brought back to help further relieve the tax burden on low-income families, and the question of giving cash "handouts" to high earners would not arise. Instead, we will now be the only developed country in the world that makes no fiscal distinction between those who have children and those who do not. Tax breaks for child care (which may or may not happen) are no substitute for a child tax allowance that could be claimed by either parent, and so would not discriminate against stay-at-home mothers. In another startlingly frank contribution to this debate (again from a Liberal Democrat, oddly enough), Norman Lamb, the care services minister, has said that pensioners should be advised to use their savings to buy private care protection packages. These insurance policies could be used to "top up" care home fees if pensioners wanted to buy better quality services than provided by the state minimum. Ah, now there is the phrase that is the key to the future: "top up," and more specifically, "top up insurance." As in the United States, where pensioners buy Medicare Advantage policies to - all together now - "top up" the basic provision of Medicare, so we shall have to open the way for this sort of solution. Insurance that is only for topping up elderly care or NHS treatment could quickly become so popular and competitive that its premiums would be widely affordable. It would be in the interests of insurers to see to it that policyholders got value for money, which would help drive down the cost of services. It would break the state monopoly of provision, giving pensioners and patients some real choice and power. So maybe losing the universal monolithic welfare state isn't bad news at all. If ever there was a moment to make that argument, this is it.