I encourage you to read this article http://en.wikipedia.org/wiki/Bretton_Woods_system because the post war miracle experience in the Western world after the second world war (and also in the USSR) was based upon the international economic regulations imposed by the Bretton-woods system. I will not in this piece explore all of the policies agreed on at Bretton-woods but the main economic consequence was the nationalisation of capital (or restrictions on the free movement of capital worldwide).
Now the irony of Bretton-wood was that the system which underpinned the free world was not subject to democracy and the bodies it created; IMF, WMF, UN and the EC (read the term of the Marshall funds) are above and beyond democratic control. On the issue of international capital control,the main aim of Bretton-wood was to prevent economic collapse and to prevent the west competing for business with other Western nations and to enable the nation state to properly tax and regulate business. Business where prevented from competing international via the aforementioned regulation of international capital movements (essential for truly global businesses) but they were also internally subject to heavy regulation and could not find new markets due once again to limitation on the free movement of capital.
Now I can think I can read you mind at this point, interesting but what does this have to do with me; well it has this to do without you. The welfare state was funded by two thing, one 60 years of UK debt and two British industries and UK capital held in place due to the strict international capital restrictions put in pace at Bretton woods. In short the Bretton woods conference enabled the high tax economies of the west by preventing capital from moving elsewhere and thus preventing international capital competition and we are posed with the funding of the same welfare state (enlarged due to increased population and technology) after a economics crash and in a world of free capital.
There are those out there who propagate a tax and spend solution to our economic difficulties and point out the irony of increasing benefit expenditure to save state funds by shedding public employees and they do have a valid point but it is a point from a very narrow standard point. The state is not going anywhere, it cannot leave this nation, and private capital aka business can. Unlike in the Bretton woods world, capital is no longer trapped in the nation state and wise and pragmatic state compete for this capital and this capital powers their economies; capital without which the public sector would run itself into a ground and capital and the resulting businesses they fund without which the economy cannot run.
There is of course allot of panicked talk about the flight of capital, caused by Britain’s shameful over reliance on the ever mobile financial services but capital though freed from international restriction will not flee from are economy as long as we offer a market for it and the skills it requires; largely regardless of tax rates and regulation levels, however, there are some very large organisations that will be put off or prevented from stating due to high taxes or over regulation and it is these businesses and these jobs which once trapped by Bretton woods will take off a fly if we try to use them to fund the welfare state.
Of course if we target there wealthy owners of capital or its movers (the share traders and currency movers) both of whom were ensnared by the Bretton woods would simply up roots and move, well some would and they would move their skills and there businesses with them. The point is again that Bretton wood enabled his taxes and regulations by preventing people moving their capital and thus making it easier to tax it. Without this it is economic suicide to peruse a moral which hunt against the very people who by their avarice fund the state and double economic suicide to chase away the capital are state so needs.