All good states are Nanny states; they protect us from ourselves. Left to our own devices, we would not even protect ourselves adequately against invaders and marauders.
Free Riders are part of the problem. There will always be some people who want the Benefit without contributing to the Cost and there are many goods (what economists call Public Goods) where it is impossible to exclude the non-payers from the Benefits. Enforcing Clean Air legislation costs money, but there is no way to stop someone breathing the cleaner air when they avoid paying their share of the cost. Instead, they have to be tracked down and coerced into payment. And that also costs money. Free Riders are a pain.
Unchecked, would-be Free Riders can be sufficient in number to raise the cost of building roads, paving sidewalks, safely disposing of human sewage, controlling infectious diseases, providing public green spaces, and so on, to levels at which no one would want to contribute.
Hold-Outs are Free Riders on Speed. They are people who would rather no one received a Benefit if they are to receive less than the Full Benefit to which they feel entitled. This is the case where so-called Vulture Funds buy up public debt which is going cheap because of likely default. When the default happens, they decline to take part in any re-structuring which would give bond holders something rather than nothing. Instead, they hold out for full payment even if it means nobody (themselves included) gets anything. Hold-Outs are the kind of people who favour children's playgrounds only if their own children can monopolise the swings.
Hold-outs need a cuff round the ear from the Nanny state: You will accept what the other 95% have agreed to accept or you will get nothing.
But the big problem for the modern democratic state is short-termism. The job of the state is to protect us from our own short-termism which always leads us to prefer jam today to bread and jam tomorrow. Left to our own devices, we simply won't insure adequately against ill health or old age just as we don't spend enough maintaining our homes, keeping them insulated and dry.
Unfortunately, the short-termists are also the voting population. It is a Sysyphean task to persuade voters to think of the morrow and it is a vote-winner to tell them that, No, they don't have to suffer - they can have tax cuts today. And no public services tomorrow.
This is what we will see being played out in England over the next few months, as the voters are treated and bribed. The future is a lost cause. The stupid party will win again.