Both classical and modern liberals value freedom, but they disagree over its nature. Classical liberals believe in negative freedom, a principle often linked to the idea of freedom of choice or privacy. Freedom can be expanded most clearly by restraining state power. Classical liberals also believe in egoistical individualism: that society is composed of rational individuals who can make decisions in their own interest.

The logic of negative freedom leads to the rolling back of the state, to encourage individuals to take more responsibility for themselves. Self-reliance is a key virtue for classical liberals.

Dependence on the state is damaging because it undermines the self-respect of the individual and saps the spirit of enterprise on which economic growth depends.

Current debates over the growth of a 'dependency culture' are linked to the ideas of classical liberalism. The idea of the dependency culture has come from the expansion of the UK welfare state since 1945, which has been associated with a loss of personal responsibility, the breakdown of the traditional family and the persistence of unemployment across generations. Neoliberals argue that social welfare should be targeted at those who really need it, and that others should be encouraged to lift themselves out of poverty through their own efforts.

Modern liberals believe that negative freedom is necessary but not sufficient for a good society. It can amount to little more than 'freedom to starve' for those facing disadvantages over which they have no control — for example, working in an occupation prone to periods of unemployment, or suffering an industrial accident. These people need assistance to live truly free and fulfilling lives.

This is why modern liberals support the idea of positive freedom. This defines freedom as self-mastery or self-realisation. Freedom can be expanded by qualified state intervention in the economy and society, to widen individual opportunity and liberate citizens from social evils such as poverty. Modern liberals favour developmental individualism — enabling individuals to enjoy personal growth and empowerment.

Classical and modern liberals have some common ground on the nature of the state. Both believe in the decentralisation of government and protection of civil liberties. In the 19th century, Gladstone tried to grant Home Rule or self-government to Ireland. In the 20th century this equated to the concept of devolution — the transfer of certain central government functions to elected bodies in the different parts of the UK. This influenced the New Labour governments of 1997-2010, which set up elected bodies for Scotland, Wales and Northern Ireland. Liberal reforms of the constitutional framework in the same period included the Human Rights Act and Freedom of Information Act, which guaranteed certain rights for citizens. Classical Liberals emphasise the wisdom of the past and view the state as an organic entity whose component parts cannot be rearranged at will. Liberals subscribe to a mechanistic theory of the state — they see it as a machine created to serve the individual. Its parts are equal in worth and interchangeable.

However, there are different liberal views of the role that the state should play. Classical liberals believe that the state should merely lay down the conditions for orderly existence and leave other issues in the hands of private individuals and businesses. They support the idea of a minimal or 'night watchman' state, whose role is to maintain social order, enforce contracts and provide defence against external attack. The state should not interfere in economic and social life more than is strictly necessary, since this would risk undermining individual liberty. Its role is to maintain a stable framework for trade, uphold the value of the currency and generally create an environment within which laissez-faire capitalism can thrive.

In the 19th century, some classical liberals went further and developed what later became known as Social Darwinism. They borrowed from the naturalist Charles Darwin the concept of natural selection, which they applied to human society. They argued that, because individuals differ in their abilities, it is unavoidable that some will succeed and others will fail. Their most important figure was Herbert Spencer (1820-1903), author of the classic text The Man and the State (1884), who coined the phrase 'survival of the fittest'. He maintained that those who do well are those who adapt most successfully to their economic environment. The logic of this position is that government should not intervene to support people through the provision of social welfare.

By contrast, modern liberals believe in an enabling state — a larger role for government in helping individuals to be free and to achieve their potential. They arrived at this position through a growing awareness of the inequality of late 19th-century society, which they linked to low pay, unemployment, slum housing and poor working conditions. Known in the late-Victorian and Edwardian periods as 'New Liberals', they supported policies of welfare as the way to bring about equality of opportunity. They argued that, if individuals and groups are held back by their social circumstances, the state has a social responsibility to reduce or remove these disadvantages —known as welfare or social liberalism. It was expressed in the reforms of the Liberal governments

of H.H. Asquith before the First World War, including the first old-age pensions, National Insurance and labour exchanges, the forerunner of today's job centres.

Modern liberalism also includes economic management on the lines proposed by the economist John Maynard Keynes (1883-1946). Keynes argued that the image of a self-regulating free market is a myth, and that government intervention is necessary to ensure that market economies deliver sustainable growth and keep unemployment low. In particular, governments should prevent a slump by managing the level of demand in the economy so that full employment is maintained. In his best-known book, The General Theory of Employment, Interest and Money, written during the Great Depression of the 1930s, Keynes argued for a programme of public expenditure to create jobs and stimulate the economy. Keynesianism was most influential in the decades immediately after the Second World War, when governments became more willing to act in order to correct the failings of the market.

Is modern liberalism a contradiction or a continuation of classical liberalism?

There is a clear difference between the classical liberal fear of the state and modern liberals' willingness to use its power to promote social justice. In the 19th century, liberals were sceptical of the benefits of state intervention. Gladstone described it as 'construction', a term that to him had negative connotations. He believed that it would take responsibility out of the hands of the individual.

Nevertheless, both classical and modern liberals are concerned in their different ways by expanding the freedom of the individual. Modern liberals see the state as helping individuals to help themselves and they regard state provision of welfare and education as a means to ensure equality of opportunity.

Both types of liberal are anxious to resist the idea of an over-powerful government. They share a commitment to holding the government to account, to decentralising power and to protecting therights of the citizen. Where they differ is in the extent to which they are prepared to use the state to achieve liberal objectives.