Behold, the onward march of the state. Describing the current occupants of No 10 as statists might sound provocatively counterintuitive. Ever since the neoliberals began reshaping Britain in their own image, from the 1970s onwards, state-bashing has become a kind of national religion. Critics of austerity – such as myself – have slammed today's Tories for rolling back the state in ways Margaret Thatcher would have dismissed as too radical. The Lib Dems are fellow travellers: when Nick Clegg became their leader, he promised to "define a liberal alternative to the discredited politics of big government". Projections by the Office for Budget Responsibility suggest day-to-day spending on public services will drop to levels unseen in Britain for decades.

And yet, in so many ways, this government has promoted the growth of the state through its policies. Take what the government and its allies call "welfare dependency". Last week it was revealed that, since the Clegg-Cameron love-in began, wages have tanked and the number of people in work claiming housing benefit has jumped by 59%. There were 650,561 workers claiming housing benefit when the coalition was formed. That soared to more than 1 million last year, costing the taxpayer an extra £4.8bn. Overall, 4.3 million are now thought to claim in-work benefits. The state has grown because we are subsidising employers who are paying wages workers cannot live on and private landlords charging rents tenants cannot afford.

Statism intrudes into people's lives in more pernicious ways under the coalition. The long-term unemployed will be compelled to march to a jobcentre every day: more a means for the state to humiliate those without work and treat them as feckless leeches than a serious attempt to find them employment. The state has come up with other sticks to discipline those thrown out of work: benefit "sanctions" strip unemployed people – including poppy-selling war veterans such as Stephen Taylor – of support, for the most spurious reasons.

The Lobbying Act – in reality, a gagging law – imposes onerous new regulations on nongovernmental organisations. Michael Gove is centralising education, leaving free schools and academies in the clutches of the secretary of state rather than accountable to local authorities. The idea of a crackdown on tax avoidance is hugely popular, but George Osborne proposes giving HMRC the power to seize money from people's accounts – a statist measure that lacks due process. Rather than going after giant corporations such as Amazon and Google, who find devious means to avoid paying what they owe, the state is after the little people.

Then there's the immigration bill, which compels landlords to check the status of their tenants, transforming them into agents of the state. The government repeatedly tries to resurrect attempts to give itself powers to monitor emails. The first wave of student protests against the coalition was met with police batons and kettles, a form of state repression condemned by the UN as "detrimental to the exercise of the right to freedom of peaceful assembly". And what else is Help to Buy than a reckless state subsidy for mortgages, fuelling yet another a housing bubble which could explode with calamitous economic consequences?

Thatcherism promised to set the individual free, but authoritarian statism was always part of its creed. It imposed laws boastfully described by Tony Blair as "the most restrictive on trade unions in the western world"; David Cameron now proposes to make them more restrictive still. The police were given sweeping powers to batter down the miners 30 years ago; then came legislation giving them the right to stop and search citizens without reasonable suspicion, and anti-terror laws that eroded individual rights in favour of the state. We've even had undercover police officers having sexual relationships with radical activists: statism has invaded the bedroom under false pretences.

It falls to the left, then, to roll back the state. The state dependency of poverty-pay employers and rip-off landlords could be reduced with a living wage and by allowing local authorities to build homes. State powers that intrude on the civil rights of trade unionists, protesters and ethnic minorities could be repealed. A new federal Britain could take power away from the central state in favour of regions and local authorities. Public ownership is often caricatured as being about as statist as it gets, in large part because of the postwar model pioneered by Peter Mandelson's grandfather, Herbert Morrison, who introduced the Attlee government's top-down, bureaucratic form of nationalisation. Instead, the left could propose a form of democratic social ownership for rail, energy, water and other utilities that hands management to workers and consumers.

There is a long tradition of individualism on the left waiting to be reclaimed. At the beginning of the 20th century, the French socialist leader Jean Jaurès wrote about how capitalism alienated workers from their "very individuality". Indeed, the individual needs to be defended from more than the state. Poverty strips individuals of their freedom, imposing limitations on every aspect of their lives, from what they can eat to how they spend their leisure time. To provide for themselves and their families, workers are compelled to work some of the longest hours in Europe, losing time that could be spent on more fulfilling activities. Hence the need to limit the working day and crack down on unpaid overtime. Freed from financial hardship, excessive work and the constant fear of job and housing insecurity, the individual can prosper and fulfil her or his potential.

For the right, rolling back the state means allowing the wealthy to behave as they wish, while coming down hard on the poor. They hand public assets to profiteers at knockdown prices, robbing the taxpayer and leaving individuals at the mercy of private companies who have no interest in their wellbeing. Taxpayers spend far more on subsidies for privately owned railways than they did in the era of British Rail: "rolling back the state" in this case means "socialism for the rich". "Individualism" for the right means leaving the rich to prosper at the expense of society while those at the bottom must sink or swim.

The authoritarian statists in No 10 have got away with dressing themselves up as freedom-loving champions of the individual for too long. The fight for personal freedom and liberty is a great historic cause, but it now falls to the left to take it up.

Twitter: @owenjones84