Yes I think your post hits the issue on the head.
The model only works if you have a large number of working people and a small number of non working people (be that retired, unemployed, disabled)
The goverment is now working with a system with a falling number of working people and rising number of non working people (retired, unemployed, disabled)
This just does not work. Income going out is far more than income coming in.
I can absolutely see the welfare state being withdrawn either completely or revised back to a very basic provision. You support yourself or the goverment offers very basic support ( state care homes, state children homes, state work houses for unemployed). Perhaps they will be couched in nicer terms than that.
Essentially the rules will be - pay for it yourself and no problem. Your disabled kid, elderly person with dementia or unemployed person relying on benefits can live where they want, go to school where they want, have as much care or not as they want. The only criteria is you have to pay for it yourself.
Anyone that can't pay for their own home, bills, kids, elderly parents and have to rely on the state will have to take what they can get rather than demanding what they think they are entitled to but the country can't actually afford.
The country is in a downward spiral just now. Previous goverments have sold off industries, privatised everything, sold off land and gold, sold off council houses etc. All these things allowed the country to enjoy short term gains but longer term pain. The gains are now gone and the long term pain is here.