Debate with a Libertarian

I have been discussing on Twitter with @V__Vendetta  who seems to be a libertarian and a "small stater".  These people intrigue me, as they can come on as real tory right winger authoritarians, which seems to contradict the idea of liberty. We began the debate on Twitter, but V came up using Twitlonger, and I copied it over here so we could debate in more than 140 characters.

V says:

Many people resent people "playing the benefits system" and it's destructive behaviour as it creates resentment against all and any benefit recipients regardless of their position. Most of us would wish to help people who are between jobs, layed off, unlucky, whatever but we don't like freeloaders. The state can only be indiscriminant about benefits (anyone with x income etc) whereas the people naturally have a greater concept of "deserving". We'd still not let someone die or fall ill, but we want to give less to one who doesn't help himself and give back. The state can't and doesn't do this and it causes problems.

We have talk of 'fat tax' or paying people to be slim - why? Because it's costing NHS (government) money, not because they 'care' else they would ban this and that rather than taxing it. But without the state giving "free" care in the first place, this mechanism would naturally exist in higher insurance premia for poor lifestyles and waistlines. Would we let the poor die? No, we'd pay a base voluntarily. By subsidising the supplier not the consumer in health we make a poor system which demotivates both sides. Supplier gets paid anyway so wait for months (and that's just for the phone to be answered) and consumer has no choice or fiduciary benefit. The poor lifestyles of others are socialised. Bailed out...

Pretty much any action taken by government causes problems - pick your favourite.

My response:

Benefits: 

Sure, self-reliance and responsibility has been a Green meme for as long as I can remember.

But we object to the right-wing tabloids absurd obsession with daily exposure of freeloader cases. Benefit cheats cost the economy £1bn a year, but tax cheats and avoiders cost more like £100bn a year.
If only the tabloids would concentrate as strongly on the big cheats.

Families with a long history of unemployment will need re-education.

However, in the present recession, there is a scarcity of jobs, and the indigent will be the last to get a job when one becomes available.

Therefore it makes more sense to concentrate on providing jobs for them as wants one, namely through the Green Wage Subsidy.

The Fat Tax is a good thing, something I put in Bills of Health. It is an instance of Polluter Pays - in line with personal responsibility. You put a product on the market which harms people, you pay for the harm you cause. Need a Sugar Tax too.

V, are you sure you didn't get Supplier and consumer the wrong way round?

[Update] Coincidentally, the excellent Unlearning Economics website started writing about libertarianism at the same time as I started this. Theirs is much better. It is here.