Over half a century ago a lot of people died to save us from loss of freedoms like that. Would you give them up so easily?
For a moment, I thought we were talking about transponders, but it all seems to have become a lot more melodramatic now.
Transponders in general, and Mode C transponders in particular are a great way of allowing essentially uncontrolled traffic to co-exist with bigger controlled stuff.
Realistically, this need for co-existence is at its peak in the various class D zones where the big traffic is at its most vulnerable. So it doesn't seem unreasonable to me for all aircraft that wish to use that kind of airspace to squawk mode C.
If the density of traffic in those zones is such that more refined monitoring is required, it is possible to see why mode S might be desirable too. If you don't want to pay, then stay out of those zones. Simple enough.
In the UK, because of our highly engineered blocks of controlled airspace, that could almost be an end to it, however things change when you cast your eyes over the Channel. There airspace tends to me much freer. Lower level airways are class E and airspace is substantially unrestricted all the way up to (typically) FL195. For this reason, the French and the Germans can't talk in terms of the risk of collision purely in the control zones surrounding large airports. There is a significant risk even to "proper" IFR flights in airways. As a result, to preserve that freedom, and to avoid creating the sort of airspace structure we have in the UK that restricts our freedom to fly VFR wherever we like, Mode S is being mandated.
We in the UK are at the wrong end of this one. Not only do we have the restrictive airspace structure that keeps us apart, but we are likely to have the wholly unnecessary Mode S mandated to small planes when the need is less than abroad.
The obvious solution would be to create an airspace structure that is rather more aligned with the rest of Europe (and indeed the US). At least we would then enjoy some of the freedoms that Mode S is designed to protect.
I think we can safely say though, that this kind of airspace redesign is highly unlikely prior to to Class A-G being abandoned in a few years time and being replaced with the new 3-class system currently being worked through.