As soon as the money supply was checked house prices had to fall
and there had to be a recession. If property prices collapse
so will the UK banking sector.


10. How many people work?

The official data that is published by the British Government is, at first sight, very thorough and comprehensive. However when studied in detail it almost appears that many of the categories that are used have been created to make simple interpretation difficult. The benchmarks and methodology for assessing the data are routinely changed every few years to put a better gloss on the information but comparisons are still made between the latest data and historical data with no reference to these changes.

The official statistics tell us that the number of people employed by the State has increased to 20.4% of the total working population. Everyone knows what is meant by a Public Servant but there are a large number of activities that are undertaken for the State by private companies. They are executing work for the State and are being paid by the State so technically the people that work for these companies are State employees. It is just that the Office of National Statistics classes them as being in the private sector. There are parts of the State system that have been privatised yet where the State still accepts responsibility for the pension entitlements for older staff.

There are many examples of how the Government adjusts the official data to keep the number of people who are employed by the State within acceptable levels. The employees of Railtrack, who now work for a nationalised company, are omitted from the total number of Government employees. Also 47,000 GP's and their associated staff which amount to some 200,000 people are left out of the Government figures although their wages are clearly paid by the State. This sort of sleight of hand means that there is a huge amount of direct State expenditure that is creatively hidden in the private sector. In reality the State now directly and indirectly employs over a third of the working population and accounts for 45% of the gross domestic product of the country.

Officially there are about 31 million people engaged in full time employment out of a total population of 61 million. There are about 12 million children plus 8 million economically inactive people (this includes students) and about 1.7 million unemployed people. There are over 10 million people over the age of 65. Of these the only group that directly contribute money to the Exchequer are those who are in private paid employment. Those who work directly for the State never had the tax money in the first place. It was given to them in theory and then taken back in theory

The unemployment rate was 5.3 per cent for the first quarter of 2008. The number of unemployed people increased to reach 1.64 million. Today it is around 2 million people. The number of workforce jobs in March 2008 was 31.67 million. This is supposed to be the highest figure since records began in 1959. Of course since 1959 a large number of part time workers have been reclassified as full time workers. The inactivity rate for people of working age was 20.8% at the beginning of 2008 or some 7.86 million. The unemployment figures would look rather less good if the number of economically inactive people (excluding students) who are claiming State benefits and unemployed people who are seeking work were combined as they once were.

The number of people who are directly or indirectly employed by the State, or who are dependent upon the State, increases every year. The number of people who are employed to support this group of people also increases. All these people are protected from the reality of a recession. This is the reason why recessions are so important to the Treasury, as it affects the level of Government borrowing, and yet so unimportant to politicians. To a politician a recession is not that serious because less than a third of the voting population are not funded by the State. Take out employees who work for monopolies like the banks or the utilities and the figure drops to a quarter.

Many methods are employed by the British Government to improve the employment statistics. A good example was the way that Government attempted to persuade half of all school leavers to go to University. It did not succeed in achieving its target but it did better than many people thought possible. In 1950 there were over one million conscripts plus regular soldiers, NCO's and officers in the British Army. There were also a lot of conscripts in the Royal Navy and the RAF. At that time there were only some 300,000 university students. Today the military has shrunk to a fraction of its former size. However there are now 2.2 million university students plus staff and assistants. This is a massive job creation programme on a par with conscription. The difference is that these new conscripts pay for themselves. At least half of the students who are currently at university will not realise any financial benefit from doing so. From the Government's point of view it is good as it takes a large number of people out of the unemployment figures and it also keeps them out of the housing market. The size of debt that they have to carry will mean that most of them will have to wait until they are over 40 before they can enter the housing market. The Government also benefits because their borrowing releases billions of pounds into the economy today that will have to be paid back in the future.

In the West the number of people who are in gainful employment is reducing as manufacturing and to a lesser extent service jobs are exported to low cost countries. The British Government has created well over a million jobs since 2000. However, almost three quarters of these new posts have been filled by migrant workers. The Government clearly realised that the private sector was not going to create any more jobs so a positive decision was made for the State to do so. From the Government's point of view it was a good approach to adopt because it meant the number of people in full time employment increased and job losses in the private sector went undetected. It also meant that GDP figures maintained an upward course. None of these new Government jobs are real jobs as far as the outside World is concerned. Part of the money paid to these people will be transferred abroad as so many of them are migrants. In the long term there will be considerable resentment if migrant Government employees get good pensions whilst the indigenous population, who worked in the private sector, get minimal State assistance. Of course this is not a matter of concern for the current group of politicians.

These recent developments also explain why there is progressively less capital expenditure by the State as time progresses. The State has an increasing number of people who are dependent upon it for employment or financial support and few capital projects are significant to most of the voting population. A failing infrastructure is only of real importance to businesses that depend upon things like long distance freight routes. As the role of manufacturing declines so the infrastructure becomes progressively less important to the State. As the role of manufacturing declines so the ability to pay for new infrastructure becomes harder for the State. That is the reason why most of the motorways in Britain were built in the 1960s and 1970s and almost nothing of significance has been built since.

The infrastructure that was put in place by the Victorians was paid for by trade. Raw materials came into the country, were processed and the finished goods sent abroad. This simple activity created the wealth that built the country's infrastructure as well as the schools, the hospitals and the homes that were needed at that time. This advantage has now been transferred to the China and to a lesser extent India. They want to build an entirely new infrastructure for themselves and to do so they are becoming the workshop of the World. Providing that the price of goods and services provided by India and China remain slightly lower than can be achieved in the Western economies then no home grown British company can ever succeed. This means that the British Government will never have the money that is necessary to undertake major infrastructure works.

Published: August 2008