Sunday, 21 February 2010

The illusion of Growth - the 'State' and the 'Parastate'

New research shows that nearly three-fifths of the growth in jobs under Labour during a decade in power was directly or indirectly created by the state.  Across the country as a whole, it says 57% of new jobs created during the period 1997-2007 were state or “para-state” — i.e. jobs dependent upon government spending.  The research, which was carried out at Manchester University’s Centre for Research on Socio-Cultural Change, concludes that Britain’s business model before the financial crisis in 2007 was “undisclosed and unsustainable”.

The researchers define para-state employment as activities such as rubbish collecting or nursery education which depend for revenue on government funding, together with parts of private healthcare and other sectors partly dependent on government support.  It includes consultants employed by central government and local authorities who are officially in the private sector but whose work would disappear if the public spending taps were turned off.

In all, the researchers calculate that of the 2.24m jobs created in Britain under new Labour until 2007, fewer than 1m were true private sector jobs, while 1.27m were in this wider public sector. In the West Midlands there was a net fall of nearly 37,000 in private sector jobs, offset by a 105,000 rise in state and para-state work. In the northeast, 79% of new jobs were state-dependent, compared with 41% in London and the southeast.

One of the report's authors stressed the importance of politicians becoming more intelligent in their approach to public spending: “Longer term we need a debate about a new kind of national business model. The public sector cannot sustainably fill in for an anaemic private sector".

With the illusion now well and truly over, a new national business model is not only needed in the long term, it is needed now, or to be more precise it was actually needed 10 years ago!  

Thursday, 18 February 2010

Steaming ahead ... to a Precipice?

As the UK Government continues blindly along its path (without changing a thing), the 'elephant in the room' is still steaming ahead and taking the UK economy towards the edge of the precipice.  With buoyed up (i.e. inflated) asset prices, colossal debts (Government and personal debts), collapsing tax receipts (income tax and corporation tax) and economic activity 'quietly' but steadily declining (and with massive jobs cuts predicted in the public sector too), it doesn't take long to see the unsustainable nature of the currently 'recovery' (0.1% growth!) and where it's heading.

However, 'talking things up' appears to be back, with news of house prices 'apparently' on the rise once again (i.e. more asset price inflation/speculation - rather than building of new property, which is real wealth creation).  The folly of such concepts is plain for all to see, with just a little digging, as the only people who truly profit in the long run from this are the landowners and the banks (who take away most of our younger generation's salaries). Reports of banks making bumper profits (and paying themselves large bonuses are also back), which is not hard to do in the short term when you can pay out at 0.5%, whilst lending out to businesses/individuals at 5%-30%, and whilst you can also take taxpayers money and re-invest and speculate it in the short term on collapsing assets prices (that are a result of previous actions of the banks themselves) whilst the Government/taxpayer underpins any of their bad debts.

However, inflation is now rising (the Bank of England has had to write to the Chancellor this month), and in normally the best month for tax receipts (January), the Government has had to borrow yet more money rather than being able to pay any debt back - for the first time since records began!! Our economy is in crisis, and founded on outdated/flawed leadership and management practices (i.e. poor moral values, self interest and greed).  The present system is continuing to collapse, but those in power (e.g. Government leaders, banks) are choosing to look after themselves rather than doing anything about it (for the majority of people in this country, and particularly younger generations).  Real economic inactivity and the impact on future generations has been recently highlighted, and there will be more of this to come in the future unless we change things quickly and for the better. The opportunities in the future are vast, but only if we embrace them.

As the risks associated with our economy grow, investment in the UK will drop, our debts will become increasingly expensive to service, and more young people will look elsewhere when considering their future - none of which the UK can afford ...