ENGLAND HAS LOST ITS WAY
Credit: Gemini
We have written at length about the many ways the United States has strayed from its founding as a limited-government republic - a nation where political power resides in the people - and steadily trod the path to socialism where power increasingly resides in a small coterie of government officials who find endless ways to drain wealth from the working people and transfer it to themselves and their cronies. This never ends in a socialist workers' paradise, but in poverty and despair for the working classes with recent examples being Cuba and Venezuela. Sadly, the great nation of England is speeding down the road to big government socialism. Following fourteen years of incompetent governance by the Tories, the Labour party was swept into office two years ago. It quickly proved to be utterly clueless about how to revive the over-taxed, over-regulated English economy. Labour's leader, Prime Minister Keir Starmer, is about to be ejected from Number 10 by his own party members. The nation's problems are many and there is no consensus on how to address them.
Growing Youth Unemployment
One in seven of UK's 16 to 24-year olds are now outside of employment, training or education - almost a million of them. This means they are not paying taxes, not supporting themselves and with high likelihood never will be. The UK now surpasses Italy for youth unemployment. Sixty percent of this group has never had a job, the highest rate since records began. Many claim a disability or chronic health problem that is said to prevent them working They have learned from the internet how to easily game the disability system to secure benefits.
Government policies contribute to make it harder for them to gain access to entry level jobs. The minimum wage has been increased. This both discourages hiring and encourages employers to lay off workers. The national health insurance tax that employers must pay for each employee was then increased. That too discourages hiring and encourages the laying off of staff. That was followed by proposed amendments to worker's' rights laws reducing employee's probationary periods from two years to just six months. This discourages employers from taking on new employees out of concern they will be stuck with an incompetent, unqualified, unsuitable or troublesome worker that they cannot terminate except at great expense. As a result, entry level jobs are evaporating.
Further proposed tax raids on employers threaten additional job losses. The Confederation of British Industry fears that "hundreds of thousands" of people will become unemployed this year causing social welfare costs to soar. This is coupled with bank lending to British businesses reaching the lowest levels in thirty years, stifling business expansion. Bank of England interest rates are far too low considering rising prices but any rise will be an additional hit to businesses and hiring.
Another development adversely affecting youth employment opportunities and increasing the number of people on unemployment benefits is the government's failure to ensure that public school students attend classes. Growing numbers of truants miss classes, fail to learn essential skills, thereby making themselves unemployable.
The next hit to education was the government's decision to impose a stiff 20% VAT tax on tuition paid by parents to private schools on the basis that such students are "privileged elites" and their rich parents can well afford to pay it. That ignored the fact that many middle class families work hard and save their money to send their children to private schools hoping that will give them the advantage of a good education and better prepare them for employment. It also ignored the scholarships that were offered by private schools to needy students. Proud anti-elitism has ended up hurting many who are far from elite.
Increases in business tax rates further stresses these schools. Result? The number of private school students has declined by 40,000 (not including special needs students) and over 47 schools have closed - pushing those students into the already stressed public school system. The most elite schools continue to thrive due to domestic and foreign parents able to pay tuition and the VAT tax. Instead, it is the moderately priced private schools that were forced to close their doors to the great disadvantage of middle income families.
General Unemployment
There are nearly 300,000 British households where nobody has ever been employed according to the Office of National Statistics. Since Labour took over in 2024, the number of households in which every adult is unemployed has risen by 55%. There are 3.2 million workless households containing 4.3 million people of working age. The cost to support these households is staggering - about 25% of the total government budget.
More than 600,000 households receive more in benefits than the average worker's salary, seriously disincentivizing work. Four out of five youth unemployment claimants in the North West have been signed off as being too sick to work - with no requirement to ever look for work. One in ten people in England and Wales now claim sickness or disability benefits. Decrepitude now defines a rapidly growing portion of the British population.
Those receiving benefits has risen from 2.8 million in 2019 to 4 million last year - with many claiming mental health issues. One in twenty of those in their mid-20s have been on Universal Credit for at least five years. Paying for this surge in claims is a huge problem. Pat McFadden, one of Starmer's confidants, recently said that at every meeting he attends with Labour MP's he is asked, "Who can we tax in order to pay benefits to others?"
A report by Zurich Insurance found that having a mental health problem has become the norm for young people between the ages of 15-19. It estimates that 51% of people in this age group claim to have a mental or behavioral disorder such as anxiety, depression or ADHD. It forecasts that by 2030 this will hit 64% if trends persist. This will obviously impact subsequent employment, with many destined for a lifetime on benefits. No nation can long survive when more than half its population suffers from mental health issues. Whether this results from surging real mental health problems, over diagnosis, or people learning to game the benefits system, it is not sustainable and will lead to national ruin.
Surging Immigration
Between 2021 and 2024 some 4.2 million people immigrated as the UK opened its doors to foreigners. About 1.2 million are eligible for indefinite leave to remain. Since then many tens of thousands of people have illegally entered the country coming on small inflatable boats from France. They are being housed, fed, educated and provided medical care at tremendous public expense. These costs far exceed tax revenues from those who find employment. Almost 1.5 million migrants receive Universal Credit (welfare) benefits. This has placed huge financial burdens on taxpayers to care for them. Immigration is also rapidly changing the demographics of the nation, to the consternation of natives. An astonishing 40% of all newborns have a foreign-born parent. There is no serious effort to stem the flow of immigrants despite that being the most vocal concern expressed by voters.
The National Health Service
We asked Google's AI to prepare a paragraph commenting on the status of England's vaunted National Health Service. The result comports with what we have read. Here is its depressing output.
England's National Health Service (NHS) is facing an unprecedented operational crisis, marked by severe systemic failures to meet its foundational obligations to patients. Despite recent minimal drops in overall elective wait numbers, the total backlog remains staggering at over 7.1 million cases, leaving millions trapped in pain and uncertainty. The service is consistently failing to meet critical safety metrics: less than 73% of cancer patients receive treatment within the required 62 days, and emergency departments are under such extreme stress that more than 50,000 patients a month wait over 12 hours on hospital trolleys just to be admitted. This lack of capacity has institutionalized "corridor care," with an alarming 3,000 patients a day receiving treatment in hospital hallways, resulting in an estimated 1,300 avoidable deaths per month due to A&E delays. Driven by chronic underfunding, decaying infrastructure, acute staff shortages, and a broken social care system, public satisfaction with the NHS has plummeted to a 40-year low of 29%, prompting a massive spike in citizens resorting to private healthcare simply to bypass the failing state system.
Punishing Those Who Feed You
Fuel and fertilizer prices have soared and there is little assurance that farmers will be able to make a profit on their crops this year. To further their problems, the government proposes to cut farm support on the basis that "we all must economize in these tough times." Cue food shortages and rising prices. To further ensure pain for family farms the Labour government has enacted a law subjecting farmers to an inheritance tax of up to 40% on the passing to their heirs of their farmland and equipment valued over a million pounds. This insures that many multi-generation family farms will have to be sold to pay the tax. They will be acquired by large corporate interests that will favor short term profits over land stewardship. Rising council taxes add to the farmers' burden. The nation's real estate owners already pay the highest taxes of any major economy.
Punishing Those Who Save
Desperate governments are always looking for low hanging fruit to pluck to fill their shrinking coffers. A tempting pot is retirement accounts. Workers spend decades saving for their retirements and now discover that their efforts will be thwarted by their elected representatives. Defined contribution pensions above a nil-rate will now be pulled into people's estates for inheritance tax purposes. Such plans were previously exempt from the IHT. Pension funds, particularly local government plans, are being pressured to invest their funds in government-preferred activities such as infrastructure and housing.
Another scheme punishing retirement plan participants is to allow businesses to withdraw "surpluses" from defined benefit retirement funds, taxing those funds on the way out. There may be a surplus currently but that could quickly evaporate during the next recession. There is no provision for a return of those funds to meet the plan's future funding needs. The government also proposes to force smaller pension funds to consolidate into government-friendly mega-funds so that plan monies can be directed at politically favored investments. The premise of pension plans is that they have a fiduciary duty to act in the best interest of the plan participants. That concept is being turned on its head to favor government priorities. Adding to the crisis is the fact that 18 million Brits saved nothing for their retirement last year.
Government pensions are underfunded and operate on a "pay-as-you-go" basis, meaning that current benefits are paid with current plan revenues. There is no fund standing behind the pension plan's promises. In other words, they are classic Ponzi schemes. UK total pension liability amounts to nearly 6 trillion pounds. The crisis is magnified by politicians' promises of a "triple lock" on pensions meaning that the government promises that pension payments will regularly rise by the highest of inflation, average wage growth or 2.5%. This is not sustainable with the number of retirees growing faster than the number of workers contributing to the system. Twenty percent of the population of the UK is now over 65. With a national debt of 3 trillion pounds, exceeding 100% of GDP, the country's pension day of reckoning is not far off.
Crystalizing Bank of England Bond Losses
During the Great Financial Crisis, Covid Crisis and Banking Crisis of 2023 the Bank of England printed huge sums of money to buy government bonds (commonly know as gilts). Having built up its inventory of bonds to a staggering level, the bank decided to actively reduce that inventory by selling them off on an ongoing basis. At first blush, that sounds like a reasonable plan - until you realize that they bought bonds that paid exceedingly low interest - before rates rose during the crises. That means the bonds being sold must be offered at much reduced prices in order to find a buyer (no one wants to buy a 2% bond when current ones on offer pay 4%).
Deutsche Bank estimates that the BOE is having to discount the price of longer term bonds by as much as 50% to unload them - meaning it is suffering staggering losses on the sales - losses large enough to pay the whole defense budget. The result of this monetary malfeasance is that the country now pays the highest rate of interest on its bonds of all major nations.
The Bank has warned that the Iran war risks pushing inflation above 6%. It nevertheless recently voted to keep rates steady at 3.75%. Should energy prices remain higher for longer than expected, it will be forced to hike rates to stave off price inflation. That would rapidly hurt bank lending and the economy.
Under Investment In Defense
Jeremy Warner at the Telegraph puts the situation is stark terms.
We cannot defend Britain with an ever-expanding welfare budget. We are under prepared. We are underinsured. We are under attack. We are not safe. Britain's national security and safety is in peril. There seems to be plenty of money when it come to inflation-busting increases in public sector pay, but ministers struggle to find the resources needed to sustain an operational Navy. Somewhere along the line, the Government lost its sense of priority.
Its navy, once the most powerful in the world, has shrunk to just 10 submarines, 2 aircraft carriers, 6 destroyers and perhaps 7 operational frigates. Twenty critical electric and communication cables running across the Channel from England to Europe are at constant risk of sabotage by Russian submarines and merchant ships that have damaged them dozens of times. There will be no solution to the defense problem because the funds needed to do so would have to come from social spending and that is a political non-starter. The nation's ability to defend itself will continue to erode.
Talk of Rejoining the EU
There is growing discussion in liberal circles that rejoining the EU is the salvation for the UK's growing list of vexing problems. Of course, that would mean becoming a minority voting member of the EU, assuming its joint debt obligations, and handing control of the nation's money, laws and borders to bureaucrats in Brussels whose interests frequently do not align with England's.
Supporters of the "Re-join" faction have neglected to take note of what has actually been happening in the great EU experiment. Its two major economic powers, France and Germany, find themselves struggling. France's Q1 growth of GDP was an abysmal 0.0%. Germany's was little better at 0.3%. France has a tax burden of 51% of GDP; Germany's is 48%. Politically, they both are in chaos. Macron has an appalling voter approval rating of just 17%. Mertz' is little better at 19% and he faces a surging, right- leaning, Alternative for Deutschland (AfD) political party. Germany, the former industrial powerhouse of Europe has had negative growth since 2019.
Three European luminaries: Swedish Nobel laureate Bengt Holstrom, Spanish MEP Luis Garicano and French professor Nicolas Petit from the European University Institute shine a bright light on what the EU has become.
By the middle of this century, [the EU] could follow the path of Argentina: its enormous prosperity a distant memory; its welfare states bankrupt and its pensions unpayable; its politics stuck between extremes that mortgage the future to save themselves in the present; and its brightest gone for opportunities elsewhere. We need to return the Union back to its original intent, as a federal body dedicated to economic development through a common and free market. The neglect of that purpose has been overwhelming.
That hope for salvation will never come to fruition because there is zero political will to reform the system. Former Beatle Ringo Starr is famously, and aptly, said to have described the result of decades of British and EU political incompetence and over reach: "Everything government touches turns to crap."
