Indeed, the Swedish private sector employs no more people now than it did in 1960. Unemployment, if you add in government make-work schemes, is over 12 per cent. This is naturally deeply alarming to the young, well-educated people coming on to the job market for the first time.So what will happen? Ask the sophisticated people in the financial services sector and they say that the economic need for change is clear, but the perception of that need for change has yet to sink in So the country faces some more years of disappointment. But the problem seems to me to be less one of taxation or political will, but rather one of the distortions to the economy that the tax/spend regime causes.One distortion from the tax system is that it discourages the formation of new companies, another that it discourages increased employment by established ones. The draft budget for next year was published last week and was the familiar mix of tax increases and trims and tucks to spending.

Living standards will continue to be squeezed, people will try to offset that by demanding higher wages, and some of those who are disappointed will respond by going on strike. And top tax rates have come down, so that they are now lower than in neighouring Denmark.True, there is a tax shortfall at present. The Swedish budget deficit is now 7.5 per cent of GDP, and the plan to get this down to the 3 per cent Maastricht limit by 1997 looks shaky. Taxes are certainly very high - VAT at 25 per cent; petrol 80 pence a litre; top income-tax rates, with local taxes, about 58 per cent. But my strong impression here is that, while people in the business community complain, there is general political support for the high-tax/high-spend system People feel they get value for their tax money. In fact Sweden is the only European country where the birth rate is above replacement rate.

A high proportion of women working and high birth rates are made possible by the lavish state-subsidised child-care system The state pays about 90 per cent of the cost of day-care. So women work, earning money to pay the taxes that then fund the wages of other women who look after their children. The household sector of the economy, the things which in other countries are done informally in families, has been made into an economic transaction. One Swedish economist, Assar Lindbeck, said that Sweden had "nationalised the family".But if Swedish people want to do this, why shouldn't they? If they are prepared to pay the taxes, then that would seem to be their choice and they should carry on.The pat answer is that, whatever people say to reseachers, when it comes to voting, they vote for lower taxes But that is not really true in Sweden. For while the pressures on the Swedish welfare system are the pressures on other European welfare systems writ large, so too is the ability of Sweden, with its excellent education and its social cohesion, to cope with these pressures. The size of the Swedish state sector relative to the rest of the economy is almost as large as that of Britain's in the middle of the Second World War. One-third of all workers are employed by the state; about 60 per cent of GDP passes through the state system.