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I was reading Philosopher's Stone again in the last week. I got it back from my Mum who had it (she lives 700 kilometres from me, so that's no small feat!). Anyway, I noticed when Hagrid goes to pick Harry up from the Hut on the Rock he said he was so keen for the job because in getting to Harry he was allowed to use magic. He sends Dumbledore a message about having found Harry and then performs magic in giving Dudley a pigs tail, and the next morning he uses a charm to get the row boat to go faster. He asks Harry not to say anything about these incidents, yet why would Harry need to squeal. The ministry knows when magic is performed in a location anyway. Any thoughts on it?
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You're right, they do, but I believe we are told that they don't know who performs it. I think it says at some point that it's up to parents in wizarding households to keep their children from doing magic because they can't tell the individual that casts it, only the vicinity it's performed in. The reason they have known it was Harry is because he is the only magical person in his household.