2010 - A Year of Hope?

At least there is a broad consensus that growth is returning in 2010 and the even the Organisation for Economic Co-operation and Development (OECD), which has traditionally set a gloomy outlook, has indicated next year should see a strong rebound with China benefiting most while the outlook for the UK is good too.

In revising its forecasts, the OECD has predicted that even the UK will perform better than it thought previously which must be welcome news at last for a beleaguered Alistair Darling. October was another farce in terms of predicting borrowing with a record rise in our Public Sector Borrowing for a traditionally strong tax month of £11.4bn, pushing this year to date to nearly £90bn.

The main 'head winds' to growth, as the OECD calls them, will be unemployment and our public finances - the two areas where this Government has performed poorly. October was a dire month for both, the borrowing figure showing finances are nowhere near under control as we dedicated yet more to bank bail outs, while in turn banks announced major swathes of redundancies. Just when the news needs to be getting better, October could not have been worse all round, particularly as we found out that were still officially in a recession.

Reports in some papers today talk of a 'Black Hole' in our finances which is affecting our Government's debt calculations while others talk of unemployment rising to 3m in less than a year as the full repercussions of the recession are felt, dragging as down as we recover. The Queen's Speech was depressing from three aspects - 1) we missed the opportunity to get action on MP Expenses, 2) we got some pretty ill thought through but headline grabbing initiatives on care for the elderly which seemed to favour only one sector for some curious reason and badly at that and finally, 3) we got no action on how to solve the public finances.

This latter inactivity will cost us dearly on our road to recovery. Yesterday, I blogged on 'Hope is not a strategy' and clearly the message falls on deaf ears. Hoping to cut the budget deficit by half and then seeing the forecast for borrowing missed within a day for the previous month just shows a hopeless lack of understanding of our finances and a monumental hubris about what needs to be done for the future. While the strategy of spending is generally accepted as reasonable, surely we must be focusing on where we can make cuts and efficiencies so that we try to at least cut the deficit now to have any kind of hope of meeting the increasingly delusional target of halving the deficit by 2014?

The danger here is that as we recover, we continue to spend recklessly and find cutting hard - in fact, the temptation will be to believe that because growth is returning there is less need to cut spending. This will be a huge mistake.

The public finances has been for the last 12 years, and will be for the next 12 years, the most critical part of a Government's strategy. We have wasted vast tranches of money in the belief our economy was 'robust' and the temptation will be to waste more because we believe it is recovering. Getting our National Debt down must be the number one priority going forward and we are already way behind in our action plan. The last few months of this Government is already laid out in terms of its plan and not a single action along the way is designed to cut the deficit.

With that kind of leadership, what hope have we of meeting goals and reducing debt by 2014?

This is already, and will be for the future, a massive millstone around our necks as taxpayers. Add that to our limitless liability for bank losses, of which there could be more massive losses in 2014 as Private Equity Houses default on their loans, the future is actually not as bright as we would think.

Perhaps Brown has already worked that one out and has already 'lost the election' in his mind and so is actually preparing the ground for a ruined economy to be handed over to the next poor incumbent to make their tenure really awful.

What a nice way to thank John Major, who did precisely the opposite for him.