As many people in the UK are winding down to Christmas office closures it would be nice to post a blog entry with some Christmas cheer.

It is reported today however that the UK Deficit is at it's highest record since 1993 when records began £11.2 Billion (not sure if that includes the £55 Billion lent to Northern Rock or not).

The tax take from UK citizens is also at it's highest level in 20 years and you would therefore think that with more tax being collected that ever before in the last 20 years the economy would be in a fantastic state? Sadly actually we have Gordon Browns legacy. Debt and more debt. 

Not only are personal debt levels at their highest since records began (and rising) but the Government has also been heavily borrowing at record levels.

The word prudent seems to have gone out of the window and don't worry about anything beyond tomorrow is the modern financial model. "talk it up" is the moral of this Government in the hope it will get better based on a feel good factor.

It is therefore highly likely that taxes will have to continue rising while the Government continues borrowing to pay for today.

Is this down to bad management of the economy? I am probably not qualifed to say. A personal opinion though is that there is worse to come sadly.

In fact I cannot personally see blues skies in financial terms for the majority of the UK population for probably the rest of this decade (especially anyone under 40 due to high housing costs, rising bills in almost every sector, and falling net incomes in real terms).

So sadly this year the forecast for 2008 in rising taxes, rising deficits and almost certainly rising inflation as people will need to earn more and more to keep up with rising costs of living in the UK. Basics like food, fuel, and taxes all on the up means falling net spendable incomes. This mean falling growth.

My prediction is that the Government's sole tool to try to "mange" the economy is interest rates. Interest rates will be used (possibly dropped further) in order to prop up a weak economy). To me it is a real sign of danger ahead with the interest rate tool is so heavily relied upon. I can remember with mortgage interest rates were 15% and it is less than 10 years ago. To many commentators who talk of this being a thing of the past they talk as if it was 50 years ago. Ironically 40 years ago interest rates were around 6% not that different to now. In reality low interest rates have driven high house prices and to me that means in reality that house prices have been very much linked to linterest rates and more so than ever by this Government. It is of course what Government wanted. It is largely due to "healthy" house prices that this Government stayed in office. In fact house prices (and the money that can be borrowed due to the feel good factor) are a major vote winner so why on earth wouldn't Government want to do all it can to sustain house prices as otherwise it is potentially on it's way to the exit door.

More manipulation and tinkering to try and rescue the economy is also forecast for 2008. The motive is not a "healthy" society but vote winners to keep the policitions in well paid jobs and great pensions, plus sizeable expense accounts, with sidelines such as lucrative after dinner speeches, book offers, directorships and many other perks lined up along the journey.  Lets face facts being a politician is not so much about "public service" and much more about "self service".

Still as it is all part of the financial cycle and there is certainly much more to life than money my Christmas wish to all is this...

Appreciate what you have whether that is money, love, health or just a sence of peace. It is rare to have all four and some can come at the price of others if your not careful. As the Chinese proverbs says "Be careful what you wish for...".  

A Merry Christmas to all readers of this blog.