Sunday, December 28, 2008

Here they are: my predictions for 2009

Forecasting is a mug’s game, but here’s mine: there will be a general election in May/June 2009. Gordon Brown will lose his majority in the House of Commons, but will return to power as leader of a Labour-Liberal Democrat coalition government. This will be called a National Government of Reconstruction and David Cameron will be invited to join it, but will refuse.

The Scottish National Party will lose Glasgow East in the May election and Alex Salmond will fail to deliver half of his forecast of 20 MPs. The Scottish government will encounter a succession of crises as its budgetary plans come unstuck in the recession and thousands of Scots lose their jobs. The opposition parties in Holyrood will attempt to topple the minority Nationalist administration in the autumn budgetary crisis, but will fail leaving Alex Salmond crowing at the year end.

The general election will be announced in the week after the Prime Minister hosts the G20 summit of world economic leaders in London in April 2009. The newly-installed President of the United States, Barack Obama, will commend Gordon Brown’s management of the economic crisis and call on the world to unite behind the PM’s second global financial stimulus package. The G20 will call for an international programme of investment to tackle the effects of climate change. America and China will fail to agree on the precise terms of this. The two nations will also accuse each other of introducing protectionist measures as world trade slumps and a global recession takes hold.

Gordon Brown will be accused of “cutting and running” by holding a Spring election when the world economy is heading for disaster and unemployment rising to 3 million. The Conservative leader, David Cameron, will claim that Brown is not telling the nation the truth about just how bad the economic recession is going to be. Brown will reply that the previous two Labour administrations have been four year terms of government - 1997-2001 and 2001-2005 - and that he is merely following precedent established by Tony Blair. He will admit that the economic situation is serious, that things have got worse since the start of 2009, and that he needs a mandate from the people of Britain to launch the next economic recovery package which will take borrowing to 60% of GDP.

Property prices will continue to decline and by the end of the year the average house will be worth 35% less than in August 2007. Nowhere will the fall in house prices be more marked than in Edinburgh where the crisis in the financial services sector will deepen. RBS and HBOS will suffer further write downs and losses requiring another injection of public funds and a further extension of public ownership. On the bright side, the Homecoming celebrations centred on the 250th anniversary of Robert Burns will be an unexpected success as visitors come to Scotland in record numbers to benefit from the huge fall in the value of the pound.

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