After a decade of reckless spending, the government’s kitty is bare and its debts are mounting. In November, Alastair Darling said the economy would shrink just 2%, but predicted, Micawber-style, that it would turn up in mid-2009. Well, the economists’ consensus is that it actually shrank 3.7%, and that it’s hardly going to turn up this year at all.

Unemployment’s already 2 million, heading for 3.2 million. That’s a lot more people drawing benefits and not paying taxes. And there’s those expensive bank bailouts to pay for. So the Chancellor is borrowing wildly. Again, the economists’ consensus is that he borrowed £160 billion in 2008-09 and will need another £167 billion this year. That’s a whopping £100 billion more than he anticipated in November. It’s borrowing on a scale not seen since World War II. Then, we were fighting a war. Now, we’re just borrowing to pay off our debts.

The Institute for Fiscal Studies says the national debt could climb to 73% of GDP – 84% if you add the bank bailouts. That’s scary (scarier still if you include the future costs of nuclear decommissioning, PFI schools and hospitals, and civil servants’ gold-plated pensions).

Getting out of debt like that will take years – even if spending is cut back. But with places like Derbyshire putting their council tax up 8.7% and Whitehall’s generous budgets being set until 2011, there’s scant chance of that.

Still, after June 2010 it will be the Tories’ problem, so expect Darling to announce giveaways and gimmicks (like electric cars) now, and large tax rises that bite after the election. But what we really need is to slash regulation and tax on the people who, unlike politicians, can really create jobs – investors and employers.

Dr Eamonn Butler is Director of the Adam Smith Institute and author of The Rotten State of Britain.

Published in the Spectator here