On January 26th figures for the last quarter of 2009 were published showing economic growth of 0.1%. The recession is over. Technically.

Yet the outlook is grim. British government debt is above 12% of GDP, about the same as Greece who’s debt is causing chaos on financial markets. Gordon Brown and Alistair Darling anxiously say that this borrowing binge has been in the cause of fighting the recession by replacing private spending with government spending. The billions paid out to banks were, we are told, necessary to prop up the banking system.

This is dishonest. As chancellor Gordon Brown borrowed millions even in the boom years, a mistake no first year economics undergraduate would make. Since 2002, long before banks came rattling the begging bowl, Brown’s spending still managed to outstrip ballooning tax receipts. The shocking level of government debt is not down to fighting the recession or saving banks but is due to years of Brown’s fiscal incontinence.

The debt will have severe consequences. The mountain of debt is scaring off the international capital markets Brown is borrowing from. Gilt yields, the price the government pays to borrow money, are rising. These higher rates will attract capital towards government debt causing rising interest rates throughout the economy. The effects of this on the weak recovery would be disastrous.

Brown shows little sign of understanding the depth of the catastrophic state of the national finances. His pre budget report in December was a list of giveaways for favoured Labour voting groups. With donors fleeing the Labour Party Brown is beholden for funding to the trade unions who are concentrated in the very public services where the axe will have to fall. Would he be in any position, in the unlikely event of an election victory, to force his paymasters to accept the drastic cuts needed to restore financial health?

Tax rises are the alternative. Given that UK government debt amounts to over £23,000 per person the tax rises needed to bridge this gap would be immense. Even without this, by 2013, 9p in every pound paid in taxes will be spent, not on nurses and teachers, but on servicing British government debt.

Continued borrowing would invite a greater economic catastrophe than we’ve just been through. The alternatives are brutal spending cuts or savage tax rises. None of this will be pleasant. It is, however, the inevitable, disastrous outcome of nearly a decade of massive Labour spending.

The government which, in 1997, inherited the best set of economic circumstances since before World War One from the Conservatives will, probably, in 2010, leave them the worst set of economic circumstances since World War Two. That is the story of this government.