CHALLENGING YEAR AHEAD

Walking to work from across the Thames this morning, I was met by a strong icy blast - for Gordon Brown, this must feel like a metaphor for the political problems which face him in the New Year.Mr Brown appeared on one of the Sunday morning political TV programmes to answer, or rather not answer, questions about political issues.

The bags under his eyes suggest he has had a lot to keep him awake in the past few weeks.

This is Mr Brown's first full year in the job which he has coveted for so long. But, as I watched his rather nervous performance on television, I was reminded of Oscar Wilde's observation that "there are two tragedies in life - one is not getting what you want and the other is getting what you want. The latter is the real tragedy."

Mr Brown was not a bad Chancellor of the Exchequer but he has not been a great Prime Minister so far, and the solid economy on which he built his reputation has been looking rather less secure of late.

In the next couple of months, we shall find out how serious the slowdown of the economy really is. If there is a significant economic slowdown then that will really cause problems - higher unemployment, bankruptcies and consumer debt problems, declining tax revenues and an even bigger hole in the Government's finances.

For much of Mr Brown's time as chancellor, the public finances were actually in a pretty good state - which gave him money to spend on public services and - usually in the years before General Elections - on a few carefully-chosen tax cuts.

An economic slowdown causes mayhem for Government finances, which are already stretched to breaking point. Slower growth has a "double whammy" effect on Government finances by pushing up spending - for example, on unemployment benefits - and simultaneously reducing tax revenues.

The Government has no real buffer against this outcome, which is why Mr Brown must be feeling so uncomfortable at this time.

Mr Brown's mind will also, no doubt, be on the electoral cycle - he would probably be planning to hold a General Election in spring 2009 but these plans would be likely to be scuppered by an economic recession this year.

There are many other political challenges facing the Prime Minister in 2008 and he will have every chance of proving the veracity of Groucho Marx's description of politics as "the art of looking for trouble, finding it everywhere, diagnosing it incorrectly, and applying the wrong remedies".

I awoke this morning to hear on the radio that the Government is promising a "renewal" of the NHS, which seems a bit odd since it has been running it for the past 11 years. This sounds like more micro-management from Whitehall, when what it really needed is more devolution of powers within the NHS to those who use and run the service at a local level.

Over the next few months, the Government will be trying to implement its hugely unpopular plan to close 2,500 sub-post offices, which seems to be part of a strategy of centralising services. This is causing huge frustration for many people, who find themselves dealing with faceless and increasingly unresponsive Government agencies.

Spring will bring the next round of council tax rises, which will be inflated by one of the worst local government settlements for years. The Government's failure to grasp the nettle of council tax reform means that many people on modest incomes will be hit hard by council tax rises.

Meanwhile, pensioners will be kept waiting until sometime between 2012 and 2015 for the relinking of their pension rises to earnings growth.

In Iraq and Afghanistan, our armed forces still face extremely tough conditions, with inadequate equipment and (in Afghanistan) with too few troops to do the job which they have been given.

It is becoming increasingly clear that the Ministry of Defence's budget simply is not large enough to cope with all of the pressures on it - which have been exacerbated by fighting for years in what are essentially two wars.

It is difficult to avoid the conclusion that this will be a challenging year both for the Government and for our country. It is also likely to be a year which shapes Britain's politics for some time to come.