A new year, a great year? Unfortunately not. This column accurately predicted the inevitable back in 2007, and how that would run out in time for an election, and the very real potential of a hung parliament. (By the way prepare for lots of media coverage on that subject).

Politics are very political. In 2007, Mr Brown was (probably as any politician would have been at the time) under big scrutiny. It was clear a recession was on the way. With that much excess in the system, an inflated economy would inevitably cause a bubble. Faced with an election in 2010, I figured they would use the old skill of bringing forward an outcome. If you know something is inevitable, bring it forward.

And so all the headlines from the chaps at the top were about very difficult times ahead. 'The UK needs to brace itself' and so on. One minute we were all told to be happy then we were all told to be sad. One minute all the different folk at the 'house price index' say house prices are rising then they are falling. The power of the media.

And so with the recession brought forward, the timing of when to drive us back out was the next key. Eighteen months ahead of an election is the prime time, as that is how long it takes for any changes in fiscal policy to make their way through to the economy in full. Sure enough, with more timing than an 'x' factor singer, we had both quantitative easing and record low interest rates thrown into the system.

The next few months will be about winning an election, and the following couple of years will be about paying for that. So expect a nice run through over the next months. Expect news that we have been taken out of recession sometime over the next few weeks. Expect inflation to return and with it a threat of interest rate rises. We might even have a rate rise with the self appointed 'gold star' being the fact they have had to do it because they have been so successful in taking us out of the state we were in.

Then the pain will start. I might be cynical in thinking that capital gains tax was reduced to 18% at the same time that many other allowances were discontinued, only for the next budget to bring capital gains tax back in line with other taxes i.e. why would you have income tax at 50% and Capital gains tax at 18%. Watch out for that, and if you are thinking of selling assets I would approach your accountant to chat through the timing of any sale.

If you are a higher rate tax payer, what fun you will have. Mr Darling who announced higher earners will 'have to contribute a bit more' only 'while we resolve this situation' made the mother of all gaffs last week when he announced (mistakenly) that the higher 50% tax rate has been factored into the budget until 2015.(1) The higher earners will expect to pay £10.7b more over that period. Whilst that mightn't worry those under the higher rate tax barrier, most have seen that taxing brains doesn’t achieve much, as the better brains leave the country, or simply find the right adviser to mitigate the tax. There is always a way.

All this is coming at a time when PIMCO, the world's biggest bond house is preparing to sell off its UK Gilts.(2) Hmmm. The potential for a sovereign debt crisis looms large. This was always a risk, a risk we mentioned here in this column on countless occasions and the inevitable sell off of gilts will not be favorable. Gilts are seen as a benchmark rate for lending. The drive upward will not be favorable for the borrowers as gilt prices fall and the yield rises. PIMCO rated the probability of a UK downgrade to 80%. If it happened the U.K. would have to pay more for its foreign debt driving us further into the mire.

In the meantime however, equity investors are having a field day. In November '09 the investment management association announced that private investors bought £2.4bn unit trusts and OEIC's breaking the previous record of 2000.(3) Happy new year.

If you would like investment advice call Peter on 0845 230 9876, e-mail info@wwfp.net