Pay-back time...and this time it's serious

A year ago, I said on this blog that 2009 looked like being the hangover year when we finally started paying the price for a bust, over-borrowed economy.
Given the financial thumping everyone took from the credit crunch, it was an easy forecast to make.
Even so, it wasn't entirely accurate.
Yes, the UK has gone through one of the longest recessions on record, but this one seems so far to have avoided the war-zone bloodbath that some predicted – partly because many businesses and workers have agreed to cut pay and working hours to avoid cutting jobs and losing skills.
My forecast was also wrong on something else: in the purest economic sense, we haven't really started paying the price.
When I say 'we' I mean our Government. The 216-page Pre-Budget Report which I dutifully read through a few weeks back managed the notable feat of giving no meaningful detail about how the Government intended to pay back the billions and billions it borrowed to stop the economy falling over.
This is a huge issue for us because it has the potential to skew the whole economy.
If the international ratings agencies decide that the UK Government hasn't got a plausible plan to wean the economy off handouts and get it growing again, they could well downgrade the UK's creditworthiness.
This would mean that when the Government tried to borrow money it would have to pay significantly more for it. It would be like you or me suddenly being told our mortgage interest rate was going up by 10% or more. To pay the bill, we'd have to make drastic cutbacks.
It's reasonable to assume that the Government doesn't want to give detailed plans because that would lift the lid on its spending plans after next year's election – giving the opposition some useful campaign weapons.
Believe me, there will be significant cuts whoever comes to power. That's the only realistic way we can pay back our debts.
We are probably out of recession in pure technical terms already, but that doesn't mean business will steam ahead next year.
The problem is that in a country where consumers are indebted, banks don't want to lend cheaply and the public sector is hitting the brakes, there are no obvious routes to significant growth.
Against that background I'm afraid it means job losses will probably continue for a while yet. If businesses can't see a way to grow some weary company owners may hang up the 'for sale' sign and see if rivals who've hoarded cash want to leapfrog their way to growth by buying their customer base.
This kind of rationalisation often leads to job cuts.
The same will happen in the public sector, which expanded massively during the boom years. Their budgets can't continue rising and since the biggest cost in councils, health services and the like is staff that's where the axe may fall.
Saving money in the public sector is the Holy Grail for cost cutters because it's money saved from what's known technically as an 'unproductive' part of the economy – activities funded by tax revenues which don't produce goods that earn money for the economy or taxable profits to plough back into it.
No government will like doing this quickly. But Britain's reputation in international credit markets means they may not have much choice.