Rue Britannia, as the stiff upper lip curls in anger

I've become quite used to it now. Every time I return to my home town of London another seemingly permanent aspect of British life has been swept away, or has collapsed in chaos, or been sold or taken over. For the past 12 months it was the UK's economic and commercial system - the banks and property lenders, the great High Street retailers, the public transport system - that went into a spasm, apparently every time I set foot in the Heathrow arrivals hall.

It was rather like being back in a town you once knew quite well but hadn't visited for a few years: "Wasn't there something there once, just on that patch of urban wasteland? Oh yes, I remember. It used to be a world-class financial system." Last weekend was the most profound shock to date, because the British system of parliamentary democracy looks to be in danger of extinction. The extravagant abuse of expenses claims by members of parliament, drip-fed on a daily basis on the front pages of The Daily Telegraph, is threatening to undermine British politics in a profound and radical manner.

It is difficult to know which is the more serious threat: the scorn and disrepute heaped on all politicians as a result of the expenses scandal, with a resulting potential for alienation from the entire political process; or the risk that voters at the next election, which has to be called before May next year, will shun the traditional political parties, especially Labour and Conservative, in favour of extremists from right and left.

I have never encountered a political atmosphere such as that which exists in London now. There is unprecedented outrage on the part of ordinary citizens, struggling to get through the ravages of economic recession, that their political masters should be shown to be such arch-agents of venality and downright fraud. Politicians have been ripping off the system for years, it seems, claiming as legitimate expenses anything from grocery bills, adult movies and lavish chandeliers. They have also been breaking the capital gains tax laws on quite a lavish scale.

Serious commentators are talking about the "collapse" of normal political life and the need for radical reform of the "Mother of Parliaments". Whatever else the scandal does, it is the final nail in the coffin for Gordon Brown (although this particular coffin is so riven through with metal it will take a crane to lower it to its final resting place). Barring a miracle, the prime minister will be lucky to reach next year's election date without being toppled from leadership, but even if he survives it will only be to lead his party to ignominious defeat.

On the macroeconomic front, Mr Brown's legacy was thrown into sharp relief by recent reports from international agencies which showed just how badly the UK has been affected by the global crisis. The IMF brought out a scathing indictment of Mr Brown's handling of the crisis, accusing him of incompetence and ineffectiveness in his reaction, implying that any incoming government would have to take more painful action, especially with regard to public spending.

The ratings agency Standard & Poor's (S&P) also stuck in the knife with a downgrading of Britain's economic prospects and, by implication, the creditworthiness of the government. Calling the long-term outlook on the UK "negative", S&P raises the real possibility that the UK could lose its valued "AAA" status in the next couple of years, only the second of the major industrialised countries - Japan is already "AA" - to face such shame.

Losing that "A" would be a rather more serious threat to Britain than, say, a chef losing a Michelin star. And, of course, it would be, for joking aside this is a deeply unsettling matter. The UK is faced with such a huge public sector debt, equal to total GDP by some estimates, that it will have to take drastic measures on cutting public spending, increasing taxes and seeking further access to international bond markets.

If its creditworthiness is reduced, it will find it all the harder to raise funding on decent terms. The real prospect of national bankruptcy looms over the UK. For many individuals, that fate is already a reality. A study of the true state of individual debt in Britain suggested that almost one million people would be technically insolvent by the end of this year, and would be seeking to do some sort of deal with creditors and bankers.

It is a depressing prospect, especially with unemployment still rising inexorably. But with that gloomy prognosis came a simultaneous warning that politicians caught in the spotlight of public hatred might be contemplating suicide. The true state of public opinion is that most debt-battered citizens would favour a ritual bout of hara-kiri en masse by Britain's parliamentarians. It is not a healthy atmosphere over there at the moment.