Liberal Democrats will hear two words often over the next few days – ‘Annus Horribilis.’ The general consensus is that we’ve had happier times, better years.

But 2006 has not been entirely “challenging”. Most of the bad news, which has grabbed the headlines, has come from the party in and around Westminster. The news from Scotland has often been good, and there have been successes in local government too. And as we end the year, the party in Westminster looks like its turning a corner too.

2006 started with a bombshell – Charles Kennedy’s resignation in January seemed unreal to many. Thirty Parliamentarians in a democratic party of tens of thousands of members, a party founded on a principle of one member one vote, had deposed a popular and charismatic leader. His initial attempt to carry on with the backing of the membership in a leadership ballot was blocked by some fancy media footwork. On 7 January, Charles Kennedy resigned.

In less than a week, four leadership contenders were in place. Within two weeks of that, two were ‘outed’ by the press as having had homosexual relationships in the past, one dropped out, and polls suggested a collapse in party support to 13%. February and March were devoted to leadership hustings, hand-shakes and horseplay between the three remaining leadership contenders.

The leadership contest was at times less than courteous. Speaking during a BBC Question Time special, Menzies Campbell openly criticised Chris Huhne for lacking modesty. Huhne and Campbell both drew flack from Simon Hughes, who denied authorship of critical remarks that had been put out in his name on his website. As the contest progressed, supporters of the three contenders engaged in a more damaging war of anonymous briefing.

But in the midst of this, the party was buoyed by the declaration on February 9 that Willie Rennie and his campaign team had won the Dunfermline and West Fife by-election. An excellent Scottish campaign delivered the 63rd Liberal Democrat MP to Westminster.

Among the grassroots it was perhaps more with a sense of relief than elation that Menzies Campbell was convincingly elected leader on 2 March – ending the leadership contest which some felt had lasted too long. Campbell’s first major speech at spring conference was well received. He unveiled his senior shadow cabinet members four days after being elected – that teams remains largely unchanged at the end of the year. He fulfilled his pledge to “steady the ship”.

However, the leader’s early performances at Prime Minister’s Questions, his hands visibly shaking in the first few weeks, were to lead to increasingly unflattering press coverage – a question about pensions earned a sedentary “declare your interest!” from Conservative Eric Forth MP, to humiliating howls of laughter. A mixed bag of local election results in early May were described as a “consolidation” by the new leader.

The aforementioned Eric Forth passed away on May 18, leading to a by-election in his Bromley & Chislehurst constituency on June 29. Thought to be one of the safest Tory seats in England, a magnificently run Liberal Democrat campaign came within 633 votes of seizing the seat, sending a damaging shock-wave to Cameron’s leadership.

There was more good news on July 1, when a smoking ban came in to force in Scotland, which the Scottish Liberal Democrats had been instrumental in delivering. Further south, as the Commons rose for recess in July, Mark Oaten announced he would be stepping down as MP for Winchester – Oaten and his wife then embarked on a series of revealing interviews in the press and other media.

August brought us the pre-publication press coverage of Times journalist Greg Hurst’s book: “Charles Kennedy: a tragic flaw“, bringing with it new revelations about the extent of the former leader’s alcohol problem. But August also saw the launch of what would become the Green Tax Switch campaign – a comprehensive set of clear environmental tax plans that can run rings around the other parties. Green Taxes would become a recurring theme in the following months.

Autumn conference in September saw the party rally behind the leader, while waving a fond farewell to Charles Kennedy. Jenny Tonge got in to a spot of bother with some remarks that were later criticised for being anti-Semitic, and the first step in a new series of campaigning innovations – the diversity fund – was launched. Conference was judged as a success for Menzies Campbell after potentially controversial motions on part-privatisation of the Royal Mail, and new tax policies, were passed. Simon Hughes was unchallenged for the position of party President. Also in September, the Liberal Democrats became the biggest party in Burnley, following a defection.

Throughout the warmer months the party’s poll ratings resettled at about the 20% mark, following the earlier instability in the year.

October brought the return of Parliament after a long recess, and a series of stronger performances at Prime Ministers Questions from the leader. The Electoral Commission announced it will issue a final decision on Michael Brown’s £2.4m donations “within weeks”. Richmond Council, which the Liberal Democrats took control of in May, seized the headlines by announcing an ambitious new scheme to financially penalise drivers of so-called “Chelsea tractors.” Nicol Stephen moved the Scottish Liberal Democrats to an election footing with the launch of their Scottish Parliament election pre-manifesto .

Paul Keetch announced in November that he would not be seeking re-election at the next General Election. Liberal Democrat MP Don Foster was successful in legalising radio transmitters for MP3 and other portable music players. In Redbridge ward in London the Lib Dems came from fourth to cement earlier success in Camden. Nick Clegg and Menzies Campbell launched “the freedom bill” – a list of ten laws a Liberal Democrat government would repeal on taking office. Paul Holmes saw off a late challenge from Jenny Willott, to continue as chair of the Parliamentary Party.

A restructuring of the party’s central policy making operation kicked in over November and December, and in December a new head of Campaigns was appointed – Hilary Stephenson was the architect of the successful 2005 Cheadle by-election campaign. The news from the party in Westminster took a less positive turn when Lembit Opik got in to hot water in the media for talking to an immigration minister about the case of his new partner and her sister. His local party executive found no wrongdoing.

In his new year message, Menzies Campbell ended the year by calling on the party to sharpen its message on crime, and launched a consultation.

That was then, this is now

So, after a roller-coaster ride in 2006, can we look forward to a happier 2007? Perhaps. Our leader will have the opportunity to take on a new Prime Minister. Devoid of policies, the Conservatives may see their base desert them in May. There is the prospect of a Liberal Democrat First Minister in Scotland. There is even the prospect of a General Election.

But there are many major challenges. If the Electoral Commission call on the party to default Michael Brown’s £2.4m donations, a court case will ensue that could run until May – meaning that issue will have rumbled on for two years, causing much damage.

Four years ago, on the back of massive and growing resentment of the Iraq war, a huge number of Liberal Democrat councillors were elected with the result that next year something like half of all Liberal Democrat councillors in England are up for re-election. Polls in December suggest support for the party may be slipping.

And Menzies Campbell’s team need to be looking for an issue on which the leader can seize the political agenda. In recent months parties smaller than the Liberal Democrats have been punching above their weight in Westminster on issues like cash for peerages and Trident. Welsh nationalists forced a vote on the Iraq war. Our MPs need to up their game and be ambitious in making the political weather.

2007 is already set to be another roller-coaster, and the ride hasn’t started yet. The ups and downs will call for strong leadership and so, in 2007 as in 2006, all eyes will be on the leader as he continues to prove himself to the membership and to the country.