I have memories, clouded by sorrow

A quick note on the budget. Looking at it all, it seems quite reasonable to me. A lot of people are upset at the cuts, but ultimately there comes a point where an entity - in this case, the UK - is living beyond its means and simply has to start spending less. You can't just keep borrowing in the hope that eventually the spending will pay for itself because eventually the interest payments mount up, and you're left more vulnerable in the meantime. We currently spend more as a country on interest payments on our borrowing than we spend on housing, the environment, and transport, for example.

It's not just about cutting the deficit, it's about eliminating it entirely. National debt is fine, if you have the capability to pay it off, but as long as there's a deficit of any size then that debt grows and grows and we fall further behind on repayments. We've been spending more than we actually make since 2002, hoping that we can pay it back later, pretending it's "investment" when it is not. It's pretty irresponsible spending really. So things have to change.

Cuts in the Budget that seem fine to me include these:

• Child benefit frozen for three years. That'll be a cut in real terms of about 10% after the three years but it gives people time to tighten the purse strings.
• Public sector workers face a two-year pay freeze if they earn over £21,000. Again, they will just have to learn to spend less. Yes, it's a pay cut in real terms, but the country doesn't have enough money, so that's how it goes. Better than being made redundant.
• Tax credits reduced for families earning over £40,000 next year. Cry me a river - why are we paying any benefits to families on £40,000 a year? If you're earning £40,000 a year and you can't afford to pay for your family, then your family is too big. Try looking at your spare income before you squeeze out another kid.
• Housing benefit: New maximum limit of £400 a week for properties with more than three bedrooms, £250 a week for a one-bedroom flat (etc). I don't know about London but it's trivial in Nottingham to find properties below those prices and hard to find properties above them. People have no right to complain. Housing is perhaps a right but luxury housing is not.
• Introduce a medical assessment for Disability Living Allowance from 2013 for new and existing claimants - good. If done properly, those who need it will have nothing to worry about. No doubt it won't be done 100% properly but is that a good reason not to do it at all? You can't go doling out public funds giving people the benefit of the doubt all the time.

I can understand worries about the whole 'double dip' recession thing but there is plenty in the budget to encourage businesses to create jobs and to invest:

• The "entrepreneurs relief" rate fro Capital Gains Tax of 10% on the first £2m of gains will be extended to the first £5m.
• From April 2011, the threshold at which employers start to pay National Insurance will rise by the rate of inflation plus £21 per week.
• Corporation Tax will be cut next year to 27%, and by 1% annually for the next three years, until it reaches 24%.
• The small companies' tax rate will be cut to 20%.
• People setting up new businesses outside London, the South East and the east of England will be exempt from £5,000 of National Insurance payments for the first 10 workers.

As for the people complaining about the Liberal Democrats (and to a lesser extent, the Conservatives) breaking election promises, it needs to be borne in mind firstly that the current Government didn't have access to the previous Government's balance sheet when campaigning, and secondly that it's necessary for coalition governments to compromise in order to pass bills like the Budget. It's disappointing that some of the people who seem to demand proportional representation in order to benefit their favoured Liberal Democrats won't accept that under such an electoral system compromises are inevitable.

There's one negative for my job in the Budget: tax relief for the video games industry will be 'scrapped'.I put scrapped in quotes because I don't think it was ever enacted in the first place, just planned. I think this was a small mistake as the UK is well placed to make a lot of money from knowledge-based industries such as software, entertainment, and, well, entertainment software. It requires little in natural resources, next to no reliance on imports or foreign labour, and benefits from a well-educated and densely populated work base, which we have. Oh well!

Someone facetiously commented on the BBC site recently that one way out of the credit crisis was simply for a country to default on its debt to smaller countries who have no real way of forcing them to pay.

So it's been interesting to see the economic hostilities between Iceland and the UK that evolved over the last 24hrs, as a result of the opposite of this situation happening.

- The Icelandic bank Glitnir was nationalised, indicating problems with the Icelandic economy, so worried UK savers and investors started moving their funds out of other Icelandic banks such as Landsbanki, contributing heavily to Landsbanki being nationalised also.
- These banks were not covered by the UK savings deposits protection, meaning UK investors would lose money.
- The UK government claims to have asked Iceland what they would do about this, and the Icelandic government are reported to have said they will not pay any compensation to UK citizens, only Icelandic citizens. (One would presume they simply don't have the cash to go around.)
- Because Iceland was judged therefore to have defaulted on the debt, banks based in Iceland were judged to not be solvent, and so the Financial Services Authority took the UK operations of a 3rd Icelandic bank Kaupþing and sold them to protect investors.
- This led to Kaupþing being nationalised overnight, since confidence in their debt would have plummeted to a new low.
- And now the UK government has started freezing Icelandic assets in the UK, using powers under The Anti-Terrorism, Crime and Security Act 2001, starting with those of Landsbanki, with a view to perhaps selling them off to compensate UK investors, or at least to hold them as security, as up to a billion pounds of UK local government money is invested in Icelandic banks, on top of any private investments.

Crazy stuff. The UK is taking a hard line with Iceland over this, but Iceland probably made a big mistake in explicitly saying that they wouldn't cover UK investors, when other countries (eg. Ireland) are saying they'll guarantee the deposits of foreigners in order to shore up confidence in their banks. Perhaps they realised the situation was so bad that they couldn't afford to take that gamble since there are so many UK (and Dutch, apparently) investors who stand to lose out if things continued.


Apologies to velvetchamber if I've mangled any Icelandic names above...

I find it rather bizarre and pointless that, in the wake of the murder of a student in his home a few days ago, that police are going to step up their visible presence in the area in an attempt to reassure residents.

The reason for my thoughts on this can be seen here: behold, a map of the murder site (in blue) and the city's Central police station (in red):

If that isn't enough of a police presence already, then what is?

What's perhaps worse is that the ambulance service, which was the first emergency service called to the scene, immediately notified police. Police used to always attend serious injuries where an ambulance was needed, yet in this case, despite being just across the road, they still didn't get there first?

"Police have been probing the couple's links to a website dedicated to fans of computer fantasy game Advance Wars. Reports suggest Matthew had argued with a gamer, who had taken revenge." Internet gaming: Serious Business.

Apparently they arrested someone in Germany in connection with this, which is interesting. But it does mean that the armed arrest outside my house the other day remains, as yet, unexplained.

In other news... the credit crunch, isn't it fun? It's quite interesting to see all the details coming out of the highly unscrupulous activities undertaken by people in finance, such as traders borrowing shares and selling them in the hope of buying them back at a cheaper price (sometimes rightfully deflating a company's overvalued stock, other times wrongfully depressing the price due to the herd mentality of traders), and banks borrowing more money so that they can afford to lend, while ignoring that that money still has to come from somewhere. And the end result of all this is that governments bail out the banks, ie. privatising risk but socialising debt. When it goes well, the traders win, when it doesn't, the average person pays through their taxes.

An interesting and often forgotten aspect of this however is that it may not have come about if it wasn't for the so-called 'subprime' crisis, ie. a lot of Americans being given mortgages that they weren't in a position to pay off, and banks being left with their only option being to repossess a house which is worth less than what they paid for it in the first place. The root of the problem here is the American entrepreneurial attitude taken and applied to poverty, encouraging people to borrow more, work hard, and hard workers will (or should) see a return on their 'investment'. Work hard, and anybody can get anywhere. The American Dream, etc.

That approach is fine for business, where you gamble with your business, and declare bankruptcy if it goes wrong, and where all sides understand the stakes. But it's not fine for your domestic housing, which gives you and your family shelter from the elements, and provides a base from which you are able to earn and live. It's not something to be gambled with, and people on the borderline should be encouraged to rent within their means rather than encouraged to buy at prices well beyond them just so that the bank can cream off the interest. People have always talked about rent as lost money and a purchase as an investment, and there is truth to that, but house prices both sides of the Atlantic have been hyper-inflated for a long time. It didn't take a genius to see that, and it is totally naïve to assume that a house price will always go up or stay stable when the worth of almost everything else you buy in life goes down.

We have a team of highly important businessmen in the office at the moment, who've come over from the US and represent part of the world's second largest marketing services group, apparently. Serious Business, literally.

One of them has a 'Blind Guardian' sticker on his folder.

What is the world coming to?!