There is a Spending Review coming up with government departments and their anxious ministers finding how much money they are going to get (SPOILER: slim pickings unless the people in your portfolio wear scrubs or khaki or like going on Saga cruises). For most ministers it will be their first Spending Review in government and it will be a humbling experience for them as they turn up, cap in hand, at HM Treasury only to be told to essentially ‘f*ck off’ by a bespectacled 24 year old.
Much has been written in the past about ‘Treasury Brain’ and how it stops good things happening. I share this sentiment but it needs to be remembered that HMT mandarins are often on the side of the angels in stopping foolish and wasteful projects from being approved and in fact does a good job at hiring people with ‘certain traits’ who have zero qualms about telling people to ‘f*ck off’.
I enjoyed Tom Harwood’s recent Substack on the UK’s Right search for its own Javier Milei and why Rachel Reeves has been the one championing a bit of ‘chainsaw treatment’. I’ve written before on why I think that the government was wrong to means test the Winter Fuel Allowance in the way it did and she was wrong to go on a spending splures to appease Labour’s union paymasters. However, she is right to at least try and go for spending restraint by being less generous to wealthy Boomers and so it is disappointing that she has clearly been sidelined to some extent.
As alluded to above, the government is clearly going to increase spending on defence, the NHS, and pensioners. It will also hopefully scrap the two child benefit cap Some of this increased spending is essential such as for defence where we should absolutely be spending more money in light of Russia’s aggression and the fact that we live in a more dangerous world. Some of this increase is inappropriate as it represents a capitulation to Big Boomer (even though the policy itself might be solid). As for the NHS, the whole system needs fundamental reform rather than just more money.
Regardless, there is going to be more money spent on certain departments. The government will claim that this is being funded through cuts elsewhere but in reality public spending will be increasing overall. What is more, it paves the way for Reeves to introduce even higher taxes. Hiking taxes would be a disaster and I’ve written before on why making cuts to certain departments is simply not good enough and in some ways would be counterproductive (you really do need a chainsaw when it comes to public spending).
I don’t think much of this spending should happen but it will. I also don’t think that taxes or borrowing should go up. So, how do we fund it?
I found inspiration from Nigel Farage a number of times this week. I’m very supportive of his policy to scrap the two child benefit cap, I support him pledging to end the means testing of the Winter Fuel Allowance (even if his motives aren’t the same as mine), and I was quoted in The Telegraph this week on why his ‘tax break’ for married couples is actually a good idea (I’m a pro-natalist).
However, the inspiration came from something which I disagree with. Reform has said that it will introduce the Cryptoassests and Digital Finance Bill if it forms a government. There is a lot going on in there and I don’t want to go into detail on why I think that such a reserve isn’t a good idea, but it is intriguing.
The UK government already holds quite a lot of Bitcoin. In fact, it holds even more than El Salvador, with only the US and China holding more. This is not quite by accident even though it wasn’t purchased by HMT or the Bank of England, but it also wasn’t government policy to own it. To quote Lyle Lanley.
A town with money is a little like a mule with a spinning wheel. No one knows how he got it, and danged if he knows how to use it
We don’t know exactly how much the government’s holdings are or how it got it but the vast majority of it has been seized from people suspected of criminal activity. In such instances the assets seized are split between the police and the Home Office. This is obviously fine for relatively small amounts of money but with Bitcoin we’re talking around the £4 billion mark.
Given how unstable cryptocurrencies are the government should not hold on to it. Yes, there is a danger that it sells it off and then the value increases and it becomes another ‘Gordon Brown sells off the gold’ moment (although he was right to do it) but given that crypto is so volatile, and we need the money, the government needs to sell it.
The government needs to be smart here. Germany found itself in a similar situation and fumbled the bag. Obviously if you signal to any market that you’re keen to sell an asset then you tend to lower the value of it and you get less money.
Instead, the UK should treat its Bitcoin holdings in a similar way to its gilts. Rather than just selling it off all at once it should release its Bitcoin holdings gradually and through auctions. There should be a reserve price attached and should be conducted during periods where demand for Bitcoin is high.
The government won’t raise a fortune this way but it should raise more than £4 billion. This is not an insignificant amount. For example, it could fund the scrapping of the two child benefit cap and reversing the means testing of the WFA for a year. It could also be spent on the Defence Budget. I don’t really mind.
The government is probably going to increase public spending and it’s likely going to increase taxes to fund it. It’s currently sitting on a bit of a gold mine and so tap into it.
Thanks as ever for reading. I might write something tomorrow as well but we shall see. The sun is shining and the football is on this evening so enjoy your weekend!