In a tale of two economies, the UK grapples with soaring government debt while the US anticipates a crypto-fueled future under a second Trump administration. As the Exchequer faces tough fiscal choices, Bitcoin’s meteoric rise shows no signs of slowing down.
UK Borrowing Jumps in October
According to the Office for National Statistics (ONS), UK public sector net borrowing reached a staggering £17.4 billion in October 2024. This marks a £1.6 billion increase from the same period last year and represents the second-highest October borrowing figure since monthly records began nearly three decades ago.
The larger-than-expected borrowing has pushed public sector net debt to 97.5% of GDP, a level not seen since the early 1960s. Even using the government’s new “persnuffle” measure, which excludes public sector banks, the national debt stands at a sobering 83.7% of GDP.
“This month’s borrowing was the second highest October figure since monthly records began in January 1993,” noted ONS deputy director Jessica Barnaby. “Despite the cut in the main rates of National Insurance earlier in 2024, total receipts rose on last year. However, with spending on public services, benefits and debt interest costs all up on last year, expenditure rose faster than revenue overall.”
Little Fiscal Wiggle Room
The disappointing borrowing figures underscore the limited fiscal headroom Chancellor Rachel Reeves has to maneuver, despite the tax hikes announced in last month’s budget. Economists warn that if the Chancellor wants to boost spending further, additional tax increases may be on the horizon.
“Given that the Chancellor only had £9.9bn of fiscal ‘headroom’ against her fiscal mandate left over after October’s Budget, this suggests that if she does want to increase day-to-day spending further, taxes will probably need to rise too,” cautioned Alex Kerr, UK economist at Capital Economics.
The government maintains it is committed to putting public finances on a sustainable path. “This government will never play fast and loose with the public finances,” assured Chief Secretary to the Treasury Darren Jones. “Our new robust fiscal rules will deliver stability by getting debt down while prioritizing investment to deliver growth.”
Bitcoin’s $100,000 Milestone
Meanwhile, as the UK wrestles with fiscal constraints, Bitcoin is on the cusp of breaking the psychological $100,000 barrier for the first time. The leading cryptocurrency has jumped to around $97,902 in early trading, extending its rally to 132% year-to-date.
The impending return of a crypto-friendly Trump administration has fueled much of Bitcoin’s recent surge. Since the former president’s election victory two weeks ago, the digital asset has soared from below $70,000 on expectations of a more welcoming regulatory environment.
“Bitcoin is inching closer to a monumental $100,000 milestone, driven by mounting confidence that President-elect Donald Trump’s administration will usher in a crypto-friendly era,” observed Stephen Innes, managing partner at SPI Asset Management. “Speculators rally behind the narrative, fuelling a frenzy as the digital asset edges toward an unprecedented valuation.”
Crypto Capital of the World?
Trump’s pledge to make the United States the “crypto capital of the world” has not gone unnoticed by the market. Reports suggest the incoming administration is even considering creating a dedicated White House post for cryptocurrency policy, underscoring its commitment to embracing digital assets.
As Bitcoin reaches for new heights and the US prepares to welcome crypto with open arms, the UK faces a delicate balancing act. With public debt at multi-decade highs and borrowing showing no signs of abating, the Exchequer’s room for fiscal maneuver is rapidly diminishing.
The divergent paths of the UK and US raise intriguing questions about the future of money and the role of digital assets in the global financial system. As one economy grapples with the weight of its fiscal obligations, the other appears poised to embrace a new monetary paradigm. In this brave new world, will Bitcoin’s rise be the UK’s loss?
