Next government may struggle to fund public services due to biggest debt challenge since 1950s
The next government could struggle to fund public services because of the biggest debt challenge since the 1950s, according to a respected thinktank.
Whichever party wins the next election may be unable to fund key services if politicians are not transparent about the trade-offs they face, the Institute for Fiscal Studies (IFS) says in a new report.
Higher borrowing costs, as a result of increased interest rates, as well as low economic growth and both the Conservatives and Labour committing to reduce debt, leave the next government with little financial flexibility, the IFS adds.
It could be one of the most difficult parliaments for tax and spending since the 1950s, according to the report.
It says: “These challenges – unlike a conflict, pandemic or financial crisis – are entirely predictable.
“None can be meaningfully confronted by a government that wilfully ignores reality and the need to choose between difficult competing options.
“As tempting as it may be to engage in ‘cakeism’ – to seek to have the government’s fiscal cake and eat it – any party serious about governing after the election should resist the urge. The electorate surely deserves better than that.”
The government will have to achieve something that hasn’t been done in 20 years – tax takes and state revenue streams will have to rise to become greater than government outgoings.
This is more difficult at present with the current high debt interest payments and low growth forecasts.
Achieving debt reduction goals by raising taxes may also be politically unpalatable as the UK tax burden, the amount of taxes paid as a percentage of national income, is at a high not seen since the Second World War.
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What is fiscal headroom?
Potential budget cuts will be difficult, too, the IFS says – as living standards have been in a period of “record-long stagnation” and public services are “visibly struggling, and performing less well than they were back in 2010”.
But public services, except health, are to have an effective budget cut as funding isn’t being “sufficiently topped up”, the IFS said at the time of the autumn statement.
The thinktank says political parties need to “be honest with the public about the tough trade-offs they will inevitably have to make on tax and spending”.
“If they are promising tax cuts, let’s hear where the spending cuts will fall. If they are going to raise, or even protect, spending, they should tell us where taxes will rise,” IFS director Paul Johnson said.
“Or parties might think that further increases in government debt are justified: in which case they should make the argument for why debt should be rising.”
Lawmakers in the US Senate Banking Committee voted to advance the nomination of Paul Atkins to be a member of Securities and Exchange Commission (SEC), paving the way for a full floor vote in the chamber.
In an April 3 executive session of the banking committee, lawmakers voted 13-11 for Atkins to serve two consecutive terms as an SEC commissioner, taking over former Chair Gary Gensler’s term and another term ending in 2031.
Atkins’ nomination will soon go to the Republican-controlled Senate for a full floor vote, where many experts suggest he is likely to be confirmed.
Senator Tim Scott addressing lawmakers on April 3. Source: US Senate Banking Committee
Before calling for a vote, committee chair Tim Scott said Atkins would bring “much-needed clarity for digital assets.” Ranking member Elizabeth Warren reiterated earlier concerns about Trump’s SEC pick helping “billionaire scammers” like former FTX CEO Sam Bankman-Fried and Tesla CEO Elon Musk “actively trying to destroy” federal agencies.
This is a developing story, and further information will be added as it becomes available.
The US Treasury Department sanctioned eight cryptocurrency wallet addresses linked to Russian crypto exchange Garantex and the Houthis.
The United States Office of Foreign Assets Control (OFAC) sanctioned eight crypto addresses that data from blockchain forensic firms Chainalysis and TRM Labs had linked to the organizations. Two are deposit addresses at major crypto platforms, while the other six are privately controlled.
Visualization of transaction flow related to OFAC sanctions. Source: Chainalysis
The addresses in question reportedly moved nearly $1 billion worth of funds linked to sanctioned entities. Most of the transactions funded Houthi operations in Yemen and the Red Sea region.
Slava Demchuk, a crypto-focused money laundering specialist and United Nations Office on Drugs and Crime consultant told Cointelegraph that “the inclusion of Houthi-linked wallets reflects a broader recognition of crypto’s role in geopolitical conflicts and terrorism financing.” He added:
“The implications are far-reaching — compliance frameworks must adapt swiftly, attribution efforts will intensify, and decentralized platforms may face increased scrutiny.“
Demchuk highlighted that the situation reshapes the regulatory landscape. According to him, crypto “is now firmly within the scope of international security.
Who are the Houthis?
The Houthis, also known as Ansar Allah, are a Yemeni political and armed movement that emerged from the Zaidi Shia community. Originating as a revivalist and reformist group, they later became a major force in Yemen’s ongoing conflict.
Related: US DOJ says it seized Hamas crypto meant to finance terrorism
In recent years, the Houthis have engaged in attacks against both military and civilian vessels in the Red Sea with missiles and drones. In January, US President Donald Trump designated the group as a foreign terrorist organization.
The announcement noted that “the Houthis’ activities threaten the security of American civilians and personnel in the Middle East, the safety of our closest regional partners, and the stability of global maritime trade.” The group was recently struck by a US bombing campaign.
Related: Binance claims’ no special relationship’ with Hamas, argues to dismiss lawsuit
Garantex: Russia’s crypto laundromat
Garantex is a Russian crypto exchange that was sanctioned and shut down in early March after purportedly helping money-laundering efforts. At the time, Tether — the leading stablecoin operator and issuer of USDt — froze $27 million in USDt on the platform, forcing it to halt operations.
The platform has reportedly shifted millions of dollars as it sought to reboot under its new brand, “Grinex.”
In mid-March, officials with India’s Central Bureau of Investigation announced the arrest of Lithuanian national Aleksej Bešciokov, who was alleged to have operated the cryptocurrency exchange Garantex.
The arrest of the alleged Garantex founder was based on US charges of conspiracy to commit money laundering, conspiracy to operate an unlicensed money-transmitting business and conspiracy to violate the International Emergency Economic Powers Act.
Magazine: Financial nihilism in crypto is over — It’s time to dream big again
Lawmakers in the US states of Minnesota and Alabama filed companion bills to identical existing bills that if passed into law, would allow each state to buy Bitcoin.
The Minnesota Bitcoin Act, or HF 2946, was introduced to the state’s House by Republican Representative Bernie Perryman on April 1, following an identical bill introduced on March 17 by GOP state Senator Jeremy Miller.
Meanwhile, on the same day in Alabama, Republican state Senator Will Barfoot introduced Senate Bill 283, while a bi-partisan group of representatives led by Republican Mike Shaw filed the identical House Bill 482, which allows for the state to invest in crypto, but essentially limits it to Bitcoin (BTC).
Twin Alabama bills don’t explicitly name Bitcoin
Minnesota’s Bitcoin Act would allow the state’s investment board to invest state assets in Bitcoin and other cryptocurrencies and permit state employees to add crypto to retirement accounts.
It would also exempt crypto gains from state income taxes and give residents the option to pay state taxes and fees with Bitcoin.
Source: Bitcoin Laws
The twin Alabama bills don’t explicitly identify Bitcoin, but would limit the state’s crypto investment into assets that have a minimum market value of $750 billion, a criterion that only Bitcoin currently meets.
26 Bitcoin reserve bills now introduced in the US
Introducing identical bills is not uncommon in the US and is typically done to speed up the bicameral legislative process so laws can pass more quickly.
Bills to create a Bitcoin reserve have been introduced in 26 US states, with Arizona currently the closest to passing a law to make one, according to data from the bill tracking website Bitcoin Laws.
Arizona currently leads in the US state Bitcoin reserve race. Source: Bitcoin Laws
Pennsylvania was one of the first US states to introduce a Bitcoin reserve bill, in November 2024. However, the initiative was reportedly eventually rejected, with similar bills also killed in Montana, North Dakota, South Dakota and Wyoming.
Related: North Carolina bills would add crypto to state’s retirement system
Montana, North Dakota, Pennsylvania, South Dakota and Wyoming are the five states thathave rejected Bitcoin reserve initiatives. Source: Bitcoin Laws
According to a March 3 report by Barron’s, “red states” like Montana have faced setbacks to the Bitcoin reserve initiatives amid political confrontations between the Democratic Party and the Republican Party.
Additional reporting by Helen Partz.
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