Spring Budget 2017
Following the vote to leave the European Union last June, there has been uncertainty across the business sector in Northern Ireland and the UK as a whole, with issues like the weakening pound becoming cause for real concern for some. Despite this however, businesses have proved resilient and it was anticipated that the Chancellor of the Exchequer, Phillip Hammond, would mirror this feeling in his first Budget.
What we got was a relatively cautious approach from Mr Hammond with few headline grabbers, particularly for Northern Ireland. The Budget urged a period of stability, seemingly preparing for the triggering of Article 50 when Brexit becomes a reality.
There was no windfall giveaway from the Chancellor, certainly not compared with the Autumn Statement, and he made it clear that the Government would not be drawn into spending more than it collects. It is completely conceivable that the Treasury is looking at what funds it may need to release over the next couple of years following Brexit. Not surprisingly, he did not characterise this money as a “Brexit fighting fund” – indeed Brexit was barely mentioned.
The Budget does provide a modest increase in capital expenditure for the Northern Ireland Executive, with the caveat of course that we have an Executive in place to spend it. This additional funding of £120million will contribute to major issues such as our infrastructure, which will in turn contribute to our competitiveness and ability to attract foreign direct investment (FDI). To make this happen we need a working Executive in place and with it an agreed budget for the forthcoming financial year. A local commentator quipped that Mr Hammond’s Budget may have been dull, but at least the UK had a Budget.
We also have the long standing issue of Corporation Tax in Northern Ireland. It is imperative that we get a rate that is competitive enough that we attract lucrative foreign direct investment; particularly given our neighbours in the Republic of Ireland currently have a 12.5% rate to attract this investment.
Perhaps the most standout announcement from the Budget was the National Insurance hike for the self-employed, aimed at aligning the taxation of the employed and self-employed. We will have to wait and see how this truly affects the 130,000 self-employed in Northern Ireland but it does create concern and a potential barrier for people setting up their own business. The construction industry would be hit significantly with this measure, with around 40% of the local industry being self-employed. This will now not proceed as planned, as confirmed by the Chancellor on Wednesday 15th March.
Another area of concern is the progress of the NI Investment Fund, aimed at stimulating private sector investment in infrastructure projects that benefit the region. Following the EU referendum result, the European Investment Bank (EIB) said it would provide the NI Executive with advisory support in relation to the development of its own Investment Fund. Without sounding like a broken record, this can only be progressed and implemented once we have a new Executive in place.
This was a slimmed down Budget with few forays into areas like infrastructure and housing, not much on transport and only glancing references to the devolved regions. It remains to be seen how the extra £120m funding for the NI Executive will be spent and how businesses will be impacted by measures such as the National Insurance hike for the self-employed. In conclusion, this is a Budget that will be aimed at steadying the ship ahead of much choppier waters.
For our full Budget analysis please download our BDO report