As it stands, we don’t quite know the scale of the ‘black hole’ of debt the public finances are in. Different groups of economists have different interpretations. It seems to be ranging from anywhere between a £14bn surplus and a £60bn deficit, writes Ross Boyd Ross Boyd Chartered Accountants
At around lunchtime on 17th November owner managed businesses in Northern Ireland, the much renowned and resilient backbone of our economy, will find out the size of the ‘black hole’ and gain insight into whether the government has gained or lost control of the economy.
With inflation running at over 10%, high-interest rates, and a cost-of-living crisis taking hold of consumers and businesses as we hurtle headlong into winter – Chancellor Jeremy Hunt may attempt redress the calamitous ‘Trussian Roulette’ mini-budget by raising taxes. In doing so he will further test the viability of many and potentially induce a wave of insolvencies in the coming year. Austerity could rub salt in the wound.
Whilst I don’t have a crystal ball – I can be certain of one thing. The cost of doing business in Northern Ireland will increase. Corporation tax and Dividends have already increased. This gives the Chancellor fewer options to focus on. I will be watching out for three areas – all of which will hit the private sector where it hurts.
Ross Boyd comments
Pensions. Costing about £40bn a year, Pensions tax relief is expensive for the Exchequer. Could the current economic situation merit a review of this? A reduction in tax relief means business owners will be less inclined to bolster their pensions – creating pressure down the line, way beyond Hunt’s tenure as Chancellor. Equally we will know how dire the circumstances are if he tackles a change to the State Pension ‘triple lock’. He may take the view that if average wages are increasing at 5% – why should a pension be linked with inflation when it sits at 10%?
A review of Capital Gains Tax may also be on the cards. His options are to increase the headline tax rate – potentially from April 2023 – or cutting an individual’s Annual Exemption for gains from £12,300 to perhaps around half of that. An increased tax rate in April 2023 would see a flurry of transactions in advance of this – boosting the current tax year – but then a stagnation post April as business owners hold on their assets.
And what of minimum wage? He may be compelled to increase minimum wage to keep pace with cost of living. The challenge here is that it will put immense pressure on already struggling sectors including hospitality and tourism. January is already looking bleak – and any increase in overheads could trigger an avalanche of insolvencies.
Whilst there may also be sweeteners – and different interpretations as to the scale of the debt. The Bank of England has already warned us that we face the longest recession since records began. I expect the Autumn Statement to reflect this.
Owner Managed Businesses need to plan out scenarios because, as ever, there are opportunities for those that can weather this looming storm.
Ross Boyd entrepreneur, fellow of the Institute of Chartered Accountants in Ireland, and a member of the Institute Chartered Accounts, founded Ross Boyd Chartered Accountants in 2010 offering a new and positive range of Chartered Accountancy, Audit and Business Advice services to businesses across Northern Ireland, with a clear vision of how to grow small businesses and provide strategic independent advice. For more information visit Ross Boyd I RB Chartered Accountants Belfast NI
