Bud­get day is on its way

Belfast Telegraph - Business Telegraph - - Front Page - byneil­gib­son @eyire­land

It comes at dif­fi­cult time and could be eas­ily lost among the brexit noise

Bud­get sea­son is nearly upon us. In Ire­land the bud­get is two weeks away (Oc­to­ber 9) and the UK bud­get will ar­rive some­time in Novem­ber.

Or­di­nar­ily, the busi­ness pages would be fo­cus­ing on what to ex­pect in the forth­com­ing bud­gets, how­ever Brexit has in­ter­vened as we are en­ter­ing a cru­cial phase in the ne­go­ti­a­tions. It is cer­tainly the case that more and more clients are talk­ing to us about con­tin­gency plan­ning for no deal but, equally, the main is­sue for most is meet­ing cur­rent de­mand and find­ing staff.

These rather more im­me­di­ate con­cerns un­der­stand­ably tend to re­ceive most at­ten­tion. Whilst there is plenty firms can do to pre­pare, it re­mains im­por­tant to fo­cus on facts and not the high stakes po­lit­i­cal game of poker be­ing played out at present.

As hard as it may be, tun­ing out the noise and fo­cus­ing on ex­po­sure and con­tin­gency plan­ning for a range of pos­si­ble out­comes re­mains the best ad­vice. There is no deal un­til there is one and it may be that the deal ap­pears at the last minute when nearly all hope is gone.

The Ir­ish econ­omy is in full bud­get mode, lob­by­ing is in full swing and the push for in­creased spend­ing is in­ten­si­fy­ing. Given the strength of the Ir­ish econ­omy, you would think the bud­get process would be eas­ier but that could not be fur­ther from the truth.

The le­gacy of a decade of re­ces­sion means there are many wounds to heal and ar­eas of un­der­spend to re­dress, not least in in­fra­struc­ture. The con­fi­dence and sup­ply agree­ment with Fi­anna Fail adds fur­ther com­plex­ity to the process.

The bud­get is likely to fo­cus on in­fra­struc­ture and pub­lic ser­vices with sav­ing for a rainy day also fea­tur­ing, though the scale is likely to be modest given the ob­vi­ous pres­sures.

The UK bud­get will come at a very dif­fi­cult time: it needs to fit into the Brexit ne­go­ti­at­ing win­dows and could eas­ily be lost amongst the Brexit noise, de­pend­ing on how the var­i­ous sum­mits go.

There may be pol­icy choices that are re­quired that sim­ply can­not be made at such a tu­mul­tuous time and there­fore it may well be a ‘ hold­ing’ bud­get.

A spend­ing re­view fol­lows in the spring and it may be that the Chan­cel­lor hopes the Brexit is­sue will be closer to res­o­lu­tion by then and the fo­cus can turn to pub­lic spend­ing choices. There is a grow­ing re­al­i­sa­tion that much of the tax sys­tem needs mod­erni­sa­tion.

The rates sys­tem, the na­tional in­surance/in­come tax regime and the raft of du­ties and levies are all be­ing im­pacted by the march of tech­no­log­i­cal change.

Pur­chas­ing pat­terns are chang­ing our high streets and the na­ture of work is also trans­form­ing which, in turn, is im­pact­ing in­come tax and cor­po­rate tax re­ceipts. How­ever, tax change is dif­fi­cult to im­ple­ment.

There is com­plex work to be done to un­der­stand how a tax change could im­pact and there will al­ways be losers and win­ners.

Un­der­stand­ably, those who may be worse off as a re­sult of a change are rarely happy to qui­etly ac­cept their fate. The pres­sures on health ser­vice bud­gets are well doc­u­mented and there are fund­ing chal­lenges too in ed­u­ca­tion, in­fra­struc­ture and other ar­eas of pub­lic ser­vice. It is al­most cer­tain that some form of tax rises will be needed to fund health spend­ing. In the forth­com­ing bud­get, this is likely to be in the form of small tax in­cre­ments here and there, per­haps fuel duty, but longer term it may be time to re­visit the na­tional in­surance con­cept and re­turn to ring-fenc­ing a chunk of tax re­ceipts ex­plic­itly to fund health and so­cial care. That would make it eas­ier to link fu­ture tax in­creases to the ris­ing need.

North­ern Ire­land is for­tu­nate in that the gen­er­ally well-re­ceived Ben­goa re­port ex­ists as a blue­print to mod­ernising health­care.

If peo­ple are lament­ing the lack of bud­get de­bate, I sus­pect the sorts of choices that we would be dis­cussing in the ab­sence of Brexit would be rather un­palat­able to many.

We are in an era where tax rises may be the norm for many and that is never as much fun as cal­cu­lat­ing who will be bet­ter off on the day af­ter the Bud­get. We can be thank­ful that the num­ber of peo­ple in work is at a record high but we are go­ing to have to find new ways to pay for the ser­vices we ex­pect.

Many read­ers may not like the di­rec­tion of travel sug­gested and, rightly, there will be a push­back to say we can re­duce costs and make sav­ings in de­liv­ery.

How­ever, it is time for a real de­bate on the struc­ture of tax and the fund­ing of key pub­lic ser­vices.

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