Alan Lowry, FSB`s NI Policy Chair, considers implications of the recent budget and calls on the NI Executive to pass on support for the retail, hospitality and leisure sectors
By Alan Lowry, FSB`s NI Policy Chair
[This article was published in the Belfast Newsletter on Tuesday 19 November 2024]
In his poem ‘The Road Not Taken’ Robert Frost set out a seemingly simple scenario arising from the choice to be made where two roads diverge yet only one path can be taken. It is an allegory about choices, destinations and futures; and the recognition and acceptance that if we make a poor choice we might regret it, but we cannot go back upon it.
Seldom can the divergence of two roads have been as stark as in the seven days spanning Halloween to Guy Fawkes Day, when the UK and the USA - both in pursuit of ‘growth’ - reached such a fork in the road and each made their choice. Both countries hope their chosen destination will deliver economic prosperity, but the reality of the divergence could not be more stark. Those seven days saw the first Labour budget in 14 years, and an almost unprecedented US election, where neither candidate could have reasonably expected their own chosen path four years ago would have led them to that particular contest.
The UK’s choice of road, as set out by Rachel Reeves, has been to opt for a high tax economy with much of the money being raised by levying taxes on business and spent, in turn, on public sector wages; with some being set aside for investing in infrastructure. In contrast, America has chosen a leader who is following an entirely different path; one which will embrace major tax cuts, de-regulation, and a slimming down of the State.
The UK’s path, viewed in the cold light of day, is showing the sheer scale of taxes and costs that have been levied on business owners and seems likely to be inflationary. It has taken time to comprehend all of the detail, but as understanding grows it has spawned alarm and, in some quarters, real anger. The farming sector is particularly incensed but there are many others, too, including the owners of businesses who stand to see huge taxes fall due on many aspects of their businesses, especially as they approach the end of their working lives. Speaking with many business-owning FSB members, there is a real sense that the 2024 UK Budget has nothing of substance that will inspire people to start businesses, nor to invest in existing enterprises, nor to take on more staff. This is a rare situation – even in the hardest of recent budgets, there have been carrots to go alongside the stick – all of which makes it hard to reconcile this latest Budget with the Government’s stated aspiration for growth. Locally, FSB will continue to press the Executive to pass on the rates discounts that the Chancellor saw fit to grant for a fourth consecutive year in England - for Retail, Hospitality, Leisure and Tourism businesses. It is little short of scandalous that Northern Ireland has received the 'Barnett consequential' of this 75% discount for the past three years yet failed to pass it on to local businesses - whilst at the same time ruing the demise of high streets across every constituency for which a rates discount would have been a vital resource.
Obviously, Donald Trump doesn’t take up office for another two months but even now, as he starts to put together his team, it is clear that America has chosen a very different path. His platform throughout the election campaign pledged a number of policies that would likely be inflationary – tax cuts; curbing immigration; higher tariffs – all of which may keep interest rates higher for longer and make the cost of borrowing more expensive; but confidence is brimming.
It is too early to draw firm conclusions, but so much about business and the economy rests on that mercurial factor, ‘confidence’. Hard to define, easy to damage, difficult to inspire – it is a factor that underpins retail sales, property prices, hiring intentions, and much more. Budgets that offer clear incentives can increase confidence – in the UK, the past certainties around pensions and ISAs have inspired saving for many years; the Patent Box and R&D tax credits have encouraged and rewarded innovation; all of this built confidence, from which growth occurred. Those massive daily tests of confidence – dealing in the FTSE 100 index and the Dow Jones Industrial Average – may give hints as to where the two paths lead. The FTSE 100 has fallen back in each of the past five days, one month, and six month periods; in contrast, the Dow Jones has grown in each of those same periods.
Having made his choice when faced with the two diverging roads, Frost’s final stanza foretold: “I shall be telling this with a sigh; Somewhere ages and ages hence; Two roads diverged in a wood, and I — I took the one less travelled by, And that has made all the difference.”
Let’s hope that when we all reflect back on the choice of road taken in 2024, that ‘sigh’ is one of quiet satisfaction and not a belated recognition that the ‘difference made’ was the irreversible damage done to businesses.