The much-anticipated Spring Statement from UK Chancellor Rachel Reeves produced little in the way of headlines, and less in terms of news for the Northern Ireland economy.
Most reaction has been to the fact that the Office for Budget Responsibility (OBR) has downgraded UK growth predictions for 2025 from 2% to 1% – but upgraded it for every year after for the rest of this parliament.
The Chancellor announced no new tax measures, more news on welfare cuts and plans to boost both planning and house building as well as confirmation of the increase in defence spending.
Northern Ireland reaction was muted. Eamonn Donaghy, Tax Partner and Chairman at HNH, said:
“The absence of new tax announcements in Rachel Reeves’ Spring Statement was no surprise with the breaking of a clear election pledge not to raise taxes appearing to be a bridge too far. The Chancellor limited herself to announcing further anti-avoidance measures which are expected to raise an additional £1bn. However, unless things dramatically change in the next six months, the Budget this autumn could well see additional taxation being raised with growth hoped for last October already halved in the current year from 2% to 1%.
“But it isn’t a case of no pain, with many of the proposals announced last October soon coming to fruition. In April, the employer’s National Insurance rate will rise to 15% and this, together with the proposed increases in the national minimum wage, have already had an unwelcome impact on business.”
Ross Boyd, owner and director of Belfast-based chartered accountancy, RBCA, said, “Chancellor Reeves has been desperate to downplay the Spring Statement as a fiscal event – but the economy is well known for not bending to a Chancellor’s will. The Office for Budget Responsibility has halved the 2025 UK growth estimate from an underwhelming 2% to a virtually flatlining 1%. Inflation has dropped 0.2% to 2.8%. If we needed confirmation that the age of stag-flation has arrived, this is it.
“Simply put – any fiscal headroom she had planned for is gone. And in a few short months economic stimulus is now being sacrificed as the global geo-political position shifts and defence spending finds itself top of the bill.
“We expected the rhetoric about encouraging long term growth and productivity, and nothing to support local businesses in the coming months. There remains no plan for short term economic growth.
“Reeves talked a lot about working people – and getting people into work, however employment must be delivered through the private sector and whilst owner-managed businesses are the backbone of our local economy, they remain an afterthought in Reeve’s economic policy.”
And Andrew Webb, Chief Economist at Grant Thornton NI, commented:
“While the Chancellor’s 2025 Spring Statement did not directly reference Northern Ireland, the increased spending on defence that was declared could deliver an economic boost for businesses in the region that service that industry.
“However, it is important to remember that more defence spending does not translate to a Barnett consequential for Northern Ireland as the Stormont Executive does not have devolved defence powers.
“This government’s first multi-year spending review, due to be published in June, will be a more telling announcement for Northern Ireland. By that stage we will have a comprehensive sight of how departmental spending will look in the coming years, so it is a case of ‘watch this space’.
“Analysing the Spring Statement more widely, it is interesting to note that, while the Truss premiership was one of the shortest in history, it may have cast the longest shadow. Governments now seem to live in perma-fear of how the markets react to anything they do.
“No matter how much the Chancellor might want to play the ‘blame game’ – the previous government, geo-political uncertainty, higher interest rates, and trade wars all got a touch – there were choices here and the Chancellor chose to punch down on some of the poorest and most vulnerable.
“Having boxed herself in on no further tax increases after the Autumn Budget, and having decided that her self-imposed fiscal rules are unbendable, a £4.8 billion cut to the benefits system was the choice she made. That said, spending more on chasing down tax evaders is a welcome move in this statement.
Meanwhile, Northern Ireland’s First Minister’s reaction was that an increase in UK defence spending is part of a “macho agenda of militarization”.
Michelle O’Neill was speaking after the chancellor used her Spring Statement to confirm an additional £2.2 billion for the Ministry of Defence in the next financial year.