The Finance Minister Sammy Wilson yesterday gave a cautious welcome to the Chancellor’s Autumn Statement.
Delivering his statement in the House of Commons, George Osborne announced a benefits squeeze and a raid on the pensions of the wealthy as the UK economy continues to falter.
In a bleak Autumn Statement, the Chancellor said that weakening economic growth meant the era of austerity would be extended for another year to 2018, well into the next parliament.
He sought to sweeten the pill, scrapping a planned 3p-a-litre rise in fuel duty which had been due to come in January.
However, he was also forced to admit that the independent Office for Budget Responsibility (OBR) now believed he would miss his target for debt to start falling as a proportion of GDP from 2015/16 - the year of the next general election.
Quoting the latest OBR growth forecast, Mr Osborne said that net debt will be 74.7 per cent this year, 76.8 per cent next year, 79 per cent in 2014-15 and 79.9 per cent in 2015-16. It will then fall to 79.2 per cent in 2016-17 and 77.3 per cent in 2017-18.
Mr Wilson said the OBR projections for the UK economy and public finances suggest that further public expenditure reductions will be necessary beyond 2014-15.
“There can be no doubt that the Executive will face some very difficult decisions as part of its next Budget setting process. It is therefore critically important that all Ministers deal responsibly with key policy areas to ensure that no unavoidable costs are imposed on us.”
The Minister welcomed the Chancellor’s decision to channel more funding into capital investment, which for Northern Ireland, will mean additional resources of £131million over the next two years.
“The additional capital investment allocations were funded by cuts to Whitehall departments’ resource budgets of 1 per cent next year and 2 per cent in 2014-15. However, because health and education were exempt from these cuts and some additional allocations were made in respect of business support measures, the impact on Northern Ireland was much less severe.”
He added: “I am pleased that the decision to protect health and education from the Whitehall resource expenditure reductions means that any negative impact on Northern Ireland is much mitigated. In fact, our resource Departmental Expenditure Limits (DEL) will increase by £2.4 million next year, with a subsequent reduction of £34.3 million in 2014-15. This is manageable without the Executive having to re-open its Budget position.”
The Chancellor, setting out spending plans for 2015-16 and a framework into 2017-18, said deficit reduction measures would be achieved fairly with further savings from bureaucracy, from benefit bills and the better-off.
He again ruled out a mansion tax but confirmed plans to cut tax allowances for big pension pots.
He said that from 2014-15, the lifetime allowance would be cut from £1.5 million to £1.25 million and the annual allowance from £50,000 to £40,000, saving £1 billion a year by 2016-17.
He told MPs: “I know these tax measures will not be welcomed by all; ways to reduce the deficit never are. But we must show we’re all in this together. When you’re looking for savings, I think it’s fair to look at the tax relief we give to the top 2 per cent.”
The Chancellor said most working age benefit increases would be pegged at 1% for the next three years - a real terms cut.
The higher rate income tax threshold would also be increased by just 1 per cent in 2014-15 and 2015-16, so the income at which people start paying the 40 per cent rate will go up from £41,450 to £41,865 and then to £42,285.
He also announced another cut in corporation tax rate by a further 1 per cent to 21 per cent, compared with 40 per cent in the US, 33 per cent in France and 29 per cent in Germany.
He said: “This is the lowest rate of any major western economy. It is an advert for our country that says: come here; invest here; create jobs here; Britain is open for business.”
He confirmed that the planned increase in fuel duty would be suspended, saying: “It means that under this Government we’ll have had no increase in petrol taxes for nearly two and a half years.”
And he announced more help for working people with an increase in the amount they can earn before paying any income tax from next April - currently due to be £9,205 - by a further £235.