Finance Minister Simon Hamilton last night welcomed the additional funds pledged for Northern Ireland as part of George Osborne’s pre-election Budget, but warned that they brought no instant fixes for the challenges facing the Province.
As part of what was generally hailed as a generous Budget, the Chancellor announced the allocation of an additional £10.9 million to Northern Ireland’s Resource Budget for 2015-16 as well as a further £0.5m for capital investment.
But Mr Hamilton warned that the extra cash would do nothing to alter plans to slash up to 20,000 public sector jobs as part of the Executive’s rebalancing programme.
“The Chancellor’s oft stated policy of using the proceeds of growth to pay down the deficit has continued in this Budget and this is reflected in the levels of public spending,” said Mr Hamilton.
“Whilst modest in the context of our overall Budget and the fiscal challenges we face, an extra £10.9 million for our hard pressed Resource Budget in Northern Ireland will assist the Executive in supporting key public services and underpinning economic growth.
“An additional £0.5m of capital funding will add to the near £1.2bn the Executive will invest in infrastructure next year.”
However, he added: “It is important that people realise that the Executive’s Budget will continue to reduce until at least 2019-2020, meaning that tough choices and difficult decisions lie ahead.
“This Budget – and in particular the confirmation of public spending reductions into the near future – should underscore the importance of pursuing our focus on reforming and restructuring the public sector.”
A number of specific decisions taken by the Chancellor would have a positive impact for many people in Northern Ireland:
• Farmers will be able to average their incomes over five years for tax purposes;
• Charities will be able to claim gift aid on up to £8,000 of small donations;
• No national insurance for employing under 21s from April 2015 and no national insurance for employing young apprentices from April 2016.
Danske Bank chief economist Angela McGowan said that two months before an election, the Budget was perhaps less generous than it might have been.
“There were no big give-aways for the general public other than first-time house buyers,” she said.
“There was, of course, a lot of talk about the economic plan working, unemployment falling and achieving a surplus in public finances of 0.2 per cent of GDP by 2018-19.”
In other areas she said there was less detail, such as how the Chancellor was to find £30bn of savings to keep his economic plan on track.
“There is also a further £12bn of savings to be found from a reduced welfare bill and Mr Osborne is confident that he can find a further £5bn of his necessary savings from increased tax avoidance measures.”
As for direct impact on the Province, Ms McGowan said a number of policy decisions would undoubtedly affect households and businesses.
However, she highlighted the failure to relieve pressure on the hospitality sector with a VAT reduction as a missed opportunity.
“Some sectors got a special mention, with one of Northern Ireland’s fastest growing sectors, the creative industries, awarded more generous tax credits.
“It was, however, disappointing that there were no specific changes to VAT levels for the hospitality industry, particularly when this sector is struggling with the strong pound and in Northern Ireland the sector is competing with the nine per cent rate in the Republic of Ireland.”
For individuals she said the changes to personal tax allowances was to be welcomed.
“The Personal Allowance will slowly creep up to £11,000 a year in 2017 and the rate at which workers pay the higher rate of tax will be increased to £43,300 in 2017-18,” she said. “For Northern Ireland this increase in the personal income allowance to £11,000 is important because wage levels in the local economy are lower relative to the rest of the UK.”
The freeze on fuel duty was also significant with many households locally having to spend a much higher proportion of disposable income on energy costs.”
While the attention on pensions was a big part of Mr Osborne’s speech, Ms McGowan said that while even more pensioners would be able to cash in their annuities, it was more an issue of timing over access “rather than encouraging people to save into pensions for the long-term”.
“From an economics perspective this is a fairly risky strategy. While individuals might believe it to be an attractive policy, the long-term consequences from cashing in pensions could be negative in terms of increasing upfront spending at the cost of long-term income stability.”