THE post-election Northern Ireland Executive will have an additional £45 million to work with as part of this week’s Budget package, business advisors PwC has said.
The region will also benefit from a raft of new measures to help rebalance the economy, including a five per cent cut in Corporation Tax over the next four years.
Chancellor George Osborne promised Northern Ireland a lower rate of Corporation Tax than in Britain with Secretary of State Owen paterson due to reveal a consultation paper on tax-varying and Enterprise Zone powers.
PwC tax partner, Martin Fleetwood said the £45 million would be welcome: “The Executive has just agreed a Northern Ireland Budget they will find very difficult to deliver, so every penny of new money from Westminster will be welcome. In addition to the Corporation Tax changes, business can expect improved tax breaks under the Enterprise Investment Scheme (EIS) and Venture Capital Trust schemes and a reduction in red tape for the region’s small firms.
“Freezing the proposed increase in the aggregates levy rate will help take some pressure off the quarrying sector, and the proposal to reinstate an aggregates levy credit scheme until 2021, will be particularly good news also for the quarry and construction sectors.”
Other announcements included an extension of the business rate relief for a further 12 months and a three-year exemption from new regulations for firms with fewer than 10 workers.
There was good news for motorists and for drinkers: the Chancellor cut fuel duty by 1p per litre, deferred April’s planned inflation-linked fuel duty hike until 2012 and scrapped the 1p above inflation “fuel escalator” rise until 2015.
However, contrary to some forecasts, he did not reduce the VAT rate on fuel, but also confounded other observers by opting not to change alcohol duty rates.
There was no increase in personal taxation, although personal tax allowances will rise by £630 to £8,015 in April 2012.
Tobacco duty rates are to rise by two per cent above inflation, with the duty regime to be reformed.
Mr Osborne announced that he intended to simplify tax system and would issue a consultation document on merging National Insurance and income tax.
He also announced a new, flat-rate single tier state pension, worth around £140 per week, although he stopped short of announcing when this new hybrid pension would be introduced.
Turning to the economy, Mr Osborne’s 56 minute speech confirmed that the independent Office for Budget Responsibility’s (OBR) growth forecast had been marked down for 2011; to 1.7 per cent.
Equally gloomy is the forecast level of consumer price inflation this year of between four and five per cent.
PwC Chief Economist, Esmond Birnie said that, although there was a small improvement in forecast borrowing this year to £146 bn, the economy still faced serious challenges.
“Marking down of UK growth for 2011 and the threat of stagflation are especially concerning for Northern Ireland where unemployment is continuing to rise and GDP growth this year will probably be only one per cent.
“These are grim times for the Chancellor as he tries to navigate through the twin difficulties of a gaping deficit and a very fragile economy where the threat of rising inflation is a further challenge.
“Despite a Budget that seemingly offers some hope of rebalancing the local economy, the Northern Ireland remains precariously balanced.”
Welcoming the Budget, Secretary of State Owen Paterson said it would deliver a strong and stable economy, promoting growth and supporting enterprise.
“This is a Budget for growth across the whole United Kingdom in which Northern Ireland will share,” he said.
“This Budget and the Plan for Growth will help business and individuals alike, it will take 9,000 in Northern Ireland out of tax altogether and reduces tax for 640,000 others.”
Referring specifically to Corporation Tax he said: “The Exchequer Secretary, David Gauke, will be in Northern Ireland and together with Northern Ireland party leaders we will be publishing measures to help rebalance the economy.
“This is the start of a process which could lead to increased investment and make Northern Ireland one of the best places in Europe to do business.”