Belfast Telegraph

Nuances of complex Budget leave Executive ministers with some difficult questions to answer

The Chancellor, George Osborne, has given the Northern Ireland Executive major complex questions from two major issues in his Budget.

First, with the publication of the Treasury consultation dealing with rebalancing the economy, the decision making on how corporation tax is to be administered becomes a real debate.

Does Northern Ireland want this extra devolution of responsibility and are the cost implications acceptable?

Second, alongside the creation of 21 new enterprise zones in England, does the Northern Ireland Executive wish to introduce a similar concept?

Arguably, a Northern Ireland enterprise initiative might be rather more ambitious and apply to the whole region. Are NI ministers ready to assemble a range of measures applying across Northern Ireland that would give this concept a local wow factor?

The new Executive will need to consider the full mixture of policies on company taxation, enterprise initiatives that will need to be studied by Arlene Foster (right) and local variations on a range of marginal incentives.

For the wider UK economy, the Chancellor had very little scope to be optimistic.

The UK Government will stay on course to reduce spending, selectively increase some taxes and reduce the scale of borrowing.

The Chancellor emphasised his ambition to stimulate faster growth and offered some longer-term adjustments to specific tax concessions, planning reforms and training for young people. Nevertheless, his Budget arithmetic forecasts that GDP growth in 2011 will be only 1.7%, instead of his earlier forecast of 2.1%.

For Northern Ireland, there is little in the Budget proposals that offer assurance that the current recession will be reversed in 2011.

Average family incomes will buy a lower standard of living than in 2010. Inflation, tax increases through National Insurance and VAT, pay restraint and job losses, taken together, mean that total household incomes will be lower and, after inflation, will provide lower real income.

The big spending elements of the Chancellor's Budget were set last autumn.

There is some uncertainty about the impact in Northern Ireland of the tax changes designed to improve the UK's tax competitiveness. While Stormont may take over corporation tax-setting powers (which might not be effective until 2014 anyway), larger businesses will welcome the fall in corporation tax to 26% next month and the further fall to 23% by 2014.

Several of the growth measures, promised in GB, now need to be either endorsed or rejected by Northern Ireland ministers.

In a complex Budget, one feature calls for a muted compliment. The Chancellor has trimmed the duty on petrol - a small step, but with only a marginal impact.

On a final note, the users of natural gas in Northern Ireland will be disappointed to know that the climate change levy exemption for gas suppliers is being phased out starting on April 1, 2011. That becomes, possibly inevitably, a small extra tax charge.