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The Budget 2016: Good news for business, but a harsh sting from cuts

By Angela McGowan

Published 17/03/2016

Angela McGowan is chief economist at Danske Bank
Angela McGowan is chief economist at Danske Bank

It must have been hard for the Chancellor to stand up and admit the roof was not fixed when the sun was shining. Despite economic growth, he confirmed that UK debt levels have risen further over the past six years.

However, it should be noted that the forecast growth rate for the UK still remains fairly healthy at just over 2%, although this rate is predicated on the UK staying in Europe.

Rising debt levels have forced the Chancellor to cut public spending by a further £3.5bn a year from now until 2019/20, and without doubt Northern Ireland will feel the pain when it comes to cuts.

In this Budget, the Chancellor focused on a number of key areas. Reform of business tax was a main theme and he included more anti-avoidance measures. Commercial stamp duty will be reduced for lower value properties, corporation tax is to fall to 17% by 2020, and the threshold for paying business rates in the UK has risen to £15,000 (much to the relief of many small firms).

In particular, the energy sector was singled out for extra support because it employs thousands of people across the UK and has been badly hit by low oil prices. Agriculture, however, saw little by way of support initiatives. The soft-drinks industry was singled out for a hammering as the Chancellor set out sensible plans to tax fizzy drinks and force the sector to act more responsibly.

There was some support for enterprise, too, as National Insurance contributions will be scrapped for the self-employed and capital gains tax will be reduced to 20% for higher rate taxpayers and only 10% for basic rate taxpayers.

There were a significant number of budget measures aimed at households too. In particular, working families will see a rise in their tax-free allowance and the 40p higher rate of tax will only be applied to every £1 earned after £45,000.

The Chancellor is keen for people to save, which is a little surprising given that economic growth at the moment is being driven by private consumption. Nonetheless, he has announced that the limit on tax-free savings on an ISA account is rising to £20,000 and he introduced a new lifetime ISA for those under 40 years of age.

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While on the surface it appeared there were plenty of giveaways for working households, there were also a number of very important things that were not covered. The NHS was not mentioned and, indeed, university and further education funding got no air time at all.

Other areas important to Northern Ireland were not really on the agenda, such as skills and sectors such as manufacturing, and tourism. The creative sector received no attention either.

Large-scale announcements around infrastructure and connectivity were strictly kept for regions in England, Wales and Scotland.

On a positive note, though, the Chancellor announced that an air ambulance service for Northern Ireland would be fully funded from the Libor fines, and that is without doubt a positive move for the public here.

Overall, small business, working households and savers were the winners, but for non-working households and those that are dependent on public services there was not much to celebrate.

Angela McGowan is chief economist at Danske Bank

Belfast Telegraph

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