The Budget: Low earners pocket most as firms also benefit
But more fiscal pain on way, says economist
Northern Ireland's workers will benefit more than others in the UK from the 2015 Budget because of our lower average earnings, a top economist has said.
Chancellor George Osborne announced that the amount workers can earn before they are eligible to pay tax will rise from £10,600, to £10,800 next year and to £11,000 in the financial year 2016-17.
The threshold at which workers start paying the higher rate 40p income tax will also rise - above the rate of inflation - from £42,385 in 2014-5 to £43,300 in 2017-8.
Richard Ramsey, chief economist for Northern Ireland at the Ulster Bank, said because the region had lower average incomes than the rest of the UK, more individuals here will no longer have to pay income tax.
Mr Ramsay said while this Budget appears to have eased off austerity, there is more fiscal pain to come after the election.
"Effectively, the 2015 General Election has acted as a speed camera for the pace of austerity, and after May the austerity accelerator will have a heavy right foot on it again," he said.
"Regardless of who wins the next election, a second emergency Budget is expected in June. Public spending growth is not expected to return until 2019-20."
The business community in Northern Ireland welcomed the Budget as providing measures that "will provide the certainty needed for businesses to plan and invest".
Wilfred Mitchell of the Federation of Small Businesses (FSB), said his members are "especially pleased with the idea for a single digital tax account".
"Implemented properly, this should reduce the time businesses take to complete their tax returns, and offers opportunities to deliver targeted support and therefore we look forward to further details," he said.
Pubs of Ulster welcomed the cut in beer duty by a penny as a "real boost".
However, spokesman Colin Neill said it is "regrettable" the rate of VAT for the tourism sector was not cut.
"Tourism is a crucial economic driver and it is essential that Northern Ireland is able to compete with the Republic of Ireland where the rate of VAT for businesses in the tourism sector is considerably lower," he said.
DUP MP and former Finance Minister Sammy Wilson said while Britain may be walking tall in some aspects, he said there are many areas and many people "stooped under the weight of parts of the economy which are ailing".
Mr Wilson said he was disappointed that over the next five years public sector infrastructure spending as a percentage of GDP will fall by 17%.
"Such spending is one way the government could have stimulated the economy without damaging its own fiscal position," he said.
"Infrastructure projects help attract private sector investment and contribute to economic growth overall."
However, he welcomed the promise to introduce a universal service obligation for the provision of broadband as "particularly important for Northern Ireland, with many large rural constituencies".
Meanwhile, Sinn Fein slammed the Budget.
Phil Flanagan said it is a continuation along "the failed path of austerity regardless of the devastation it will inflict on the most vulnerable in society".
"Disposable incomes here continue to diminish under this British government and the strain on the local economy is unremitting," he said.
"The increase in the minimum wage is insignificant and it will have little or no impact on the living conditions of the increasing numbers being employed on zero hour contracts."
The income tax personal allowance rises to £10,800 next year and £11,000 the year after, making a typical working taxpayer £900 a year better off and cutting tax for 27 million. The threshold at which people pay the 40p income tax rate will rise above inflation from £42,385 this year to £43,300 by 2017/18.
The pension pot lifetime allowance is to be reduced from £1.25m to £1m from next year, a total saving of £600m annually. The law is to be changed to allow pensioners to access their annuities, with the 55% tax charge to be abolished and tax applied at the marginal rate.
The fuel duty increase scheduled for September is cancelled, helping the drivers of Northern Ireland’s 880,000 cars and businesses with transport costs. Fuel duty has now been frozen for four years. The RAC said it was “very welcome” while the AA said it “allows the coalition to dodge the fuel-protest bullet”.
A Help to Buy Isa for people aspiring to get on the property ladder was unveiled. The maximum Government contribution will be £3,000 — it will add this to a maximum of £12,000 in an Isa. This could help over 30,000 people in Northern Ireland to purchase their first home in the next five years.
The Office for Budget Responsibility confirmed that, at 2.6%, UK growth was faster than any other major economy last year. The OBR revised its forecast UK growth for 2015 upwards to 2.5%. The forecast for 2016 was revised upwards to 2.3%, then 2.3% in 2017 and 2018 and 2.4% in 2019.
Alcohol and tobacco
A penny a pint will be knocked off beer duty, cider is cut by 2% and duty on Scotch whisky and other spirits will also be cut by 2%. The total tax burden, including VAT, on a 70cl bottle of Scotch now stands at £9.89, or 77% of the average £12.90 price, down from 78%. Wine and tobacco duty is unchanged.
A new horse race betting right will be introduced. It marks a defeat for bookmakers, who argued they paid enough to the horseracing industry to support it. Offshore bookies had avoided the 10.75% horseracing levy but now all bookmakers will have to buy a licence. Gambling duty is unchanged.
The unemployment rate in Northern Ireland fell by 1.5 percentage points over the year. The production sector has grown by 2.7%; and an additional 12,200 jobs have been created in the private sector. Across the UK, unemployment is expected to fall to 5.3% this year.
George Osborne said people are better off at the end of this parliament than five years ago, with GDP per capita up by 5% and real household disposable income higher in 2015 than 2010. The average household is around £900 better off in 2015 than 2010, he also claimed.
Government to legislate on diverted profits tax aimed at multinationals shifting profits offshore. Tax rules to be tightened to prevent contrived loss arrangements and use of foreign branches to reclaim VAT on overheads. Measures on tax avoidance and evasion to raise £3.1bn over the forecast period.
The deficit is less than half of that inherited from the previous government, but at 5% this year “it’s still far too high and it must come down”. Deficit forecasts from autumn revised down to 4% in 2015/16, 2% in 2016/17 and 0.6% in 2017/18. A budget surplus of 0.2% is now forecast for 2018/19.
The squeeze on public spending is to end a year earlier than planned, so that in 2019/20 spending grows in line with the growth of the economy. This will bring state spending as a share of national income to the same level as in 2000. However, before that, public services can expect very deep cuts.
The annual savings limit for an Isa has been increased to £15,240. Isas, which are ringfenced from the taxman, are being made more flexible, so that people will be able to put money in — up to £15,240 in the 2015/16 tax year — and take it out in the same year, without losing their Isa tax benefits.
Film and television
The chancellor extended tax breaks to assist the creative industries — a growth area here. Tax relief to encourage film production in the UK will increase to 25% for all eligible film productions, while the distinction between limited budget films and all others will be removed.
A new personal savings allowance from April next year means the first £1,000 of interest on savings will be tax-free. It means someone receiving £1,500 in interest will not pay tax on the interest up to £1,000, but will on the £500 interest earned above their personal savings allowance.
Employers’ national insurance for under-21s will be abolished from this April and for young apprentices from next April. The NI Independent Retailers Association welcomed this, but criticised a lack of progress on setting up Enterprise Zones in Northern Ireland — only one so far.