It's jam tomorrow, but not much in this year's Budget
The 'giveaways' in George Osborne's Budget won't arrive in time to relieve the economic gloom this year, says Angela McGowan
Published 22/03/2013 | 09:00
This was not an easy Budget for the chancellor to deliver – particularly when it is set in the context of slashed growth forecasts, removal of the UK's AAA credit rating and rising national debt levels.
George Osborne could not possibly have looked any more uncomfortable than he did when Labour delivered its response.
There has been considerable pressure on the chancellor in recent weeks to use this Budget to stimulate growth and take the pressure off squeezed households. But, ultimately, he kept expectations low and a fiscally neutral budget was both promised and delivered.
To some extent, the chancellor was rather innovative in terms of his re-distribution of resources.
We saw announcements such as a significant £2,000 Employment Allowance for small businesses towards their employer's national insurance contributions bill.
This initiative will be welcomed locally, as Northern Ireland's economy is dominated by small firms.
But, of course, to pay for such 'giveaways', the chancellor looked to the public sector.
UK departments (excluding health, schools and overseas aid) will be expected to deliver £11.5bn in savings in the next comprehensive spending review.
However, as a significant proportion of Northern Ireland's block grant goes to health and education, the overall impact in Northern Ireland of departmental spending cuts will be limited in cash terms.
While some departmental budgets are protected, public sector workers, however, are not. Having limited their pay rises to 1% in 2015, the chancellor also plans to remove the automatic pay increases for public sector staff.
In addition, the national insurance rebate (which people on final salary pension schemes have previously been entitled to) will go. As the public sector is Northern Ireland's largest employer, these changes will undoubtedly have a negative effect in the longer-term.
The pressure was also on the chancellor in the run-up to this Budget to take some pressure off cash-strapped households. With inflation now sitting above target for three years, it seemed that he had little choice but to cancel the planned 3p increase on a litre of petrol, or diesel.
However, with no change in the current level of fuel duty, local households must continue to endure already high fuel bills.
On a positive note, some support for employees came by way of the expansion of the personal tax allowance. The Autumn Statement had already committed to raising the personal allowance, on which no tax is paid, to £9,440 this April and in yesterday's Budget this ceiling was raised to £10,000 by 2014.
Some relief for working parents was also included, with a 20% rebate on childcare costs. However, parents will have to wait for another two years before they reap the rewards from that initiative.
A degree of protection for pensioners' savings will arrive in 2017, when social care costs will be capped at £72,000 and the flat-rate weekly pension of £144 will be available in three years' time.
Overall, when it came to short-term personal boosts, there was nothing new in this Budget on the taxation or benefit side that would make a dramatic difference to the spending power of local households in 2013.
Even on the business side, that £3bn-a-year boost to infrastructure will not be available until 2015/16. But Northern Ireland's construction sector can look forward to the local economy's proportion of increased capital spending, estimated to be in the region of £94m.
A reduced rate of corporation tax was not mentioned in the Budget, but the chancellor said that, in two years' time, the UK rate of corporation tax will be 20%.
In summary, the chancellor took with one hand and he gave away with another. While the giveaways are always welcome when economic stimulus is badly needed, unfortunately they will not be delivered in time for any real change in economic circumstances this year.