Osborne's bitter pill may be sweetened by fuel levy U-turn
Published 20/03/2013 | 09:00
The Chancellor of the Exchequer had a tough time of it last year with the Budget. The 'pastie tax', now so infamous it has its own Wikipedia page, was just one of many policies dropped in a series of humiliating U-turns.
George Osborne will be hoping that 2013 will be different – and he may even have a few goodies in his red box for people and businesses in Northern Ireland.
It looks likely that he will scrap a 3p rise in fuel duty, due to come into force in September. The issue has been raised again and again by Northern Ireland MPs.
Just last week, Nigel Dodds told the prime minister that "toxic fuel duty tax" is pushing up the cost of living for people in the province and urged him to bring petrol and diesel prices down to help "hard-pressed motorists and industry".
The DUP's call for the rural duty relief applied in the outlying islands of Britain to be extended to Northern Ireland is unlikely to be in the Budget, as is Sinn Fein's suggestion that fuel duty be devolved. Air passenger duty – another tax that Northern Ireland MPs are unhappy with – is also unlikely to be reduced.
After last year's Budget, the SDLP called for the personal income tax allowance to be raised to £10,000. It appears that measure will be announced by Mr Osborne tomorrow, which will lift many of the province's lowest-paid workers out of income tax altogether.
Corporation tax will be reduced to 21% in 2014.
That is the lowest of any major Western economy, but across the border in the Republic it is 12%. While businesses here would like to see it cut further, so they can better compete with the south, the dire economic picture makes that unlikely.
Economic forecaster Ernst & Young predicts the UK borrowing announced tomorrow will be £88bn this financial year – up from an estimate of £80bn just three months ago.
While the chancellor's instinct is to cut taxes, there is simply not enough money. Treasury sources were briefing that the Budget will be "a few sweeteners in the middle of a pretty tough message".
Economic development is already devolved and the Treasury is in discussions about giving local politicians responsibility for corporation tax.
However, when the issue was raised at Northern Ireland questions just a few weeks ago, Theresa Villiers merely said she had "a number of very useful discussions with the prime minister and chancellor on this important matter".
David Cameron is expected to meet the First and deputy First Ministers in the next few months for more useful discussions, so any devolution of tax powers will not be in tomorrow's Budget.