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Esmond Birnie

Chancellor does little to close gap between Executive's aspirations and its resources

Esmond Birnie



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Chancellor Rishi Sunak

Chancellor Rishi Sunak

PA

Chancellor Rishi Sunak

At least in upfront terms, new Chancellor Rishi Sunak delivered a good Budget for smokers, drinkers, those on National Living Wage, car owners and farm users of red diesel.

Those paying National Insurance contributions will enjoy the (minor) windfall of between £70-100 an year.

But the main fiscal action was the Chancellor committing an extra £12bn mainly to the NHS and business support in England (with, perhaps, a further £18bn of spending across the economy).

The Office for Budget Responsibility reckoned all this could add 0.5% to UK GDP across the next two years - a not inconsiderable sum when their (pre-virus) forecast was for growth of (only) 1.1% this year and 1.8% next year.

That said, the forecasting of the OECD suggests Covid-19 could imply an economic hit at the global level of between 0.5% and 1.5% depending on severity and duration. So, if that is replicated at the UK level it would wipe out all the gain through this Budget.

What about the Northern Ireland impact in particular?

Given the extra spending in England, we will get a Barnett consequential of £210m next year. NI should actually get more than that given that it will also benefit from the UK-wide benefit spending increases, City and Growth Deals and funding for digital improvement. But even if the sum proves to be around £300m, that would probably still be less than the amount the Executive was hoping for to close the gap between its aspirations and its resources.

Another a big disappointment was that the Chancellor played for time regarding the future of air passenger duty - there is to be a consultation on UK aviation taxation. It was probably never likely that Number 11 would renounce a tax which yields about £3bn annually at the UK level.

One more cheerful thought - all being well, we come back in the autumn for a November Budget.

Dr Esmond Birnie is senior economist at the Ulster University Business School

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