Budget a welcome boost for NI but devil will be in the detail

Margaret Canning

Chancellor Rishi Sunak had to reconcile the need to pay out to get the UK through the Covid-19 pandemic, and the reality that taxes will have to rise to help the government balance the books in future. (Stefan Rousseau/PA)

March 03 2021 03:25 PM

The Budget was more than ever a balancing act for Chancellor of the Exchequer Rishi Sunak but overall, he seemed to give more than take away.

Northern Ireland is to receive £410m under the Barnett rules for spending on the devolved nations, although we will need more detail to establish if that is as generous as it sounds.

Mr Sunak had to reconcile the continued need to pay out to get the UK through the Covid-19 pandemic, and the reality that taxes will have to rise to help the government balance the books in future.

Budget 2021: Rishi Sunak provides £410million for Northern Ireland Executive

The measures to support the economy amounted to £65bn over this year and next, taking the total Government support to £407bn.

There was the heartening news from the Office for Budget Responsibility that the economy will recover six months earlier than expected — though in five years time, it will still be 3% smaller than it would have been otherwise.

A corporation tax rise had been well-trailed in advance — and Mr Sunak confirmed that the main rate of corporation tax on profits of bigger companies of 19% will rise to 25% in 2023.

That is not such great news for Northern Ireland, where we share a land border and compete for investment with the Republic and its invitingly low corporation tax rate of 12.5%.

However, for smaller companies the level will remain at 19%.

Off-setting the bad news on corporation tax is a new ‘super-deduction’ to encourage business investment. And unlike all the other juicy announcements, this one was not in the trailer.

It means that companies investing in their business will be able to off-set 130% of what they have spent against tax. This is one measure which Mr Sunak hopes will set the economy on the road to recovery.

The extraordinary level of government generosity continues with the extension of the furlough scheme until the end of September. Furlough was supporting 106,200 jobs here at the last count.

Business rates relief for retail, hospitality and tourism will also continue until the end of June, and then there will be a special discounted rate of 12.5% for another nine months. As business rates are a devolved matter, we have to wait and see whether that can be replicated here.

In the same manner, the stamp duty holiday which cancels out the tax for houses costing below £500,000 is also extended for another three months — and afterwards, it will apply on houses costing below £250,000 until the end of September.

With Northern Ireland’s average home costing around £148,000, that will mean a lot more homes here will be eligible for the holiday than in other parts of the UK. That could fuel an even more frenzied housing boom than we have had already, with a 5.3% rise in average prices and the busiest quarter for house sales since the crash of 2007 at the end of last year.

Mr Sunak also announced a new government guarantee for 95% mortgages, designed to help more people onto the housing ladder.

But a critic of that measure has said he is concerned it could fuel irresponsible borrowing. Again, it could act as an additional catalyst here for an unwelcome boom in prices. Arguably it is more necessary for locations like London and the south east of England, where homes are around 12.1 x and 10.1 x the level of salaries respectively. In contrast, our more affordable prices are just 4.9 x our average salary levels.

The Chancellor also announced that free ports — where special low taxes will apply — will be set up around the UK, though only England’s free port locations have been announced.

Overall, the Budget wasn’t really tailored for Northern Ireland needs but as we benefit from an extension to the furlough and nearly all the other measures, we really won’t be complaining.

Budget a welcome boost for NI but devil will be in the detail

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