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No easy way to cover cost of the Covid pandemic

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Chancellor of the Exchequer Rishi Sunak

Chancellor of the Exchequer Rishi Sunak

PA

Chancellor of the Exchequer Rishi Sunak

No one will argue with Chancellor Rishi Sunak that it will take the economy a long time to recover from the effects of the coronavirus pandemic. The level of public borrowing to keep the country afloat and provide support for those sectors most affected is mind-boggling and will take decades to pay off.

The Chancellor did his best to keep a positive tone, but it is difficult to believe that the economy will bounce back as quickly as he hopes, given the depths to which it has plunged.

The Office for Budget Responsibility says the bounceback will be six months earlier than expected, but that will be in five years' time.

In many ways, given the extraordinary context of the past year, it was the usual curate's egg of a budget, with some good news and quite a lot of bad.

Measures such as the extension of furlough until September and the additional £20 on Universal Credit payments for another six months are welcome initiatives that will help people keep their jobs and give a little bonus to those in the lowest income brackets.

Tax-free personal allowances are to be frozen until 2026, which is the Chancellor's way of dragging an estimated one million more people into paying tax and another million people into paying high-rate taxes.

Given that the Tories, in theory at least, pride themselves as the low-taxation party, this is a budget which shows there is going to be no easy way to pay off the debts incurred.

Public services are to be scaled back as budgets are cut.

One measure announced by the Chancellor which will affect Northern Ireland most is the plan to raise corporation tax to 25% in 2023.

At one time, lowering the rate was seen as a necessary step if the province was to compete with the Republic of Ireland for inward investment.

In two years, we will be in a very uncompetitive position with our cross-border neighbours, which puts a dent in the hope that our unique position as being both in and out of the EU will make us a very attractive investment destination.

The stamp duty holiday extension and the extra £410m for the Northern Ireland budget are also welcome developments, although most of the extra money will be set aside for dealing with the effects of the pandemic.

Of course, all the Chancellor's predictions depend on the current success in curbing the pandemic continuing. That is why it is vital that the emergence from lockdown is as sure-footed as possible. That would enable a return to near normality, but it is a normality which will have more than a whiff of austerity.

Belfast Telegraph


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