22/06/2010
Commenting on today’s Budget, Angela McGowan, Chief Economist at Northern Bank said:
"This was a particularly difficult budget for any Chancellor, even for one who can claim no responsibility for the current financial mess. George Osborne’s primary aim has been to find a sustainable fiscal path for the UK to follow which will comfort international investors but not stifle economic growth. His projections for ‘balancing the books’ by 2016 have initially been well received by markets and on Tuesday afternoon sterling strengthened slightly on the back of his speech."
Impact on Northern Ireland
"The overall impact upon Northern Ireland will generally be negative. We have a relatively high proportion of public sector workers, many of whom will endure a pay freeze for two years. The local economy will also take a hit from the £11 billion shake-up in welfare benefits, particularly as the local economy has a higher proportion of the population claiming Disability Living Allowance relative to other UK regions. In addition, the impact of a higher rate of VAT early next year will also impact upon our household spending levels and further reduce the ability for Northern Ireland to attract those cross border shoppers and tourists who are already trailing off with the weakened euro."
Impact upon the business community
"In his efforts to support the business community, the Chancellor has introduced a staggered reduction in Corporation Tax - until it reaches 24 per cent. The Northern Ireland economy is dominated by small businesses and therefore the latest proposal to cut the small companies tax rate to 20 per cent will go some way towards supporting local enterprise. However, as Northern Ireland is currently competing with a 12.5 per cent Corporation Tax in the Republic of Ireland, the latest announcement probably does not go far enough for the business community. The proposed consultation paper on re-balancing the Northern Ireland economy will no doubt debate this issue further. Local companies who rely on consumer demand will be stung by the rise in VAT which will take its toll on overall demand."
Impact upon households
"What is obvious from this latest budget is that sacrifices are now required from everyone- from ordinary households and public sector workers right through to high-earners. One of the biggest impacts upon households will come from the hike in the rate of VAT. This increase, to be implemented in January next year, will place further price pressures on households, many of whom are also seeing no growth in their pay packets. Although low income households will be paying less income tax from next April, the blow from reduced levels of public services will unfortunately disproportionally impact upon the less well off."