Northern Ireland could be around £100m better off as result of today’s Autumn Statement, according to a leading economist.
The Chancellor, George Osborne, committed to annual infrastructure investment of £33bn for the duration of the current comprehensive review period to 2014/15; that means the Executive gets a boost to its capital spending budget of £132m.
PwC chief economist, Dr Esmond Birnie says that means the Executive will be better off to the tune of around £100m:
“With planned Executive capital expenditure running at £1.2bn annually, today’s additional funding represents a small by useful 4% increase in spending power.
“The Chancellor is anxious to get capital projects moving to stimulate infrastructure investment, economic competitiveness and the construction sector, so the Executive has now got increased leverage to do the same.
“The challenge now is to find big projects in Northern Ireland that are ‘shovel ready’ and can stem the continued haemorrhage in the local construction industry.”
And in a move to boost overseas and domestic investment, the Chancellor also reduced the headline rate of Corporation Tax again; it will now fall to 21 per cent by 2014.
But there was no move to cut the Northern Ireland headline rate of Corporation Tax or any indication as to when, if at all, an announcement might come.
The Chancellor also announced additional infrastructure investment, including expanding ultrafast broadband in 12 cities, including Derry/Londonderry.
As a result of today, the Executive can also defer £50m of borrowing through the Reinvestment and Reform Initiative from 2012-13 to 2014-15; to help fund investment in the A5 road.
PwC tax partner Martin Fleetwood says today’s announcements around personal taxation and allowances will take around around 8,000 people out of income tax entirely:
“Overall, today’s announcements are more likely to hit the highest and lowest earners in society.
“Around 615,000 people in Northern Ireland will have less income tax to pay and scrapping the planned 3p increase in fuel duty will save local motorists around £40 next year.
“A range of benefits - like Jobseekers Allowance and Child Benefit - will be go up by 1%, less than half the current rate of inflation and that increase is pegged for the next three years.
“And with the proposed changes to UK welfare spending intended to save £3.7bn by 2015/16, there will undoubtedly be further pain for those on benefits and for the long-term sick.
“At the other end of the income scale, tax relief on those putting large sums in their pension pot comes down to £40,000, delivering around £1bn a year, while from 2014-15 the lifetime pension relief allowance will fall from £1.5m to £1.25m.”
Turning to the economy, the latest growth figures from the Office of Public Responsibility confirmed that growth in 2012 will be negative -0.1%, down from 0.8% of growth, predicted in the March Budget.
Future year forecasts are also well down on the Budget predictions with new forecast growth of 1.2% in 2013, 2% in 2014, 2.3% 2015, 2.7% in 2016 and 2.8% in 2017.
Summarising the overall reaction for Northern Ireland, Martin Fleetwood said:
“Given the prolonged recession and the continued state of the eurozone economies, today was about as good as it was likely to get.
“We didn’t really expect an announcement on corporation tax for Northern Ireland so the overall reduction in the headline rate, plus the additional net £100m for the Executive’s capital spending is relatively good news.
“And while the likely incentives for shale gas exploitation will prove contentious, overall we should be reasonably content with today.”