Budget 2015: George Osborne warns Northern Ireland parties on corporation tax

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The Chancellor has warned Northern Ireland’s political parties that they must reach agreement on welfare changes if they are to get power over corporation tax.

George Osborne made the comments in his final budget before the election.

He said it was “critical that the parties continue to focus on their commitments”.

The law allowing the tax to be devolved will be passed before the election, but the Treasury will retain a veto.

Sinn Féin withdrew support for welfare reform last week and talks on the issue are to continue.

The budget will deliver a small boost to Stormont’s finances – an extra £11m.

The government has said that increases in the threshold at which people start to pay income tax will mean that since 2010, 103,000 people in Northern Ireland have been lifted out of income tax.

It said additional support through a package of measures aimed at the creative industries, including film and television tax reliefs, “should provide a further boost to Northern Ireland’s recent successes in attracting international productions”.

Finance Minister Simon Hamilton welcomed the allocation of an additional £10.9m to Northern Ireland’s resource budget for 2015-16 as well as a further £0.5m for capital investment.

“The Chancellor’s oft-stated policy of using the proceeds of growth to pay down the deficit has continued in this Budget and this is reflected in the levels of public spending,” he said.

“Whilst modest in the context of our overall Budget and the fiscal challenges we face, an extra £10.9m for our hard pressed resource budget in Northern Ireland will assist the executive in supporting key public services and underpinning economic growth.

“An additional £0.5m of capital funding will add to the near £31.2bn the executive will invest in infrastructure next year.”

Simon HamiltonSimon Hamilton welcomed the allocation but warned of future public spending reductions

However, Mr Hamilton warned that “the coming years” will continue to see public spending reductions and it was important that people realise “that the executive’s budget will continue to reduce until at least 2019-2020, meaning that tough choices and difficult decisions lie ahead”.

Sinn Féin Enterprise spokesperson, Phil Flanagan, described the Budget as “being of little benefit to our economy”.

“The main message coming out of this Budget is that the Tory Chancellor is determined to continue on the failed path of austerity regardless of the devastation it will inflict on the most vulnerable in society,” he said.

“The continued emphasis on austerity only maintains the unbearable financial pressures that increasing numbers of families and individuals are suffering under.”

SDLP Foyle MP Mark Durkan said there was “a lot of smug preening” in the Budget about cost of living respites “which stem from lower world commodity prices rather than government policies”.

“George Osborne also confirmed the Tory intent to keep reducing the headline rate of corporation tax for the UK,” he added.

“This would mean on the one hand that the north’s devolved corporation tax power might enjoy less competitive advantage within the UK. On the other hand we would have to ensure a lower relative cost in future years to the block grant for the executive.”

Ulster Unionist Party economy spokesperson, Danny Kinahan, welcomed the “renewed commitment” from the Chancellor on corporation tax.

But he said moves to reinvigorate and rebalance the Northern Ireland economy must not be stymied by Sinn Féin “posturing over welfare reform”.

Northern Ireland Secretary of State, Theresa Villiers said the NI economy was “clearly benefiting from the government’s long term economic plan”.

‘Economic reality’

“Figures released today show that the unemployment rate fell by 1.5 percentage points over the year; the production sector has grown by 2.7% over the year; and an additional 12,200 jobs have been created in the private sector,” she said.

However, the trade union, Nipsa said the “smoke and mirrors” around the Budget bore “little relation to the economic reality” that their members were experiencing.

“Our members and their families already know what austerity and economic insecurity looks like in terms of increments denied; real terms pay cuts, pensions and public services attacked,” Nipsa Deputy General Secretary, Alison Millar said.

The Institute of Directors [IoD] Northern Ireland division said it supported the Chancellor in urging parties to commit to the delivery of the Stormont House Agreement in order for NI to set its own rate of corporation tax.

“With Britain witnessing faster growth than any other major advanced economy in the world, it is crucial these corporation tax varying powers are devolved in order for Northern Ireland to take advantage and benefit directly from this undeniable cross sector growth,” Linda Brown, Director of the Institute of Directors Northern Ireland division, said.

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