The UK chancellor’s pledge on Wednesday in his summer budget to cut British corporation tax to 18 per cent by 2020 will reduce the overall cost to the Northern Ireland Executive of introducing a substantially lower rate in the North.
George Osborne said the UK's corporation tax rate will fall to 19 per cent in 2017 and 18 per cent by 2020 - a move which actively helps Northern Ireland's ambitions to introduce a new rate of corporation tax of 12.5 per cent to match the current rate in the Republic.
Dr Esmond Birnie, PwC chief economist in Northern Ireland said the Chancellor's decision to reduce corporation tax "significantly reduces" the potential impact of introducing a lower tax rate in the North.
“It will also reduce the cost to the block grant, which the government has estimated as £300 million annually.
“But the immediate issue is overcoming the current impasse in Stormont and setting the “rate and the date” for corporation tax implementation.”
In his budget today Mr Osborne stressed that “delivering the Stormont House Agreement and sustainable public finances was a priority for both Westminster and the Northern Ireland political parties”.
But he also clearly set out his intentions to “move Britain from a low-wage, high-tax, high-welfare society to a higher-wage, lower-tax, lower-welfare economy”.
Part of his new vision for the UK includes sweeping welfare cuts that will wipe £19 billion off the UK’s welfare bill by 2020 - this result in families particularly being hit by reductions to tax credits and universal credit while working age benefits will also be frozen for four years including housing allowance and tax credits.
Mr Osborne has said he wants to make it more attractive for people to get back into the workplace.
His latest budget includes a range of measures to support this from the introduction of a new national living wage of £7.20 next year for the over 25s- which rises to £9 per hour by 2020 – to enabling people to earn more before they have to start paying tax – the personal tax allowance will rise to £11,000 next year and the point at which people will start paying income tax at 40p will also rise from £42,385 to £43,000 .
But local politicians are warning that the package of welfare cuts could make it harder not easier for people to work in Northern Ireland.
The SDLP’s Enterprise spokesperson Patsy McGlone said: “This is a budget against working people. It is one that will abandon those who need help most and plunge them into further deprivation.
“For lone parents, tax credits have been crucial in supporting them to work and helping them to look after their children. Indeed, they play a big part in the increased employment rate among lone parents.”
