BELFAST BRIEFING:Whichever side of the Border you reside, there is misery in store tomorrow, writes FRANCESS McDONNELL
TAX HIKES, savage public expenditure cuts and the prospect of sweeping job losses in the public sector. Sound depressingly familiar? It should, regardless of where on the island you live.
It is becoming increasingly obvious that a common theme is emerging when it comes to government blueprints for rescuing an economy. Whichever side of the Border you reside, there is misery in store.
Tomorrow the UK chancellor will deliver one of the most important economic reports of the year to the British Parliament. In his third Pre-Budget Report (PBR), Alistair Darling is expected to explain why tax increases and dramatic cuts in public spending are unavoidable across the UK, including the North.
The chancellor is expected to reveal that Britain’s deficit has soared above £175 billion in 2009. Darling wants to reduce the deficit from more than 12 per cent of GDP currently to below 6 per cent by 2013. The only way he can do this is by implementing harsh policies that, according to business advisers PricewaterhouseCoopers (PwC), will help “put the public finances back on a sound footing once the recession is over”.
The PBR provides a progress report on what the government has “achieved since the previous budget”. Its primary aim is to provide an update on the state of the economy and public finances.
Darling will use the PBR to set out the direction of Government policy in the run-up to the spring budget. Nobody in the North is expecting him to lavish much love on the Northern Ireland Executive by allowing it to escape the worst of his budgetary cuts. But the PBR could have a potentially colossal impact on Northern Ireland.
It could result in millions of pounds of budget cuts across government departments, leading to a reduction of services, pay freezes, direct job losses and less money being spent in the North.
According to Hugh Crossey, PwC managing partner in Northern Ireland, a worst case scenario could see the North facing a budget shortfall of £720 million.
The UK treasury is keen to highlight specific action already been taken by the government to actively help people and businesses in the North in the last year. The treasury points to an “additional provision” of £143 million for the Northern Ireland Executive as “a consequence of additional provision for UK government departments”.
It said businesses have also directly benefited from the Business Payment Support Service, which has allowed them to spread their tax payments over a timetable they can afford. According to the Treasury more than 5,840 agreements were made through this scheme.
It says several initiatives have also brought direct benefits to people living in Northern Ireland. One is the increase in the annual investment limit for individual savings accounts (ISAs) to £10,200.
It also highlights what it describes as support for homeowners and homebuyers, including an extension of the stamp duty holiday for all houses costing up to £175,000 which is in place until the end of 2009.
The treasury says the PBR will set out the government’s strategy “to support businesses and families until the recovery is secured”.
But what will this mean in reality and for people and firms in the North where unemployment is soaring. Darling has already warned that high earners are going to be among his key targets. The basic rate of income tax in the UK is currently set at 20 per cent. Anyone who earns more than £37,400 is taxed at 40 per cent. Next April, those earning more than £150,000 will be taxed at 50 per cent.
Campaigners have called for the chancellor to change the personal allowance tax bands to help those on low wages and to resist introducing new tax implications for those in receipt of child benefit payments.
Darling could be tempted tomorrow to explore the option of raising further revenue from old favourites such as alcohol and tobacco. But, given that there is a general election just around the corner, he is unlikely to take the risk of upsetting the British electorate too much.
When it comes to the North he is in no such danger – it is local politicians who might pay the highest price from the fallout from Darling’s economic report tomorrow.
