Businesses on the Budget
Businesses have been largely welcoming of George Osborne’s Budget, particularly the paper into rebalancing Northern Ireland’s economy.
The reduction of corporation tax to 24 per cent over the next three years is a positive element of the Budget, but should go further according to local business.
“Even after the four years of reduction, our corporation tax will be 6.5 per cent higher than the Republic; a position that is simply not sustainable and any paper which fails to address this point will have little or no impact,” commented Francis Martin, President of the Northern Ireland Chamber of Commerce.
The Institute of Directors (IoD) welcomed reform of the corporation tax system, and the Government’s decision to consult on the “important topics” of the taxation of foreign profits and of intellectual property.
Eamon Donaghy, who chairs the Chartered Accountants of Ireland’s taxation committee, stated that: “A lower rate of corporation tax for this region would in our view assist in boosting economic prosperity and rapid job growth by attracting high value added foreign and direct investment.”
The CBI’s Northern Ireland Director Nigel Smith also welcomed the reduction but said it was “disappointing” that some of Northern Ireland’s larger companies will lose out from reductions in R&D tax credits and changes to capital allowances.
The extension of the enterprise guarantee scheme “delighted” the Federation of Small Businesses (FSB) which had been instrumental in calling for the scheme that sees government guaranteeing part of start-up loans taken out by small businesses.
The Chamber of Commerce, however, pointed out that “take-up of this and other funding schemes in Northern Ireland has been limited and steps must be taken to ensure it is fully utilised.”
Another positive for new small businesses is the exemption from national insurance contributions; however the FSB believes that this should also be extended to existing businesses which have the capacity to employ people.
The hike in VAT from 17.5 per cent to 20 per cent will have a negative effect on small business, according to Francis Martin who claimed: “It will increase the cost of doing business and could have negative effects if it stifled consumer demand. Combined with a weaker euro, it also signals the end of any significant benefit from cross border shopping.”
Glyn Roberts, Chief Executive of Northern Ireland Independent Retailers, said the Chancellor had been tough but not fair.
“The VAT hike to 20 per cent is a regressive move which will do absolutely nothing to restore consumer confidence and get them spending again in our shops.”
The basic state pension will be linked to earnings from April 2011, with the pension guaranteed to rise in line with earnings, prices or 2.5 per cent, whichever is the greater.
This is warmly welcomed by the IoD which is glad it will replace the “impossibly complex” regime created by the Labour Government by putting a simple limit on annual contributions.
The reform of public sector pensions is long overdue according to most business groups, as is the two year pay-freeze.
“Significant cuts were confirmed though the exact impact on Northern Ireland remains unclear. The Executive needs to start preparing for more radical re-engineering of how public services are delivered,” CBI’s Nigel Smith contended.
In response to the forecasted recovery, Dr John Philpott, the Chartered Institute of Personnel and Development’s chief economic advisor, claimed this was “remarkably rosy”.
He added: “The fiscal squeeze both at home and across the eurozone will curb the demand for the goods and services that ultimately drives business investment and exports. Economic growth will slow by far more than today’s budget suggests and unemployment will continue to rise toward 10 per cent by the time Osborne’s measures take full effect.”
