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Business responds to the emergency budget
A full round-up of how the business organisations have responded to the Emergency Budget
Chamber of Commerce: coalition’s zealous approach must be adapted in tackling NI structural problems
President of the Northern Ireland Chamber of Commerce Francis Martin has welcomed the Chancellor’s announcement that he is to produce a paper on rebalancing the Northern Ireland economy. He also outlined his broad support for the commitment to improve public finances, but is clear that more need to be done to ensure a competitive rate of Corporation Tax in Northern Ireland and voiced concern on the increase in V.A.T.
"The Corporation Tax rate is central to any discussion on Northern Ireland’s future. Today’s news that Corporation Tax is to be reduced over the next four years will no doubt be welcomed by business in England, Scotland and Wales. The fact is that even after the four years of reduction, our Corporation Tax will be some 6.5% 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.
“The Conservatives pledged to the people of Northern Ireland that they would create a Special Economic Zone and it is vital that that process kick starts our long-overdue economic recovery. A change in the Corporation Tax rate is central to this.
On the Chancellor’s five year commitment to cut the deficit he said: “It is clear that the current position of UK government finances is not sustainable and the Chamber welcomes the commitment to reduce the deficit. While the news that the Enterprise Guarantee Scheme is to be widened, the fact remains 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 utilized.
On the effect on the SME sector, he said: “Today’s budget poses a mixed bag for the SME sector. The exemption from National Insurance payments for new businesses is a strong sign of the government’s commitment to the sector, however wider problems continue to make business start-up very difficult. The increase in V.A.T however has a negative effect on small business by increasing 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.
“While today’s budget is a challenge for everyone, it is clear that some of the tough decisions are being taken. We await the result of the upcoming Comprehensive Spending Review for the specific impact on Assembly spending and will working with colleagues in the Executive, Government and business to ensure that our economy strikes the correct public/private balance,” he added.
Institute of Directors backs bold budget
The IoD Northern Ireland said: “George Osborne has faced up to the challenge. The economy needed faster and deeper deficit reduction and that’s exactly what the Chancellor has delivered. Equally important to the scale of deficit reduction is the way it is done. Here again the Chancellor has chosen the right route, by concentrating overwhelmingly on closing the fiscal gap by lower spending instead of higher taxation. We do not believe the Budget will threaten economic recovery. Quite the contrary, it is likely to improve the economic outlook by showing the public finances are finally being brought under control.
We particularly welcome the news that a consultation paper will be published on rebalancing the economy of Northern Ireland. This is something the IoD has been calling for for many years and in fact forms a central plank our policy paper published in 2008 ‘The 1.7 Challenge’.
“Today’s Budget is an important step on the road to fiscal common sense. Knowing that the public finances are being brought under control is one less worry for companies and will also help long-term interest rates and business investment. We never expected the Chancellor to tick all our wish list but he did tick many boxes. Ideally we would have left CGT unchanged but that was never an option politically and the proposed changes are a tolerable compromise.”
The IoD responded nationally to some specific tax measures in the Budget:
With regard to specific spending measures:
Chartered Accountants Ireland commends Budget Announcement for Northern Ireland
Chartered Accountants Ireland has reacted to today’s Budget announcements.
Chair of the organisation's Northern Ireland Taxation Committee Mr Eamonn Donaghy said:
"Of its nature, this was going to be a difficult Budget. However we are pleased to see that some progressive tax elements were part of today’s Budget announcements, especially those of relevance to Northern Ireland. These include the proposal to reduce the small company rate of corporation tax to 20% from April 2011 and the introduction of an Employer’s NIC exemption scheme for new businesses.”
“The Government paper to examine mechanisms for changing the rate of corporation tax in this region has been on the cards for a while. We advocate that this process needs to start as a matter of urgency. 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 Direct Investment. Chartered Accountants Ireland will be offering our assistance and expertise in this process to both local and national Government.
Ulster Society Chairman Richard Gardiner further commented:“Chartered Accountants Ireland has consistently participated in the process of developing an economic strategy for Northern Ireland. We note that the Government has responded to our call for commercially aligned tax measures as an important strand of this developing strategy and our members will continue to engage fully and constructively in the debate surrounding all of the issues which are raised by such a potential alignment”
“There are also a number of other UK wide measures which too will help the SME sector in Northern Ireland although many of these will not have an immediate impact due to a delayed start date. Taken together the overall package can help in addressing the long held public/private sector imbalance in this region and we hope, that when combined with other measures, it will act as a catalyst for growth of the private sector in Northern Ireland."
CBI COMMENTS ON GOVERNMENT’S CORPORATE TAX PLAN
The CBI has today commented on a strategy announced by the Chancellor in the Budget to simplify the corporate tax system, and bring down the headline rate of corporation tax in the medium-term.
Will Morris, Chair of the CBI Taxation Committee, said: "The coalition’s plan for corporate tax sets a very positive course for the future direction of tax policy. This policy framework, combined with a strong process for business input, will reassure companies in the tough times ahead."
On the tax policy-making process, he added: "It is clear that, despite the talented people involved, the tax policy-making process is simply not working as it should, from formation through to final legislation. We welcome the Government's decision to consult on this in order to produce a better system for every stage of that process."
Northern Ireland Independent Retailers
Glyn Roberts, NIIRTA Chief Executive said: “The Chancellor has described this Budget as ‘tough but fair’-but how exactly is the VAT hike fair in any way for small businesses and retailers”
“It is a major mistake and one which will cost Northern Ireland’s small businesses and consumers dearly”
“The VAT hike to 20% is a regressive move which will do absolutely nothing to restore consumer confidence and get them spending again in our shops. It could well result in a further drop in consumer spend which could mean more unemployment and business closure such as we have seen with Laser”
“There is the further expense for small retailers of having to change their pricing which could cost them nearly £2000 not to mention the considerable hassle of making these changes “
“Hiking VAT means that low income families will be hit further when buying goods and services and reduce the impact of the their tax cut announced in the Budget”
On Corporation Tax
“Reducing Corporation Tax is welcome as it lowering National Insurance Contributions for new start businesses outside South East England. This is a positive step and we look forward to the Coalitions Paper on the Northern Ireland Economy”
“NIIRTA welcomes the move to decrease the Small Companies Tax Rate to 20 per cent which will be some help to many local small businesses”
In Conclusion Mr Roberts said: “We have said that cuts were inevitable, but this Budget has cut too much, too soon and could stall an already very shaky recovery. While it is crucial that the Government cut the deficit, we believe that this Budget may restrict business growth and confidence and postpone a real and meaningful recovery”
FSB reaction to the first Coalition Government Emergency Budget
The Federation of Small Businesses (FSB), today (22 June) welcomed many of the measures that the Chancellor has announced in the Emergency Budget, but expressed concern that rises in Employer National Insurance Contributions (NICS) were not completely reversed.
The FSB is pleased that the Treasury has listened to concerns about hiking Capital Gains Tax to 50 per cent, and has chosen instead to increase it to 28 per cent for those on the highest incomes. The FSB welcomes moves to increase the Entrepreneurs Relief threshold to £5 million from £2 million. This relief was called for by the FSB under the previous administration.
The move to reduce the Small Companies Tax Rate to 20 per cent is welcomed and will help over 850,000 small firms. The FSB is also delighted that the Government will extend the Enterprise Finance Guarantee which was introduced following calls from the FSB and helps many small businesses who face difficulty in accessing credit.
The FSB welcomes the proposals to exempt new businesses from NICs but believes that this should also be extended to existing businesses, which have the capacity to employ people. This useful scheme should also be made UK-wide.
Moves to increase personal allowances by £1,000 are also welcomed as it will help to reduce the pressure on businesses from wage demands and give employees more cash in their pockets.
Government plans to hike VAT to 20 per cent from 17.5 per cent will hurt small businesses in the high street. However, we are pleased that there is some time to go before the increase takes place and it is interesting to note that common sense has prevailed with the increase coming into play on 4 January 2011 and not on New Year's Day.
For many small businesses insurance on many items is a must and the proposal to increase Insurance Premium Tax (IPT) from five to six per cent is a tax on responsible business and should be reversed.
The FSB was pleased to see that its campaign to save many businesses in the tourist sector has reaped results with the Chancellors announcement that tax breaks for Furnished Holiday Lettings will continue.
While the Chancellor referred to stability in fuel prices, the FSB is concerned that proposals for a fair fuel stabilizer to control erratic movements in the price of fuel were not announced today.
John Walker, National Chairman, Federation of Small Businesses, said: "The measures announced in the Emergency Budget will go a long way to reducing the deficit and will please the 93 per cent of FSB members who called for a clear plan on tackling the country's debt.
"The increase in VAT to 20 per cent will however, hurt small firms who will have to pass the increase on to their customers, unlike big business which can absorb the cost.
"We welcome moves to give a national insurance holiday to start-up firms, but are concerned that with 70 per cent of firms operating below capacity, those businesses already trading will not be helped. We need to see a full reversal of NICs increases to fully offset the ‘tax on jobs' which the previous administration initiated."
Northern Ireland pub trade cautious on budget
Following today’s first Coalition Government budget announcement, Colin Neill, Chief Executive of Pubs of Ulster, formerly known as the Federation of the Retail Licensed Trade, said: “While the industry welcomes today’s announcement that there will be no new increases in wine, beer and spirit duty, we do so with caution. The Chancellor was unclear as to whether the previously announced duty increases of 2 per cent above inflation from 2013 will proceed and also confirmed a further review of taxation and the pricing of alcohol which he will report back on in the autumn.
The current level of alcohol duty is already 25 per cent higher than two years ago meaning that publicans currently receive just 23 pence profit from the sale of a £3.00 pint of beer. Any further tax increases are unsustainable and will place the survival of pubs and the jobs of the 34,000 people working in the industry here in serious jeopardy.
Encouragingly, the Coalition Programme for Government did include a pledge to ban the below cost sale of alcohol. Unfortunately, today’s announcement provided no further clarity on whether this will lead to the introduction of minimum pricing to end below cost selling by supermarkets, or indeed any reassurance that a further social levy or tax will not be enforced on the licensed trade as a blunt measure to address alcohol misuse and binge drinking. Therefore, there is still a great degree of uncertainty as to the Government’s commitment to introducing measures which support rather than penalise the future of the industry.”
Toughest budget in a generation, says NICVA panel
Seamus McAleavey, NICVA, who chaired the panel stated: “This is a very tough budget and the full extent of its outcome will not become obvious until next year. The spending cuts in particular could see Northern Ireland lose £1 billion or more over four years. That will mean public services will be cut and Northern Ireland will lose a substantial number of jobs.”
In general the NICVA panel thought:
Jennie Hammond, Employers for Childcare, said: “Employers for Childcare is a campaigning charity whose ethos is ‘to make it easier for parents with dependent children to get into work and to stay in work. We appreciate that difficult decisions had to be made today however we are concerned that some of these decisions are to the detriment of working families. The announcement of a rise in Child Tax Credit cuts for families with household incomes of over £40,000, removal of the Baby element of Child Tax Credit and the shortening of the backdating period. The abolition of the universal ‘Health in Pregnancy’ grant and the limitations being introduced to the Sure Start Maternity Grant will also impact upon families.
Mr Osborne has stated that he wants this budget to reward the efforts of those who want to work. In order for this to happen, the government will need to address childcare as an economic and a labour market issue”
Andrew Dougal, Chest, Heart and Stroke stated: “The Chancellor missed a great opportunity to increase revenue substantially by 5% above inflation increase on tobacco tax. People will not respond to incremental changes in nicotine tax, particularly when an addictive substance like nicotine is involved.
Tobacco costs society almost £14 billion a year but brings in only £10 billion in taxes to the Exchequer. The Chancellor should have announced that during this parliament he would increase tobacco each year so that it would be cost-neutral by 2015. This would mean an increase of £1.29 per pack, bringing the price to £7.42 per pack by 2015. If announced now, this would have acted as a powerful incentive for smokers to quit. 7 out of 10 smokers would clearly love to quit the habit.”
Lynn Carvill, WRDA, commented:“It would appear that women and families have been a clear target in this budget and proposed spending cuts.
‘Giving birth’ will be penalised with the abolition of the Health in Pregnancy grant and the baby element of the Child Tax Credit system. This is a huge financial blow to expectant and new mothers.
Reduction in benefits will inevitably have a greater impact on women who are more likely to rely on social security and are more at risk of poverty throughout their lives.”
Bob Stronge, Advice NI, said: “Advice NI said today’s budget announcements on welfare reforms will have a harsh impact on households in Northern Ireland. We have a higher reliance on welfare benefits in NI and the cuts announced to tax credits, child benefit and housing benefits will be disproportionate here. The rise in VAT will further add to this burden. We will also see huge cuts across government spending which will lead to reduced public services across the board. It’s hard to see how the government’s commitment to move people from welfare to work can be achieved.”
Elaine Campbell from Age NI, commented: “The restriction of the link to earnings for the basic state pension is welcome. However, the state pension remains too low. Furthermore, the increase in VAT to 20% will disproportionately impact upon those already in poverty. We know that the rate of poverty among pensioners is higher than anywhere else in the UK. People in poverty will face even harder times. We agree this budget is tough, but penalising the poor is not fair. Asking people to work until 66 while maintaining the default retirement age may leave people vulnerable. It will allow employers to sack older workers, who will be unable to claim their pensions.”
Marie Cavanagh from Gingerbread, stated: “Gingerbread - the organisation working with the one parent families in Northern Ireland - considers today’s budget to be an attack on these families. We believe that the reductions in Tax Credits, the freeze on Child Benefit and the increase on VAT will disproportionately impact on one parent families who rely on benefits or are on low paid employment.
The long term implication of this budget will be that those who are least well off in society will be most heavily penalised in trying to address the budget deficit”
Declan Allison, Friends of the Earth, commented: “This budget was a missed opportunity. The Chancellor should have announced support for the Green New Deal. Instead we got a re-run of the Government’s pledge to create a Green Investment Bank but with no details. The Green Investment Bank should have at least £2 billion in its first year, focussed on renewables and energy efficiency. This would create thousands of jobs, help to cut fuel bills, and reduce carbon emissions – a win, win, win situation.”
Dermot McCluskey from Disability Action, said: “Disability Action’s main concern on the initial announcement is the assessment of people with disabilities in relation to Disability Living Allowance. There is not enough detail at present and we will be closely monitoring the situation. The raising of the threshold for tax credits is also a concern. The impact on families with children with disabilities could be disproportionate and we need to investigate this further.
The overall budget focuses significantly on spending cuts as opposed to tax increases and our concern is that the trickle down effect of this approach through to Northern Ireland will be significant.”
CIPD
The CIPD responds to the implications of the Budget for jobs, public sector pay, pensions and the default retirement age
Dr John Philpott, chief economic adviser at the Chartered Institute of Personnel and Development (CIPD), comments as follows on today’s emergency Budget:
“The Chancellor has introduced what must surely rank as the most astonishing UK budget statement in modern times. Mr Osborne’s combination of £32 billion additional spending cuts by 2014-15 and an £8 billion net tax hike amounts to an unprecedented fiscal squeeze, including an extremely severe clampdown on the welfare bill. Yet both he and the independent Office for Budget Responsibility (OBR) reckon there is a greater than evens chance that the government will meet what the Chancellor calls its ‘fiscal mandate’ with barely any serious short-term impact on economic growth and employment.
“Although the OBR has downgraded its pre-Budget economic growth forecasts in the light of Mr Osborne’s austerity measures, and become a bit more pessimistic about jobs, the suggested outlook for the economy is nonetheless remarkably rosy, with investment and net exports more than making up for weak household spending and a big drop in public spending. The Chancellor could hardly have asked for more had he and his Treasury team stuck with tradition and come up with the forecast themselves.
“One suspects, however, that the forecast outlook will prove too good to be true. 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, rather than peaking at 8% this year, unemployment will continue to rise toward 3 million (10%) by the time Mr Osborne’s measures take full effect. This will add to public borrowing and debt, not reduce it. The 2010 Emergency Budget is not the beginning of the end of the UK’s post-recession economic difficulty but the start of a period of painfully slow growth, falling living standards, and prolonged high unemployment.”
Additionally, Dr Philpott comments on the public sector management challenge ahead:
“Significant job cuts were inevitable whoever won the election. However, there is little evidence that any of the parties gave serious thought to the enormous management challenges associated with delivering their manifesto commitments through a workforce demoralised by redundancies, pay restraint and pensions reform.
“We’ve warned consistently that the public sector may be numerically overmanaged, it is qualitatively undermanaged. To get the best from a workforce cowed by the harsh winds of fiscal restraint will require a step change in management capability in the public sector. Those who lose their jobs are only part of the story – how the ‘survivors’ are managed will determine if the story has a happy ending for the UK’s public services.”
Charles Cotton, CIPD reward adviser, also comments on the two-year public sector pay freeze, plans to raise the state retirement age and to consult on the default retirement age, and the newly-formed Hutton Commission into public sector pensions:
Public sector pay:
“In the short term, while a pay freeze will stop the public deficit getting any worse, it will do little to help the deficit get any better. For that to happen we need to review what public sector services we need, what delivery structures are most appropriate, what skills, behaviours, attitudes and performance we need from public sector workers and how we should reward and recognise these. At the moment, however, serious joined-up thinking about how to reform pay and benefits to get the best from public sector workers is being drowned out by the incessant, monotone noise of the deficit reduction vuvuzelas.
“The government also needs to be wary of the dangers of a prolonged squeeze on public sector pay. Keeping the lid on pay for year after year would cut costs at the expense of severe public sector recruitment and retention difficulties. This would harm the quality of public service provision as public sector employers would have to make do with lower quality staff, while history suggests that periods of tight pay restraint are subsequently followed by periods of significant public sector pay inflation when earnings are raised to competitive rates.”
Plans to raise the state retirement age:
“It is no great surprise that the Government is planning to accelerate the rise in the state retirement age. However, it is a shame that they have swerved a clear decision on the default retirement age, and have chosen instead to hold yet another consultation on its abolition. They should make their consultation swift, and move quickly to bring to an end the absurdity of enforced retirement. In tough times like these, it is all the more crazy to force people out of the labour market and into the pension claimant ranks. People who want and are able to keep working can do more to reduce the deficit than people forced out of work and into unwilling retirement.”
Hutton Commission into public sector pensions
“Plans to ask public sector employees to contribute more now towards their future pensions are nothing more than a necessary short-term down payment on more substantial reform of public sector pensions. We welcome this first step towards reform, but expect more substantial recommendations for the medium and long term from John Hutton when he reports back on his findings.
“Public sector pensions today manage the uniquely poor combination of being extremely costly, while still somehow failing, given their cost, to be used as effectively as they should to attract, retain and motivate people in the public sector. As well as addressing the costs, public sector employers need to find better ways of communicating to employees the benefits of public sector pensions.”
President of the Northern Ireland Chamber of Commerce Francis Martin has welcomed the Chancellor’s announcement that he is to produce a paper on rebalancing the Northern Ireland economy. He also outlined his broad support for the commitment to improve public finances, but is clear that more need to be done to ensure a competitive rate of Corporation Tax in Northern Ireland and voiced concern on the increase in V.A.T.
"The Corporation Tax rate is central to any discussion on Northern Ireland’s future. Today’s news that Corporation Tax is to be reduced over the next four years will no doubt be welcomed by business in England, Scotland and Wales. The fact is that even after the four years of reduction, our Corporation Tax will be some 6.5% 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.
“The Conservatives pledged to the people of Northern Ireland that they would create a Special Economic Zone and it is vital that that process kick starts our long-overdue economic recovery. A change in the Corporation Tax rate is central to this.
On the Chancellor’s five year commitment to cut the deficit he said: “It is clear that the current position of UK government finances is not sustainable and the Chamber welcomes the commitment to reduce the deficit. While the news that the Enterprise Guarantee Scheme is to be widened, the fact remains 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 utilized.
On the effect on the SME sector, he said: “Today’s budget poses a mixed bag for the SME sector. The exemption from National Insurance payments for new businesses is a strong sign of the government’s commitment to the sector, however wider problems continue to make business start-up very difficult. The increase in V.A.T however has a negative effect on small business by increasing 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.
“While today’s budget is a challenge for everyone, it is clear that some of the tough decisions are being taken. We await the result of the upcoming Comprehensive Spending Review for the specific impact on Assembly spending and will working with colleagues in the Executive, Government and business to ensure that our economy strikes the correct public/private balance,” he added.
Institute of Directors backs bold budget
The IoD Northern Ireland said: “George Osborne has faced up to the challenge. The economy needed faster and deeper deficit reduction and that’s exactly what the Chancellor has delivered. Equally important to the scale of deficit reduction is the way it is done. Here again the Chancellor has chosen the right route, by concentrating overwhelmingly on closing the fiscal gap by lower spending instead of higher taxation. We do not believe the Budget will threaten economic recovery. Quite the contrary, it is likely to improve the economic outlook by showing the public finances are finally being brought under control.
We particularly welcome the news that a consultation paper will be published on rebalancing the economy of Northern Ireland. This is something the IoD has been calling for for many years and in fact forms a central plank our policy paper published in 2008 ‘The 1.7 Challenge’.
“Today’s Budget is an important step on the road to fiscal common sense. Knowing that the public finances are being brought under control is one less worry for companies and will also help long-term interest rates and business investment. We never expected the Chancellor to tick all our wish list but he did tick many boxes. Ideally we would have left CGT unchanged but that was never an option politically and the proposed changes are a tolerable compromise.”
The IoD responded nationally to some specific tax measures in the Budget:
- We welcome the 2011 reduction in the main and small companies rates of corporation tax, and the promise to make further reductions in the main rate in future. Modest reductions in capital allowances are a reasonable price to pay. However, we would not want to see further reductions in capital allowances to below typical depreciation rates.
- We welcome the package to neutralise the damaging effect of the national insurance increase, through an increase in the level of income at which employers’ contributions start to be payable and an increase in the personal allowance.
- We welcome the Government’s commitment to a long-term reform of the corporation tax system, and the decision to consult on the important topics of the taxation of foreign profits and the taxation of intellectual property. It will however be important to consult on all the proposals, so as to ensure the package really is business-friendly.
- We welcome the decision to review IR35 and the taxation of small businesses.
- The rise in CGT rates is regrettable, but not as bad as an increase right up to income tax rates would have been.
- We welcome the decision that any changes to aviation tax will be subject to full public consultation.
- We warmly welcome the decision to review the restriction on pension contributions, with a view to replacing the impossibly complex regime created by the previous government with a simple limit on annual contributions.
With regard to specific spending measures:
- We recognise the need for bold action to freeze public sector pay for 2 years.
- We welcome the urgency to fast-track public sector pensions reform.
- The IoD also stated that whilst it was pleased the Coalition won’t cut infrastructure spending even more than under Labour plans, it is concerned that investment will still halve over the next 3 years.
- We welcome the proposed slow-down in the growth of welfare spending, and want to see further radical structural reform of the system.
Chartered Accountants Ireland commends Budget Announcement for Northern Ireland
Chartered Accountants Ireland has reacted to today’s Budget announcements.
Chair of the organisation's Northern Ireland Taxation Committee Mr Eamonn Donaghy said:
"Of its nature, this was going to be a difficult Budget. However we are pleased to see that some progressive tax elements were part of today’s Budget announcements, especially those of relevance to Northern Ireland. These include the proposal to reduce the small company rate of corporation tax to 20% from April 2011 and the introduction of an Employer’s NIC exemption scheme for new businesses.”
“The Government paper to examine mechanisms for changing the rate of corporation tax in this region has been on the cards for a while. We advocate that this process needs to start as a matter of urgency. 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 Direct Investment. Chartered Accountants Ireland will be offering our assistance and expertise in this process to both local and national Government.
Ulster Society Chairman Richard Gardiner further commented:“Chartered Accountants Ireland has consistently participated in the process of developing an economic strategy for Northern Ireland. We note that the Government has responded to our call for commercially aligned tax measures as an important strand of this developing strategy and our members will continue to engage fully and constructively in the debate surrounding all of the issues which are raised by such a potential alignment”
“There are also a number of other UK wide measures which too will help the SME sector in Northern Ireland although many of these will not have an immediate impact due to a delayed start date. Taken together the overall package can help in addressing the long held public/private sector imbalance in this region and we hope, that when combined with other measures, it will act as a catalyst for growth of the private sector in Northern Ireland."
CBI COMMENTS ON GOVERNMENT’S CORPORATE TAX PLAN
The CBI has today commented on a strategy announced by the Chancellor in the Budget to simplify the corporate tax system, and bring down the headline rate of corporation tax in the medium-term.
Will Morris, Chair of the CBI Taxation Committee, said: "The coalition’s plan for corporate tax sets a very positive course for the future direction of tax policy. This policy framework, combined with a strong process for business input, will reassure companies in the tough times ahead."
On the tax policy-making process, he added: "It is clear that, despite the talented people involved, the tax policy-making process is simply not working as it should, from formation through to final legislation. We welcome the Government's decision to consult on this in order to produce a better system for every stage of that process."
Northern Ireland Independent Retailers
Glyn Roberts, NIIRTA Chief Executive said: “The Chancellor has described this Budget as ‘tough but fair’-but how exactly is the VAT hike fair in any way for small businesses and retailers”
“It is a major mistake and one which will cost Northern Ireland’s small businesses and consumers dearly”
“The VAT hike to 20% is a regressive move which will do absolutely nothing to restore consumer confidence and get them spending again in our shops. It could well result in a further drop in consumer spend which could mean more unemployment and business closure such as we have seen with Laser”
“There is the further expense for small retailers of having to change their pricing which could cost them nearly £2000 not to mention the considerable hassle of making these changes “
“Hiking VAT means that low income families will be hit further when buying goods and services and reduce the impact of the their tax cut announced in the Budget”
On Corporation Tax
“Reducing Corporation Tax is welcome as it lowering National Insurance Contributions for new start businesses outside South East England. This is a positive step and we look forward to the Coalitions Paper on the Northern Ireland Economy”
“NIIRTA welcomes the move to decrease the Small Companies Tax Rate to 20 per cent which will be some help to many local small businesses”
In Conclusion Mr Roberts said: “We have said that cuts were inevitable, but this Budget has cut too much, too soon and could stall an already very shaky recovery. While it is crucial that the Government cut the deficit, we believe that this Budget may restrict business growth and confidence and postpone a real and meaningful recovery”
FSB reaction to the first Coalition Government Emergency Budget
The Federation of Small Businesses (FSB), today (22 June) welcomed many of the measures that the Chancellor has announced in the Emergency Budget, but expressed concern that rises in Employer National Insurance Contributions (NICS) were not completely reversed.
The FSB is pleased that the Treasury has listened to concerns about hiking Capital Gains Tax to 50 per cent, and has chosen instead to increase it to 28 per cent for those on the highest incomes. The FSB welcomes moves to increase the Entrepreneurs Relief threshold to £5 million from £2 million. This relief was called for by the FSB under the previous administration.
The move to reduce the Small Companies Tax Rate to 20 per cent is welcomed and will help over 850,000 small firms. The FSB is also delighted that the Government will extend the Enterprise Finance Guarantee which was introduced following calls from the FSB and helps many small businesses who face difficulty in accessing credit.
The FSB welcomes the proposals to exempt new businesses from NICs but believes that this should also be extended to existing businesses, which have the capacity to employ people. This useful scheme should also be made UK-wide.
Moves to increase personal allowances by £1,000 are also welcomed as it will help to reduce the pressure on businesses from wage demands and give employees more cash in their pockets.
Government plans to hike VAT to 20 per cent from 17.5 per cent will hurt small businesses in the high street. However, we are pleased that there is some time to go before the increase takes place and it is interesting to note that common sense has prevailed with the increase coming into play on 4 January 2011 and not on New Year's Day.
For many small businesses insurance on many items is a must and the proposal to increase Insurance Premium Tax (IPT) from five to six per cent is a tax on responsible business and should be reversed.
The FSB was pleased to see that its campaign to save many businesses in the tourist sector has reaped results with the Chancellors announcement that tax breaks for Furnished Holiday Lettings will continue.
While the Chancellor referred to stability in fuel prices, the FSB is concerned that proposals for a fair fuel stabilizer to control erratic movements in the price of fuel were not announced today.
John Walker, National Chairman, Federation of Small Businesses, said: "The measures announced in the Emergency Budget will go a long way to reducing the deficit and will please the 93 per cent of FSB members who called for a clear plan on tackling the country's debt.
"The increase in VAT to 20 per cent will however, hurt small firms who will have to pass the increase on to their customers, unlike big business which can absorb the cost.
"We welcome moves to give a national insurance holiday to start-up firms, but are concerned that with 70 per cent of firms operating below capacity, those businesses already trading will not be helped. We need to see a full reversal of NICs increases to fully offset the ‘tax on jobs' which the previous administration initiated."
Northern Ireland pub trade cautious on budget
Following today’s first Coalition Government budget announcement, Colin Neill, Chief Executive of Pubs of Ulster, formerly known as the Federation of the Retail Licensed Trade, said: “While the industry welcomes today’s announcement that there will be no new increases in wine, beer and spirit duty, we do so with caution. The Chancellor was unclear as to whether the previously announced duty increases of 2 per cent above inflation from 2013 will proceed and also confirmed a further review of taxation and the pricing of alcohol which he will report back on in the autumn.
The current level of alcohol duty is already 25 per cent higher than two years ago meaning that publicans currently receive just 23 pence profit from the sale of a £3.00 pint of beer. Any further tax increases are unsustainable and will place the survival of pubs and the jobs of the 34,000 people working in the industry here in serious jeopardy.
Encouragingly, the Coalition Programme for Government did include a pledge to ban the below cost sale of alcohol. Unfortunately, today’s announcement provided no further clarity on whether this will lead to the introduction of minimum pricing to end below cost selling by supermarkets, or indeed any reassurance that a further social levy or tax will not be enforced on the licensed trade as a blunt measure to address alcohol misuse and binge drinking. Therefore, there is still a great degree of uncertainty as to the Government’s commitment to introducing measures which support rather than penalise the future of the industry.”
Toughest budget in a generation, says NICVA panel
Seamus McAleavey, NICVA, who chaired the panel stated: “This is a very tough budget and the full extent of its outcome will not become obvious until next year. The spending cuts in particular could see Northern Ireland lose £1 billion or more over four years. That will mean public services will be cut and Northern Ireland will lose a substantial number of jobs.”
In general the NICVA panel thought:
- The budget is less progressive than the chancellor asserts
- People on the lowest incomes are the hardest hit, particularly women
- VAT up to 20% will hurt the poor most
- The sting in the tail will be the loss of many services with the 25% reduction in Public Expenditure over 4 years.
Jennie Hammond, Employers for Childcare, said: “Employers for Childcare is a campaigning charity whose ethos is ‘to make it easier for parents with dependent children to get into work and to stay in work. We appreciate that difficult decisions had to be made today however we are concerned that some of these decisions are to the detriment of working families. The announcement of a rise in Child Tax Credit cuts for families with household incomes of over £40,000, removal of the Baby element of Child Tax Credit and the shortening of the backdating period. The abolition of the universal ‘Health in Pregnancy’ grant and the limitations being introduced to the Sure Start Maternity Grant will also impact upon families.
Mr Osborne has stated that he wants this budget to reward the efforts of those who want to work. In order for this to happen, the government will need to address childcare as an economic and a labour market issue”
Andrew Dougal, Chest, Heart and Stroke stated: “The Chancellor missed a great opportunity to increase revenue substantially by 5% above inflation increase on tobacco tax. People will not respond to incremental changes in nicotine tax, particularly when an addictive substance like nicotine is involved.
Tobacco costs society almost £14 billion a year but brings in only £10 billion in taxes to the Exchequer. The Chancellor should have announced that during this parliament he would increase tobacco each year so that it would be cost-neutral by 2015. This would mean an increase of £1.29 per pack, bringing the price to £7.42 per pack by 2015. If announced now, this would have acted as a powerful incentive for smokers to quit. 7 out of 10 smokers would clearly love to quit the habit.”
Lynn Carvill, WRDA, commented:“It would appear that women and families have been a clear target in this budget and proposed spending cuts.
‘Giving birth’ will be penalised with the abolition of the Health in Pregnancy grant and the baby element of the Child Tax Credit system. This is a huge financial blow to expectant and new mothers.
Reduction in benefits will inevitably have a greater impact on women who are more likely to rely on social security and are more at risk of poverty throughout their lives.”
Bob Stronge, Advice NI, said: “Advice NI said today’s budget announcements on welfare reforms will have a harsh impact on households in Northern Ireland. We have a higher reliance on welfare benefits in NI and the cuts announced to tax credits, child benefit and housing benefits will be disproportionate here. The rise in VAT will further add to this burden. We will also see huge cuts across government spending which will lead to reduced public services across the board. It’s hard to see how the government’s commitment to move people from welfare to work can be achieved.”
Elaine Campbell from Age NI, commented: “The restriction of the link to earnings for the basic state pension is welcome. However, the state pension remains too low. Furthermore, the increase in VAT to 20% will disproportionately impact upon those already in poverty. We know that the rate of poverty among pensioners is higher than anywhere else in the UK. People in poverty will face even harder times. We agree this budget is tough, but penalising the poor is not fair. Asking people to work until 66 while maintaining the default retirement age may leave people vulnerable. It will allow employers to sack older workers, who will be unable to claim their pensions.”
Marie Cavanagh from Gingerbread, stated: “Gingerbread - the organisation working with the one parent families in Northern Ireland - considers today’s budget to be an attack on these families. We believe that the reductions in Tax Credits, the freeze on Child Benefit and the increase on VAT will disproportionately impact on one parent families who rely on benefits or are on low paid employment.
The long term implication of this budget will be that those who are least well off in society will be most heavily penalised in trying to address the budget deficit”
Declan Allison, Friends of the Earth, commented: “This budget was a missed opportunity. The Chancellor should have announced support for the Green New Deal. Instead we got a re-run of the Government’s pledge to create a Green Investment Bank but with no details. The Green Investment Bank should have at least £2 billion in its first year, focussed on renewables and energy efficiency. This would create thousands of jobs, help to cut fuel bills, and reduce carbon emissions – a win, win, win situation.”
Dermot McCluskey from Disability Action, said: “Disability Action’s main concern on the initial announcement is the assessment of people with disabilities in relation to Disability Living Allowance. There is not enough detail at present and we will be closely monitoring the situation. The raising of the threshold for tax credits is also a concern. The impact on families with children with disabilities could be disproportionate and we need to investigate this further.
The overall budget focuses significantly on spending cuts as opposed to tax increases and our concern is that the trickle down effect of this approach through to Northern Ireland will be significant.”
CIPD
The CIPD responds to the implications of the Budget for jobs, public sector pay, pensions and the default retirement age
Dr John Philpott, chief economic adviser at the Chartered Institute of Personnel and Development (CIPD), comments as follows on today’s emergency Budget:
“The Chancellor has introduced what must surely rank as the most astonishing UK budget statement in modern times. Mr Osborne’s combination of £32 billion additional spending cuts by 2014-15 and an £8 billion net tax hike amounts to an unprecedented fiscal squeeze, including an extremely severe clampdown on the welfare bill. Yet both he and the independent Office for Budget Responsibility (OBR) reckon there is a greater than evens chance that the government will meet what the Chancellor calls its ‘fiscal mandate’ with barely any serious short-term impact on economic growth and employment.
“Although the OBR has downgraded its pre-Budget economic growth forecasts in the light of Mr Osborne’s austerity measures, and become a bit more pessimistic about jobs, the suggested outlook for the economy is nonetheless remarkably rosy, with investment and net exports more than making up for weak household spending and a big drop in public spending. The Chancellor could hardly have asked for more had he and his Treasury team stuck with tradition and come up with the forecast themselves.
“One suspects, however, that the forecast outlook will prove too good to be true. 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, rather than peaking at 8% this year, unemployment will continue to rise toward 3 million (10%) by the time Mr Osborne’s measures take full effect. This will add to public borrowing and debt, not reduce it. The 2010 Emergency Budget is not the beginning of the end of the UK’s post-recession economic difficulty but the start of a period of painfully slow growth, falling living standards, and prolonged high unemployment.”
Additionally, Dr Philpott comments on the public sector management challenge ahead:
“Significant job cuts were inevitable whoever won the election. However, there is little evidence that any of the parties gave serious thought to the enormous management challenges associated with delivering their manifesto commitments through a workforce demoralised by redundancies, pay restraint and pensions reform.
“We’ve warned consistently that the public sector may be numerically overmanaged, it is qualitatively undermanaged. To get the best from a workforce cowed by the harsh winds of fiscal restraint will require a step change in management capability in the public sector. Those who lose their jobs are only part of the story – how the ‘survivors’ are managed will determine if the story has a happy ending for the UK’s public services.”
Charles Cotton, CIPD reward adviser, also comments on the two-year public sector pay freeze, plans to raise the state retirement age and to consult on the default retirement age, and the newly-formed Hutton Commission into public sector pensions:
Public sector pay:
“In the short term, while a pay freeze will stop the public deficit getting any worse, it will do little to help the deficit get any better. For that to happen we need to review what public sector services we need, what delivery structures are most appropriate, what skills, behaviours, attitudes and performance we need from public sector workers and how we should reward and recognise these. At the moment, however, serious joined-up thinking about how to reform pay and benefits to get the best from public sector workers is being drowned out by the incessant, monotone noise of the deficit reduction vuvuzelas.
“The government also needs to be wary of the dangers of a prolonged squeeze on public sector pay. Keeping the lid on pay for year after year would cut costs at the expense of severe public sector recruitment and retention difficulties. This would harm the quality of public service provision as public sector employers would have to make do with lower quality staff, while history suggests that periods of tight pay restraint are subsequently followed by periods of significant public sector pay inflation when earnings are raised to competitive rates.”
Plans to raise the state retirement age:
“It is no great surprise that the Government is planning to accelerate the rise in the state retirement age. However, it is a shame that they have swerved a clear decision on the default retirement age, and have chosen instead to hold yet another consultation on its abolition. They should make their consultation swift, and move quickly to bring to an end the absurdity of enforced retirement. In tough times like these, it is all the more crazy to force people out of the labour market and into the pension claimant ranks. People who want and are able to keep working can do more to reduce the deficit than people forced out of work and into unwilling retirement.”
Hutton Commission into public sector pensions
“Plans to ask public sector employees to contribute more now towards their future pensions are nothing more than a necessary short-term down payment on more substantial reform of public sector pensions. We welcome this first step towards reform, but expect more substantial recommendations for the medium and long term from John Hutton when he reports back on his findings.
“Public sector pensions today manage the uniquely poor combination of being extremely costly, while still somehow failing, given their cost, to be used as effectively as they should to attract, retain and motivate people in the public sector. As well as addressing the costs, public sector employers need to find better ways of communicating to employees the benefits of public sector pensions.”
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22/06/2010
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