Northern Ireland

Budget: Stormont ponders Osborne cuts

George Osborne
Image caption George Osborne delivered his first Budget to the Commons

Politicians at Stormont are reflecting on Chancellor George Osborne's first Budget, which was dominated by spending cuts and tax increases.

Mr Osborne said he would publish a paper on rebalancing the Northern Ireland economy later this year.

He increased VAT from 17.5% to 20% and announced a two-year pay freeze for public servants paid over £21,000.

The NI Executive was told last month it must save an extra £128m on top of £393m other savings this year.

Mr Osborne said UK government departments - excluding health and international development would be cut by 25% over four years, with the full details to be set out on 20 October.

The government said 600,000 basic rate taxpayers in Northern Ireland would benefit from the increase in the personal income tax allowance which will rise by £1,000 in April to £7,475.

That is worth £170 a year to basic rate taxpayers.

However, lower earners could be hurt by a package of measures including a freeze on child benefit for the next three years and, from next year, a reduction in tax credits for families earning over £40,000.

From 2013 the large number of Disability Living Allowance claimants in Northern Ireland will face a medical assessment.

The government said up to 15,000 businesses in Northern Ireland could benefit from a scheme which will mean new companies will be exempt from £5,000 of National Insurance payments for the first 10 workers.

As the devolved administration in Northern Ireland does not have responsibility for tax-gathering, the Treasury in London works out how much money it gets from the UK's overall income.

Political leaders in Northern Ireland have already pledged to fight the cuts and protect as much of its block grant as they can.

Stormont Finance Minister Sammy Wilson told the Commons on Tuesday it would be "very difficult" but Mr Osborne's Budget announcement meant there could at least now be some certainty.

"One has to look at where Northern Ireland is on the economic cycle at present.

"We do lag behind, we are still on the downward part of the economic cycle and all of the indices, whether it is output, employment, forward orders, investment or whatever, all of the indices show that we are still on the downward slide.

"The concern which we will have will be the attempts ... to restructure the economy and the impact this could have.

"Whilst growth might occur in the rest of the UK, we might find ourselves still stuck in a recession because of the particular circumstances which there are."

Secretary of State Owen Paterson said Northern Ireland must "play its part in reducing the deficit and ensuring our recovery".

"Failure to tackle the deficit would lead to disastrous increases in interest and mortgage rates," he said.

"This would have catastrophic consequences for everybody in Northern Ireland."