Budget 2021: What does it mean for the Executive?04 March 2021 - by Matthew Jackson
All eyes turned to Rishi Sunak yesterday and the contents of his red briefcase, with the Chancellor speaking to MPs in the House of Commons for just under 52 minutes.
The key announcements were well trailed including extension to the Furlough Scheme and other COVID supports, as well as a rise in corporation tax.
The news from the Office for Budget Responsibility that the economy will return to its previous level by the middle of next year, six months earlier than was previously thought, will be welcomed. As will be the commitment to more government spending and pandemic support, as least in the short-term.
However more concerning will be the promise of higher taxes and public spending cuts taking effect from April 2022. While the Northern Ireland Housing Executive received the good news that it is to be exempt from corporation tax, others can expect to see an increase to 25 percent, thus reversing the journey started by George Osborne as Chancellor.
Sunak confirmed an additional £2.4 billion for the devolved administrations for 2021-22 through the Barnett formula. This is an additional £1.2 billion for the Scottish Government, £740 million for the Welsh Government and £410 million for the Northern Ireland Executive.
Finance Minister Conor Murphy was quick to point out that of the extra £410 million, the majority is earmarked for pandemic response, with only £4.2 million available for everyday public spending and no extra funding for capital spending.
Future budgets will likely mean difficult decisions for Executive Departments, strengthening the case for a move to multi-annual budgeting through the Spending Review and to budgeting for outcomes in the new Programme for Government, providing a degree of certainty and stability in departmental spending.
The Executive will also come under renewed pressure to lower corporation tax – particularly in the context of dual market access and the rate in the Republic of Ireland – however it has resisted this since given the power in 2015, largely due to potential impact to the Block Grant.
What is certain is that balancing the economic direction set by Westminster, ongoing pandemic response along with impacts and opportunities of EU exit, together with driving a recovery that reflects local needs and circumstances, will require creative decision-making by Executive Ministers.