THE budget is likely to bring a "mixed message" to Northern Ireland taxpayers, a leading economist has said.
George Osborne is set to deliver the first Conservative budget since 1996 tomorrow.
PwC's chief economist in the north Dr Esmond Birnie took a look at what it might mean for people locally.
“Expect new data from the Office of Budget Responsibility (OBR) confirming that the recovery is stronger than previously anticipated and that the economy is growing slightly faster than we had previously believed," he said.
“Four months ago, the OBR said the government needed to borrow £75.3 billion in the current financial year, but official borrowing figures for April and May are down by around £5bn year-on-year.
“That’s thanks to around 400,000 more employees in employment and the resulting rise in the tax take.
“However, Northern Ireland is recovering more slowly than the other 11 UK regions and, while we might see better than expected growth in 2016, the prosperity gap is not narrowing.
“We should also expect the chancellor to look to the lowest-paid and the most disadvantaged and to try to deliver what the prime minister has described as ‘blue-collar conservatism. However, the other side of that particular coin is that tax breaks have to be paid for somehow and by someone.”
PwC said the chancellor must decide if he will deliver on election pledges that include raising the income tax personal allowance to £12,500 and raising the 40 per cent tax threshold from £42,385 to £50,000 as well as a manifesto commitment to raise the minimum wage in line with that threshold.
PwC’s Northern Ireland tax leader Janette Jones said that proposals to raise the inheritance tax (IHT) threshold for a family home for a married couple to £1 million have already been widely trailed.
“While a relatively small proportion of people in Northern Ireland will benefit, the move is still likely to be popular as research shows people don't like the principle of inheritance tax regardless of whether they'll have to pay it," she said.
“Even with local house prices continuing to rise, a relatively small number of local taxpayers will benefit from the increased threshold in the future.”
The elephant in the room tomorrow, will be the promised £12bn reduction to the welfare budget and Dr Birnie said that particular elephant had been "well settled in the Northern Ireland Executive’s room since the new year".
“Welfare reform has stalled political progress, sidelined implementation of the Stormont House Agreement and may well threaten the reduction of corporation tax," he said.
“If the chancellor goes ahead with a £12bn cut in welfare spending, tomorrow will show just where then axe will fall, with tax credits and housing benefit expected to bear most of the pain.
“And with the Barnett formula determining how much new money comes to Northern Ireland, severe cutbacks in spending across England may not deliver good news for the executive.
PwC said that another conundrum might be if the chancellor decides to relax Sunday trading for big retailers England and Wales. If elected mayors and councils there are given powers to relax Sunday trading laws, which campaigners claim could create 3,000 jobs in London alone.
