Spending Review 2015- What Does it Mean for Us?
NICVA’s Centre for Economic Empowerment has trawled through the Chancellor of the Exchequer's 2015 Autumn Statement and Spending Review to uncover the key issues that will be relevant for the voluntary and community sector and their service users across Northern Ireland. This is our quick take, there will need to be further analysis to fully understand the consequences and consequentials for Northern Ireland.
The Northern Ireland resource budget will remain broadly flat in cash terms from £9.7 billion in 2016-17 to £9.9 billion in 2019-20. Although Finance Minister, Arlene Foster, has noted this will ‘represent a 5.3% real terms reduction in the Resource DEL budget for Northern Ireland’. Resource DEL reflects the on-going cost of providing services (e.g. pay or operating costs).
The Spending Review delivers significant real-terms increases to Northern Ireland Executive capital budgets. Funding available for infrastructure investment via the block grant through to 2020-21 will rise by 12%, meaning over £600 million more than if it had been held at 2015-16 levels.
The review also confirms the funding package supporting the implementation of the Stormont House Agreement as outlined in A Fresh Start. This includes additional support of £160 million for the Police Service of Northern Ireland.
Tax Credit Changes
The Government has reversed some of the most controversial elements of previously proposed tax credit cuts. This will come as a relief to working families, many of whom faced a significant drop in their incomes from April 2016. Changes include:
- Withdrawing a proposed reduction in the income threshold – the sum beyond which credits begin to be withdrawn as income increases. This remains set at £6,420 per annum but was to fall to £3,850 per year.
- There was also a planned increase in the taper rate: the pace at which a claimant’s allowance is reduced when their income goes above the threshold. This will remain at 41% but was set to rise to 48% from April 2016.
- Income thresholds for child-tax-credit-only claimants will remain at £16,105 from April 2016. This was previously set to reduce to £12,125.
Other changes to welfare announced in the summer budget will proceed.
It will now be the transition to Universal Credit that matters long-term. As part of welfare reform most tax credits will become part of Universal Credit when it is introduced, and the cuts there remain. As the Resolution Foundation show in their distributional analysis, it will be those at the lower end of the income distribution who will eventually be worse off.
VAT on Sanitary Products
A new £15 million annual fund equivalent to the VAT raised each year on sanitary products (commonly known as the ‘Tampon Tax’) will support women’s charities. The government has already announced that an initial donation totalling £5 million with further donations and recipients to be announced at Budget 2016. The fund will run over the course of the current Parliament.
Higher rates of Stamp Duty Land Tax (SDLT) will be charged on purchases of additional residential properties (above £40,000), such as buy to let properties and second homes, from 1 April 2016. The higher rates will be 3 percentage points above the current SDLT rates. The government will consult on the policy detail, including exemptions.
Regional Air Connectivity Fund
The government is also providing £7 million through the Regional Air Connectivity Fund to support new air routes promoting domestic and international connectivity and stimulating jobs and growth, including from Belfast to Carlisle and from Derry to Dublin.
The apprenticeship levy on larger employers announced in the Summer Budget will be introduced in April 2017. It will be set at a rate of 0.5% of an employer’s pay bill. The levy will only be paid on any pay bill in excess of £3 million and that less than 2% of UK employers will pay it. By 2019-20, the levy will raise £3 billion in the UK. Spending on apprenticeships in England will be £2.5 billion, and Scotland, Wales and Northern Ireland will receive their fair share of the levy.
From April 2016, the basic state pension will rise to £119.30 per week, an increase of £3.35. This will be the highest real terms increase to the state pension for 15 years.
Big Lottery Funding
The Chancellor has not progressed with rumoured plans to cut the amount of lottery money which is distributed to via the Big Lottery Fund and using it instead to compensate arts and sports bodies.