British budget boost for BoI, cross-border shoppers

BANK of Ireland, cross-border shoppers and the IDA were the winners in yesterday’s pre-election British budget.

In a budget that analysts said hit the better off, the British government made no changes to the 17.5% VAT rate, keeping prices in the North well below those in the Republic, where the VAT rate is 21%. There had been speculation that the government in Britain would announce a hike in VAT to 20% yesterday.

The government also failed to lower the British corporation tax rate of 21%. This will be a welcome relief to the IDA, which uses Ireland’s 12.5% as a major selling point in attracting companies to Ireland.

Managing partner with Ernst & Young in Belfast Michael Hall said: “With the competition intensifying to attract foreign investment, the Chancellor had an opportunity to set out a plan to reduce corporation tax in the next parliament. Attracting foreign multinationals to locate in Northern Ireland is a critical component in moving to a private sector-led economy and reducing our dependency on the huge subvention from the Treasury.”

The British government, which is in the middle of a general election campaign also announced that the Northern Ireland Executive is to get an extra £33m (€37m) to help with devolution.

Duty on beer, wine and spirits will increase from midnight on Sunday, with 10% on cider, and further increases to come on high strength cider.

This will not come as good news to drinks firm, C&C, which has strong sales of Magners cider in Britain.

Tobacco duty will increase by 1% above inflation, and then increase by 2% in real terms each year until 2014.

Chancellor of the Exchequer Alistair Darling also signalled the government’s support for a “People’s Bank”, when he said that he guaranteed that everyone would be able to get a bank account, benefiting one million people.

In December, the government launched plans to use the Post Office network, which is a joint venture with Bank of Ireland, to offer a range of financial services to lower-income households who may not be able to open a bank account.

The Communication Workers Union said the proposals for the People’s Bank would mean that half the profits would go overseas, given Bank of Ireland’s involvement.

It wants the Post Office to partner with a state-controlled bank, such as the healthy assets of Northern Rock.

Other measures in the budget include work or training for all under-24s out of work for six months, six more months of mortgage support for the unemployed, stamp duty limit to double from £125,000 to £250,000.

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