I’m delighted that the Treasury has now cleared the way for Northern Ireland to strike its own corporation tax rate. The announcement was made yesterday and today the Welsh are making noises that they want to be able to set their own corporation tax rate – even if it means a reduced block grant.
I don’t hold out too much hope that there is enough strategic vision in the ranks of the DUP/Sinn Fein Partnership Executive (mostly fiscal lefties) to guarantee a rate reduction any time soon. But at least the Treasury has offered the opportunity to the Executive. We’ll see how long it takes for it to realise that it is an opportunity to be seized.
Corporation tax is one of the nastiest and most regressive taxes. It actively militates against investment and entrepreneurship.
As for the block grant I’d hope that the Executive actively considers axing pointless, costly and badly run quangos like the NI Consumer Council. That will go some way, at least, towards covering the cost of the block grant reduction.
Owen Paterson – the Secretary of State – appeared on the BBC Hearts & Minds programme on BBC Northern Ireland last night and made all the right noises. He cautioned against sensationalist media speculation about draconian reductions in Northern Ireland’s block grant and he continued dropping heavy hints about reductions in Corporation Tax. But he was also realistic about the need for the local Executive to play its part in helping to reduce the UK budget deficit.
On a trip to Boston last week he was dropping heavy hints that he may want to undercut the Republic of Ireland’s corporation tax rate by implementing a 10% rate for Northern Ireland. He also elaborated on why he is getting rather fed-up with the division industry that insists on separate sectarian inspired institutions (like schools) that perpetuate the Norn Iron two-tribe consensus. Well said.
I’ve said some pretty hard-hitting things about Owen on this site – and will not forgive or forget the UCUNF debacle. But on fiscal matters Paterson is making good sense – and I hope it continues next week.
Stormont: Image by lyng883 via Flickr
Sammy Wilson, our perma-tanned Finance Minister, has just made the point on BBC Spotlight that if the the cost of a reduction in corporation tax is a £500m reduction in the the block grant he, and his Assembly colleagues, would say ‘no’ to such a reduction in corporation tax.
This neatly sums-up the sheer lack of any strategic vision on the part of the Finance Minister and his Assembly colleagues.
Regional tax differentials are an extraordinarily handy way to rebalance regional economic inequities. If the Treasury offers Northern Ireland the tantalising prospect of a reduction in corporation tax the Assembly should grasp the opportunity with both hands.
Northern Ireland’s costs of doing business are substantially lower than the Republic of Ireland’s. We have better infrastructure. We have more ready access to the UK economy and markets. And we have very useful clusters of businesses – especially in ICT. A reduction of corporation tax to the same level as the Repeublic of Ireland would be a strategic move in the right direction to putting the Northern Ireland economy at significant competitive advantage over other parts of the UK – including the South East of England.
To forego the opportunity to create huge economic competitive advantage for indigenous business growth and FDI on some aburd point of principle would be foolish in the extreme and Sammy Wilson is crazy and blinkered to suggest he would look this gift horse in the mouth.
The Assembly needs to wise-up on this issue. The prize of a reduction in corporation tax is a huge one. Don’t mess it up.