DUP: importance of getting macro conditions right

The DUP’s Robin Newton has an Op Ed in last night’s Belfast Telegraph backing the SDLP’s call for corporation tax to be reduced to 12.5%, or better still 10% so that Northern Ireland can remain competitive with the Republic.He goes on to break the now familiar narrative of “fair shares of the cake”, to arguing that government investment must concentrate on growing the cake:

This one factor – immediately attracting greater levels of inward investment – could achieve a great deal in economic growth and should be central to any strategic and political planning. We also need better targeting of funding in the commercial and education sectors and have to recognise that research and development (R&D) is weak, with existing availability of R&D support for firms poorly utilised. We need to encourage and reward – not penalise – companies that invest in R&D. There should also be a shift in emphasis which redirects the lion’s share of support to firms that focus on innovation and, in partnership with the universities, to reinforce attempts at hi-tech business incubation opportunities and to reassess how private investors can be encouraged to take a greater role in financing businesses in Northern Ireland.

  • smcgiff

    Of course, there’s a more obvious course of action to ensure a 12.5% tax rate *whistles innocently*

  • smcgiff

    BTW, on that banner headline in Mick’s link – Do posters in the UK get the advertising of PSNI jobs at €29,400. Does this change to £ if viewed from the UK.

    Interesting to see the PSNI recruiting in Irish Papers at the moment.

    Sorry for the sidetrack.

  • Stephen Copeland

    Of course, there’s a more obvious course of action to ensure a 12.5% tax rate *whistles innocently*

    Indeed.

    Economics is rapidly becoming unionism’s achilles heel.

  • Mick Fealty

    Is anyone actually interested in engaging with Newton’s argument?

  • Cormac

    Hmm, not sure if I agree with his inclusion of call centres in the definition of the IT industry. Sure some call centres are specialised, and the workers require a high level of IT knowledge, but as for the rest (and I think most) call centres… well, ever tried to get your broadband sorted in the Republic?

  • páid

    well to try and engage with the argument……… I suspect it might be a bit late in the day to copy the republic. The North, with it’s manufacturing tradition, never really needed the absolute dedication to attracting industrial investment which the IDA has practised over the last 30 years. An awful lot of low-end manufacturing in the South is done by immigrants these days. What is needed North and South, IMHO, is high-tech centres of low-volume, high added-value niche products. Otherwise you’re competing with Turkish wagerates. Expect trouble from Scotland and Wales if NI is given special treatment also.

  • fair_deal

    On the tax cut I just can’t see this happening so can’t see what real value there is in expending time and effort on it.

    A package around R&D, labour market initiatives and welfare reform would seem the wiser course of action.

    Also his assertion that “Belfast’s human resources would not be found wanting.” is questionable. The availability of jobs does not mean an end to economic inactivity and this is what is key weakness in our labour market which is having to import labour for entry level jobs not unemployment. So any strategy of job creation through tax cuts is not an panacea.

    (Also note to Robin Newton and the DUP, this debate is about all of Northern Ireland not just Belfast and East Belfast)

    Stephen

    “Economics is rapidly becoming unionism’s achilles heel.”

    Economic determinism, while more to show for it than historical determinism, is not the clincher some think it is. If NI’s economy is struggling Unionism makes the argument the RoI cannot cope with the costs of amalgamation thus the need for the Union. If NI’s economy is a success Unionism argues it shows the Union works and no need for change. Unionism – the ideology with the arguments for all economic performances 😉

  • Mick Fealty

    Given the differential in private sector growth rates across the UK, might this not be an appropriate time for desparate measures?

    If PM Brown doesn’t grasp the nettle, might an incoming Cameron government just do it?

  • smcgiff

    ‘Expect trouble from Scotland and Wales if NI is given special treatment also.’

    And Cornwall and N. England and… well, pretty much everywhere outside Greater London.

    It’s a not a gonna happen.

  • DK

    This is interesting when read in the context of the Isle of Mann dropping it’s rates to zero. Does the Isle of Mann expect a large number of businesses to relocate there? Or just the usual Cayman Island offices. Dropping the NI rate to 10% would probably have a similar effect, with the companies in the South opening an office staffed by 1 receptioist in NI and keeping the work force in ROI. Does mean that NI would get the 10% tax and the ROI wouldn’t though. But that’s just a fiddle, not sustainable.

    Far better to compete with the ROI by offering the 10% corporation tax on condition of employing a work-force.

  • Stephen Copeland

    fair deal,

    If NI’s economy is struggling Unionism makes the argument the RoI cannot cope with the costs of amalgamation thus the need for the Union.

    pid,

    Expect trouble from Scotland and Wales if NI is given special treatment also

    We can kill those two birds with one stone. A phased reunification would allow the NI corporate tax rate to be harmonised with the south, but without Scotland or Wales complaining. In this way, over a period of 10 years the NI economy can become as successful as the south, and for the same reasons, thus removing the need for the GB subvention.

    If Scotland and Wales want, they could join the south too – we could have a United Republic of the Celtic countries – though I suspect they won’t want to.

  • Tochais Siorai

    What would happen if England wanted to join as well?

  • DK

    They could call it the United Kingdom

  • eranu

    LOL 🙂

  • Stephen Copeland

    What would happen if England wanted to join as well? … They could call it the United Kingdom

    It’s been done. Didn’t work.

  • Alan

    So the DUP are looking to China and Eastern Europe (?!) for inward investment – but what are they doing about it – refusing to work the assembly ?

    The recent Westminster Hall debate on the economy instigated by the DUP was a lacklustre affair with the same highlights of cut taxes and remember the Titanic. Their policies are almost as realistic as those of SF. Depressing or what?

  • John East Belfast

    In my opinion UK Corporate Tax Rates are too high and hence that is the issue rather than harmonizing the NI/ROI Rate – as others have pointed out the rest of GB is just across the water so why should NI be the exception ?

    At the same time I think ROI Rates are too low and as a result ROI corporates are getting a free ride at the expense of other tax payers. For instance I dont see the northerners calling for lower Corporate Tax rates also asking for the ROI Higher Income, VAT & Stamp Duty rates that those south of the border pay.

    Governments have to raise Revenue from somewhere.
    As usual northerners want UK standard of Education, Health and other social services but want somebody else to pay for it.

    The question of course would be would a lower Corporate Tax Rate lead to greater economic stimulus in NI and the loss in Tax Revenue be far outweighed by other economic benefits and hence increased government revenues ?
    As we are currently running at near full employment in NI then I assume what they mean is finding alternative employment for the bloated public sector ?

    This is possibly true but to be honest I think the influx of large multi national companies in search of tax breaks is a dangerous game to play anyway – in today’s global environment when the likes of Poland with 70% lower labour costs start to lower their corporate taxes as well then an ill wind could blow across the Republic.

    In addition to exploiting our tourism and leisure industries what NI really needs is the encouragement of home grown entrepreneurs developing niche products.
    The Fiscal environment to do this is already highly attractive.
    If an entrepreneur in the UK builds a business from scratch and sells it after 2 years under Business Property Relief he will only pay 10% Capital Gains Tax on the Gain – this is as good as it gets.
    Such people live here and although they are likley to move manufacturing facilities etc elsewhere they will have their routes here.

    If you lower the Corporate Tax levels in NI’s family owned Corporate environment the extra post tax profits wont go in investment but will be sucked out by shareholders for holiday homes abroad, new plasmas and X5s etc.

    It is easy to join in the “lets pay lower tax” chorus without fully appreciating either the consequences or the alternatives.

  • mnob

    NI companies only paid 100 million pounds corporation tax last year. Additionally most of the pressure is coming from a small group of individuals (who dont pay corporation tax on their interests in NI but who have significant interests in GB for which they do pay corporation tax) and some of these people represent signifcant media interests. One wonders what their motive could possibly be ?

    Additionally there are benefits available in NI and not the ROI such as R&D tax credits which many companies who could take advantage of are not.

    Reducing corporation tax sends out the message that NI is a low cost economy – is this the way we want to go ? Also where does it stop – do we match the Isle of Man’s 0% (which they managed to do without unification with the ROI BTW) ?

    To those who rubbish contact centres I would encourage you to have a look at the whole sector. Yes there are low level jobs – same as in any industry, but there are also every type of job above this – many requiring a high degree of technical and/or commercial skill. They are also pulling a lot of inward investment and lots of ‘proper’ R&D jobs in behind them.

    These are the jobs that are replacing the mill jobs and manufacturing jobs – are you really saying that being a machine operator in a struggling manufacturer is a better job ?

  • Stephen Copeland

    John East Belfast,

    ROI corporates are getting a free ride at the expense of other tax payers. For instance I dont see the northerners calling for lower Corporate Tax rates also asking for the ROI Higher Income, VAT & Stamp Duty rates that those south of the border pay.

    Tax regulations are notoriously complex and difficult to compare. Nonetheless, I think you are wrong here. The actual rates of income tax (and stealth income taxes like NI or PRSI) are comparable between the two jurisdictions, and may actually be lower in the south. While an individuals personal allowance is higher in the north, so is the rate of National Insurance contribution. An average earner (£20K/€30K) will thus lose about £4700 in the north, and about €6800 in the south. Given the exchange rates, this is about the same amount.

  • Brian Boru

    The UK govt would never agree to give NI a special 10-12.5% corporation-tax rate without doing the same for the rest of the UK. It would meet great opposition from English, Scottish and Welsh MP’s. You would effectively be asking them to make themselves less attractive to multinationals relative to the North. Aint gonna happen! There are only 2 ways you will get that sort of rate – the UK govt agreeing on it UK-wide (a big cut) – or a United Ireland.

  • Rory

    That most innocent of all idle whistlers, Mr McGill, is of course right.It simply “ain’t gonna happen”.

    It is interesting nevertheless to see where the concerns of this of the Unionist parties, the one with the greatest mass support among the working (and unemployed) classes, really lie: “closer co-operation between government, educationalists and business entrepreneurs…..would have a dramatic effect”.

    No mention of any input by the governed, those being educated or the workers that would create the wealth to provide the profits. Now that would be dramatic, but that “ain’t gonna happen” either. Is it?

  • Rory

    Oh dear! Apologies, Mr McGiff. I am so sorry that I appear to have given you a bit an “ell” of a name.

    Rory

  • Elvis Parker

    Anyone who suggests cutting Corporation Tax without listing the hospitals, etc they would shut is simply talking rubbish. The UK taxpayers in south of England already support NI (and Wales, Scotland and vast swathes of England) very generously. No one can seriously that that support will contain AND we can cut our taxes. you cannot have your cake and eat it
    The Bel Tele campaign is laughable

  • Yokel

    Here’s an answer to help the economy..go out get jobs, spend, build businesses..create wealth…no amount of programs or special measures is going to change the moribund nature of much of the local populous who believe that their happiness, wealth and success is someone elses to create or destroy.

  • Crataegus

    Yokel

    Are you in business? I am and I think getting the balance between tax and support fairly important. I wouldn’t turn my nose up at 12.5%. Recently I have decided to start to diversify out of here, some of the reasons are;
    * Constantly increasing costs, in particular rocketing rate bills and energy costs.
    * The attitude of government bodies which is consistently complacent or negative.
    * Inefficient government departments.
    * A fairly stagnant market. Compared to say the South East of England there is simply less money in circulation.
    * Political instability and lack of common purpose coupled with local politicians and their juvenile activities.
    * Rotten climate.

    Unfortunately costs are cheaper elsewhere and the prospect for capital growth greater. Money goes further elsewhere.

    This place has little to offer and much to repel. I agree attitudes need to change but anything that helps make NI a better location to do business should be supported and I don’t mean bodies like LEDU but real direct support using tax structures that encourage more people to set up their own businesses. Being self employer should potentially be a better option for more than safer employment such as the civil service. Also need to lift the cap on University places and perhaps have a look at the type of course on offer.

  • IJP

    There’s one problem and one problem alone with Newton’s argument – it’s not going to happen.

    The UK simply doesn’t do differential tax rates and it’s not going to start now – if NI gets it, so does Scotland, Wales, Cornwall, Northumbria, the East End, Brixton…

    Unionists should be honest about the nature of the Union. It’s not ‘a la carte’! Part of being in the Union is we get tax rates set for the South East of England, supposedly evened up by the ‘Barnett Formula’.

    That’s the deal folks, get used to it.

  • Yokel

    Yes I am in business and in short while tax and other support measures are nice they will not change the attitude problem in this country that is the core of the economically moribund environment…its like a bunch of breastfeeding children who moan when their mothers stop feeding them even though they are 25….

  • Crataegus

    Wouldn’t put it in quite those glowing terms but see where you are coming from and empathise.

    IJP

    What is now does not have to be what is tomorrow. I agree highly unlikely but I wouldn’t say impossible. I think a good case could be put that would not set a precedent. The irony is if the economy were stronger we could tell No11 to get stuffed, but because we are weak we cannot introduce the sort of measures necessary to address the problem. We are trapped condemned to servitude.

  • GrassyNoel

    Does anyone really believe that NI can ‘remain’ (?) competitive with the Republic? While it is in its current shambolic state? Northern Ireland will always have trouble attracting foreign investment because for generations to come people who think of Northern Ireland will think of the grimmest of grim places. Petrol Bombs & pipe bombs thrown at young children walking to school. Spides trashing their own city trying to attract sympathy because ‘themmuns’ are getting this or that. And the people in charge of running the place would rather it stay that way rather than co-operate properly with each other.

    Coporate tax rates may have done a lot to boost our economy down here, but let’s be realistic – NI has an entirely different set of problems altogether.

    GrassyNoel

  • Crataegus

    GrassyNoel

    Good point about perception. Corporation tax in itself won’t do it though it would help. It would take a more comprehensive approach and a radical change of attitude and a sense of common purpose. NI needs some clever strategic planning. I won’t be as negative as you, it could change and often change when it happens comes with surprising speed. Two major problems our pathetic political class, pigmies, and the appalling slow speed of the PSNI in its campaign against organised crime. (what crime isn’t organised, but the term is symptomatic of the problem, waffle and spin over substance).

  • Billy Pilgrim

    IJP

    “There’s one problem and one problem alone with Newton’s argument – it’s not going to happen. The UK simply doesn’t do differential tax rates and it’s not going to start now – if NI gets it, so does Scotland, Wales, Cornwall, Northumbria, the East End, Brixton…”

    Perhaps IJP, but there’s a variable you might have overlooked, and it’s this.

    We have a Secretary of State who is talking openly about NI’s future being in an all-island economy. We have the remarkable vista of the DUP calling for the harmonisation of the two corporation tax regimes in Ireland. Might it be possible that the British government might see a potential opportunity here?

    This debate over tax might present the British government with the chance to reduce it’s inconscionable financial burden here, and more importantly, to formalise Northern Ireland’s position as a semi-detached member of the UK.

    Then when people in Scotland, Wales, Cornwall, the northeast or wherever start arguing that they too should be given local tax-varying powers, the British government could respond by arguing that Northern Ireland isn’t a real part of the UK, that it’s position within the union is fundamentally different from that of the various regions of Britain.

    Who could deny it?