Irish tax row causing Labour pains in Scotland…

THE Government’s so-called ‘£50 billion’ economic peace package was described by Peter Hain at the time as “extraordinary” and he condescendingly told (rightly) sceptical punters after its dissection that even “If it were only £2.5bn, people ought to be grabbing it before the chancellor has a chance to close his red box”. The package might even be worth that, but because no-one believed Hain’s spin (and everyone knew he was only hyping the package to impress the Chancellor before he became Prime Minister), the peace dividend has become devalued as a financial carrot to dangle in front of the local parties. Interestingly, what was missing from the Brown envelope – reduced business taxes – is now causing Labour ructions in the chancellor’s home, Scotland…At the time, a more circumspect Brown had said the funds would only provide “certainty” through which public services could be delivered. Hain has finally come round to that way of thinking. He now admits that “the package confirms that the current level of spending will be sustained in real terms over the period to 2011”.

Sir Reg Empey went on the offensive: “I think that there is anger at all the spin that went into it. What we want are the tools to correct the fundamental imbalances in our economy so that we can be self-sustaining and won’t have to be reliant on hand-outs.” Ah, but while hand-outs might cost the Exchequer a few measly million, ‘tools’ – such as a reduction in Corporation Tax to compete with the Irish Republic’s, as favoured by all NI parties – might prove more politically expensive long-term. And the Government doesn’t want that.

Not only are there the short-term losses between the introduction of lower business taxes and the arrival of outside companies to take advantage of them, there’s the added problem of the Scots jumping on the bandwagon, depriving the Treasury of further revenue and fuelling dreams of greater autonomy. After this intervention, who wouldn’t want to be a fly on the wall the next time the future Labour Party leader meets the Scottish Labour Party leader in their native country?

Jack McConnell told Members of the Scottish Parliament: “I believe in consistency in tax policy across the United Kingdom. And of course, measures introduced in Northern Ireland would be very welcome here in Scotland. We would want to have the same incentives as elsewhere in the United Kingdom”.

And if Brown perceives Hain’s unnecessary spin as having been unhelpful in the debate over the peace package, might the current chancellor be more inclined to look elsewhere for a deputy when he moves next door to Number 10?

One can only pray.