Ulster Nationalist/Scottish Nationalist pact

Some of us think that a lower corporation tax rate is a good idea for the whole of the UK, not just this or other regions of it. Andrew McCann seems to think so too (I will be stood corrected if I am misrepresenting him)

  • fair_deal

    I doubt if lower corporation tax is the silver bullet it is portrayed to be and rather than get fascinated by it, minds should be kept open as to possible policy tools.

    However, it is not about wheedling more cash from the English. It is about trying to tackle two core disfunctions in the UK economy the reliance on public funding/weakness of the private sector and the over-concentration of private sector growth in the South of England.

    These problems are not restricted to Wales, Scotland and Northern Ireland but mars significant tracts of England too.

  • Er, Michael, has Jimmy Nick not told you that variation of corporation tax rates within an EU member state is contrary to EU competition law and thus a total non-starter – that is unless you believe, like me, in the UK’s withdrawal from the EU.

    See Jim Allister’s question to the European Commission on the subject:

    http://www.jimallister.org/default.asp?blogID=644

    Why is this still a live issue? Shouldn’t we be looking to other ways to increase competitiveness?

  • Frank Sinistra

    Eh? The north was granted a derivation from Objective 1 qualifying and treated as having less than 75% of GDP due to the ‘peace process’.

    Derivations have been shown to be possible in this specific case and given the EU’s commitment to support the ‘peace process’, recently reaffirmed by the President, giving up like Nicholson and Allister just seems to indicate poor understanding of the bigger picture on their part.

  • Michael Shilliday

    fair_deal, a reduction in corporation tax in the UK generally would tackle both the problems you highlight, for pretty obvious reasons. Yes there may be higher transport and associate costs by moving north, but there are also lower labour costs outside of the south east. Lowering corporation tax generally is the right solution, and a better solutiuon than trying to make Northern Ireland a special case.

    Watchman, I think you are refering to having different tax levels in different regions of the same country, unless I am misulderstanding? If so, I think there is some debate, but regardless I think it would be the wrong thing to do in the UK.

  • It was Sammy McNally what done it

    Looks like bad negotating by both sides ( SF, DUP) in the run up to STA deal.

    No one to my knowledge raised the point that the British were holding out on the power given to the Assembly. The DUP were quoted as resisting Police and Justice and I presumed ( perhaps incorreclty) that the only limit on devolution of power was becuase of disagreements between the parties. If non iron has the right to vote itself out of the UK completlely presumably it has the right to vote itself lower taxes.

  • fair_deal

    “reduction in corporation tax in the UK generally would tackle both the problems ”

    No it wouldn’t. The present disfunctions developed and have grown under a common corporate tax rate how would a common reduction change it?

    “there may be higher transport and associate costs by moving north, but there are also lower labour costs outside of the south east.”

    A common reduction in tax rates would do nothing to tackle regional disparities in costs whereas a targetted reduction could.

    Companies are already well aware of the regional variations in costs and they are generally opting for the south of England. Simply giving them more cash to invest will not mean they suddenly decide “I always fancied a company base in Enniskillen now we have this spare million or too we’ll do it.”

    On the issues of costs that is probably were the discussion needs to focus rather than an obsession on corporation tax.

  • Michael Shilliday

    Major companies flock to the South East because they have to given the global importance of London, they flock to RoI because it is desirable to do so given the tax incentives. If you create a low corporation tax area across the UK, then the UK as a whole becomes desirable for industry and more than just essential.

  • abucs

    I thought we were going to get through the whole McCann article without a ‘separatist’ designation. Nearly. :o)

    With the corporation tax, you could always lease part of Northern Ireland to the south for 99 years like the previous Hong Kong type set-up. That could allow a setting up of a Business Park environment and get around the problem.

    A deal could be done with company / private tax revenue and security, law and order.

    Too soon to suggest that ? :o)

  • DaithiO

    This is difficult, I mean to not play the man, AMcC is not the great authority he thinks he is. For example he gets a little confused as to what is Britain and what is the United Kingdom.

    If there was a referendum in the whole of the UK to decide the fate of the counties of Antrim, Armagh, Derry, Down, Fermanagh and Tyrone, there is little doubt that the vast majority would endorse a re-united Ireland. The state of the Union should not be settled locally, it should be decided by all of its subjects.

    Talk of corporate tax rates in relation to the position of the border makes partition even more ridiculous.

  • I Wonder

    Link doesn’t work..oh wait, thats right I was banned by those defenders of “freedom of speech”…I wonder is Jeffrey Donalson similarly banned for taking David Vance to task in the NewsLetter for being a complete political and electoral failure?

  • fair_deal

    “Major companies flock to the South East because they have to given the global importance of London”

    None of which is addressed by a common reduction. There is no push to this pull by a common reduction.

    “they flock to RoI because it is desirable to do so given the tax incentives”

    A overly simplistic view. Taxation was only one of the tools used by the RoI government.

    “If you create a low corporation tax area across the UK, then the UK as a whole becomes desirable for industry and more than just essential.”

    Yet again a common reduction will not guarantee such an equality of benefit nor address existing disparity. There is no incentive to go to the areas of the UK with an under-developed private sector.

  • Michael Shilliday

    I’m not as convinced as you that a pull is needed in addition to an across the board tax reduction. No it wont guarentee anything, but politically as well as economically it is desirable to try it this way, at least in the first instance.

  • There’s a particular paragraph in the ERINI study that addresses just this point:

    in the UK context the relatively prosperous South East with major
    concentrations of companies seeks to capture tax from those moving into
    the region to gain access to its markets. The loss of revenue from a
    cut in Corporation tax would be significant. On the other hand more
    peripheral regions with a smaller tax base can use a strategy of lower
    Corporation tax to promote themselves as attractive profit centres for
    FDI without suffering large losses of tax from existing enterprises.
    This form of analysis suggests that a unified Corporation tax rate may
    not be optimal for different regions within the UK.

    The reason why the UK corporation tax is where it is because it’s optimal for the UK as a whole, and primarily for the City and the South of England. It’s obviously not optimal for Northern Ireland.

    I wouldn’t be surprised if the UK rate were to fall further, but it’s not going to fall to 12.5 per cent. London is already one of the top two financial centres in the world. How much more business can it attract to offset the revenue lost by cutting the tax for companies that are already there?

  • IJP

    Actually few doubt London is now established as the top financial centre in the world.

    Which makes the rest of Tom‘s point all the more relevant.

    Frankly, we might do better to see how we can generate spin-off from London’s success (and indeed Dublin’s in other sectors) than waste our time arguing for something which ain’t gonna happen…

  • bob wilson

    I’m largely with IJP (and Tom) on this one. Although the INCREASES in the tax rate for all small businesses in the UK in the last Budget are not helpful

  • Just to be clear, I’m in favour of a regional corporation tax cut for Northern Ireland.

    It is going to be the very last thing that Gordon Brown wants to do, but that doesn’t mean it is unattainable.

    Sooner or later, there will be political showdown over the West Lothian Question and the Barnett Formula, and the end result is likely to be more fiscal autonomy for all parts of the UK.

  • Prince Eoghan

    We are forever being fed the lie about Scotland taking more than she is due. There are regions of England who are given more from the exchequer per capita than Scotland, London follows very closely behind Scotland also. The money Scotland gets has to provide services for a third of the UK land mass, often in hard to reach and under populated areas.

    The Scottish sun of all papers (Aye I’ve been caught reading it) Has an article today that points the finger at London as the real subsidy junkie. Apparently;

    “a string of hidden subsidies means a torrent of public cash is flooding into that city without showing up in national accounts.”

    Thousands of civil service jobs in the foreign office, defence, trade and industry etc. These jobs are considered part of the shared UK total and not added onto London spend. Prof. J. Mitchell of Strathclyde Uni. reckons the spendings go into the billions. We also have had the dome in the past, the 789 million at least for the Olympics, 3.5 billion for a new tube line, massive monies on museums. And the good auld BBC that spends lavishly in the London area, I’m sure there is lots more. Remember this mony is NOT included in the per capita amounts given to the various areas of the UK.

    Of course London brings in loads of cash, but then again so does Scotland. Maggie T would not be dining off her reputation were it not for Scottish money propping up the UK throughout the eighties and into the nineties. Now it seems that they don’t need our money that we are beggars.

  • Diluted Orange

    Prince Eoghan

    Some interesting points there Eoghan, I’ve never really bought into the idea that Scotland is propped up by UK subsidies either.

    The problem with the UK as a whole is that its economy is indelibly linked with the success/failure of London’s economy; for the past decade or so the rest of the country has essentially been fed on the success of the London financial markets. I would be interested to see how the North of England, in places like Liverpool, fair in comparison in terms of per capita government spending with Scotland.

    [i]Of course London brings in loads of cash, but then again so does Scotland. Maggie T would not be dining off her reputation were it not for Scottish money propping up the UK throughout the eighties and into the nineties. Now it seems that they don’t need our money that we are beggars.[/i]

    It’s true that Scottish oil pretty much propped up the UK economy, but this was in the 70s though and not the 80s. Maggie was responsible for the expansion of the London financial sector which has gone on to be the hub of the UK’s economy.

    What’s interesting though is the fact that the per capita public spending in Northern Ireland is even higher than that in Scotland. However, we really are a basket-case economy and the English have wanted shot of us for a long time. But as you have similarly pointed out about the English once depending on Scottish industry, whilst they were never dependent on Irish industry I still maintain that the only reason Lloyd George and the Lib-Con coalition wanted to retain Northern Ireland within the UK in 1922 was not due to Unionist demands but rather because of they wanted to maintain access to critical ports in Belfast and Derry and also due to importance of the Belfast ship-building industry at the time. All down to their paranoia about the Germans around the time I reckon – and ever since we served our purpose in WWII we’ve been surplus to requirements.

  • It’s true that Scottish oil pretty much propped up the UK economy, but
    this was in the 70s though and not the 80s. Maggie was responsible for
    the expansion of the London financial sector which has gone on to be
    the hub of the UK’s economy.

    The former chairman of Astra, Gerald James, argues that Thatcher pump-primed the city with a series of huge arms deals. Several of the countries involved, which were often intermediaries for one or other side in the Iran/Iraq War, did not pay up, and the deals were financed with Government export credits, i.e North Sea oil.

    ever since we served our purpose in WWII we’ve been surplus to requirements.

    Here’s what the Cabinet Secretary said when Harold Wilson raised the possibility of withdrawal in 1976:

    “Although we now make comparatively little use of Northern Ireland for
    defence purposes it is vital to ensure that it remains in friendly
    hands. The North Channel between Scotland and Northern Ireland is as
    narrow as 11 miles and through it pass both British and United States
    submarines from the Clyde bases. It is also the vital channel for
    shipborne supply to this country. Thus we should need a water-tight
    defence agreement with an “associated state” of Northern Ireland.” (National Archives)

  • Prince Eoghan

    DO

    Fair enough! I would still contend that it was well into the eighties that the UK relied on Scottish money. Considering that we make up less than a tenth of the population of the UK, just how well would we have done with it to ourselves.

    The McCrone report was kept quiet until the freedom of information act freed it. In it he reflected that if anything the amount of money coming from north sea oil was underestimated. It was stamped not to be disclosed or some other official way of burying it. So for all those years Scots were mocked for claiming that our oil money would have made us the Dubai of the North. Vindication! It’s still not too late!

  • Diluted Orange

    [i]So for all those years Scots were mocked for claiming that our oil money would have made us the Dubai of the North. Vindication! It’s still not too late![/i]

    The sad thing is that the chance (for Scotland to be an independent nation that reaps the rewards of having an oil industry) has probably been squandered by now as reserves in the North Sea are drying up.

    If Scotland had gone independent in the 70s however, it would probably be a different story. You only have to look at the success of Norway (a similarly sized country in terms of population) due it’s share from the carve up of North Sea oil to see how good it could have been.

  • Cruimh

    Come on D.O – the Scots and the Norwegians ?
    The Scots would only have p*ssed it up against a wall 😉

  • Prince Eoghan

    >>probably been squandered by now as reserves in the North Sea are drying up.<

  • Dewi

    Alex started well Prince, Is that just my opinion or consecsus up there ?

  • Ziznivy

    I’ve always been a bit confused as to why Scottish nationalists think they have such an exclusive claim to North Sea oil Owen.

  • Dewi

    Not exclusive – just their bit !

  • Prince Eoghan

    Z

    >>I’ve always been a bit confused as to why Scottish nationalists think they have such an exclusive claim to North Sea oil Owen.<

  • Prince Eoghan

    Also Dewi

    http://news.bbc.co.uk/1/hi/wales/6223504.stm

    Seems to be interesting times in Wales also. Every chip off the bloc counts ;¬)

  • DK

    Assuming that all the UK North Sea Oil belongs to Scotland – and assuming the peak production of 6 million barrels per day – and assuming that the price is a nice high US$70 per barrel – and assuming that the Scottish corporation tax is 30%…. the value per annum of North Sea Oil to the Scottish exchequer would be UK£22 billion.

    However, taking a more realistic case scenario – Scotland only gets half of the oil; the production is the more average 4 million barrels per day, and the price is the more typical US$50 per barrel. This gives the Scottish exchequer UK£11 billion

    The UK GDP is presently over UK£1,160 billion, of which Scotland accounts for about UK£90 billion. So Scottish oil is worth 1-2% of the UK GDP, but some 10-20% of the Scottish GDP.

    It seems to me, from this back of the envelope calculation, that an independent Scotland would need the oil to survive, but the UK could ignore it if needs be.

  • Prince Eoghan

    >>t seems to me, from this back of the envelope calculation<