Cameron was clumsy but accurate…

David Cameron has touched off something of a bush fire in his interview with Jeremy Paxman on BBC2 in speaking of the dependency culture in Northern Ireland. He compared the amount of state support to that of some of the Communist Eastern bloc countries.

The potential PM was clumsy in his exposition despite the accuracy of what he was actually saying.

My suggestion that there was ‘a whiff’ of the infamous Harold Wilson “spongers” sobriquet about Mr Cameron’s observation, sent , exercised Tory/Unionists to their blackberries and to the phone.

This is an attempt to bring some sanity to the discussion arising from David Cameron’s somewhat louche utterance.

Reg Empey, the other partner to UCUNF must have come close to choking on his cornflakes on hearing the drift of David Cameron’s remarks.

DEL, the Departmental Expenditure Limits in Northern Ireland, or block grant annually, is £10b.

AME/ the Annual Managed Expenditure for Northern Ireland is £7/8b. This goes to cover pensions and social security.

Our annual allocation of UK funds is governed by the so called Barnett principles.

Neither David Cameron nor anyone else is free to alter that willy nilly or else this impacts  elsewhere, in Scotland, Wales etc.

If Northern Ireland raises £12b in taxes then logically the Treasury gives us £6b on top of this, almost one third, to keep us afloat annually.

David Cameron seems to want to refashion the economy in Northern Ireland making it more entrepreneurial and self sufficient.

One way of doing that, I am told, would be to allow the Assembly to set its own corporation tax rate, possibly 12.5% in line with RO1 or even lower than this,10%.

The upside of this would possibly be to attract ‘high end’ jobs and inward investment.

The downside from Northern Ireland’s point of view would be that any loss of business  taxes to the Exchequer would necessarily result in a reduction in the block grant until such time as a buoyant economy would produce higher corporation taxes.

In the meantime Northern Ireland I would have the benefit of attracting premier division investment which would pay decent salaries.

If David Cameron were to go down this road, this might remodel  the economy here and establish a credible industrial base.

All this is predicated on Mr. Cameron, should he become PM, lowering corporation tax to facilitate the Assembly to create conditions to stimulate economic activity and attract fresh inward investment.

Our politicians should do a little more homework and take more care in explaining and expressing what they are really saying.

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  • Ha Ha Ha

    i see this blog has been reactivated
    http://unionistsnotconservatives.wordpress.com/

  • RepublicanStones

    It’ll be interesting to hear how the UU’s are going to spin the perceived intent of their benefactor across the sea if and when he gets a crack at the whip.

  • David

    Eamon

    Excellent summary of the issues. I think that the road we’re encouraged to go down has a risk reward balance. My understanding is that should a reduced Corporation Tax be offered and accepted then there must (in European Law) be an equivalent reduction in the Block Grant to Northern Ireland. This will effect public services, because on top of this reduction in the Block Grant due to Corporation Tax there will be another reduction in the Block Grant due to required Govt efficiencies.
    If we don’t go down this route simply retaining our Corporation Tax as is, and continuing to be a drain on scarce resources within Westminster, then I can see the Barnett formula either undergoing a review or the Treasury putting substantive barriers around Northern Ireland spend.
    We need to manage this change – the risk being that we move on reducing Corporation Tax and sufficient Foreign Direct Investment doesn’t materialise. Therefore we are left with a recurring defecit which we cannot reduce.
    Amazing challenges all round – and I hear so little from our politicians on how we’re going to manage this. This is the real election issue – for Westminster and Stormont.

  • Driftwood

    On a point of reference. Harold Wilson’s remark has been widely remarked on as a view on NI in general. Actually he referred to the “loyalist” strikers and their supporters as “spongers” who expected Britain to pay for their lifestyles.
    You can google his speech and see the term in context.
    As with Reggie Maudling, the natives get upset about very little.
    Cameron has only said what most people here (and other parts of the UK know. And he said it deliberately and honestly. Has there been a big fluster in Tyne and Wearside about this?

  • slappymcgroundout

    Mr. Mallie, just how do you hope to establish a credible industrial base? The old-fashioned way of doing so was to erect a tariff wall and allow your industry to develop behind that wall. What with your Euro free movement of goods, that might be hard to accomplish now.

    Complicating the matter is that some others in your Euro zone will longer hours for less pay. Those same some are also better geographically situated, i.e., you are on the edge of the zone and so the cost of transporting your goods will be higher than that of some others as well.

    If it helps console you, this is all one of the reasons why some of us think that some others are dreaming here in the US when they also speak of reestablishing our industrial base. Your and our way out is to gain an information advantage, i.e., you and we getting the information that no one else has and creating our very own niche product(s). That’s likely to be high tech and not autos, washing machines and microwave ovens.

    The alternative is to think rather outside the box. Hard thing about that, of course, is that most people are incapable of doing just that. For what I mean, former US Secretary of Labor Robert Reich has stated on a few occasions that America has the capacity to produce what everyone in the country needs and wants, however, the people here don’t have the money to buy all those things.

    For the outside the box thinking, why do we have money? Because the barter system was grossly inefficient and so rather than trade in goods let us exchange money for goods? So query, if money was introduced to remove inefficiency and money is itself now inefficient, what should happen to money?

  • slug

    I agree that it’s great this issue is finally taking root.

    NI is WAAY too public sector dependent.

    That’s why so many people have to leave to get a job.

    We need more private sector jobs here and its great this is coming up as an issue.

  • John East Belfast

    Leave Corporation Tax alone – adjust Indirect taxes instead – VAT, Fule Duty and also reduce NI NIC

    Then restore 10% CGT Relief for Capital Gains on Business development which will do more to encourage the NI entrepreuenerial sector than FDI. Bring in the Venture Capitalists and Private Equity Funds with new seed capital.

    The CGT move will encourage the Private Sector and the reduction in NIC and Indirect Taxes will reduce the overall cost of doing business In NI.

    The lower VAT Rate will encourage our tourism industry.

    Non of this will impact the UK Exchecquer as messing about with the UK CT Rate would.

    In terms of how to pay for it – simple – abolish the vast majority of Invest NI activities

  • Alias

    If corporation tax is lower in one region of the UK compared to another then UK business will migrate from where it is higher to where it is lower for tax purposes, thereby artificially reducing the amount of subvention required from central government while decreasing the amount of taxes going to central government.

    It is also aimed at siphoning FDI from the economy of Ireland and directing it into the economy of the United Kingdom since the rate is to be pitched at parity with or below the Irish corporation tax rate. So the aim would be to remove several billion from the Irish economy and to have it boost Her Majesty’s economy instead.

    It’s a good wake up call to the docile Irish to break out of “island of Ireland” peace-processing mode and to recognise that Northern Ireland is a competitor state that is part of the economy of the United Kingdom and not part of the economy of Ireland.

  • Eammon has this spot on. The analysis was right, the language and timing were naive and amateurish at best.

     I’ll never vote Tory but Cameron is absolutely right in his ultimate assessment that NI must grow it’s Private Sector and reduce our over reliance on the Public Sector. We have an unhealthy imbalance and without a stimulus in the private sector – particularly in attracting a range of jobs which pay in line with and above average Public Sector jobs we are incredibly vulnerable and have been for some time to Public Sector cuts and also any increase in interest rates (likely in the next parliament) which will hit many of our overstretched “property boom” keyholders. I wonder how many interest only mortgages there are in NI held by people borrowing multiples greater than 3 against public sector wages likely to be capped/frozen in the next parliament? 

    All our politicians know this is a fact. Many are on record re this in the past. The executive is on record as agreeing with Camerons sentiments on Private Sector growth – the 2009 IREP report recognised it. Many commentators and the occasional blogger like myself have been suggesting for some time that this was the real elephant in the room (http://www.shanepcarmichael.com/2010/01/a-new-vanguard/) while the Executive stalled and bickered over scraps from the sectarian table. An inclusive, burgeoing private sector economy supplementing our proud Public Sector makes sense not just economically but socially and politically – any post conflict society analysis tells us that employment and it’s associated benefits has one of the biggest impacts on the process of “normalisation”. University of Ulster recently published a report telling us we probably already knew – that young people with limited job or development opportunities are more likely to engage in anti social behaviour (including political and racial violence). 

    And yet our representatives on the hill have spent the last few years doing exactly what about this? Think of the time wasted while Stormont has been suspended or in sectarian stand off mode when they could have been addressing this issue given anyone with any secular political nous knew it was coming. And maybe that lack of secular nous is at the heart of this. 

     In spite of a rational if poorly executed SDLP call for a revised NI budget last year to reflect the realities of an economy in freefall nothing happened and an opportunity to stimulate a flagging economy was lost. 

    More alarmingly, at a public event in Westminster before Xmas i asked a senior political ni figure (vying now for a westminster seat and to whose political views I am broadly aligned) what he thought of IREP and his views on developing our private sector given the chances of public sector cuts in the next parliament. His response not only suggested he had barely read IREP but he actually went on to say that he “had no time for these multi national corporations coming in for a few years and then swanning off to Singapore or wherever they get a better deal. The future of our economy has to be the 1-2 person family business…”!! Seriously – you couldn’t make it up, particularly as it came 2 weeks after the great news of NYSEs support centre investment and the audience that night contained at least one potential investor from a financial MNC. It’s just an isolated example but part of a larger failure –  Politicians like that should be villified far more than Cameron on this issue. This problem has not been addressed on their watch.

    But here’s the immediate and rather sad reality for Cameron and the Tory/UU alliance. In spite of the fact all other parties agree in principle with what Cameron says, in spite of the fact they are responsible for allowing the situation to develop, all of them have the good sense to know the timing and turn of phrase he used was an act of political naivety at best and suicide at worst. It not only brings into question the nature of the Tory/UU partnership but also his own political judgement.

    The scent of blood (and cuts) is in the air. In a more mature political society Cameron may have been lauded for his honesty and it might even have triggered the long overdue advent of a more secular political debate on the issue at hand. It is badly needed –  anyone who thinks a simple cut in corporation tax is the answer to our problems is surely mistaken. It’s a much more complex consideration and needs early attention. But that’s a separate debate.    

    Unfortunately it won’t happen now in the mouth of an election – as Cameron should have known. And it might turn out to be a debate shaped by others than the Tory/DUP alliance, for in politics, perhaps more than anywhere else, “to the victor the spoils” and as Helmut Kohl once said: “You don’t win elections by putting the weapons of torture on display”.    

  • PrivateBob

    Forgive my ignorance of detailed fiscal or taxation matters, but will the proposed Tory cut to the public sector here along with a reduction of corporation tax in line with the ROI not do more than anything to aid the erosion of the union Cameron seems to like so much?

  • Argosjohn

    The Orange State needs a dose of realism. Massive cutbacks and closures to concetrate the mind. The whole ethos – Unionist, Sinn Fein, SDLP – is handout and leech.
    Whilst Harold Wilson did point out that Unionists seem almost genetically pre-programmed tob be perennial spongers, the Crown House Catholics are hardly any better.

  • Comrade Stalin

    Eamonn, I don’t think you have anything to apologize for in your reporting; the howls of protest show nothing other than that you are doing your job well. Cameron did stop just short of describing Northern Ireland as a sponger region, but the effect is much the same.

    I don’t believe we’ll ever see regional corporation tax rates, at least not in an arrangement that sees any one of the UK regions able to undercut the City of London. Why ? Because no MP (Tory or otherwise) is going to go back to their constituents and explain why large companies are upping sticks and moving their HQs to Belfast. The City is still the economic heart of the UK and no British Prime Minister is going to encourage it to move across the Irish Sea.

    This is a pledge that Cameron will have no problem quietly dropping if he wins the election, since there will be nobody in the House of Commons associated with his party who will care.

    The other thing about this debate is that it exposes a wider inconsistency of the unionist case. If unionists feel that the high corporation tax in the UK is damaging Northern Ireland as a region, then there is one very clear way to fix that – vote to join the Irish republic. If that option is unpalatable, then are unionist politicians going to argue that we are better off remaining in the UK even though the corporation tax policy punishes us ? Clearly there is some work required to straighten out the thinking here.

    On a side note, I’m wondering if regional corporation tax rates are legal under EU law. The RoI was slapped on the wrists for selectively providing favourable corporation tax rates to certain industries – IIRC, they dealt with that problem by reducing the main rate…

  • George

    Abolish Invest NI activities to pay for all the things listed? I don’t think that adds up.

    Considering Invest NI has had an average investment of 140 million a year I really don’t see how that will go very far.

    In comparison, under its Strategy for Science, Technology and Innovation the Irish Republic has allocated seven times as much a year on scientific research alone.

  • Eamonn. Aside from a useful analysis of Cameron’s comments on Friday you deserve thanks for provoking an insightful discussion on what is, for me, the key issue our Politicians should be applying themselves to.

    Cameron – or any other British PM will never allow regional Corp Tax in my opinion – for the reasons (legal and political) set out in the excellent contributions above.

    If we accept that (and even if we don’t, the challenges ROI face today and in the 1950s when CT was 0% (accepting business was less internationally mobile in those days) give the lie to the CT ‘Magic wand’ theory) then the harsh reality is that there is significant work to be done by our Politicans to resolve the challenge.

    I commend anyone interested in this to try and get your hands on a copy of ex Irish Ambassador to the USA, Noel Fahey’s analysis on what he called ‘The Irish Advantage’ published in 2005 in The Ambassadors Review. It provides a multi-layered analysis of the 30 year strategy that fuelled the Celtic Tiger – free tertiary education and a focus on science/technology therein; investment in Science, Technology and R&D in industry (as mentioned above in the excellent post by George); a social partnership contract between private/public sectors; corporation tax and infrastructure. We can learn from that and also rm where it has gone wrong for our neighbours as well. At the recent 2009 Farmleigh conference in the USA I understand that Dell or HP’s CEO (I need to check) said: “Ten years ago there were 15 reasons to invest in ROI, today only one of those remains”. I think that is a powerful message for us to heed and understand.

    I wonder if any of our elected officials have given any thought to what the strategic and long term “NI advantage” might be. If so can someone let me know? Perhaps their senses have been dulled by years of easy dependence on politcal and economic philanthropy from across the water – east and west?

    I agree with the commentator above – Invest NI sells a product, it can be improved of course (in Singapore a corporation who wishes to do so can be registered and set up to operate there in ~48 hours) but abolishing it is nonsense. Not only on the basis suggested above but simply on the basis that it exists to sell a product and therefore it can only be as good as the product itself. It is a symptom, not the cause.

    Taking a holisitc view of where we want NI as an investment location to be for the next 20 years is the only way ahead.

    Unfortunately that means there may be some interim years of living on our wits but that may be the price we pay for the lack of meaningful engagement on this issue by our elected officials for so long. Asliassays NI must indeed stand on its own two feet and realise it is in competition with the rest of the UK, Euope, USA and indeed ROI as a place to do business. My time in the USA suggests the “sympathy vote” is not long for this life in Washington DC and as we now know, we’re in Westminster’s sights…

    On a more positive note it might focus everyones attentions on policy not politics. I enjoyed Comrade Stain’s analysis of the Unionist position on developing NI’s economy – it’s a fine point well made.

    Concentrate the mind indeed….we have many advantages which should give us hope; I’m just not sure our politcal system and its commitment to sectarian politics – at any cost, including to our economy – is one of them…

  • I think Unionists need to be awfully careful with this one – “Keep Ulster Different!” seems to be their slogan rather than keep Ulster British 🙂

    All the main parties here in GB are interested in reducing costs in the public sector and centralisation is the order of the day, with processing functions being moved to areas of high unemployment, (with a correspondingly large labour pool), functions being moved to areas where office rents are cheaper and other financial matters at the top of the agenda to give the year on year reductions in expenditure that every party wants.

    Surely a good idea to keep NI well integrated in to the UK would be that the civil service should get bigger in NI – centralise processing and enquiry centres where its cheaper to run them – lets face it, its either Tyneside, North Wales or Northern Ireland – why not lobby to have these functions in NI.

    Idealogically sound (for unionists) by embedding NI in the UK, cheap for the treasury and shows NI making a positive contribution to the UK.

  • alan56

    Nesbitt good on politics show?

  • John East Belfast

    Shane

    Re your comments on Invest NI

    I think the problems with Invest NI are much broader than give credit for.
    If all INI does is “sell a product” – fine – to me that is what its job should be – it should be there as an information shop for FDI.

    What it shouldnt be is there for is a grant delievery agency.

    I am instinctively opposed to a Govt body collecting taxes of successful corporates and then redistributing them among what it considers as winners.

    I say that as both an Invest NI client as well as an owner/employee of a priavte sector company engaged in product and market development with 85% of its products going outside NI. ie the type of company that NI needs.

    All the money within the block grant that NI needs for innovatove NI ficsal solutions (as I described above) is already within the Invest NI rediculous £400m plus annual budget

  • DC

    He may well be accurate in terms of size, but the planned Tory cure sounds worse than the actual disease.

  • Alias

    It’s an issue unionists would have mixed feelings about. On one hand, creating a culture of state-dependency means that folks are less likely to vote to dismantle the state that they then depend on.

    On the other hand, a culture of state-dependency is sustainable when wealth is transferred from more prosperous parts of the UK – which, thanks to Labour bankrupting the UK, is no longer sustainable. So, it’s a case measuring the demands of the dependent against the patience of those on whose generosity they are dependent.

    I guess it all depends on whether or not there is a covert security policy involved. If there is, then Cameron will be made aware that cutbacks should be modest in NI and mainly aimed at appeasing the ‘mainland’ taxpayers rather than creating a self-sustaining economy in that part of the UK.

  • DC

    Like the Age of Austerity comments, Cameron’s Northern Ireland ones are going down like a rifled rhino.

  • DC

    thanks to Labour bankrupting the UK

    Cameron did say he would keep Labour’s spending plans for 2 years before the crash, so Brown was hardly to blame for the debt – if the Tories were going to carry on with the same “bankrupted” spending plans.

    Unless you think the banks ought not to have been bailed out then well I apologise upfront and each to their own on that issue.

  • Thanks for this. I didn’t mean to brush over the Invest NI challenge but was conscious it was already a long post. Totally accept the point on it’s grant delivery role which to an outsider seems often arbitrary eg this proposed incinerator on the shores of lough Bragg which by all accounts is getting big money for a relatively tiny no of jobs.

    You and others will know more than I on this – I’d love to hear more here – but I did not mean to dismiss it. I just think it is a smaller piece of an overall strategy to establish a cohesive, sustainable and prosperous “NI advantage”

  • The reaction of the media here highlights why someone who can cut to the chase is needed to bring people back into the real world.

    Personally I’m surprised Cameron would be so forthright but I more than welcome it and the fact we are on his mind in this regard is encouraging for the future.

    We need less of the embarrassing outrage from the spongers here. And there’s as many of those in the media as there is in the official civil service.

  • Driftwood

    The graph on this link is fairly clear, Wales will have to get in on the cleanu up act as well.

    http://www.spectator.co.uk/coffeehouse/5941658/why-cameron-was-right-about-the-regions.thtml

  • Bulmer

    I do find all this wearing of hair shirts and claims that Cameron was right, we need to be whipped, somewhat surprising. There’s an election on and one of the reasons Cameron’s support collapsed so spectaucularly in the past year was when he told the rest of the UK of huge cuts he was going to make. Something tells me not many voters in Ulster will be rushing to save Reg Empey’s sinking ship as a result of Cameron’s latest foray into electoral suicide.

    You can’t win elections by promising things will get worse.

  • Zak

    What hope for this parasitic statelet? It has never stood on its own two feet since its grubby inception and now nearly everyone there “works” in the endless line of public sector entities (or the “working classes” claim benefits). Despite the huge size of the parasite (sorry public) sector there, they deliver inefficiency and dysfunction. As the Republic of Ireland doesn’t want you and neither do most decent, honest, hardworking British people, have you lot ever thought of declaring independence and selling the Big Issue? You could still sponge off the EU!