The circle of the block grant vs lower corporation tax can be squared, we’re told

At last! The Bel Tel carries a thoughtful piece by economic commentator Paul Gosling on how to reconcile the continuing need for the substantial subvention of the block grant with the incentive of a regionally lower corporation tax. He quotes economist Mike Smyth.

” If you don’t do something like this, the subvention will be north of £10bn in a few years. If we don’t do something we will be bailed out by the Treasury in perpetuity.”

Making up the reduced block grant from Westminster is not a major challenge, suggests Smyth
” The answer is that by 2020 the rate of corporation tax will be the same as in the Republic. That would cost less than £100m [per annum].”

So that’s all right then. It’s not quick fix for the present downturn. And the case fails to take account the wider pressure in the EU to harmonise regional tax breaks – ie reduce them. It’s also quite breathtaking how Prof Smyth frankly admits that NI’s gain would be a GB region’s loss. From what I’ve heard, resistance from MPs across the water to any such concession for NI will be a formidable obstacle to overcome.  This is a factor the local debate tends to ignore.

Secretary of State Owen Paterson promised a plan to rebalance the NI economy in the New Year. Let’s hope we don’t have long to wait.

Former BBC journalist and manager in Belfast, Manchester and London, Editor Spolight; Political Editor BBC NI; Current Affairs Commissioning editor BBC Radio 4; Editor Political and Parliamentary Programmes, BBC Westminster; former London Editor Belfast Telegraph. Hon Senior Research Fellow, The Constitution Unit, Univ Coll. London

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