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.