Coalition launches consultation on NI Economy (and Corpo Tax)

So here comes the Chancellor’s latest consultation, which amongst other things, lays out a good case for what’s wrong with Northern Ireland in the post Peace Process era:

In a challenging global economy, Northern Ireland cannot rely solely on its traditional advantages such as a low cost base and grant assistance to private investors. Indeed, Northern Ireland’s ability to offer investment grants is being significantly curtailed under EU rules from the start of 2011 and could be further reduced after 2013. There is a need to develop a more balanced economy in which the private sector plays a greater role and which depends less than in the past on attracting investment in low wage sectors.

So far, so Owen Paterson. It goes on to mention Enterprise Zones, but perhaps of greatest importance, and lays out the Treasury’s own concerns by cited the Calman Commission’s findings in Scotland:

The issue of separate corporation tax rates for Scotland and Wales has been considered by the Calman and Holtham Commissions respectively. The Calman Commission’s report to the UK Government considered devolution of corporation tax but recommended against a separate rate of corporation tax for Scotland, on the grounds that a separate rate could distort competition within the UK, and that the required legislation would be likely to create significant administrative burdens.

Hey, and guess what, Northern Ireland’s current Finance Minister is worried about exactly the same thing:

The estimated costs and impact on the block are also significant – at the upper end of all previous estimates. Practically speaking we would have to look at how we could manage these, making the options where the reductions would be deferred or phased in over several years after any decision vitally important to minimise any impact on public services.

In no likely scenario is this going to be a sudden advance to the Republic’s levels of tax. But Osborne’s been flagging this tax as a number one on his target list since the Tories’ Bournemouth Conference in October ’06, and yesterday confirmed the UK would be heading in this direction.

So long as NI Assembly doesn’t jump to far ahead then some progress can be made without possibly stinging effects on the local budget. What will have to be sorted during the consultation period is who is going to pay for local collection, and what protections can the local legislature expect from a future Westminister which may decide we’re getting too much of a free ride?

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  • Pete Baker

    Interesting point in the Treasury press statement

    This consultation paper sets out options that could be taken to support rebalancing of the Northern Ireland economy, including the issues involved in devolving the power to vary the corporation tax rate for profits in Northern Ireland.

    The consultation paper does not make recommendations.

    That would be because it’s a NI Executive decision.

    So what are the views of those party’s who have been having extensive discussions with the Treasury on these issues for months?

  • ItwasSammyMcNally

    This is one of those issues where the two tribes want the same thing for somewhat different reasons, Nationalists want it becuase it moves more power across the Irish sea into Irish hands and becuae it will help to harmonise the economies on both sides of the border (as well as for economic reasons) and Unionists want it largley for economic reasons.

    If the UUP are true to form they will say something like we agree in prinicple but now is not the right time as they are a dysfunctional bunch in Stormo blah-de-fecking-blah like they did with the transfer of Police – and everybody will just ignore them – like they did with the transfer of Police.