What will the all-island corporate tax rate mean for loyalists?

What has this news about London finally preparing the way for an all-island approach to corporate tax rates got to do with loyalists marching in circles outside a chapel in north Belfast? Precisely because the two have no relationship, it’s a question that loyalists need to address.

Though many north Belfast residents will see nothing amusing about a bunch of uniformed marchers congregating outside their chapel while playing anti-Catholic songs, the pictures of grown men parading around in tiny circles should worry the bandsmen most of all. Where such marching once represented a show of force, in today’s post-Good Friday Northern Ireland it’s barely a show of farce.

Not so long ago news of any type of all-island planning would have brought Paisley, followed by his intra-tribal rivals, thundering through your television denouncing “abandonment” before threatening a “response’” from the massed ranks of loyalists. Today, far from representing an agenda imposed on unionists, all-island thinking about corporate tax rates is led by unionists.

To Peter Robinson’s credit, his and Martin McGuinness’ persistent lobbying for a corporate tax rate equal to the Republic’s may be close to paying off. But paying off for whom?

Robinson’s ‘new Northern Ireland’ project presents a contradiction for loyalists: Attempts to stabilize the north’s place in the UK by developing a more modern, innovative and competitive economy require an embrace of globalization and a loosening of clientelist traditions; though potentially rewarding and exciting for Northern Ireland’s well-educated middle class, the emergence of this economy is set to leave the working class, particularly its loyalist sections, increasingly marginalized, excluded and abandoned.

Attempts, epitomized by the forthcoming harmonization of corporate tax rates across the island, to steer Northern Ireland away from a subsidized, state-orientated economy can only accelerate the loss of traditional routes to decent employment opportunities for the relatively under-qualified.

Since there are higher rates of educational achievement and thus higher rates of upward mobility within the nationalist sections of Northern Ireland’s working class, loyalist communities are finding space to march forward ever more squeezed, literally and metaphorically. The psychological impact of ‘losing’ traditional parading routes may soon be augmented by the increasing absence of traditional routes to decent jobs paying decent wages and pensions.

As Northern Ireland prepares to take baby states from entitlement and dependency towards a more modern economy, loyalists, having long fought unionists’ battles, are entitled to ask: Where are the unionist leaders fighting for the Protestant sections of the working class?

The days of mass loyalist ‘show of force’ spectacles have been discarded by a unionist elite who have readily swapped any pretenses about Northern Ireland being as British as Finchley for the chance to compete in the global economy with the England, Scotland and Wales on totally unequal, all-island terms.

“We’re British, but our economy is Irish!” may prove an intriguing and effective slogan in various international Chamber of Commerce boardrooms in the years ahead but whether you label harmonized all-island corporate tax rates as “competition” or “cooperation” with the Republic, where in this all-island planning are needs of loyalists being considered?

As no serious strategy exists to build an education system capable – or even interested – in equipping working class communities for the demands of a less subsidized and more globally competitive (and vulnerable) economy, loyalists are disproportionately likely to face a future cut adrift from an well-educated Northern Irish middle.

Many argue that inward investment can only help the “whole community” but this entirely ducks the nature of the economic challenge facing Northern Ireland, particularly its least educated citizens. As James Forsyth rightly points out, “The current situation where public spending [in Northern Ireland] accounts for more than three quarters of GDP and the median salary in the public sector is £9,000 higher than in the private sector is simply unsustainable.”

Attracting private sector inward investment is a belated attempt merely to offset the pending public sector job losses and the devalued wages of those that survive.

Should a harmonized all-island corporate tax rate attract new jobs to Northern Ireland, these new opportunities will be largely out of reach to workers with low qualifications; workers who will disproportionately come from loyalist communities. It doesn’t have to be this way but without rethinking the education system, that’s the road we’re currently on.

Advocates and defenders of globalization are often accused of misrepresenting and overselling the “trickle-down” benefits of more open, more competitive economies – the type of economy a synchronized low corporate tax rate is designed to encourage. Yet globalization’s advocates rarely make any pretense about the negative impact on traditional working class job sources; instead, they candidly argue that citizens of western economies face a stark choice: private sector ‘high-end’ middle-class jobs, or bust.

MAs are the new BAs, at best. Frankly, “if you’re blue collar, you’re f*#ked” was the summary one World Bank economist recently offered this blogger.

Consider, for example, the retail and customer service industries. If you’re reading this in a coffee show or a shopping center, take a look around. It’s not long until the waiter taking your order or the teller ringing your purchase will be replaced, if they haven’t been already, by digital self-service technology. Low skilled jobs are less secure than ever before.

Yes it’s commendable that Robinson and McGuinness are pursuing to build a more modern Northern Ireland economy, but where is the strategy for investing in working class communities to ensure that they are equipped to participate in the more turbulent times ahead?

The real crisis facing loyalists, in particular, has little to do with traditional marching routes and everything to do with creating new routes to full participation in the unforgiving Northern Ireland economy that unionist leaders are about to remake along all-island lines.

  • Tomas Gorman

    In the grand scheme of things, why on earth should we have to give a fuck!

  • Professor Yattle

    The premise of “this blogger” is false.
    Devolved corporation tax, if it ever happens, is not about harmonising cross-border tax rates, let alone ‘Britain planning an all-island economy’.
    It’s just about devolving corporation tax.
    Calm down dear.

  • “What has this news about London finally preparing the way for an all-island approach to corporate tax rates got to do with loyalists marching in circles outside a chapel in north Belfast? ”

    That makes it sound as if an agreement has been reached between Dublin and London re the corporate tax for NI. It hasn’t and I daresay the Republic’s government will be less than delighted when NI’s rate is reduced because it will mean (nothwithstanding the fact that we live on one landmass) more… competition to their own efforts to kickstart their economy.

    Regarding the second part of the post, re loyalist economic disempowerment, their situation is not unique in the western world in the post-industrialist age and it is not something which has arisen just in the last couple of years.

    Two, possibly three generations of those at the bottom of the rung all across the UK and indeed Western Europe have not guara

    nteed jobs now since the late seventies, early eighties. Our advantage (and I am saying this only partly tongue in cheek) has been the Troubles- without them and the fear of them reigniting there would not have been the massive inflow of financial support and the development of the post-conflict subsidised society. As long as that fear is there, the loyalist and republican working/class have nothing really too much to worry about, on the economic front anyroads.

  • Ruarai

    O’Neill,

    Let me elaborate on what I mean by “London preparing the way for an all-island approach to corporate tax” because you’re right that this is not the same as an official agreement (and why I didn’t claim it to be).

    1. Reading James Forsyth ‘s Spectator piece was striking precisely because it was Forsyth’s piece. Forsyth is very close to the Tory establishment; he’s an excellent writer but is so close to what’s on London’s radar one might even tease him a little about providing a vessel for senior Tories keen to fly kites or reframe arguments. Point being, coming from him this means this is on their radar now.

    2. A corporate tax rate for NI much closer if not exactly the same to the ROI is something the SDLP tried to push for years but got nowhere. Brown always pushed back on the grounds that (a) there’s no way NI can get an investment advantage that other areas of Britain don’t get and would suffer the competitive consequences of and (b) lots of “loops” already exist/existed in the tax code that offer/offered corporations more cuts than they realized. ((b) was a typical government/non-business person’s approach.)

    That Tories are considering giving NI at distinct corporate tax rate advantage over Britain and more aligned with the ROI (for competitiveness reasons) is massively controversial news on many levels and demands discussion, planning and so on.

    And yes the loyalists’ situation and challenge is not unique; for that reason I tried to move the discussions about marching that have dominated the past few days onto more important topics that are, as you say, more about broader trends and currents in the wider world. While the challenge is not unique the response -the priorities – of loyalists arguably are. These trends should be of far more concern to loyalists and everyone else than marching – but you only have look at the comments concentration on slugger so see how screwed NI’s priorities are during this time of great and global economic transformation.

    And here is was is unique O’Neill, and it’s partly why I wrote the post. While the rest of Europe and the US are engaged in ferocious public debate about these broader trends, NI and slugger is having another around of naval-gazing about marching, etc. This is crazy! The economic crisis is urgent and the news about this potential corporate tax rate change should focus people’s minds on the new economy that will demand high skills that’s closing in faster and faster.

    What is particularly pressing for Loyalists, surely, is how they are going to be uniquely shafted and failed and let down by NI’s lack of serious planning for equipping its most vulnerable for this economic challenge. That dreadful 11plus system and the mess that’s enveloped around its phasing out is leaving loyalist communities in particular frighteningly vulnerable to the economy that lies ahead – no?

    You say that the fear of conflict will keep the subsidies flowing but (a) don’t be so sure. Yes, it would take a brave UK PM to risk destabilizing NI by cutting, etc, but some cuts are inevitable. This really is unsustainable. And (b) on a point of honor we should be determined not to live the lives of scroungers. It’s embarrassing, it’s anti-innovation and, damn it, it’s just that attitude that enables NI to bask in solipsistic march debates while the rest of the world is dealing with a financial crisis.

    Two NI ministers weighing in on online debate on marching ffs! This is not serious.

    Marching is a total sideshow compared to these questions.

    Time to debate building a modern society.

  • That Tories are considering giving NI at distinct corporate tax rate advantage over Britain and more aligned with the ROI (for competitiveness reasons) is massively controversial news on many levels and demands discussion, planning and so on

    As someone pro-Union, I am in two minds over it- I would rather other economically disadvantaged areas of the UK would also receive the same benefit as us. However, it will also put us on a (potentially) more competitive footing with the Republic. What it doesn’t represent, imo, is a step towards “all.island” economics.

    I (and most sane Unionists) don’t necessarily say we shouldn’t cooperate with the ROI in areas where it is to our specific advantage. Where it is to our specific advantage to compete, then we should have the tools to enable us to put in the best effort. The reduction of corporate tax falls into that category.

    I don’t think the *post/conflict* subsidy culture which has grown up and benefitted everyone from “Community activists” to the Quangoists is a positive at all.

    But it is a reality which suits both UK and ROI governments and the political establishment here. We also kid ourselves if that reality is one which exists distinct from the punter in the street- and in the absence of any hard questions being asked, we can afford ourselves the luxury of having 400 plus comments on a bit of recreational rioting and a bigotted band.

    If the economically disadavantaged (including the loyalists) as a collective were that bothered about their kids getting a decent education they would:

    1. Be voting for someone prepared to change the system.
    2. Providing more parental motivation for their kids to get their heads down and start moving up the system.

    Neither is happening, just isn’t seen as priority.

  • dodrade

    I simply don’t see how in the middle of a referendum campaign Northern Ireland can be offered lower Corporation Tax without Scotland receiving the same, to do otherwise would be a gift for Salmond.

  • Barnshee

    Who benefits from the Treasury largesse?
    Hint –who consumes the most social security and family based benefits?

    The Brits have already tied lower Corporation Tax rates to reduction ion the “subvention”.

    Who will be most affected by reduction in the”subvention” Answers please?

  • RyanAdams

    dodrade,

    The only answer is devolution of fiscal powers to both NI and Scotland, and possibly Wales; although given Welsh nationalism is a poorer relation in terms of popularity and power I don’t think its such an issue there. IMHO the day Salmond accepts fiscal powers will be the day of reckoning for Scottish Nationalism and the day the independence movement starts to die, alike the unification movement here when devolution was restored.

    oneill,
    “If the economically disadavantaged (including the loyalists) as a collective were that bothered about their kids getting a decent education they would:

    1. Be voting for someone prepared to change the system.
    2. Providing more parental motivation for their kids to get their heads down and start moving up the system.”

    Couldn’t agree more with that analysis, especially on your first point. The decline of the PUP (their own doing a’la Bobby Moffett and general disorganisation in my view) has left many working class unionists interests unrepresented across Belfast and beyond.

  • RyanAdams

    Barnshee,

    Don’t forget housing, mobility cars and the DLA!

  • IJP

    Ruairi

    There’s no polite way to say this, but your innate Nationalism “all-island corporate tax” has gotten in the way of the facts.

    The article you link to dates from February.

    In the meantime, meetings have been held and no progress has been made on devolving corporation tax (the accurate term).

    No progress has been made, because it won’t be devolved:
    http://ianjamesparsley.wordpress.com/2012/07/05/why-corporation-tax-will-not-be-reduced-in-ni/

  • Mick Fealty

    Quite so IJP.

    I’d add that even if NI were to track ROI Corpo Tax (an this is as likely to be a Stormont decision as Westminster) rates, any revenue increases that ensue, will likely be at the expense of southern jobs and the cash will end up in London not Dublin.

    As for the Loyalist response to that, I’d say that would roughly as “That’ll do nicely Sir”…

  • tyrone_taggart

    Mick Fealty (profile)

    “will likely be at the expense of southern jobs and the cash will end up in London not Dublin.”

    What evidence do you give to support this claim? You appear to think there is some limiting factor to the about of jobs that Ireland can bring in?

    The fact is the “Ireland is holding its own in tougher FDI game.”
    http://www.irishtimes.com/newspaper/finance/2012/0713/1224319965089.html

    More interesting Northern Ireland has the opportunity to offer “STRONG CLUSTERS” such as ICT and internet sectors.

  • Ruarai

    Mick,

    you’re a northerner through-and-through! This line made me smile:

    “any revenue increases that ensue, will likely be at the expense of southern jobs and the cash will end up in London not Dublin.”

    Ask people from most any developed country what it means to talk about the impact of foreign investment and what will you hear? “Employment opportunities”, “knock-on benefits for local supply-chains”, etc. Essentially: how the private sector will impact private citizens.

    Ask NornIron politicos what foreign direct investment means? First instinct: Its impact on the public purse.

    Mick, it’s not an irrelevant angle, ok, but it would good, for once, to have a conversation about NI that did not revolve around the role of the state, past, present or future.

    Indeed, it’s the fixation and reliance on the state that spurred James Forsyth to write the original post calling for rates close to the ROI as a means of competing with it as a means of moving move beyond state-reliance. From your replay Mick, I think NI’s reliance on the state goes much deeper, psychologically, than the immediately economic. Fair?

    IJP, you’re quite right to bring up questions about the likelihood or otherwise of any move towards regional UK differences in the corporate tax rate and, secondly, how and by whom these would be decided and authorized. I’ve long been on the receiving end of messages about how it ain’t gonna happen – which was all the more reason why Forsyth’s blog, given who he is, caught my attention.

    Assuming a rate reduction for NI is no longer, as it was under Brown, a non-starter,I come back to my original point: The real traditional routes in NI that are closing down and that should be garnering most consideration and debate are the traditional routes to decent jobs. In the years ahead there will, at best, be more of a focus on private sector jobs generally and these will require high-end skills.

    All NI’s constituencies should be preparing for this but especially those least well served by the current education system.

    TT, you’re spot on: A NI capable of attracting inward investment by minimizing its differences as an investment location with the ROI is absolutely not by definition a threat to the South. In fact, while there will be some instances where NI and ROI locations could be directly competing for the same investment, there will suddenly be new instances where NI and ROI together can better make a joint case for investment that straddles both locations on the new grounds of scale and increased stability, if based in one, still benefits both.

    Thinking about this is a zero-sum competition for investment is, among other things, simply not how potential investors automatically think about it.

  • Old Mortality

    Ruarai
    ‘…there will suddenly be new instances where NI and ROI together can better make a joint case for investment that straddles both locations on the new grounds of scale and increased stability…’

    For example?
    The most obvious one is retailing. Sainsbury, Asda et al straddling the entire island just like Tesco. Is that the sort of thing you had in mind?

  • Old Mortality

    Mick
    ‘..the cash will end up in London not Dublin..’
    I think the plan is that all the corporation tax revenue in NI will end up in Belfast.

  • Republic of Connaught

    It can be dressed up any way people want to save political face but the patent reality is it’s an admission that Northern Ireland is different to England, Scotland and Wales because it’s not on the island of Britain, it’s on the island of Ireland and needs to harmonise its tax rate with the other regions of Ireland, not Britain.

  • Mister_Joe

    Is it really true that the “PUL” community have not yet realized that the “jobs for the boys” at H&W, Mackies etc have gone away?

  • aquifer

    “Attempts, epitomized by the forthcoming harmonization of corporate tax rates across the island, to steer Northern Ireland away from a subsidized, state-orientated economy can only accelerate the loss of traditional routes to decent employment opportunities for the relatively under-qualified.”

    How so? Graduates get more of the public sector jobs.

    In an expanding or expanded private sector economy there is no reason not to expect more low skill and service sector jobs, even if government does not tackle skill gaps.

    However I think Sammy would rather feed loyalists crumb by crumb from her majesty’s table, resenting the progress made by British Catholics in Ulster and voting DUP, than have them confidently stuffing cash in their own pockets and perhaps forgetting to vote at all.

  • Reader

    Republic of Connaught: It can be dressed up any way people want to save political face but the patent reality is it’s an admission that Northern Ireland is different to England, Scotland and Wales because it’s not on the island of Britain, it’s on the island of Ireland and needs to harmonise its tax rate with the other regions of Ireland, not Britain.
    It’s a temptation to act as a corporate tax haven in the Sterling zone.
    If it ever happens (and it’s been discussed before), it will be because NI is the smallest component of the UK, and the immediate losses from the tax cut are more easily compensated for by a new slice of FDI. It would also be an experiment in the Laffer curve – does a cut in corporation tax *really* stimulate indigenous growth enough so that direct and indirect benefits compensate for the lower tax rate? It’s worth knowing the answer to that – and less risky to test it with small sums in a small region.
    If it doesn’t happen, it will either be because Scotland might want to do the same, and dilute the FDI benefit; or because existing UK based companies might use it as a tax dodge with no net benefit; or because the Northern Ireland parties are too scared to gamble a cut in subventions against an extremely uncertain return.
    Presumably Osborne will calibrate that final tradeoff to get the exact decision he chooses from the local politicians.
    But if anyone was really keen to do a bit of North/South harmonisation, they would certainly start with VAT and fuel duty – not corporation tax.

  • Ruarai

    IJP,

    Anyone, including yourself (I just read your link to yourself), who believes that you need pressure from the majority of the general public to reduce corporation tax rates:

    1. Wasn’t paying attention to how Ruairi Quinn originally ushered in the reduced rate in the ROI back in the day and

    2. Isn’t paying much attention at all to how most any decisions relating to creating “investment friendly decisions” are made by governments today. It’s wish-thinking to assume that a campaign to mobilize significant levels public support in favor of a reduced corporation tax rate will be sought or required. If you think this is immoral, fine. But that’s a normative position, not an analytical one.

    The lack of mass public support for a reduction in corporation tax in NI is nowhere near as relevant to its eventual occurrence as you imply. The other points you make about the difficulties with one UK region receiving special treatment are more on-point, though long known. It’s the fact that Forsyth is making the case for the NI exception – and making it to a UK audience – that suggests murmurings of new thinking. When these long-standing obstacles are being questioned not by Belfast but by the establishment in London, change is being considered.

    One doesn’t need to be an Irish Nationalist to see the benefits of a more harmonized all-island corporation tax rate (or a rate where NI can better “compete with the ROI”, if you’re more comfortable with that phrasing); one simply needs to have a basic sense of how foreign investors run cost-benefit analyses on NI as an investment option.

    OM,

    Sure cite those retailers as examples but I think we need to have much more ambitious and high-end investment in mind. In the last few years there was substantial interest from the Middle East about investing in the ROI – I’m talking mega-investment here (you’ll have to take my word on this one). They pulled back. Why? The place was just too damn small, in several ways, to effectively handle the scale of the investment mooted. It was an opportunity lost through lack of scale. A more harmonized corporation tax can help the ROI, in some instances, by presenting a larger opportunity to investors. Sure some ROI constituencies will at times lose to northerners but… them’s the trade-offs.

    Mister-Joe,

    I honestly don’t think the penny has fully dropped on the extent to which we’re entering a new era in terms of job and qualifications. How else to explain the luxury of hundreds of posts on marching bands while the rest of the developed world comes to realize that there is an urgent economic and social transformation afoot? NI isn’t paying attention to the world it’s in/is no longer in.

    Aquifer,

    I’ll take you on trust re: the ratio of public sector jobs going to grads. However, I’m talking here not just about the high-end private jobs being out of the reach of the under-qualified but about how this will happen in tandem with many current public sector jobs (currently taken by grads and school-leavers) being cut or reduced in wage and pension value. Point being: the changes afoot and coupled with the technology changes that will render more and more service jobs redundant, there is little hope for the under-qualified. This is an impeding social crisis (whether the reduced corporation tax rate happens or not) that should be getting much more attention than it is. This is the conversation that merits hundreds of posts, blogs and op-Eds.

  • ForkHandles

    Ruarai, you’re best to keep a serious economic post separate from the all island tinted glasses, marching and tribal stuff. In fact don’t bother with the later type of posts, there are enough nutters on this site to keep that market satisfied 🙂 You let yourself down a bit with this quite oddly framed post!
    The main point of making Nis corporate tax rate the same or lower than the ROI, is to complete with the ROI to bring companies and new jobs to NI that may have gone to the ROI based on the tax rate factor. We are in economic competition with the ROI and they with us, not to recognize this is a bit mad. Rest assured that no politician in the ROI will let any jobs go to NI if they can keep them in the ROI, and in NI vice versa. Except the chuckies, but they are not really politicians. There is a possibility that some investments may be on a scale that is too big for the skills and infrastructure base in NI or ROI alone, these will be the ones that are sold by the politicians as north / south cooperation if they can be secured with bases in both NI and ROI. No one will have a problem with this, but each country will be trying to get as many of the jobs into their own jurisdiction as possible.

    Forget about talking about working class Protestants or Catholics. The need is to educate and train all people up to a high standard so they can do the fewer and fewer types of jobs that will be available in western countries in the years to come. A highly skilled work force is in my opinion the biggest factor in attracting jobs. Its well known that basic manufacturing is going east where labour is cheap. But the advantage that we have over India or China is the work ethic and basic honesty in how we work as a team. I work with mostly Indians in the Middle East and the Indian ‘culture’ is one of avoiding responsibility and passing on work to others, this results in much confusion and a poor quality result at the end of the day. They are not able to work in a highly organized manner that we are used to. Remember the collapsing stadiums and poor quality construction of the common wealth games? Not a surprise to anyone that works with Indian companies. Chinese goods are regarded as poor quality, I don’t know much about their work culture but I would not want to drive across a bridge that had been built by a Chinese company using Chinese sourced materials.

    This quality of work and competency is the wests advantage. In NI we should be educating and training people for high skilled jobs. This is the only type of manufacturing that the west will be good at because of our ability to produce high quality and reliable goods. A study should be made of the goods that Germany produces; even in 2012 they are still able to have a manufacturing sector. This quality advantage will not last forever. In the 80s Japanese cars weren’t that good, now they are the best in the world. All because they got organized and now have the highest work ethic you could imagine.

  • Old Mortality

    Ruarai
    ‘In the last few years there was substantial interest from the Middle East about investing in the ROI – I’m talking mega-investment here (you’ll have to take my word on this one). They pulled back. Why? The place was just too damn small, in several ways, to effectively handle the scale of the investment mooted.’

    OK, I believe you but what were they proposing to do?

  • Lionel Hutz

    I’m a long way off understanding the potential dynamics of deciding corporation tax here but I’d like to run this scenario by everyone.

    If you devolve CT, you are taking Northern Irelands corporation tax contribution out of the block grant and then collecting corporation tax here.

    If that is so, what is to stop Tesco relocating its UK Centre of operations to NI and then we collect all their UK corporation tax.

    And if that happened to massive companies like and including Tesco, wouldn’t the financial consequences of leaving the UK be catastrophic as we would come to rely on this massive boast……

    Probably missed alot in that but I’ve always wondered about that

  • Old Mortality

    Lionel
    That is an entirely plausible scenario. However, it would almost certainly require Tesco to relocate its corporate headquarters to Northern Ireland, including its senior management. It’s very doubtful that they could be persuaded to move here although they could be flown in and out every day.
    A related flaw with the lower corporation tax proposal is that it would benefit Tesco’s operations here just as much as the high technology companies that it is designed to entice. Probably more so because, by the nature of its business, Tesco should have a higher effective tax rate (ie the proportion of its profits that are paid in tax).
    Ruarai seems to think that the low Irish rate was introduced by Ruarai Quinn when in fact it goes back to the 1950s but initially it applied only to manufacturing companies. Banks and retailers paid a much higher rate until the EU decided about 10 years ago that the dual rate was contrary to its rules so the uniform 12.5% was phased in.
    Is it entirely coincidence that the property mania began to get out of hand from about that time?

  • Ruarai

    Forkhaldles,

    “you’re best to keep a serious economic post separate from the all island tinted glasses, marching and tribal stuff.”

    That’s fair comment – I made a bit of a haymes of the framing; too much going on there in retrospect. Lesson learned.

    A lot of the rest of your reply merits longer discussion and covers topics I hope to unpack in posts ahead.

    One quick thing for now though: Sure lower rates would help NI compete with the ROI but it’s more interesting than that. Does anyone believe, for example, that the ROI wouldn’t prefer its northern neighbour to be more similar and prosperous and ‘normal’ than to continue as a state-dependent, conflicted, never ending “peace process” source of tension and unpredictability?

    Similarly, I stand by my claim that more harmonized/more competitive rates would present some fascinating opportunities for joined up outward facing engagement. (None of which must take on constitutional change.)

    You need not concede “all-island” is a term pregnant with threat and conspiracy. There’s more to all-island opportunities than politics and more to politics than zero-sum nationalist-unionist stuff. It’s all in flux. Here and elsewhere.

    But that’s for another post.

  • IJP

    Ruairi

    Again, understandably given your innate bias, you are making the mistake of assuming Northern Ireland is the same as the Republic. It isn’t!

    Politically, the Republic took 40-60 years after the Civil War to get serious about its economy. NI is nothing like as far down that road. Populism still reigns here. Hence, the Quinn example is irrelevant.

    That said, I didn’t say a corporation tax cut requires public support; I said a cut in subvention (to enable it) would be made significantly easier with public support – after all, we haven’t even introduced water charges! It would be possible without public support, except that there are all sorts of other legal, economic and political wrangles to overcome.

    Mick is also spot on that money so gained would largely end up in London. It is part of the culture of NI parties, even Unionist ones, that savings or contributions to the overall UK purse are seen somehow “not to count”. Another reason it won’t happen.

  • Ruarai

    IPJ,

    4 POINTS:

    1. Mick’s sidetrack into the relevance of increased foreign direct investment to the public purse was regrettable. That’s a conversation one can have but this thread was about job creation and loss and the relationship of that process to incentives and disincentives for foreign investors (and why we need to discuss all of that more). To reshape that into “who grabs the tax” should, I submit, be done on another thread. It also reinforces an impression that people in NI are miles out of touch when it comes to moving beyond a state-oriented perspetives on all things political or economic; another reason I regret Mick’s insertion of that angle.

    2. The entire thread is on the possibility of reducing the differences between NI and the ROI for prospective investors; to suggest that I or anyone else assumes that NI and the ROI are the same could only be alleged by someone who has not read the thread or the Spectator post it was based on. You have read this thread so that’s plain bad form and not helpful to fostering calm, open discussion. At best you’re erecting straw men. Please stay on topic or start another thread of your own.

    3. Speaking of bad form: I suggest you ask yourself why you have jumped repeatedly to ad hominem attacks about my alleged bias. Why not just make your case on its merits? You’d enjoy it more if you didn’t assume there was something “innately” distorted about your opponent.

    4. So, you think that a reduction in the rate is not going to happen. Fine, I think we got that. This thread is about the significance of a Tory-leaning writer from London making the case for said reduction and what the implications of said reduction could have for various NI constituencies and the ROI. It’s a discussion about case the Spectator – hardly an Irish Nationalist platform – made for the reduction.

    I appreciate your weighing in IJP but let’s keep it to arguments and analysis and ease off the Dr Phil phycho-babble about innate bias, it does nothing to help a conversation. That said, I did enjoy your own post and am glad you’re thinking about this topic. Denial is the first step on the road to the embrace, no?

  • JH

    Personally I believe the nationalist/unionist tribalism stuff is negative sum, not zero sum. It’s to the detriment of both sides…

    Anyways. There’s either a serious problem or a cunning plan at work here. Talk to any recruiter and they’ll tell you that government strategy here is to attract skilled tech jobs with the carrot that salaries will be far lower than, say, Dublin.

    The problem is with supply and demand. As more of these tech jobs move in, the supply of suitable workers remains roughly level and thus salaries inflate.

    What we really need is the large, unskilled jobs coming in to mop up the masses of available workers. We’re talking call centres, shop floors etc.

  • Ruarai

    JH,

    no, no, no! (And thanks for your post by the way.) Look, you’re right, government types probably would say something like that. But who cares? Govt types know nothing about job creation, that’s why they’re in govt.

    Let’s unpack your this point of yours for a second:

    “government strategy here is to attract skilled tech jobs with the carrot that salaries will be far lower than, say, Dublin” – wanna know how that startegy is going?

    http://www.svb.com/News/Company-News/Silicon-Valley-Bank-Plans-to-Lend-$100M-to-Irish-Innovation-Sector/

    But we could join the party…

    What we need JH, is to outgrow the dependency, anti-innovation economy and invest some of the energy we pour into nonsense into start-ups and entrepeneurialism instead. We need to turn NI into a place that the ROI would want to have and away from one Britain would like rid of.

    We’ve a long way to go but a good start would be enhancing our attarctiveness to foreign investors bringing high-skiled jobs, along lines more simlar to the ROI. Better yet, enhance our ability to and focus on starting innovative firms in NI.

    It’s frankly a tragedy that while so many of the world’s top firms choose Dublin as their European HQ, our ambitions are set on call centers and so on. We can do better.

    And we need to.

  • Ruarai,

    A lot of the so-called “knowledge jobs” in large FDI outfits are little more than glorified call centres. Aren’t we always being told that being a native English-speaking country is one of our biggest advantages?

    We shouldn’t dismiss JH’s point about lower-skilled labour – the economic law of comparative advantage treats the economy as a unit, but says little about the distribution of wealth within that unit. Yes, specialising in knowledge industries will benefit the economy as a whole, but not everyone is cut out to be an IT professional. You still need a balanced economy to give the blue-collar-inclined a fulfilling job, rather than exile them to stacking shelves and waiting tables. That means high-tech manufacturing to go along with the pure knowledge industries such as IT.

    Germany seems to have got the balance right, and that is why it remains the strongest economy in Europe even in these hard times. They haven’t abandoned manufacturing to the Chinese, they’ve just specialised in the sort of manufacturing where rich economies are still competitive. Why aren’t we trying to learn from the best?

  • JH

    Ruarai,

    I agree!

    But I do think there’s a base of employment that we have to reach as well. We have to increase the liquidity of our local economy as well as building the level of capital in it. At the minute we have a shocking high rate of unemployment and that ranges from labourers with 20 years experience to university graduates to cleaners, admin staff etc.

    On your point, look at the Collison brothers:
    http://www.siliconrepublic.com/start-ups/item/27051-collison-brothers-start-up

    They’re out in the US doing what they really can’t do back home. My own company provides an online service for a recurring fee, we’re crying out for their solution but we can’t use it yet.

    I guarantee if we could put whatever legislation in place that was necessary to allow Stripe to launch here in the north and provide it’s services to Europe we’d have an influx of tech start ups.

    It’s about culture change in my opinion.

  • Barnshee

    ” However, it would almost certainly require Tesco to relocate its corporate headquarters to Northern Ireland, including its senior management. ”

    Nope– all they would have to do is register a company in N Ireland (very cheap around £25 the last time I looked)

    Suitable manipulation via management fees and transfer pricing may be used to “move” income from other areas to the N I company and hey presto Tax Revenue is removed from the Treasury and a small proportion of it arrives in N Ireland

    I don`t think so

  • JH

    I don’t think that’s quite right Barnshee.

    In a situation where the tax rates differ between GB and here an arrangement would have to be made to tax profits where they’re made.

    It’d be far more difficult for Tesco to pull off what you’re suggesting than, say, Google.

    Tax loopholes currently involve setting up a new company as you mentioned, and transferring intellectual property (IP) into the new company as assets. The old companies then pay the Irish company a large royalty to lease the IP. Exactly what IP would Tesco be using this way? The mainstay of their business is retail.

  • Barnshee

    “At the minute we have a shocking high rate of unemployment and that ranges from labourers with 20 years experience to university graduates to cleaners, admin staff etc.”

    Simple– the society has difficulty in sustaining the current population levels, income levels and economic activity without the massive subvention from GB.–Let alone try to enhance these. Sadly we have too many in too many occupations

    Solutions

    1 Emigrate ?

    2 Encourage adjustment in population over time to try to bring population/economic activity into a closer balance with available resources including a reduced “subvention”?

    The “subvention” is, in any event, itself the major cause of the problem. The effect of the superior conditions available (in general) in the public sector have seriously distorted the labour market by providing job numbers and conditions largely unavailable in the private sector.

    The “disease” spread over many years. It is unlikely that it can be “cured” quickly

  • Barshee,

    “Encourage adjustment in population over time” – isn’t that code for “Emigration”? And what do you mean by “a closer balance with available resources”? Isn’t an educated population a resource?

    I despair.

  • Barnshee

    “Tax loopholes currently involve setting up a new company as you mentioned, and transferring intellectual property (IP) into the new company as assets. The old companies then pay the Irish company a large royalty to lease the IP. Exactly what IP would Tesco be using this way? The mainstay of their business is retail”

    Don`t usually provide this level of free advice but it some simple schemes spring to mind

    1 Tesco NI charge Tesco GB (say) 100 Million to provide management and taxation advice — 100 million moves

    2 Tesco NI become central buying company for Tesco GB all products then invoiced to Tesco NI who add (say) 2 % and invoice to Tesco GB — 2% (or such other % as canbe extracted) of value of purchases for Tesco comes to NI

    Without giving away too much about Tesco`s system (they don`t take paper invoices– all suppliers have to deliver their data electronically) procurement is already centralised and the function could be transferred to a N I company in hours.

    Bear in mind that also there is no requirement for the employees of a Company to reside in the Geographical area where the Company is registered.

    We could end up with the scenario whereby the companies “attracted” by the lower tax rate are “brass plates” on doors of a few Lawyers offices and any jobs in them are performed elsewhere.

  • Barnshee

    IAG
    “Isn’t an educated population a resource?”

    “I despair.”

    Agreed wholeheartedly with both sentiments — the point is how do cure the current situation? We have too many people looking for too few jobs-How do we achieve a balance ? Should we be taking a longer term view as to e.g.optimum population levels?

  • We have too many people looking for too few jobs-How do we achieve a balance ? Should we be taking a longer term view as to e.g.optimum population levels?

    What is an optimum population level? Are you assuming that we are above or close to that level? What if the problem is that we are too far below it to allow for economies of scale? It is no accident that many of the most economically successful parts of the world are also the most densely populated. Isn’t one of NI’s (and more generally Ireland’s) problems that too many young people are being educated here and then moving elsewhere to work?

    The first priority should be to ensure that the economy is healthy enough to give good jobs to those natives who want them. Emigration is both a symptom of economic weakness and a cause of it, a positive feedback loop (nb: positive feedback = “self-reinforcing”, not “good”). Unless of course you think the solution to NI’s problems is to depopulate it (which has crossed my mind in my blacker moments, admittedly).

  • Barnshee

    “What is an optimum population level? Are you assuming that we are above or close to that level? What if the problem is that we are too far below it to allow for economies of scale? ”

    Sadly you are merely restating the problem

    With dependency on UK largesse and the horrendous unemployment situation ,NI IN ITS PRESENT FORM, has a population level clearly beyond its optimum. There are just not enough jobs to share out.

    England (principally) has “bought” jobs in NI by allowing a bloated public sector and the local politicians have bought into this fudge.. It has taken a long time to sink into this swamp getting out of it is likely to take at least as long.

    I see no evidence of a long term strategy to address the underlying problems –probably because painful strategies cost votes.

  • B,

    You seem to be implying that the solution is to reduce the population of NI, rather than growing the economy. That is what I find disturbing.

  • IJP

    J H et al.,

    I think you’re at crossed purposes a bit.

    Clearly, the UK Government does not want Tesco to just move its HQ and stop paying over half the corporation tax it currently pays.

    They have not worked out a mechanism to stop this. This is yet another reason corporation tax will not be devolved.

    By the way, if you challenge Treasury officials, you’ll find they haven’t a clue what they’d do if Scotland reduced its main rate of income tax (as its theoretically entitled to do by up to 3p) to prove that tax payers were or were not Scottish residents either.

    Barnshee

    What you are presenting is essentially an issue of a post-industrial society in decline with low skill levels and consequent high public sector dependence (either for jobs or benefits or whatever).

    But this is far from unique to NI.

    NI unemployment is actually lower than in GB. The gap in economic inactivity levels with GB is in fact declining. Poverty levels in NI (which are effectively measures of relative inequality) are in fact lower in NI than GB.

    There is a general problem in the Western World that we have come to expect a standard of living notably higher than in Asia, for example, yet we no longer have a way of earning that standard of living.

    This problem is far from unique to NI. Indeed, there is some evidence we are far from the worst off in trying to deal with it.

  • Barnshee

    “This problem is far from unique to NI. Indeed, there is some evidence we are far from the worst off in trying to deal with it.”

    Unfortunately “we” are not trying to deal with it – The English taxpayer is –How long will this continue?

  • Barnshee

    “You seem to be implying that the solution is to reduce the population of NI, rather than growing the economy. That is what I find disturbing.”

    Rather than reduce the population we need a strategy to try and match population levels with economic activity levels which will provide decent living standards for all.

    Perhaps a mix of some emigration, some trade off in salary levels for jobs, attracting industries which would have the impact of the MMF companies (who had a huge impact in the 60s)

    Golf courses and bad weather will not hack it.

  • B,

    So you really are suggesting that government should encourage “some emigration”. I have two questions:

    1. How would that be achieved? If 40 years of violence and economic stagnation haven’t done a good enough job what would?

    2. Considering that emigrants are disproportionately highly-skilled (the infamous brain drain), how does one improve an economy by encouraging it? Or are you suggesting we only deport the plebeians?

  • Ruarai

    Guys,

    While we could analyze the degree to which NI’s current and pending job creation needs are similar to the West’s in general, surely none of us questions essential and urgent point that we’re an outlier.

    As stated in the post, around 75% of GDP comes from public spending while public sector median wages are considerably higher than those in the private sector. These are nutso stats. Unsustainable.

    Change is required but what and how?

    Aside from the case for or against aligning corporation tax more closely with the ROI’s, immigration in is as good a place to start as any. It’s really heartening to see the Polish meat shops around Ballymena. There can be few human statements more fundamentally entrepreneurial than the act of immigration. Immigrants are ‘can do’ people. More please.

    So why not go ‘all-in’ on certain types of immigration visas?

    Anyone who gets a PhD in any university in Ireland or Britain should automatically qualify for citizenship, extended to their immediate family members. Is there even one good reason not to do this?

  • Barnshee

    “1. How would that be achieved? If 40 years of violence and economic stagnation haven’t done a good enough job what would?

    2. Considering that emigrants are disproportionately highly-skilled (the infamous brain drain), how does one improve an economy by encouraging it? Or are you suggesting we only deport the plebeians?”

    Attractive as the expulsion of the plebeians may be it is hardly practical

    What is need is a closer balance between the population levels and their share of economic activity –in short find a strategy that over time achieves this balance and if possible raises both levels-otherwise we continue with the begging bowl to England