This morning I was taking part in a debate on Radio Ulster – with a lady from NIPSA who sounded like she’d memorized most of Che Guevara’s best quotes . Although my contribution was cut a bit short because Simon Hamilton, the Finance Minister, was asked to give his opinion on possible public sector strikes in the New Year. More interestingly, though, he was also asked whether the Executive would support reduced corporation tax (CT) if, as expected, the Chancellor devolves the power to set CT rates here. His answer was obfuscation.
He implied that there was a consensus view (across the main parties in Stormont) that CT should be reduced to a level similar to the rate in the Republic. However, that is highly misleading, of course, because there is clearly no consensus that the rate should be reduced if the price of a reduction is a reduction in block grant equivalent to the reduction in tax-take following the reduction (if you get my reductionist drift). This is a requirement given the EU rules on state aid following the so-called Azores judgement.
I’m not even entirely convinced that Hamilton himself would be of the view that a block grant reduction should be the consequence of a CT rate cut. I attended a lecture he gave during the Summer at Queen’s University where he made clear his view that high public spending Nordic countries were the models he aspired to.
Consensus clearly isn’t consensus if only one part of the consensus is consented. In fact there is no consensus at all. Sinn fein won’t give an inch on the introduction of welfare reform here (hence the current round of Executive cuts, rather than ‘Tory cuts’). Similarly just about nobody will agree on a £200-300m set of budget cuts following the reduction of CT.
I’d imagine that Scotland would also decide against a block grant reduction in return for the extension of CT devolution to Scotland.
Block grants, in short, produce dependency. Therefore Simon Hamilton’s morning pronouncements that devolution of CT might allow the Executive to “rebalance” the NI economy away from public sector dependency are, clearly, poppycock.