Corbynomics inspiration Richard Murphy on the dogma behind demands to lower NI Corporation Tax

Christians on the Left Tax Haven Ulster panelRichard Murphy is the Quaker chartered accountant and blogger who is credited with inspiring Corbynomics. He spoke at Tax Haven Ulster: Faith, Justice & Corporation Tax in Northern Ireland, a Christians on the Left event held on Friday night in Belfast that examined the counter arguments to dropping our local rate of Corporation Tax. You can listen back to the full event using the playlist at the bottom of this post.

With Irish roots, Richard Murphy first heard arguments being raised about dropping Corporation Tax in Northern Ireland over ten years ago. He recognised “dogma” but couldn’t see substance that would deliver benefit for the people of Northern Ireland. And the tax injustice made him angry.

He described the effect of slashing or rate of corporation tax as an enormous and immediate cut – hundreds of millions – to Northern Ireland’s block grant and a resulting cut in services.

He spoke of our local predominance of small and family businesses which are less able to leverage a lower Corporate Tax rate. Wealth and income disparities would increase. He could see no “transmission mechanism” to allow the cuts and benefits to filter through to the people who are supposed to get new jobs. Trickle down economics tends to make the rich richer.

Richard reasoned that a 30% growth in the private sector is required to ultimately compensate for a cut in Corporate Tax to bring about parity with Ireland. While the block grant would shrink immediately, there would be a significant delay before the business community would begin to reap benefits of the lower corporation tax rate and start to grow or attract new business. No where in the world has dropped Corporation Tax and achieved 30% growth.

Noting an obvious deficit of investment in Northern Ireland – both a deficit in terms of investment in physical infrastructure as well as skills and training – he called for the establishment of a National Investment Bank for Northern Ireland.

Despite the social justice theme that runs through the Gospels, never mind the rest of the Bible, it’s very rare for faith groups to discuss economics. Richard Murphy saw no point to his return to faith if it wasn’t going to be transformative. While the Green Party NI often feels fervently atheistic, council Westminster candidate Tanya Jones delivered an impressive speech that wove together her faith with her economic outlook.

SDLP MLA Claire Hanna outlined her personal position (against the lowering of Corporation Tax) and confirmed that her party’s position was to seek the devolution of the ability to vary the rate of Corporation Tax but only to change the rate “when the time was right”.

Brendan Mac Partlin SJ and Christian Aid’s David Thomas also provided alternative perspectives. The event was chaired by Jonny Hanson and was followed by a Q&A.

While not currently a member of the Labour Party, Richard Murphy is heading back to London tomorrow and will be there at Jeremy Corbyn’s coronation is likely to have a membership form thrust into his hand and become a key economic advisor to the next Labour leader.

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  • 23×7

    The corporation tax debate highlighted how intellectually bankrupt and completely out of touch our politicians are. A highly educated young workforce, educated in the STEM subjects is much more vital to encourage inward investment. But what are we doing instead, we are cutting university places. Genius.

  • Reader

    Alan Meban: Richard reasoned that a 30% growth in the private sector is required to
    ultimately compensate for a cut in Corporate Tax to bring about parity
    with Ireland.

    I don’t know whether Richard’s sums are correct, but he is asking the wrong question.
    The proper question is – what level of growth is required for the change to be revenue neutral; counting corporation tax, business rates, income tax, national insurance and VAT. So as he is an economist who clearly prefers stimulus to austerity; why has he made an exception for corporation tax?

  • In case I’ve misrepresented his argument, best to listen back to his short talk and check!

  • Ernekid

    The idea that lowering Corporation tax will have any effect other than a few MNC setting up Brass plate offices in Belfast in nonsense.

    the fallacies behind the corporation tax debate need to be challenged

  • Here’s an extended quote from a paper Richard Murphy wrote with QUB’s Andrew Baker:

    Because of EU rules, stemming from the Azores judgement, if it was to cede corporation tax setting powers to Stormont, HM Treasury would have to reduce the size of Northern Ireland’s annual block grant. It currently puts this figure at £700 million per annum, which is about 8.7% of the total block grant. Gerald Holtham estimates that, even if the cut were just £300 million, then compensating for that loss would require an additional £2.4 billion in private-sector profits. This translates into an additional £10 billion of Gross Value Added (GVA) (current figure £28 billion).

    According to these conservative calculations, breaking even on the budget would therefore require the Northern Ireland economy to grow by a third! Viewed in this light, cutting corporation tax looks like a considerable gamble with the existing budget and public services. A more candid reading might invoke the spectre of self-harming.

  • Reader

    I think that Holtham is only considering whether the Corporation tax+block grant changes are neutral. Murphy is clearly in the ‘stimulus’ camp, and ought to count all of the other taxes too. I bet he does that when talking about People’s QE.

  • chrisjones2

    Look the economics of this are very simple. A child should understand them.

    Those who benefit most will be party donors to the DUP or friends of senior DUP figures.

    Those who don’t benefit will not realise why they are worse off or do not matter

  • tanyaj

    Thanks, Alan. To set the record straight, I’ve never been a council candidate; May’s Westminster election is the only one in which I’ve stood.

  • Sergiogiorgio

    For once we agree. Corporation tax in the hands of Stormont…giving matches to toddlers..

  • Fixed.

  • Kevin Breslin

    If it wasn’t for the EU, Northern Ireland would face an even bigger race to the bottom against sub-national European regions. The rules give NI a floor to stand upon even if it’s lower down that it would like.

  • tanyaj

    You can say ‘Assembly’ now too!