Tories may devolve Corporation Tax to Stormont next month

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  GEORGE KEREVAN investigates

THE economic disolution of the United Kingdom is gathering pace, not that you would know it from the insular Scottish media. Westminster is under heavy pressure to give the Northern Ireland Assembly devolved powers over corporation tax. If approved, an announcement is likely to come in George Osborne’s economic statement on Wednesday 5 December.

A final meeting of the Westminster-Stormont Ministerial Working Group on the corporation tax proposal was held on 18 October. The Secretary of State for Northern Ireland, Theresa Villiers told the House of Commons: “We now know the broad shape of what a devolved corporation tax regime for Northern Ireland might look like.”

The idea of devolving business tax is common ground among Republicans and Unionists, as well as the entirety of Northern Ireland’s business community. The province faces intense competition for corporate investment from the Republic of Ireland, where the headline corporation tax is only 12.5 per cent compared to 24 per cent in the UK.

A new report commissioned by the Stormont Executive calculates that cutting corporation tax to 12.5 per cent would generate an additional 58,000 jobs by 2030, as well as £6bn in extra wages and profits.

Over one thousand companies and business associations in Northern Ireland have united to campaign for devolved corporation tax.  They include the Northern Ireland Chamber of Commerce and local branches of the CBI, Federation of Small Business, and the Institute of Directors.

Of course in Scotland, the head of the CBI, Iain Mcmillan, has crusaded against any devolution of corporation tax, despite the SNP Government committing itself to a cut in business taxes.

LABOUR’S CHANGING POSITION

Labour’s position on devolving corporation tax to Northern Ireland is – as so often – vacillating and opportunist. Initially the idea was rejected by Gordon Brown, who feared a loss of Treasury control, not to mention giving ammunition to the SNP. When Labour lost power in 2010, the new Labour Shadow Spokesperson on Northern Ireland, ex-Tory Shaun Woodward, soon caused trouble by sticking to the Brown line.

Woodward used a speech in Liverpool to attack the idea, branding it a “huge gamble”. He was immediately criticised by the local business community. Glyn Roberts of the Northern Ireland Independent Retail Trade Association commented acidly: “If Mr Woodward doesn’t agree with corporation tax then many people would be keen to see him spell out his alternative.”

Woodward so alienated people in Northern Ireland that he was fired by Ed Miliband in May. He was replaced by Vernon Coaker, MP for Gelding in Nottingham. (Note: the Labour Party is so committed to the UK and the Union that it does not stand candiadates in Northern Ireland.)

Since taking over as Labour’s Shadow Northern Ireland spokesperson Coaker has been making different noises on devolving corporation tax. He told the Labour conference in Manchester that the Treasury should stop “dithering” over its plans for Northern Ireland’s corporation tax rate:

“After two years of talking about devolving corporation tax powers to Northern Ireland there is still no agreement about whether it should happen…But rising unemployment and major job losses show that Northern Ireland’s economy can’t wait….The Secretary of State and the Treasury need to stop dithering. Northern Ireland needs action now.”

Note that Coaker did not actually say he now supported devolving corporation tax.  Equally he did not come out against it like Woodward. It is always good to see a Labour spokesperson being decisive. Fortunately, people in Northern Ireland are not easily fooled.

Ed Balls, Shadow Chancellor and once Gordon Brown’s economic guru, is also fence sitting. On a visit to Northern Ireland at the start of October, he claimed he had an open mind about devolving the powers on corporation tax but that it was up to the Stormont Executive to decide “whether the bill is worth paying”. So, now we know that as far as Northern Ireland is concerned, Mr Balls thinks it is up to Stormont to decide on tax devolution. And your views on Scotland, Ed?

CONSTITUTIONAL ISSUES

Theresa Villiers has been keen to stress that “constitutional” issues are tied up with devolving corporation tax to Northern Ireland.  This is code for the Scottish referendum.

Villiers admits that the independence referendum due in Scotland in 2014 is a key factor that David Cameron has to consider. Cameron fears any transfer of corporation tax could hand Alex Salmond a campaigning issue. But according to the BBC’s business editor in Northern Ireland, Jim Fitzpatrick, Stormont is trying to turn the Scottish referendum to its advantage.

Northern Ireland politicians argue that a refusal to grant corporation tax to Stormont will only demonstrate to Scotland that Westminster is likely to renege on David Cameron’s promise to grant Holyrood more powers if Scottish voters reject independence.

Westminster is well aware that granting corporation tax to Northern Ireland has consequences for Scotland and Wales. Consider the following exchange in the House of Lords on Monday 15 October, with Lord Newby answering questions for the Coalition Government:

LORD EMPERY (Ulster Unionist Party): …Will the Minister agree that the case for the devolution of these powers (i.e. corporation tax) is stronger than equivalent demands from the Scottish Government and that Her Majesty’s Government will not be influenced by the campaign for Scottish independence when reaching their decision?

LORD NEWBY (Lib Dem): …I agree that the argument in favour of the devolution of corporation tax to Northern Ireland is of a different nature to the devolution of corporation tax to Scotland because of the proximity of the Republic of Ireland, which of course has a significantly lower corporation tax rate.

LORD ROBERTS OF CONWAY (Conservative): Will my noble friend take on board the fact that Wales, too, would like to have the power to give variable rates of corporation tax?

LORD NEWBY: My Lords, of course, considerations of consequentials to Wales are always uppermost in the Government’s mind.

Note the difference in tone in Newby’s answers concerning Scotland (“different”) and Wales (“considerations”).

THE BREAK-UP OF BRITAIN

The UK state is run from London in the interests of the City banks. The result is permanent economic crisis in Scotland, Wales, Northern Ireland and the English regions. Hence the need to break the stranglehold of the UK Treasury on setting local tax levels.

In Northern Ireland responsibility for setting Air Passenger Duty on long-haul flights is already being passed to Stormont, which plans to set a zero rate. (By comparison, the tax on long-haul business class seats from Scotland is a staggering £130-£184 per single journey.)

If corporation tax goes to Stormont as well, then it is only a matter of time before the whole island of Ireland, north and south, has a common tax regime; i.e. a fiscal union. After that, political union is only a matter of course.