Plan To Turn Northern Ireland Into Tax Haven Shelved
In a response to a question asked in the Assembly by Green MLA Steven Agnew, Northern Ireland’s Finance Minister Sammy Wilson revealed that plans to cut the province’s corporation tax rate from the UK rate of 26% to match the Republic of Ireland’s 12.5% rate is now very unlikely to happen during the life of the current Assembly mandate.
Given that there were widespread predictions that George Osborne was about to give the go-ahead for the rate to be cut as early as next year, this was an unexpected announcement.
It was met by howling from the predictable quarters – the Institute of Directors wailed that Wilson was abandoning his responsibility for economic growth. They acknowledged that doing so would mean extra pressure on the block grant NI receives from Westminster, and noted that ‘there is expert evidence to suggest that the impact on our budget would be less than £250m.’
After the already-devastating cuts across the public sector here, a further two hundred and fifty million cut is not a small amount of money. A lot of people would lose their jobs. A lot of people wouldn’t get the care or the services they need. There are human beings behind the numbers that will suffer to pay for a tax cut for the business community. If you were going to risk a public expenditure cut of that magnitude, you’d want evidence that this policy would definitely work, right?
So, who then stepped up to the plate to denounce this is a ridiculous, risky proposal, with no evidence to back up that it could actually succeed in creating jobs, which could come at the high price of risking further damage to our hospitals, schools and other public services?
Because if you read the papers, it would appear that there is no debate about the proposed corporation tax cut at all here. The Northern Ireland Office commissioned a report earlier this year called ‘Rebalancing the Northern Ireland Economy,’ launched with every party leader in the NI Executive standing with a copy of the report, beaming.
The NI media has portrayed the corporation tax issue as being one of total consensus. Apparently everyone agrees that this is a great idea. The campaign ‘Grow NI’ is keen to present the image of a whole nation, every man woman and child, crying out to the British treasury to be allowed to reduce the tax.
Bizarrely, even those who I imagined would be against such an idea, such as the NI Council for Voluntary Action and the NI Independent Retail Trade Association, seem to be for it. (Incidentally, NICVA appeared to hold a ‘debate’ where there didn’t appear to be anybody arguing against CT reduction). Those Assembly parties who are desperate to assure us of their ‘progressive’ nature, their democratic socialist nature, or their social democratic and labour nature, are all slavishly for a CT cut.
Yes, occasionally a voice of opposition will be given a quick soundbite, but this is treated more as an aside than as an opposing view with any credibility. The Greens are the only party in the Assembly to oppose the cut(apart from the hardline unionist TUV, who probably oppose it more because it’d harmonize us in some way with the Republic).
A local activist I know phoned into the Stephen Nolan Show on BBC Radio Ulster, exasperated at this apparent consensus. After being patronised by all involved and treated like a fool for a few minutes, he calmly, comprehensively demolished the case for lowering corporation tax in plain language. All the presenter could do was leave a deafening silence (which spoke volumes about his own ignorance on the subject) and then say “…next caller.”
This sums the whole thing up perfectly. Apparently we are totally incapable of having a debate about this. To say slashing corporation tax won’t work, or even is unlikely to work, seems like heresy. Instead we must constantly hear the same clichés about a CT reduction being a ‘game changer’ and a huge cut in the block grant that will slash public services even more being euphemistically referred to as ‘the need to rebalance the NI economy.’ Allegedly many MLAs are unsure about the merits of a CT cut – yet we must endure some of the exact same MLAs standing in the chamber pushing for it. Some, of course, are undoubtedly viewing this solely through the narrow lens of the border question, weighing up their various predictable standpoints on becoming closer to the Republic policy-wise.
This sorry saga has its roots in the obvious Conservative Party interest in deregulation (Northern Ireland Secretary Owen Paterson said earlier this year, ‘I have spoken to many hundreds of business people over nearly four years. Two issues have come up time and again; planning and corporation tax.’), but also in the misguided Irish obsession with low rates of corporation tax. Never mind the fact that the Republic’s ‘Celtic Tiger’ was a wasteful, gluttonous, short-lived and ultimately disastrous period in the Republic’s history; we seem keen to emulate it up here. And we’re not even doing it in the right way. Low corporation tax rates are seen as the catalyst for the 1995-2007 Celtic Tiger years, ignoring the fact that the Republic of Ireland has had low corporation tax rates since 1956.
And so, we have this obsession with ‘foreign direct investment’ as the ultimate magic bullet to save the NI economy. Ignore the fact that Northern Ireland, with a lower rate of corporation tax, could become a tax haven within the UK. Ignore the obvious contrasts between the interests of our economy and the interests of big business. Blindly let the corporations come in, set up ‘head offices,’ employ a tiny amount of staff, and then move on and continue the race to the bottom. Don’t start thinking. Don’t question it.
Given Wilson’s announcement, it’s unclear whether he used the Assembly floor to start quietly disposing of the idea (He has said in the past he is skeptical about it). It’s likely this issue will start to fade away due to the apparent delay in implementing the CT reduction. That gives us some time to be prepared to start a debate and educate people in case the idea re-surfaces. Salmond is worried – albeit perhaps not for the same reasons – but the rest of the UK should take notice of the fact a tax haven could be developing just over the Irish sea.
And if you haven’t read it already, do have a look at the excellent report on devolving corporation tax to Northern Ireland by tax expert Richard Murphy – I’m near for carrying this around with me and bashing MLAs over the head with it.