Northern Ireland corporation tax devolution backed

Giving Northern Ireland politicians the ability to set the province’s rates of corporation tax will help boost the private sector, a minister has said.

Baroness Randerson said the move would allow Northern Ireland’s economy to be “rebalanced” away from over-reliance on the public sector.

Her comments came as she introduced to the House of Lords the legislation establishing the new regime, which will allow the Northern Ireland Executive and Assembly the power to set their own rates from 2017.

Lady Randerson told peers: “Northern Ireland has a unique economic position within the UK.

“It shares a land border with a very low corporation tax environment of the Republic of Ireland, it is more dependant on public sector, with around 30% working in the public sector compared to 20% in the rest of the UK.

She said per capita prosperity was consistently 20% below the rest of the UK and there was the ongoing challenge of dealing with “the legacy of the Troubles”.

“Devolving corporation tax recognises these unique challenges,” she said as she opened second reading debate on the Corporation Tax (Northern Ireland) Bill.

“The Northern Ireland regime has been carefully designed to encourage the Executive to promote genuine investment that will create jobs and growth, while minimising the opportunity for avoidance and profit shifting.”

She added: “This Bill will allow the Northern Ireland Executive greater power to rebalance toward a stronger private sector, boosting employment, growth and the standard of living in Northern Ireland with benefits to the wider UK.”

For Labour Lord McAvoy said his party welcomed the move and would do “everything we can to facilitate the passage of the Bill”.

Lord McAvoy said his party hoped the legislation would make a further contribution to peace and stability in Northern Ireland.

Former speaker of the Northern Ireland Assembly Lord Hay of Ballyore welcomed increased investment and cuts in unemployment in the province.

In his maiden speech, he said corporation tax alone wouldn’t address the economic challenges facing Northern Ireland, but was a “very important lever” for the executive to have.

Liberal Democrat Lord Alderdice said this was an opportunity for politicians on all sides to face up to the economic and political challenges of instituting a corporation tax rate which was closer to that levied in the Irish Republic.

“This is where we move from institutions of power sharing to the reality of responsibility sharing,” he said.

Former assembly first minister and Tory peer Lord Trimble said the Bill was “no magic bullet”. It might be very beneficial, but it might not.

Lord Trimble said if it was implemented, there would have to be significant reductions in the block grant to Northern Ireland to “satisfy” Europe.

There would also be pressure from Wales and Scotland for similar powers, which the Government would find difficult to resist, he warned.

Baroness Blood (Lab) said that if the change came into effect in 2017, the block grant would be cut before any of the benefits of a reduced rate of corporation tax came through.

“It’s almost like being asked to pay for your dinner before you’ve seen the menu,” she told peers.

Lord Empey, the former leader of the Ulster Unionists, hit out at the Stormont assembly for failing to balance its budget.

He told peers: “The Bill could make a marginal, but I believe positive, contribution to the Northern Ireland economy in the long term and on that basis I support it.

“But I must say to the Government that if they continue to buy off Sinn Fein threats either with money or by turning a blind eye to their related activities, no amount of tinkering will do any good.”

Tory former Secretary of State for Scotland Lord Forsyth of Drumlean criticised the legislation as “not unionist”.

He said: “If we think that there is such a huge problem from tax competition from the Republic of Ireland, the answer to that is to reduce our corporation tax rates nearer to the Republic of Ireland.

“But the reason why we don’t do that is because the cost would mean we would have to make cuts in other services, such as health and education and exactly the same applies to Stormont.”

He added: “This tinkering is inimical to a united kingdom.”