WHO thinks that Northern Ireland deserves around another £1 billion in cuts to the block grant on top of the £1 billion already announced by outgoing Finance Minister Sammy Wilson?
The answer, remarkably, is Finance Minister Sammy Wilson, who along with a siren chorus led by big business, is arguing for a dramatic cut in corporation tax!
His boss, Peter Robinson, has declared it is imperative that businesses here should enjoy tax cuts in the region of £250-300m per annum, knowing that these must be balanced by a concomitant reduction in the block grant, under EU rules. Four years of such annual corporate cuts would mean more than a billion pounds being removed from the block grant by a delighted Treasury. Little wonder it is “minded” to approve such a move!
The reckless gamble being contemplated is that this additional savage cut in our block grant will somehow be instantly remedied by a massive increase in revenues from booming business.
Speaking only last month, Mr Wilson declared that he “wouldn’t gamble” on any corporation tax cuts, believing the terms on offer to be a “rip-off”.
Back in December of last year, Mr Wilson went further and declared that the terms of business rate cuts were “totally unattractive”, but as with so much that emanates from the DUP, a U-turn has been executed and it appears that Mr Wilson now backs Robinson’s gamble.
There are at least three fundamental reasons why it is sheer folly to reduce corporation tax to try and match levels prevailing in the Irish Republic:
The first is that there is no need for Stormont to cut corporation tax at all! The UK government is already reducing the top rate from 28 per cent to 23 per cent over the next four years, which means local business can benefit without it taking a penny from the block grant. Our indigenous companies will retain more profit that can then be used to boost their future growth without endangering our public services.
The second is that those who simplistically use the Irish Republic as the template for us to follow confuse cause and effect. Yes, the Republic did do very well (until it went bankrupt!) but low corporation tax was just one strand in a series of fiscal measures prevailing at a different point in time. It is misleading to suggest that Northern Ireland will yield the same gains in the recessionary climate of 2011 as did the Irish economy back in 1998-2003. The reason IRA/Sinn Fein advocate this is clearly part of their lunatic “Provonomics” all-Ireland strategy, but it’s harder to understand why some unionists run with this.
Third, and most important, the long overdue rebalancing of our economy is not best achieved by devastating our public services. Having to sack teachers and nurses in order to boost business profits is an intolerable asking price and TUV argues for a more balanced approach.
Wouldn’t it be much better to take advantage of the corporation tax cuts already coming our way from London, and at the same time slash the bureaucracy that emanates from Stormont, and which strangles so much business growth? Wouldn’t it be more appropriate to focus on helping our small to medium sized businesses rather than fixating on a small number of big corporations? Why should Northern Ireland politicians accept the secretary of state’s plan to use our economy as a test laboratory for an economic scheme that he refuses to introduce in England? If he gets it wrong, then we pay with our jobs.
TUV believes that the path to positive economic growth is founded in maintaining the equality of our strong fiscal link to the UK rather than sloping off in a vain attempt to mimic the Republic of Ireland.
The precarious state of our economy necessitates a conservative approach to tax changes, ironically disregarded by our Conservative secretary of state. It is said gambling is the sure way of getting nothing from something. Slashing corporation tax is a gamble too far at this time.
n David Vance is the economics spokesman for Traditional Unionist Voice and assembly candidate for Upper Bann.