The chancellor of the exchequer is still in the House of Commons defending his budget statement. One of the eye catching measures announced by George Osborne this afternoon is an additional 1% cut in corporation tax, aimed at stimulating growth, on top of the 1% which was already planned. In order to signal that Britain is ’open for business’ the rate will also fall in the succeeding three years, reaching 23% in 2014.
Appropriately enough, just before the budget debate, Owen Paterson announced that the consultation paper on devolving corporation tax raising powers to Northern Ireland will be published tomorrow. It’s argued that we are peculiarly disadvantaged when it comes to attracting international investment, because our near neighbours in the Irish Republic enjoy a CT rate of just 12.5%.
The Secretary of State has long championed the idea that the Stormont Assembly should be allowed to cut taxes in order to make Northern Ireland a more competitive destination for business. The initiative is very much the Conservatives’ “baby”, with local parties blowing hot and cold on the issue.
Our current crop of politicians may yet decide to reject an opportunity to stimulate the economy. In the short term, tax receipts are likely to fall and Sammy Wilson has put on record his scepticism about making up the shortfall. Any decision to devolve the tax could also spark controversy in other UK regions.
No-one can deny that Paterson and the government have gone the extra mile in an attempt to help Northern Ireland help itself. There are powerful arguments around the rights and wrongs of varying taxes within a single state, however, if CT is devolved, it’s an impressive response to the unique demands of our economy and a show of political pragmatism.
Business spelt out the unique problems facing Northern Ireland and it looks like the government has listened. We'll soon see whether local politicians want to be handed responsibilities and opportunities or whether they just want to be nannied.