Jeff Peel's Diary

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Martin Maginnis made the bizarre claim today that cuts to the Northern Ireland budget represented a threat to devolution. What’s he suggesting? Perhaps that his next hissy fit will demand that direct rule be reinstated if the cuts aren’t reversed. Or perhaps he plans to declare fiscal UDI.

Although if the latter course were pursued he may find that the fiscal deficit would be on a par – if not worse – than the Republic of Ireland. Hence the need for massive UK subvention – cuts or not.

The fact is that the block grant has been hardly affected by ‘cuts’ at all. It is true that capital allocation has been reduced but the current account has been held static. If public sector pay can be restrained, and revenue generation enhanced, the overall effect will be minimal.

But I suspect that an epidemic of hissy fits will develop if – as has been suggested by the Secretary of State – Northern Ireland achieves self-determination in terms of corporation tax setting. I cannot see Maginnis – or many of his leftie DUP buddies – agreeing to breaks for companies at the expense of the block grant. The stumbling block is always going to be lack of vision on the part of our nanny-dependent politicians.

Strategic vision is required, of course. The Northern Ireland Economic Reform Group has been very eloquent in terms of filling the communications vacuum – arguing the strategic case for corporation tax reduction. However, I’d suggest that it, too, is shuffling away from an immediate and radical reduction in corporation tax. A better strategy, in my view, would be to argue for an immediate and radical reduction in corporation tax rate –  with the block grant cost phased (rather than the other way around). But there must be pain in order to focus minds on the end-game.

To date the ‘cuts’ have been minimal. More radical cuts may indeed be required if we are to have a competitive corporation tax rate compared to RoI. But that is a price worth paying – and it will require the Executive to start thinking about the businesses it wishes to attract.  It will also need to focus on the skills required in the local workforce to service the needs of businesses – local and not-so-local – that will locate and grow here as a result of competitive business taxation rates.

Related Articles

• The circle of the block grant vs lower corporation tax can be squared, we’re told (sluggerotoole.com)
• Business leaders in NI tax appeal (bbc.co.uk)