Reducing corporation tax from the current UK-wide rate of 28% to the 12.5% levied on firms in the Republic of Ireland would be the best way to revitalise the region's flagging economy, according to the Northern Ireland Economic Reform Group (NIEFG).

The organisation, an independent panel of senior economists, accountants and business leaders, said wages and employment levels would remain low unless the change was made.

The group estimated that the local economy is currently dependent on £9 billion worth of subsidies from the UK exchequer each year - the equivalent of £5,000 per person.

"Around half of all government expenditure in NI is financed by taxpayers in GB, and in reality taxpayers in South East England," the group said.

The experts said current government policy of awarding grants to multinational companies that decide to set up here was not sustainable, especially with the prospect of tighter EU regulations limiting such support.

The UK Government has so far rejected the possibility of cutting corporation tax in Northern Ireland. Its position was clearly spelt out in two Treasury commissioned reviews by Sir David Varney in the last three years.

But the NIEFG said the move was the only measure that would deliver the major structural change needed to get Northern Ireland out of its present economic rut, adding the Government would actually benefit in the long term because the rate cut would create at least 90,000 extra jobs over 20 years, resulting in more revenue from income tax.

Shadow Northern Ireland secretary Owen Paterson welcomed the report, saying: "They make a very coherent case for a reduced rate of corporation tax in Northern Ireland."

"Northern Ireland faces some economic challenges that are unique within the United Kingdom. That's why Conservatives and Unionists are currently looking at ways in which we could turn Northern Ireland into an enterprise zone should we win the election."