David Cameron said he will not make a decision on the devolution of corporation tax until after the Scottish independence referendum – and warned Peter Robinson and Martin McGuinness they need to do more to build a shared future in Northern Ireland.
Downing Street said the decision on handing the power to set the key business tax to the Executive would be taken in the autumn of 2014.
Instead of delivering good news at a meeting in No 10, the Prime Minister urged the disappointed First and Deputy First Ministers on the need to improve community relations. The issue will be revisited at a high level meeting on the economy in April.
The Prime Minister said in a letter to the First and Deputy First Ministers that he would be cushioning Northern Ireland against cuts in EU structural funds. The Government will provide Northern Ireland with £153.5m more than it would expect to receive from the EU between next year and 2014 – a total allocation of around £381.6m.
Mr Cameron said he and Ms Villiers would be seeking details of "the Executive's proposals to use the EU funding it receives to build a shared future".
Both Mr Robinson and Mr McGuinness said they were disappointed by the delay on corporation tax when they emerged from No 10. However, a Downing Street spokeswoman said the Prime Minister had found it "constructive".
She confirmed that a decision would be made in the autumn of next year and that, if it was positive, legislation would be passed in the current parliament. "The Prime Minister restated the Government's commitment to revitalising the Northern Ireland economy and outlined a wide-ranging package of options to help growth and tackle some of Northern Ireland's long-standing problems," she added.
One reason for delay is that the Prime Minister does not wish the devolution of corporation tax to cloud the referendum on Scottish independence on September 18 next year.
With nationalist passions already high, granting the power to Scotland would be a much more costly measure than granting it to Northern Ireland.
After the meeting, Mr McGuinness told reporters: "It is absolutely clear that no decision will be taken on this issue this side of the Scottish referendum. I think we have to face that reality."
He accused the Treasury of resisting moves to hand control of the tax to Stormont.
Mr Robinson suggested he had clashed with the Prime Minister and accused him of counterproductive tactics towards Scotland.
"What, effectively, you are saying to the people of Scotland is that if you want more fiscal autonomy then at the present time the only way to have it is through independence.
"I think that is the wrong message to be giving to the people of Scotland.
"There is absolutely no reason why a decision could not be taken today if there was the political will to take that decision today."
All the Executive parties agree that the power to levy corporation tax should be devolved to Northern Ireland. The business profits tax will be charged at 23% in the UK from April 1, falling to 20% in 2015. Local parties want to reduce it to match the 12.5% charged in the Republic. However, under EU rules, that would involve a cut in our block grant.