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Why low rate of company tax is now in the firing line

Analysis

By John Simpson

In previous local elections a persuasive appeal was that 'the economy is the priority'. Giving them the benefit of the doubt, senior politicians from major parties probably meant what they said, when they said it.

Arguably, the economy never quite attracted the top priority that the message implied.

That cautionary conclusion is hard to dismiss in a search for specific actions taken and the degree of success in reaching measureable outcomes.

Job numbers have increased notably but the overall economy is lagging compared to Great Britain. For understandable party political reasons, discretionary Government decisions have veered to addressing troubles related tensions, using discretion to defer away from welfare reform (and thus avoid following parity with Great Britain), and financing water services by central government instead of separate billing as in GB.

Making the case that the economy did benefit, ministers can point to the policies and finances which allowed the active role of Invest NI. They can also point to specific schemes to address a general improvement in the skills and workforce preparation of potential employees.

Funding allocation priorities, within the constraints of the Barnett Formula, left difficult decisions which have squeezed the scale of funding for universities and further education, limited new house building and urban regeneration efforts, and an unimpressive public sector infrastructure investment programme (including a minimal roads connectivity plan).

The austerity evidenced by the constraints of the local budget could theoretically be eased if the UK Treasury eased the problems caused by the operation of the Barnett Formula. Unsurprisingly, the political consensus at senior UK government levels is that on almost any comparative basis Northern Ireland is generously treated by the current Barnett Formula. An expert professional review might be less generous.

To return to the election issues: are the electorate being asked to vote on the costs and implications of Renewable Heat schemes and the management of health and social services against the waiting list crisis and the associated misallocation of care for (usually elderly) people who are too frequently staying too long in acute care hospitals?

An election is an opportunity for prospective ministers to commit to ways in which official policies might change, with spending reallocated to emerging priorities, and capital spending plans refreshed. Statements in the next two weeks will be carefully followed for traces of fresh thinking or a restatement of ideas validated by past experience. The outgoing Executive has left the local budget and economic policy planning in an unfinished state. After the election in 2016, somewhat tardily, the Executive published a consultation of an up-coming Programme for Government. A definitive programme had not been published at the date when the Executive was collapsed.

Just as the Executive collapsed, the Minister for the Economy, Simon Hamilton, published a further consultative document with the focus on an industrial strategy.

This was a comprehensive listing of a very large number of ambitious outcomes (or objectives) but the linkage to selective application and cost allocations was missing.

The Health Minister published a document summarising a well-considered list of waiting list measures, better articulated than any other recent transformation proposals, but they lack the commitment of being tied into a considered overall four year budget.

Critically, Northern Ireland has no agreed, or even proposed, government budget for 2017-18. This contrasts with the Scottish Government which, starting with the same Barnett allocations, has tabled a four year budget, using agreed new devolved authority for income tax rates and other fiscal changes agreed with the Treasury.

The critical question is whether the future Finance Minister has inherited budget commitments and unwelcome new bills, for items such as Renewable Heat subsidies, and making savings to finance a corporation tax reduction to 12.5%, that until after the election, the least said and least admitted the better? Without an agreed NI budget, will the Treasury authorise the corporation tax changes?

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