Secretary of State Owen Paterson has teamed up with the Federation of Small Businesses (FSB) in Northern Ireland for an online video campaign in support of lowering the rate of corporation tax here.

Speaking exclusively to the Business Telegraph during filming, Mr Paterson said he wants to ease "unnecessary nervousness" about how much of an impact the move would have on the Northern Ireland block grant.

He will be appearing on the FSB website, appealing to members to make their views known to the consultation exercise on devolving Northern Ireland's tax-setting powers, which is due to close next month.

Mr Paterson has stressed that the biggest risk is "doing nothing" and has claimed that lowering the rate from 28% to match the more competitive rate of the Republic at just 12.5% could be "the economic equivalent of the peace process".

"I have been speaking to Northern Ireland businesses at least once a week for years and every one of them says that the tax rate, in terms of creating competition with the Republic of Ireland, and planning, are the two biggest problems they face.

"Planning is devolved, so now we need to devolve the process of setting the tax rate.

"We have better broadband coverage than anywhere else in the UK thanks to Project Kelvin, we have A-Level and GSCE grades that are 10% better than the rest of the UK. Lower corporation tax could be the key to unlocking the full power of our potential and our attractiveness to foreign investment.

"Of course a lot of the FSB's members are not incorporated companies - but the knock-on benefits they will receive will be immense - it will offer an indirect benefit to all sections of society.

"77.6% of Northern Ireland's GDP is dependent on state spending and that cannot continue. From the English taxpayer's point of view, Northern Ireland is now stable and they cannot figure out why so much is being spent and there is going to be pressure to level that out.

"Northern Ireland has a uniquely terrible history which has left a legacy of people being dependent on state aid - and that is a culture we have to stop and address, it is not going to carry on while we are borrowing £233,000 every minute.

"The current unrest I feel is fuelled by deprivation and lowering the corporation tax rate could see a flow of money and jobs into these areas.

"The social and economic benefits of lowering the corporation tax rate could be the economic equivalent of the peace process.

"After all the the Republic has been through with the banking crisis, there are some very successful companies there and they are going gangbusters."

On the issue of how much lowering the rate will cost, Mr Paterson said: "The state pays £19bn to Northern Ireland of which £12bn is the block grant. If there is a 2.5% drop in corporation tax in Northern Ireland every year, we calculate that would cost £60-£90m every year - just 0.5% of the block grant.

"This is a very modest investment and I am absolutely confident it would make a lasting difference to the economy of Northern Ireland. There is so much unnecessary nervousness about the cost. If we don't do this, what else is there?

"The Republic of Ireland has already recognised that the only way to get out of their difficulties is by trading out and we have to do the same.

"And to those who criticise, what is your alternative? There is no Plan B. There is no silver bullet either, but lowering corporation tax would be fundamental to attracting investment.

"When we attract big businesses here, we also attract infrastructure and once they are here and once they are happy, those businesses expand. It would give bodies like Invest Northern Ireland much more scope, give them the opportunity to go much wider because at the moment the strata of businesses they target to come here is quite narrow.

"Lowering corporation tax will not be at the expense of a new school roof or a new cancer centre - once these changes have been implemented successfully, we can pay for two new school roofs and two new cancer centres - the biggest risk would be to do nothing.

"It is vital that people give their views before June 24."

The consultation paper, "Rebalancing the Northern Ireland Economy", is available on the HM Treasury website.

The consultation ends on June 24 2011. Responses can be sent to niconsultation@hmtreasury.gsi.gov.uk.