Belfast Telegraph

It's our best ever chance to get these powers. The next few weeks are a time for decisiveness, not dithering

Theresa Villiers has revealed that a draft Westminster Bill for the devolution of corporation tax has already been drawn up and contains a commencement date for the new powers.

The Secretary of State said she was hopeful that it will be introduced at Westminster in the New Year and passed before the general election in May. However, she stressed that the Executive would first have to satisfy the Treasury that it could balance its books and that it planned to do so. Ideally this should happen by the end of this year.

"To use these powers effectively, the Executive does need to resolve its budgetary position. It is not an unreasonable ask from the Treasury that the Northern Ireland Executive is in good shape to receive those powers before a final decision is made to legislate on them," she told the Belfast Telegraph.

She was expanding on points made by the Chancellor in Westminster.

George Osborne told MPs: "We need to be sure - this is about the taxpayers across the whole of the UK - that if we go ahead with this step, which we are very well disposed towards, the Northern Ireland Executive will be able to manage the pressure on their resources."

"That will be one of the topics for discussion in the cross-party talks. If the cross-party talks are successful, we could, as I said in the statement, introduce legislation in this Parliament."

It is no small condition. Corporation tax stands at 21% in the UK (it goes down to 20% in April) and is 12.5% in the Republic. The Executive wants to compete with the south for inward investment but it will cost them up to £40m for every percentage point they shave off the tax.

The Executive is already hundreds of millions in arrears in its budget and had to borrow £100m from the Treasury to tide it over until the end of the financial year in April. It has failed to agree on extending UK welfare reform here because Sinn Fein blocked the measure on the grounds that it would reduce the rate of increase in payouts to benefit claimants in future years.

The result is that, in London's eyes, we are running a more expensive welfare system than Britain and the government is making us pick up the tab. This cost us £14m last year and £87m this year. Next year they are asking us to build £114m in cuts into our budget to pay for the refusal to make the welfare changes.

Sinn Fein is resisting this. Yesterday Daithai McKay, the party's finance spokesperson, called Mr Osborne's comments "breathtaking arrogance from a British minister who has been responsible for austerity and poverty on a Dickensian scale."

He called for all taxation powers, not just corporation tax, to be transferred to Northern Ireland entirely at Westminster's expense.

"The Executive should not have to carry the cost of any variation while the British government gains financially from an increased tax take from the creation of new jobs. A scenario where we take the pain and the British government takes the gain is not acceptable. Tax varying powers should now be transferred without conditions so that we, not George Osborne, can then decide on how we will use this power," Mr McKay said.

That won't happen. Ms Villiers points out that under EU rules, set out in the a decision called the Azores Judgment, a devolved administration must bear the full cost of the transference of tax powers.

However, there may be room for negotiations in the talks between now and Christmas. The Azores Judgment didn't, for instance, prohibit subsidies for welfare reform or capital projects.

The DUP have suggested that the Treasury should refund the fines we have already hit with and this has not been explicitly rejected by Westminster.

Yesterday in the Commons Mr Osborne talked about the need for "some welfare reforms" to be introduced. Last week Senator Gary Hart, the US special envoy, predicted that Britain might in the end have to help with the bill, bearing in mind our special circumstances.

One thing is for sure, this is Northern Ireland's best chance ever for getting this tax-setting power and if our politicians are serious about making devolution work they need to seize the opportunity.

Labour wants to increase the rate of corporation tax in Britain and could win the May election, so the best chance of getting the legislation through is under the Tories.

When our politicians are faced with tough choices like this before they have generally played for time. The next two to three weeks are a time for decisiveness, not delay.

Ms Villiers is cautiously optimistic that the parties will find a way forward. "I believe that Sinn Fein and the other parties are taking this process seriously and I hope that we will be able to find an agreement they can all sign up to," she said.

Factfile: The tax in a nutshell

Corporation tax is a business tax levied on the net profits made by domestic companies and on the profits of permanent establishments of non-UK resident companies and associations that trade in the European Union. Prior to the tax's introduction in 1965, companies and individuals paid the same income tax, with an additional profits tax levied on companies.

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