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UK cut in business tax will not hurt similar Northern Ireland cut, Villiers says

Published 08/07/2016

Theresa Villiers at Stormont House, Belfast
Theresa Villiers at Stormont House, Belfast

Cutting the UK's corporation tax rate will help rather than hinder Northern Ireland's own plan to offer would-be investors an even lower rate, Theresa Villiers has insisted.

The Northern Ireland Secretary rejected the argument that reducing the differential between the region and Great Britain will undermine what is one of Stormont's flagship economic policies.

Ms Villiers argued that devolving tax powers from Westminster was less about giving Northern Ireland a competitive advantage over the rest of the UK, and more about giving it an edge internationally, to compete with countries such as Hungary.

She said cutting the UK rate from 20% to below 15% - as suggested by the Chancellor this week - would make Stormont's planned 2018 reduction to 12.5% more affordable - as less would have to be sliced off the annual block grant to fund the tax cut.

"It doesn't actually detract from the competitive offer that Northern Ireland would be able to give with a 12.5% rate, because they are not really competing with Manchester - they are competing with Hungary and other countries around the world who have much higher corporation tax rates," said Ms Villiers.

She added: "I think the reduction of the main rate is very good news for that very long running campaign to deliver a 12.5% corporation tax rate in Northern Ireland, because the cost of delivering 12.5% has just gone down."

Chancellor George Osborne's proposal to slash the tax on big business profits is part of his plan to counter investment uncertainty in the wake of the EU referendum result.

Brexiteer Ms Villiers, who has backed Andrea Leadsom in the race to become the new Tory leader, defended the suggested UK rate cut as she reflected on the wider fallout from the referendum in Northern Ireland, where 56% voted to Remain.

Stormont's Democratic Unionist First Minister Arlene Foster has questioned the need to off-set a corporation tax cut with a reduction in the block grant in the wake of Brexit - given the law that required it was set by the EU.

Ms Villiers has insisted the stance of the Treasury will not change, claiming that the issue of "fairness" with the rest of the UK was more central than EU law.

"If this tax cut is delivered by the Northern Ireland Executive then it needs to be funded by the Northern Ireland Executive," she said.

Earlier this week it emerged that a planned US investment mission to Northern Ireland in the autumn has been postponed, with uncertainty about Brexit understood to be one the reasons behind the move.

Ms Villiers, who insisted the referendum result was not the primary factor in the postponement, said she wanted to assure those in the Remain camp that Northern Ireland would ultimately be better off outside the European Union.

"I believe the Brexit vote will open up big opportunities for businesses in Northern Ireland," she said, noting the potential for new trade deals with the rest of the world.

"It's clear we are still going to be doing huge amounts of business with the European Union, even after Brexit takes place. It's in everybody's interests that we get a good trade deal with the EU - after all they sell more to us than we do to them."

The Conservative MP also reiterated her view that it would be "perfectly possible" to regulate the movement of people and goods between Northern Ireland and the Republic of Ireland without a hardening of the Irish border.

She also dismissed the suggestion more rigorous checks would be required on travel between Northern Ireland and the rest of the UK after Brexit takes place.

In the wake of the referendum, Sinn Fein called again for a vote on Irish unity, claiming the majority of voters in Northern Ireland should not be "dragged out" of the EU against their wishes.

Under the terms of the 1998 Good Friday Agreement, the Secretary of State has power to trigger a border poll if she believes there has been a significant shift in public opinion in favour of a united Ireland.

While Ms Villiers has made clear she does not believe such a shift has occurred, republicans have pointed to the surge in applications for EU Irish passports in the wake of the referendum as evidence of a change.

"I don't think necessarily that seeking an Irish passport would necessarily indicate a change of view about Northern Ireland's constitutional future," she responded.

"The reality is we keep an open mind on these matters but the reality is there is nothing I have seen that would indicate to me that there's the kind of shift of opinion which would require a border poll under the terms of Good Friday Agreement."

Ms Villiers also denied her position as Northern Ireland Secretary had become untenable, given she was a Brexiteer now representing the interests of a region that backed Remain.

She said: "The reality is whatever side of the debate I was on I was going to find myself on the other side of the debate to many voters and of course the Executive itself is divided on the issue (Sinn Fein - Remain; and Democratic Unionists - Leave) so I don't think it was unreasonable for me to be on the same side of the debate as the First Minister of Northern Ireland who won an Assembly election (in May) with a convincing personal mandate."

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