If Northern Ireland wants more economic help from the Government its politicians must build a shared and stable society, the Secretary of State has warned.
Theresa Villiers pledged that Westminster is prepared to fund infrastructural projects here, such as schools and roads – if its conditions are met.
The Government is also ready to hand over Ministry of Defence property to the Executive and allow it to keep the proceeds – if it sells off public assets such as Belfast Port.
However, the aid comes with other strings attached.
Ms Villiers said: "We would like to see commitments on building a shared society as part of an overall package. We will be waiting to hear from the Executive what they would do to boost the economy and also what they are doing to address sectarian divides.
"The Prime Minister sees a stable and cohesive society as a crucial part of building economic prosperity."
Ms Villiers outlined a package of measures being considered to build up Northern Ireland's economy until David Cameron makes a decision on the devolution of corporation tax in October 2014.
One of the most eye-catching proposals is to make Northern Ireland eligible for funds from the Government's Infrastructure Guarantee Scheme. This was reserved for projects of national significance, and was thought to exclude Northern Ireland.
But Ms Villiers said: "The Treasury has agreed that if Northern Ireland has good projects which have a local benefit it is keen for them to use the scheme."
Asked if projects like the A6 through Dungiven could benefit, she said: "Roads certainly qualify and I believe that hospitals and schools do as well. This is something you apply for. There is no fixed budget."
First Minister Peter Robinson, who discussed the measure with the PM, told the Belfast Telegraph this week that local departments would "get up to speed fairly quickly if there is real money available for shovel-ready projects". If the Government makes good on its offer and the Executive can bring forward projects quickly, it could have a major economic impact.
Other measures under active discussion include:
• The devolution of powers over stamp duty, the tax charged when land or property changes hands, and increasing our capital borrowing powers.
• Gifting more military-owned land to the Executive. These are thought to include the remainder of St Lucia Barracks in Omagh. The Secretary of State refused to go into details.
She said: "A wider deal on the transfer of MoD assets, including housing, is being considered. That will be discussed with the Executive. We are looking at specific examples at the moment."
• Encouraging the creation of enterprise zones, where firms setting up would be paid increased capital allowances. This would have to be at least partly funded by the Executive. However, the Government is willing to allow Stormont to keep the proceeds of the sale of capital assets to offset the cost. These would normally have to be transferred to London. She said: "If they chose to sell the Port of Belfast they have had an indication from the Treasury they could keep the proceeds."
• Support for aerospace companies Bombardier and Aerojet.
• Bringing Irish banks, which control most of the sector in Northern Ireland, into the Government's Funding for Lending Scheme. This would mean that Government money could be extended to them to lend to businesses here.
• Start-up loans and mentoring for 18-30-year-olds wishing to start up their own businesses.
Negotiations will continue until the end of April. The measures Ms Villiers outlined loosely resemble some of the City Plans offered by the Government to UK regions.
Optimistic noises on corporation tax, but it is still a waiting game
By Liam Clarke
Asked about the prospects for the devolution of corporation tax powers to Northern Ireland, the Secretary of State didn’t hesitate.
“I am optimistic,” she said. “An important step forward was taken this week.”
The qualifications crept in later, but they weren’t that strong.
“We got a pathway to a decision and there is a real possibility of legislating within this Parliament,” she said, pointing out that it will be the Prime Minister’s decision, not hers.
“Even if the Prime Minister had given a definite ‘yes’ this week it would still have been conditional on resolving the practical impact of issues.”
Mr Cameron has to await the outcome of the Scottish independence vote but Ms Villiers does not believe that if the powers are handed over to Northern Ireland, that Scotland will necessarily follow.
“What might be practical in Northern Ireland might be wholly impractical in relation to Scotland,” she said, pointing to our Troubles legacy and the relative size of the two economies.
She said a way has now been found round the issue of transferred profits which led the last Labour Government to veto the idea. Labour feared that firms would establish ‘brass plate’ operations here, effectively using Northern Ireland as a tax haven while doing most of their business in Britain.
The issue of “secondary tax effects” is thornier. If we reduce corporation tax, the Treasury could expect increased revenue from VAT and income tax collected here — and the Executive has long argued Northern Ireland should get a slice of that.
“That is not something that I think is going to happen. It is probably a ‘no’,” the Northern Ireland Secretary said bluntly.
“We need a deal that reflects our obligations under EU law to ensure that full costs of the reform are borne by the Northern Ireland Executive.”
There are other ways to help the Executive, for instance allowing it to sell major assets such as Belfast Port. But any economic package will not provide full value unless the Executive guarantees political stability and reduces sectarian division.