Forget corporation tax and put gas in economy
Published 29/03/2013 | 09:00
David Cameron's decision to push corporation tax back to autumn 2014 was hardly a surprise. Everyone has been predicting a long lead-in in the devolution of the tax-varying powers.
Just last week, Sammy Wilson, the finance minister, told us in an interview that no decision would be taken until after September 2014. Back in November, his boss Peter Robinson told me that the prime minister had only just received a paper on the issue from the ministerial working group which had been considering it.
Mr Robinson said: "We all recognise that there is a lot of work to be done; it requires legislation to be prepared and changes to computerisation.
"Even with the fairest wind possible, we are looking at 2016 before corporation tax can be devolved to Northern Ireland."
That is more or less what emerged this week. The prime minister is promising that, if devolution is agreed, he will legislate for it before the next general election, which falls on May 7, 2015.
A positive decision in September, or October, of next year would give Invest Northern Ireland an opportunity to pitch the reduced tax to potential foreign investors, who take two to three years to make major investment decisions.
We'd want a delay, so that we could market it before taking the hit on our block grant, which would come once we reduced the tax. The figure being looked at by ministers is £40m a year for every 1% cut. The tax will be charged at 20% in the UK from 2014, so if we wanted to bring it down to Irish levels of 12.5%, it would cost us £300m a year.
The prime minister could reduce this. An upturn in our economy following a cut in corporation tax would increase VAT, income tax and National Insurance revenues to London. Our minsters are urging the prime minister to factor this in.
A deal is still possible and the issues are narrowing, but after six years of talking about it, we need to do more to improve the economy in the here and now.
Our ministers should find a safe way to move forward on fracking for gas in Fermanagh: that would generate jobs and investment in depressed areas, as well as reducing energy costs to industry, which are currently the second-highest in Europe.
Secure and cheap energy supply is also something Invest Northern Ireland could market to investors and there are already tax-breaks, with no effect on our block grant, for shale gas development.
We can streamline planning and, since it suits the Government to delay the corporation tax decision until after the Scottish referendum, we can push them to make funds from the infrastructural guarantees programme available for projects here.
We also need a peaceful marching season and more streamlined planning procedures to show we are truly open for business.
What we can't afford to do is sit on our hands and hope that reduced corporation tax will eventually solve all our problems.
We need to open up other options to complement or, in the worst case, replace it.