Tax rate powers would let us control our own destiny
The issue of corporation tax is central to rebalancing our economy and improving living conditions, says Arlene Foster
Following the economic downturn, we need to ensure that the Executive has the right policy levers to increase employment, exports and productivity.
The Executive needs to work together to put in place a strategy for economic growth.
We need to increase living standards by growing the size of the private sector and making it more competitive globally.
I believe that securing the ability to set our own rate of corporation tax is central to this.
The Treasury consultation document on rebalancing the Northern Ireland economy rightly identifies the significant economic challenges we face.
Living standards remain below other parts of the UK and the recession has had a major impact on the local labour market.
We also have insufficient numbers of large companies to make significant investments in employment, exports, research and development and innovation.
We are also the only part of the UK that shares a land border with a neighbour that has one of the lowest corporate tax systems in the world. Any one of these factors are significant. But taken together they highlight the very real challenges we face.
The Treasury consultation document also offers potential and long-term solutions to help meet these economic challenges.
I believe the Government recognises that the policy levers available to the Executive are, of themselves, insufficient to meet these challenges.
They need to be combined with fiscal incentives - especially with policy levers that could be truly transformational, such as corporation tax.
The consultation also outlines other potential incentives, such as enhanced R-amp;D tax credits and capital allowances.
The Economic Advisory Group (EAG) recently produced a report highlighting the impact of reducing corporation tax on the Northern Ireland economy. It highlighted a number of positive outcomes that would stem directly from a reduced rate of corporation tax.
The research suggested that, by reducing corporation tax in Northern Ireland (based on the assumption that a reduction was announced in 2012 with a rate of 12.5% introduced by 2014), the private sector would expand, with increases in employment of more than 4,500 additional jobs a year.
However, for me, the key message was that living standards would converge significantly to other parts of the UK.
As with any consultation process, legitimate questions have been asked about how we can be sure that lower corporation tax will help boost employment and growth.
Some people contend that lowering the corporate tax rate will not stimulate the local economy, but instead simply lower the block grant. I believe that the available evidence tells a different story and we need to recognise that changes to regional aid from the start of January have already limited our ability to support industry.
Moreover, why would the UK, Canada and other countries embark on a policy to reduce their corporation tax rates?
Why would the Republic resolutely hold to its 12.5% rate unless it offers major benefits?
The EAG report also made other key points that I welcome.
Not only should we have the power to reduce corporation tax, but it should be granted 'in a manner that is affordable to the Executive/Assembly'.
Another important point was that fiscal incentives can only be considered as part of the economic reform package.
I would encourage everyone to participate positively in responding to the Treasury consultation.