Autumn Statement: Business tax cut hopes raised by George Osborne
The Chancellor's championing of low corporation tax signals that a campaign to lower the rate in Northern Ireland is still on the table, according to the Secretary of State.
Speaking to the Belfast Telegraph following the Autumn Statement, Theresa Villiers said George Osborne's remarks mean that devolution of corporation tax "remains a very real possibility and very much on the table still".
A long-running campaign to devolve tax-setting powers aims to have the Northern Ireland rate brought closer to that of our neighbours in the Republic at 12.5%, compared to the present UK main rate of 23%.
Supporters argue that it would make the region more competitive and would encourage inward investment and job creation.
However, following a consultation process and the publication of a White Paper on the issue, any decision from Whitehall will be stalled until the results of the Scottish independence referendum next autumn.
In his speech to Parliament yesterday, the Chancellor quoted analysis by KPMG which he said showed that corporation tax cuts have helped increase investment and raise productivity.
In 2010, he published a corporation tax 'road map' to cut the rate from 28% to 20% over the lifetime of the current Parliament.
The Secretary of State said: "Some of the Chancellor's statement is pretty much in tune with people in Northern Ireland who have been arguing for devolution and reduction in corporation tax.
"He has often advocated reducing corporation tax. The reality is that technically-speaking, it's not an easy thing to run more than one system in the same country."
However she said the decision would not be known until at least this time next year.
Eamonn Donaghy from KPMG, a prominent campaigner for a lower corporation tax rate in Northern Ireland, also sounded a note of caution.
"George Osborne is obviously a clear fan of lower corporation tax and he quoted a KPMG survey which revealed that the UK is one of the most competitive of the major economies, which reflects how well the UK tax legislation is working," he said.
"He has helped introduce measures like Patent Box and the Controlled Foreign Companies legislation which makes it a lot easier for companies to operate out of the UK and his policies seem to be working, but it remains to be seen if he goes any further than a cut to 20%.
"As it stands Northern Ireland is still seen as being in the back end of the UK, on the border with the Republic. I still think there is a strong case for us to have a lower rate and the Chancellor himself recognises that lower corporation tax creates more investment and if Northern Ireland had an even lower rate, we would become much more attractive as a destination for business, but we will not know anything until after the Scottish referendum."
Economist John Simpson said that the Chancellor's comments on lowering corporation tax in general would strengthen the argument for a lower rate in Northern Ireland – but equally, they could be interpreted as favouring the lowest possible rate of tax across the whole of the UK.
Northern Ireland 'must not remain out on the margins of UK policy'
By Lesley Houston
The Autumn Statement was flagged by the Chancellor as a boon for business.
But the kickstart to the stagnant house building market offered in areas of Great Britain will not apply in Northern Ireland as housing is a devolved matter.
George Osborne also said he was boosting employment prospects of young people by abolishing employer National Insurance Contributions for under-21s.
But the trade union-funded Nevin Economic Research Institute said the policy could merely have the effect of making it cheaper for firms to employ young people, without creating any new youth employment.
The Northern Ireland Chamber of Commerce also said business-friendly policies in the statment should be implemented in Northern Ireland.
More support for businesses in England is being given through the business rates, including a £1,000 discount for retailers.
Chamber president Mark Nodder said: "Increased support around business finance and export development are very welcome but Northern Ireland has been at the margins of UK policy in these areas.
"The Chancellor's rates freeze will be welcomed in England but as control over Northern Ireland business rates lies with the NI Executive, our own businesses need reassurance that this cost won't rise here too."
Mr Osborne also announced an increase in apprenticeships to 200,000 over the next two years to boost job opportunities.
But while that is not applicable to Northern Ireland, which has devolved power over such matters, Stormont yesterday did promise "a wide range of proposals to boost apprenticeship uptake".
Following a review earlier this year, a spokesman for the Department for Employment and Learning said the review aimed to "ensure that the training opportunities on offer closely match the needs of the economy".
"The report will include the expansion of higher level apprenticeships and progression pathways across professional, technical and academic routes and how best practice in other jurisdictions can be incorporated into the model for apprenticeships."
Could rates discount breathe new life into our high street?
By Angela McGowan, Danske Bank chief economist
There is no doubt that the Chancellor was in a much more exuberant mood this week when he delivered his fourth Autumn Statement. There was good news for Northern Ireland, with an increase of £136m in the Executive's Budget over the next two years.
After three years of delivering bad news he announced that Britain's economic plan is "finally working" – even if his earlier central promise of "balancing the books by 2015" had to be pushed out to 2018. The Chancellor presented a number of very optimistic forecasts from the Office of Budget Responsibility, which included a budget surplus for the UK by 2018/19 and the creation of 3.1m new private sector jobs by 2019. It should be noted though that the further out forecasts go, the more uncertain they are.
Despite higher economic growth, the deficit in the UK is still too high and so the Autumn Statement was fiscally neutral and could perhaps be described as "a bit of tinkering around the edges".
Retailers received a little help with the introduction of a £1,000 business rates relief (and small cafes and restaurants will benefit from this too). There will also be a 50% discount for retailers who re-occupy vacant stores in an effort to restore life into struggling high streets.
In the UK large business will be a little grateful for the 2% cap placed on business rate hikes – but obviously a bolder move from the Chancellor by way of freezing business rates would have been the preferred option.
He also announced that small firms will pay no rates at all, but, since business rates are a devolved issue for Northern Ireland, we will have to wait for the Northern Ireland Executive's response.
There were no changes for corporation tax, with the Chancellor reminding people of the KPMG report which demonstrated that the UK has one of the most tax competitive environments in the world.