Belfast Telegraph

George Osborne's Autumn statement: Corporation tax powers will only be devolved to Stormont depending on party talks outcome

By Claire Williamson

Corporation tax will only be devolved in Northern Ireland depending on the successful outcome of party talks at Stormont.

Chancellor George Osborne said it would be devolved if parties can demonstrate they are able to manage the financial implications and that it was dependent on the outcome of the current talks.

Today is the Chancellor's final Autumn Statement before next May’s general election.

Corporation tax is what companies pay on their profits.

The Executive has identified the power as a potentially key economic lever to attract new business investment and therefore drive private sector growth in a region viewed as overly-reliant on the public sector.

Ministers have stressed that Northern Ireland is a special case in terms of the rest of the UK as it shares a land border and therefore directly competes with the Republic of Ireland, where business tax rates are significantly lower.

The current talks among the five parties are addressing long-standing disputes on flags, parades and the past. As well as also trying to find consensus on budgetary disputes, including the failure to implement the UK Government's welfare reforms in the region.

Mr Osborne said: "The Treasury believes it can be implemented provided the Northern Ireland Executive can show it is able to manage the financial implications

"The current talks will see if that's the case and, if it is, the Government will introduce legislation in this parliament."

First Minister Peter Robinson said resolving these issues were at the "heart of the Talks Process" but that the fault was with Sinn Fein, SDLP, UUP and Alliance.

The DUP leader said: “I welcome the approval in principle from the government on the devolution of Corporation Tax-setting powers to Northern Ireland.  While the Chancellor’s conditional statement falls short of the oft-repeated promise to decide whether Northern Ireland would be given such fiscal powers by the time of the Autumn Statement it is not, in my view, unreasonable for the government to satisfy itself that it is placing those powers in a stable political environment where there will be responsible financial management.

"The DUP have taken all the necessary hard decisions relating to the economy, welfare reform and the budget.  The failure of other parties has caused this delay.

"Let us be clear.  If Sinn Fein and the SDLP had been prepared to agree the DUP enhanced welfare reform proposal and if the SDLP, UUP and Alliance had been sufficiently mature to take the difficult decision to support the draft Budget we would have been moving to legislate for Corporation Tax powers to be devolved on Monday.

"There are only a few weeks left for these parties to step up to the plate.  If this opportunity is lost they will have to explain why they failed to behave in the best interests of our people and why they have rejected the opportunity to create up to an additional 50,000 jobs here."

East Belfast Alliance MP Naomi Long supported the potential devolution of corporation tax to the Assembly but warned any such powers must be used responsibly by her party’s Executive colleagues.

She said: "Alliance has long supported Northern Ireland obtaining the power to vary the rate of Corporation Tax, as it gives us the opportunity to transform our economy in terms of both job creation and the generation of wealth.

She continued: “The prize for Northern Ireland could be very significant but Alliance wants to make sure this opportunity is delivered responsibly. A lower level of Corporation Tax cannot be successful in a vacuum.

"We need to see continued investment to assist economic growth, among other moves. Before making any commitments around a revised rate of Corporation Tax, it is important the Executive sets out a clear and sustainable plan as to how this would be funded.

“We have been consistently calling for serious engagement from all parties on all the issues under consideration in these talks. This news increases the need for a comprehensive agreement dealing with all the topics on the table, not a piecemeal approach.”

SDLP MLA Patsy McGlone said the announcement lacked detail.

He said: "It was remarkable to hear British Chancellor George Osborne make a heavily conditional announcement about the devolution of corporation tax varying powers in his Autumn Statement this afternoon.

"Usually statements of this significance have to be analysed and absorbed for some time because the devil is found in the detail but this announcement contained virtually no detail at all.

“This is a power which the Executive Parties all agree should be devolved, the British Treasury has agreed that it could be devolved and yet the Chancellor is basing it on the outcome of the Talks which he will now judge.

He added: “Today was an opportunity to invest the power to positively shape the local economy in the hands of local people. It is one that the Chancellor has missed and the burden now rests on the Talks teams. It is now more important than ever that we deliver and that the outcome is matched by generosity on the part of the British Government.”

Northern Ireland's largest business organisation the Federation of Small businesses (FSB) has urged politicians to work together to bring about what will be an "essential boost to the Northern Ireland economy".

FSB NI policy chair Wilfred Mitchell OBE said: "The FSB welcomes the Chancellor’s recognition of the arguments for devolving corporation tax setting powers to Northern Ireland.

“However, his decision is conditional and requires a subjective judgement that the NI Executive can show it is able to manage the financial implications. That creates uncertainty but, of more concern, is that the Chancellor committed to “introduce legislation” rather than “to legislate” in this Parliament .

"We must all strive to ensure that this is an unequivocal commitment to transfer the power before this Parliament concludes in March 2015. "

The Northern Ireland Independent Retail Trade Association (NIIRTA) Chief Executive Glyn Roberts said it was "critical" that the current talks reach a "successful conclusion."

He said: "It is very welcome that the UK Government has indicated that they are in principle willing to devolve Corporation Tax. It is now critical that the current talks reach a successful conclusion to ensure that these game changing powers are transferred to the NI Executive”

Coming on the back of Corporation Tax reduction, more Foreign Direct Investment will lead to more jobs which will be a big long term boost in spending for our local retail sector.

The key points of George Osborne's statement

  • UK is fastest growing major economy in the world.
  • Deficit is falling
  • We stay on course for prosperity
  • Employment at a record high we must never give up on finding work for our young people
  • Mr Osborne said the UK is now "the fastest growing of any major advanced economy" with higher growth, low unemployment, falling inflation and a deficit that is half what the Government inherited.
  • "Warning lights are flashing over the global economy," and the Office for Budget Responsibility has revised down forecasts for global growth in every year of their forecast, said the Chancellor.
  • The economy has grown more than 8% over the Parliament and business investment has risen by 27%.
  • OBR forecasts UK GDP growth of 2.4% in 2015, 2.2% in 2016, then 2.4%, 2.3% and 2.3% in subsequent years.
  • A year ago we expected GDP to grow by 2.4 % in march we expected 2.7 today it is forecasted growth by 3%
  • We have grown 2 1/2 times faster than Germany, and over 7 times faster than France
  • Manufacturing growing faster than any sector, growing faster in the UK than any other advanced economy.
  • OBR predicts wage growth above inflation for the next five years.
  • Regular earnings growth is now faster than inflation, at 4% for those in full-time work for over a year.
  • Half a million new jobs created over the last year, with numbers claiming unemployment benefit falling by 23% and young people on long-term jobless benefit almost halving. Unemployment forecast at 5.4% next year before settling at 5.3%.
  • Gender pay back fallen to its lowest level in the entire history of this country that is progressive politics
  • OBR's GDP growth forecast for this year is 3% - up from 2.4% forecast a year ago.
  • Mr Osborne announced a £45 million package to support exporters to economies in Asia, Africa and South America.
  • Deficit is falling this year and every year
  • OBR forecasts deficit to fall from £97.5 billion last year to £91.3 billion this year, then £75.9 billion next year then £40.9 billion and £14.5 billion in subsequent years before reaching a surplus of £4 billion in 2018/19.
  • Surplus of £23 billion predicted for 2019/20. Deficit as percentage of GDP at 5% this year, falling to 4% next year, then 2.1% and 0.7% before moving into surplus of 0.2% in 2018/19 and 1% in 2019/20.
  • Government will meet its debt mandate a year late and fiscal mandate two years early.
  • Debt as a share of GDP 80.4% this year, peaking at 81.1% next year then falling to 80.7%, 78.8%, 76.2% in following years before reaching 72.8% in 2019/20.
  • Tax receipts have not been rising as quickly as predicted and are forecast to be £23 billion lower by 2017/18, but this is offset by savings on welfare and public service pensions and spending cuts, said Mr Osborne.
  • The coming years will require "very substantial savings in public spending" and a new Charter for Budget Responsibility will be published next week, with a House of Commons vote in the new year, to reinforce the commitment to deliver them.
  • The Government will spend £10 billion less this year than set out in its plans.
  • Public sector pay restraint in the next Parliament to deliver savings "commensurate" with the £12 billion achieved over the past four years.
  • Employment Allowance of £2,000 to be extended to carers.
  • Commitment to complete public service pension reforms, saving £1.3 billion a year.
  • Plan published for a further £10 billion of efficiencies in Whitehall, and Chancellor commits to raising at least £5 billion by cracking down on tax avoidance and evasion.
  • UK's net payments to European Union to fall by about £1 billion this year and next year and decline in real terms over the next five years.
  • Total welfare spending to be £1bn a year lower than forecast
  • End of military operations in Afghanistan to save an additional £200 million this year.
  • Repay total national debt from WW1
  • Hospice charities, search and rescue and air ambulance to be granted VAT refunds.
  • Extending 'funding for lending' scheme by a year
  • Double small business rate relief for a year
  • High street rates discount up to £1,500 a year
  • Air passenger duty for under-12's scrapped from next May
  • Government to legislate to devolve corporation tax to Northern Ireland if the Northern Ireland executive shows it can manage the financial implications. And depending on the outcome of all-party talks.

What would devolved corporation tax power mean for Northern Ireland?

The Northern Ireland Executive has identified the power as a potentially key economic lever to attract new business investment and therefore drive private sector growth in a region viewed as overly-reliant on the public sector.

Ministers have stressed that Northern Ireland is a special case in terms of the rest of the UK as it shares a land border and therefore directly competes with the Republic of Ireland, where business tax rates are significantly lower.

But the issue is far from straightforward.

Any loss in revenue generated from cutting corporation tax from the UK rate of 21% to the 12.5% that operates across the Irish border would result in a reduction in Northern Ireland's block grant funding allocation from the Treasury.

So ministers at Stormont will have to determine whether the economic stimulus they hope to deliver will, at the very the least, off-set a loss to the public finances that could be in the region of hundreds of millions of pounds annually.

Meanwhile unions have warned against taking such a hefty chunk of public spending.

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