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Parties banking on tax cut pledge to be a vote winner

Cutting Corporation Tax in Northern Ireland is fast becoming the single transferable policy idea of the General Election campaign. Political Editor David Gordon goes behind the headline-grabbing manifesto pledges

What is Corporation Tax?

It is a UK tax on company profits — taking between 21% and 28%, depending on the level of profits.

How is it playing in the campaign?

Cutting Corporation Tax in Northern Ireland is repeatedly cropping up as a party manifesto commitment.

The DUP and SDLP both featured it prominently, while David Cameron's Conservatives committed themselves to a review. More details are expected when the Tories launch the Northern Ireland version of their platform with their UUP allies.

The idea has been kicking around for a while?

It was a big issue here after devolution returned in 2007. Advocates of a cut say Northern Ireland is at a particular disadvantage given that the Republic's rate is 12.5%. The UK Treasury has been far from keen on the idea. There are legal complications due to EU law on state aid.

There are also political considerations for the Treasury. A lower rate in Northern Ireland could lead to companies relocating here from across the water. And Scotland, Wales and regions of England would hardly be thrilled if we got a special deal.

How are the Tories floating the idea?

Their Northern Ireland manifesto is expected to propose giving Stormont the power to fix its own corporation tax rate.

A key point is that it would have to finance such a concession itself. The cost of the tax reduction would be taken from the block grant — the money the Assembly gets each year to fund public expenditure.

That could be a big ask, when the increasing squeeze on public spending is already affecting the NHS, schools and other key services.

DUP Finance Minister Sammy Wilson has claimed a corporation tax cut could mean hundreds of millions being slashed from Government spending and given to shareholders.

But the DUP manifesto also proposes cutting the tax?

Yes, but it suggests this should not involve a “compensating reduction” from the block grant.

That's a big ask too, even leaving aside the European law issue. It seems unlikely that the Treasury — not to mention British taxpayers — would accept such a special measure for Northern Ireland, particularly in the present tough economic climate. It would surely take an unlikely hung Parliament scenario to unfold, with a new Government relying on Northern Ireland MPs for survival and being prepared to let them name their price.

Mr Wilson has said his party actually wants a UK-wide Corporation Tax cut.

That would get round some of the practical difficulties with a Northern Ireland-only measure. But it seems highly unlikely in the current financial and political environment.

The debate will continue?

It is bound to and it may develop into other areas. It is not impossible that regional public sector pay and benefit levels could also be on the agenda for a future Westminster government. It is hard to see such proposals being warmly welcomed here.

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