Corporation tax cut will pay off in long run
It was no surprise that the Chancellor, George Osborne, was at pains to stress that any legislation to allow lowering of corporation tax in Northern Ireland would come with a hefty financial bill attached. He said that between £200m-£300m would be lost from the block grant of around £8bn if the business tax is lowered to a comparable rate with that in the Republic. Quite understandably, that is a concern to many people.
But Mr Osborne's comments have to be taken in context. As one of our most distinguished business figures, Sir George Quigley pointed out in this newspaper yesterday that the estimates of lost revenue are not necessarily as high as the figures quoted by the Chancellor and are relatively small when viewed against the total amount which comes to us from the Exchequer.
What also has to be taken into account is that the lowering of corporation tax is a once-in-a- generation opportunity to boost Northern Ireland's private sector. The Department of Enterprise, Trade and Investment's economic advisory group predicts that a cut in the tax could lead to job growth of more than 5,000 a year. Without it annual job growth would be a paltry 600.
Whichever way it is viewed, the case for lowering corporation tax - even by degrees - is compelling. Yes, there will be pain in lost revenue initially, but the long-term advantages could be quite massive. As Sir George said, it was an initiative that worked elsewhere, spectacularly in the neighbouring Republic of Ireland. If we don't lower our corporation tax rate we will not only miss the opportunity to attract investors but we will continue to be at a competitive disadvantage to our nearest neighbours.
The Chancellor says he is unlikely to make any decision on whether or not the tax can be reduced until the autumn. Although he is generally perceived as agnostic on the issue, even he recognises that Northern Ireland is a special economic case because of its land border with the Republic. There really is only one answer he can give and that is to allow the Executive to lower the tax rate.