Corporation Tax (Northern Ireland) Bill

Debate between Lord Forsyth of Drumlean and Baroness Randerson

Tuesday 17th March 2015 Lords Chamber

[The Parliamentary Under-Secretary of State, Wales Office (Baroness Randerson) (LD)]

My Lords, it is very appropriate that we are discussing this Bill on St Patrick’s Day. I take this opportunity to wish noble Lords a happy St Patrick’s Day.

I shall start by highlighting the history behind the policy enshrined in this Bill. Since 2010, the UK Government and Northern Ireland Executive have shared a common objective to rebalance the Northern Ireland economy away from overdependence on the public sector and to drive faster economic growth. In 2011 this Government published a consultation document Rebalancing the Northern Ireland Economy. Among other things, the consultation considered the possibility of devolving corporation tax powers to the Executive and Assembly. Responses to that consultation from the business community and Northern Ireland political parties nearly unanimously supported the devolution of corporation tax.

After considerable work on the detail and technical work needed to make this measure possible, this Bill was introduced in the Commons on 8 January. The proposals will allow the Northern Ireland Executive and the Northern Ireland Assembly to set a different rate of corporation tax from the rest of the UK for most types of trading profits arising in Northern Ireland. The tax base, including reliefs and exemptions, will remain under the control of the UK Government. The earliest financial year for which Northern Ireland could set its own rate is 2017. This will allow time for businesses and agents to become familiar with the new rules.

[Lord Forsyth of Drumlean (Con)]

Can my noble friend tell me why this Bill—unlike for example the measures that gave income tax powers to the Scottish Parliament—has been certified as a money Bill and therefore all its stages have to be taken at once?

[Baroness Randerson]

I understand the noble Lord’s point, and indeed there are clearly constitutional issues in relation to this Bill, but it has been certified as a money Bill by the Speaker of the other place. It is important to bear in mind that unlike the other legislation to which my noble friend refers, this is a simple measure that deals entirely with one issue. I am sure my noble friend will agree it is a highly technical Bill and therefore akin to many other money Bills this House deals with.

I will go briefly over the aim of this policy and the key measures within this Bill. Northern Ireland has a unique economic position within the UK. It shares a land border with the very low corporation tax environment of the Republic of Ireland. It is more dependent on the public sector, with around 30% working there, compared with about 20% in the rest of the UK. Economic prosperity—GVA per capita—is persistently some 20% below the UK average, and has been for a number of decades and it has to deal with the challenging legacy of the Troubles.

Devolving corporation tax recognises these unique challenges. The Northern Ireland regime has been carefully designed to enable the Executive to encourage genuine investment that will create jobs and growth, while minimising opportunities for avoidance and profit shifting. It balances this with the need to keep the costs of a reduced rate proportionate, both for the Executive and in relation to any additional administrative burdens for businesses.

The design of the regime builds on the principles agreed in 2012 by the Joint Ministerial Working Group which included Ministers from HM Treasury, the Northern Ireland Office and the Northern Ireland Executive. Companies trading in Northern Ireland will attract a Northern Ireland rate on their qualifying trading profits only. Companies will continue to pay the UK rate on their profits from non-trading activities which do not generate jobs or economic growth in the same way.

The rules are designed to deter businesses from seeking to exploit, through profit shifting and avoidance, a rate differential between Northern Ireland and the rest of the UK. The regime will not provide opportunities for brass-plating. Because they offer significant scope for profit shifting without the benefits of bringing substantial new jobs, the regime does not extend to profits from financial trading activity, such as lending and reinsurance. However, the policy recognises the genuine growth and employment potential for Northern Ireland offered by back-office functions, so companies with excluded profits from certain financial trades may make a one-off election to bring a notional profit attributable to the back-office functions of those excluded trades within the Northern Ireland rate.

To reduce the administrative burdens for SMEs, a special regime exists for them. A simple in-out test will mean that the majority of the companies will be spared the burden and cost of apportioning profits. More than 97% of SMEs operating in Northern Ireland meet the 75% employment test threshold and will benefit from the Northern Ireland regime.

Although this measure should go a long way in helping the Executive to encourage genuine investment that will create jobs and growth, the Government have been clear that devolving corporation tax is not an end in itself. For the full potential benefit of corporation tax devolution to be recognised, there are a number of other areas of reform that need to be addressed, such as education, skills and infrastructure.

The Stormont House agreement set out that the progress of this Bill through Parliament would proceed in parallel with implementation of key measures to deliver sustainable finances. These include agreeing and delivering a 2015-16 budget that works; progressing the Welfare Reform Bill in the Assembly; and taking the steps required to put the Executive’s finances on a stable footing for the long term. The Northern Ireland Executive agreed their budget for 2015-16, passing their Budget Bill on 24 February, and the Welfare Reform Bill also passed through further consideration stage of the Assembly on the 24 February. Sinn Fein has since withdrawn its support of the Welfare Reform Bill through its final stage in the Assembly. There can be no doubt that this decision was a setback, and the Secretary of State for Northern Ireland chaired a meeting of the party leaders last week in an attempt to help them to resolve the situation. The party leaders have since held further talks, and the Secretary of State proposes to convene another meeting with them later this week.

Changes to the welfare system in Northern Ireland were a key part of the Stormont House agreement and, as the Secretary of State has made clear, it remains pivotal that all aspects of the agreement are implemented. In simple terms, the Executive’s budget for 2015-16 does not balance without progress on these important issues. The Stormont House agreement was a major step forward and, although there has been good progress since the beginning of year, there were bound to be bumps in the road. The Government remain determined to implement the agreement and propose to continue with the progress of the corporation tax legislation through this House. The legislation contains a commencement clause, and commencement will not take place until the conditions set out in the Stormont House agreement have been met and changes to the welfare system in Northern Ireland have been implemented. This means the devolved power will be “switched on” for the planned start date of April 2017 only if the Executive are delivering their side of the agreement, including achieving sustainable public finances.

The unique challenges faced by Northern Ireland have been recognised by all parties. This Bill will allow the Northern Ireland Executive greater power to rebalance the economy towards a stronger private sector, boosting employment, growth and the standard of living in Northern Ireland, with benefits for the wider UK.

I therefore hope that noble Lords will give this Bill a Second Reading.

Stormont House Agreement

Debate between Lord Forsyth of Drumlean and Baroness Randerson

Wednesday 7th January 2015 Lords Chamber

[Baroness Randerson]

The noble Lord points out the complexities of dealing with the range of issues that this agreement covers. The number of bodies being set up is significant. They fulfil a whole range of functions. It is intended that one of them should be established as an international body. It is intended that some of them operate completely independently of political representatives. Others do not, but there is always that balance when there is elected political representation.

It is important to bear in mind that the agreement makes provision for an implementation and reconciliation group to oversee the bodies and the work being done on the past. It is important to bear in mind also that the British and Irish Governments and the Northern Ireland Executive are committed to regular, six-monthly monitoring meetings to ensure that things are proceeding in the fair, balanced and transparent manner that I mentioned.

[Lord Forsyth of Drumlean (Con)]

While understanding the particular circumstances in Northern Ireland, does not my noble friend think that there is a danger in this piecemeal constitutional reform? For example, what are we to say as unionists to the nationalists in Scotland who are demanding corporation tax powers on the grounds that it will help their economy when my noble friend is justifying corporation tax in Northern Ireland being set on precisely the same basis? Should we not be careful in moving forward with devolution that we do so on a basis that is balanced and clearly thought through? Is not my noble friend’s answer that she is not yet able to tell us what the effect on the block grant would be deeply worrying in the context of further devolution of tax powers?

Wales Bill

Debate between Lord Forsyth of Drumlean and Baroness Randerson

Tuesday 11th November 2014 Lords Chamber

[Baroness Randerson]

I may stand to be corrected by the noble Lord, Lord Elis-Thomas, whose experience of Assembly Standing Orders is much more recent than mine, but I believe that the two-thirds majority would still stand on issues such as this. I can see that he is nodding so there would be a requirement for a two-thirds majority, which is an Assembly Standing Order requirement.

I think we would all agree that this is a significant step in terms of Welsh devolution.

[Lord Forsyth of Drumlean]

Why is this being restricted to the referendum and not extended to votes for the Assembly?

[Baroness Randerson]

There is no feeling in the Government that the Bill is an appropriate vehicle for establishing a different franchise for Wales from that for the rest of the United Kingdom. There is, as the noble Lord has argued several times today, a need for consistency across the United Kingdom on certain franchise issues and it is important that we do not take a decision in relation to one part of the country without considering the other nations and regions.

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[Baroness Randerson]

I thank the noble Lord for his intervention. I interpreted that phrase to mean that the decision should be made in Wales and that is what we will be seeking when we bring forward the amendment.

The Government do not accept that it would be right to impose on Wales a new franchise for elections to the Assembly or to local government as Amendments 3 and 11 seek to do, nor do we agree that this Bill should be the vehicle for devolving that power to the Assembly as Amendment 2 seeks to do. Devolving to Scotland the decision on whether 16 and 17 year-olds were able to vote in the referendum had no automatic read-across to the franchise for elections. As I have already mentioned, my right honourable friend the Secretary of State has made it clear that he intends to begin discussions to seek cross-party consensus on the way forward for Welsh devolution. Electoral arrangements in Wales will form part of those discussions. That is the appropriate context for discussing these issues.

[Lord Forsyth of Drumlean]

I apologise for interrupting my noble friend once more and I promise that I will not do it again. Can she be clear about what the principle is? I take her point about consistency across the United Kingdom. Is the principle that 16 year-olds will be able to vote in referenda which are concerned with devolved bodies, or is it a principle that is to be generally applied to all referenda? In other words, would 16 year-olds have the vote, for example, in a referendum on our membership of the European Union, should that ever arise, or is it solely limited to devolved bodies?

[Baroness Randerson]

My Lords, the amendment we are in the process of drafting specifically relates to this referendum on tax-raising powers because there are discussions still to be had across all parties—I suspect there will be lively discussions during the coming general election campaign—on whether votes at 16 should be adopted on a much wider basis.

Wales Bill

Debate between Lord Forsyth of Drumlean and Baroness Randerson

Tuesday 11th November 2014 Lords Chamber

[Baroness Randerson]

The noble Lord makes an important point. By moving forward on a cross-party basis, it is the intention to ensure that there is commitment across the four parties in Wales to ensure that the Bill can come forward in the early stages of the next Parliament.

[Lord Forsyth of Drumlean (Con)]

I apologise because I had to leave the Chamber for part of this debate. I do not understand. If my noble friend is talking about doing this by St David’s Day, which I think is in April—

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[Lord Forsyth of Drumlean]

In March; forgive me or I shall ask people to tell me when Burns Night is. If my noble friend is talking about doing this within six months, why on earth is she against the amendment?

[Baroness Randerson]

The amendment refers to starting within six months of Royal Assent to this Bill—and, of course, that will not take place for some time yet, even assuming that it has a swift passage through the other place.