Corporation Tax (Northern Ireland) Bill

Debate between Lord Forsyth of Drumlean and Lord Alderdice

Tuesday 17th March 2015 Lords Chamber

[Lord Alderdice (LD)]

My Lords, it is a great pleasure to follow the noble Lord, Lord Hay of Ballyore. I have been looking forward to his maiden speech for some time. He succeeded me as Speaker of the Northern Ireland Assembly, and when it was announced in August last year that he would be coming to your Lordships’ House, I thought, “That is wonderful”. It has taken quite a while, but that is because he has had something of a scare. Sometimes when people are appointed to your Lordships’ House they say, “My goodness, I was so surprised that I nearly had a heart attack”. The noble Lord took that further than most people, which set him back a bit, so it is wonderful to see him in this House and to hear him speak.

Colleagues will know of the noble Lord’s long and distinguished public service in Northern Ireland. He was elected to Londonderry City Council in 1981, became deputy mayor of the city in 1992 and mayor in 1993. He was elected to the Northern Ireland Assembly just after the formation of the Belfast agreement in 1998 and went on to be appointed Speaker in 2007. He served for some seven years until the latter part of last year. He has done a lot of other things as well. He was a member of the Northern Ireland Policing Board, the Northern Ireland Housing Council and the Londonderry port authority. He has held many distinguished positions, but what noble Lords may not necessarily know about—because it is not the kind of thing that is recorded in Wikipedia, Dod’s or whatever—is the kind of work that the noble Lord has done quietly and privately but most significantly, especially in the city of Londonderry. There have been many difficulties, but as a member of the Orange Order and of the Apprentice Boys of Derry, quietly and behind the scenes he has forged remarkable friendships. He has demonstrated real leadership and—I make no criticism of his party here—he was prepared to go out in front of his party on occasion to lead it on to developing relationships with people in the nationalist and republican community which later would become an everyday matter. He was out in front and doing these things in a quiet and thoughtful way.

Consider his experience in the Northern Ireland Assembly. I know, from talking to members of all political parties, staff in the Speaker’s office and staff in the clerking department, that he is held in great affection and regarded with great appreciation for the quiet, thoughtful work that he does. This House will find that he will continue that kind of public service here. He is a man of great courtesy and thoughtfulness, but also a man of real determination to make things better for his community.

One of the other distinctive things about him, which makes St Patrick’s Day a particularly appropriate day for him to come here, is that he is an Irish citizen. He was born in Milford, in County Donegal. One does not necessarily associate noble Lords from the Democratic Unionist Party with Irish citizens, although one never knows what the future may hold. For him, it is a very distinctive feature, and he comes here on St Patrick’s Day as an Irish citizen.

Of course, this is an important day for the Corporation Tax (Northern Ireland) Bill as well. The noble Lord, Lord Hay, knows, because of his experience on both sides of the border, that the relationship between north and south was one of the important strands that we were trying to address in the Belfast agreement. One of the economic dilemmas we have faced is that corporation tax on the other side of the land frontier is much lower than in Northern Ireland. It has been one of the great successes that led to the Celtic Tiger, with its positive and difficult sides, but it is an important challenge for us economically in Northern Ireland.

My noble friend raised some questions as to whether this was just a money Bill or whether there were other elements to it and whether the Speaker of the other place had gone a little far in his certification of the Bill. As a former Speaker speaking just after a former Speaker, I do not think the noble Lord would expect me to question what the Speaker in another place would say, but there is more to the Bill than simply the question of money. No one, I think, would believe that the Bill on its own will address all the economic problems of Northern Ireland—far from it—but there is an important principle here. There are those in Northern Ireland who seek better relations with the Republic of Ireland economically, politically, socially and otherwise. It is very important that nationalists and republicans have it put to them that it is possible to move to greater tax harmony north and south of the border, but there are economic realities if you do that.

In Scotland, which my noble friend comes from, the Scots Nats have for years been claiming they wanted more powers, but they never used the income tax powers that they were given in the legislation of devolution. Had they not been given them, they would of course have complained. Here is the opportunity for nationalist and republican politicians, along with Unionist, Democratic Unionist and Alliance politicians, to face up to the political and economic challenges of instituting a corporation tax rate that is closer to that of the Republic of Ireland and different from that of the rest of the United Kingdom.

This is where we move from institutions of power sharing to the reality of responsibility sharing. We saw the dilemma of that just before Christmas last year, when the issue of welfare came forward, with all its social and financial implications. It was a real hurdle for people in the nationalist and republican communities to overcome.

[Lord Forsyth of Drumlean]

I am most grateful to my noble friend. I apologise for interrupting him, but as he has mentioned the Scottish position, I am, unusually for me, defending the Scottish Nationalists. The reason that the tartan tax powers were never used, by way of explanation for them, was that they could only set the rate. They could not change the allowances. This is precisely the position in the Bill, which allows Northern Ireland only to set the rate, while the allowances and all the other conditions are set centrally. Does it not have the same problem that prevented the Scots from doing so?

[Lord Alderdice]

No, it is not. I think it is the same problem, but I do not think that is the reason the Scottish Nationalists did not go down that road. I think the reason was they like to eat their cake and have it. They liked the possibility of being able to complain that they do not have the power to do things, but then, when they have the power, but there is an actual cost to doing it, they do not do it. I think we will find exactly the same thing in Northern Ireland. We had this dilemma over the Stormont House agreement. Nationalists and republicans signed up for the agreement and knew perfectly well that the sums did not add up. Then, when there came to be a bit of pressure and people asked, “Well, how does this actually work out?”, they backed off from it, and now they will find themselves having to move forward. The truth is that the peace process is less like riding a bicycle and more like playing an accordion, where people move backwards and forwards instead of straightforwardly. That is the reality of politics.

The Bill does not devolve corporation tax; it makes it possible for the devolution of corporation tax to take place—if there is responsible, political and economic governance in Northern Ireland, if there is a responsible budget that adds up, if parties then look at it and want the power, and if they then decide to implement it. In fairness, the world has changed economically over the last number of years and corporation tax in the Republic of Ireland may not stay at its current level, but in a sense those are secondary issues. This is about people having power to act responsibly and a responsibility to share that power in a serious fashion, taking into account all the dilemmas that are present.

On this St Patrick’s Day, when we share our patron saint as we share the piece of territory and the politics of the island, with different perspectives and different views but nevertheless with a sense of vision and hope for the future, with all the difficulties and dilemmas that we have, this is an opportunity to challenge my colleagues at home to use the power and responsibility that are being offered to take us forward. I hope that none of us here or there will be found wanting in that regard.

--- Later in debate ---

[Lord Forsyth of Drumlean]

I understand that. I was making the point, perhaps wrongly, that one reason why it has not been done is that it would result in a reduction in the block grant—the point made so eloquently by the noble Baroness, Lady Blood. I think that my noble friend Lord Alderdice earlier referred to the position in Scotland, where the Scottish Parliament allowed its income tax raising powers to desist. They were never used. The reason they were never used was that using them would have resulted in a corresponding reduction in the block grant. It is not terribly electorally smart to tell people that you are going to put their income tax rate up by 3p and, in return, you are going to have the block grant—which is already very generous because of the Barnett formula—reduced by exactly the same amount, so you ask people to pay more tax in order to stay where they are. Exactly the same applies here, unless you believe that a reduction in corporation tax will result in more revenue. I do believe that that is the case, but I would prefer to see this Government, who have made fantastic progress in reducing the rate of corporation tax for the United Kingdom as a whole down to 20p for the next financial year, continue in that way. If we think that there is such a huge problem in tax competition from the Republic of Ireland, the answer to that is to reduce our corporation tax rates nearer those of the Republic of Ireland. But we do not do that because the cost would mean that we would have to make cuts in other public services, such as health and education. Exactly the same applies to Stormont.

[Lord Alderdice]

I am very grateful to my noble friend for giving way. The problem that I have found is that these changes are not made because they do not work for the Treasury here in London, and it regards the value for people in Northern Ireland to be far too small an issue, one that does not get any attention paid to it. That is the reason. The reason for the air passenger duty with respect to the United States is because it is so easy for people to go across the border and to fly out of Dublin. The whole point is that there is a land border. If Scotland was to leave the United Kingdom, I think that you would find that a lot of those kinds of changes became relevant. But it is very important to understand that the situation in Northern Ireland is quite different from that in Scotland, because it is so small, does not have a large financial industry and has a land border. Those are the many reasons why read-across to Scotland does not work, with due deference to my noble friend.

[Lord Forsyth of Drumlean]

I think that the argument about the land border is overemphasised. I happen to know that people fly from Scotland to Dublin to go on international flights because the flights from Dublin are priced by the airlines at a very much lower rate. That has nothing whatever to do with air passenger duty or taxation and everything to do with the view of the commercial airlines of what the market will bear for their fares. It is a very simple thing to hop on an aeroplane—there are about six or seven a day out of Edinburgh and as many out of Glasgow—to go to Dublin and then to fly to wherever you want to go, to Hong Kong or the United States or wherever. So I do not think that that argument holds water; but perhaps that is a mixed metaphor, because my noble friend is arguing that it is about a land border.

I am totally opposed to giving air passenger duty powers to the Scottish Parliament because it will have a catastrophic effect on Newcastle and the rest of the north of England. Already the amount that we pay in taxes is very considerable. I am arguing that as a United Kingdom we should have a unitary tax system and that this tinkering is absolutely inimical to maintaining a United Kingdom. If as a United Kingdom we believe that reducing corporation tax will result in more revenue and business development, that should be the policy for the United Kingdom.

The noble Lord, Lord McAvoy, chided me for attacking capitalism when it was his job. I was merely pointing out to him the inconsistency of his position. If he supports this Bill and argues that he is in favour of these reductions in corporation tax to help business expand and grow, he cannot at the same time satisfy the noble Baroness, Lady Blood, in her concern about the impact—even if you believe, as I believe, that cutting the top rate of tax from 50% to 45% has resulted in revenues going up by £8.5 billion. I believe that tax cuts can have a dynamic effect. Similarly, when the Liberal Democrats insisted on putting up capital gains tax from 18% to 29%, what happened? The revenue went down by several billion pounds. My noble friend nods; I apologise for not being very positive. However, even if you believe that that is not the case, there is a time lag, and in between times you do not have the money and you have to take that money away from public services. The noble Baroness made that point. I do not think that will be particularly popular and it seems a very strange approach to a situation where people cannot agree on balancing the budget and on meeting their obligations as it is. So I think this Bill is a deal and a piece of constitutional tinkering which is misguided in its approach.

As a Scot, I am worried because I have not heard a single argument here today, other than there is a land border, which will enable me to fend off the devo-max brigade in Scotland and the nationalists who are now running rampant in the polls. The latest poll has them on 55%. That has all been caused by raising expectations and confusing two things—that is, confusing more powers with more money. Everyone in this Chamber knows that having more powers will actually mean less money, but it is being sold to the voters—I suspect that it may well have been sold in this way in Northern Ireland—that if their parliament has more powers, they will have better education and health services and better everything else. However, that is a fantasy. When people wake up to the fact that this is a misguided fantasy, they will blame London and our United Kingdom will be fractured. Therefore, I am very disappointed by this Bill.

However, I agree with my noble friends Lord Alderdice and Lord Trimble on the importance of stimulating the private sector. Scotland also has too large a public sector and we need to encourage business, but corporation tax is paid only by profitable businesses and businesses which are generating capital for investment. However, lots of businesses are struggling. If you want to encourage businesses and cut taxes—that is a priority—why not deal with business rates and levels of national insurance, as I hope my right honourable friend the Chancellor will tomorrow? Corporation tax is a very odd choice indeed.

For all that is said about the success of the tiger economy in the Republic of Ireland, corporation tax receipts went up so dramatically in the Republic when the rates were low because lots of businesses operating in the United Kingdom repatriated their profits to the Republic. According to leaks that have emerged before the Budget, the Chancellor says that he will take action against the Amazons and others who organise their affairs so that they pay tax in low corporation tax countries. The Government seem to be trying to have it both ways.

By the way, no one has mentioned the impact of all this on the Barnett formula. The Labour leader in Scotland is saying that if people vote nationalist, they will lose Barnett. If you continue to devolve more and more tax-raising powers to the constituent parts of the United Kingdom, by definition you will erode and lose Barnett. As was pointed out in the earlier part of the debate, we also have to think about why there is such a disparity in grant to the constituent parts of the United Kingdom. Therefore, as we go down this road, we must move towards a more needs-based system of funding which again will put pressure on Northern Ireland and the public services. So I am with the noble Lord, Lord McAvoy, in arguing that we need a constitutional convention and we need to look at these things as a whole and not on a bit-by-bit basis. Does the noble Lord wish to intervene?

Business of the House

Debate between Lord Forsyth of Drumlean and Lord Alderdice

Thursday 29th November 2012 Lords Chamber

[Lord Alderdice]

Does my noble friend the Leader of the House share my curiosity that there was such unanimity in this House, and indeed in the other place, in welcoming the developments of very unusual forms of coalition in my part of the United Kingdom and regarding those as important pieces of political progress, and yet when it comes to having to face exactly the same kinds of issues of coalition together in this place, there seems to be a mixture of puzzlement and amusement? Would it not be wise for those who may find themselves in a coalition Government in the future to be a little more circumspect or they will find such matters being quoted against them, as has repeatedly been the case in the last little while on a number of matters of policy where the Labour Party in its previous incarnation said rather different things from what it has said while on the opposition Benches?

[Lord Forsyth of Drumlean]

Surely this House is about holding the Government to account, and we have Statements so that we can hold the Government to account—not for people to issue their manifestos on particular issues. Surely the purpose of this House is to hold the Government to account, but we need someone to tell us what the Government’s policy is. We cannot have a pick-and-mix approach to government policy. Are we to find that Ministers speaking from the Front Bench give two answers to the same question? What conclusion can we reach if they give different answers to the same question?