Corporation Tax (Northern Ireland) Bill

Lord Trimble Excerpts

Tuesday 17th March 2015 Lords Chamber

[Lord Trimble (Con)]

My Lords, it is a pleasure to follow the two previous speakers. Perhaps I may first say to the noble Lord, Lord Hay, how much we enjoyed his maiden speech and how pleased we are to see him here. I shall not try to emulate the achievement of the noble Lord, Lord Alderdice, in going through the noble Lord’s history, but I want to pick out the reference that was made to the noble Lord’s contribution to resolving some of the communal differences within Londonderry. To underline a point that flows almost from what the noble Lord was able to achieve, it is fair to say that the members of the loyal orders in Londonderry have always had a more realistic and more sober approach to problems than people in other parts of Northern Ireland, particularly in and around Belfast, who sometimes did not seem to understand what life was like outside.

Perhaps I may also say how much I appreciated the remainder of the speech of the noble Lord, Lord Alderdice, which focused on taking responsibility—and I agree with everything that he said in that regard. It will indeed be fascinating to see what impact that has on people, although what is happening at the moment does not encourage one to be sanguine about the matter.

The Minister said in introducing the Bill that she would go back into history, but she went back just to 2010. My own recollection of this issue goes back a bit further, perhaps another dozen years, and I shall reflect a little on that. Shortly after finding myself in office, I had a discussion with our finance people about corporation tax—the issue was being raised by businessmen in those days; indeed, even earlier—and I received from the officials I spoke to a very clear answer: that they did not think that the issue was important. They said that while the Republic had the advantage of being able to say, “Our corporation tax is so low”, they could put together a package in Northern Ireland which was just as good and just as competitive as what was available in the south. Much of that package was financial, too, in terms of providing facilities and premises at low rates or with rental and rate holidays, so there were substantial and even more focused benefits and assistance available in that way.

The second argument which the officials gave me for why this was not an important matter was the state aid issue. They said that if this was implemented it would be ruled in Brussels as being state aid. I am deep into the history here. This was before the Azores case and the issue of state aid was a complete block until jurisprudence in the European Union moved as a result of that case to enable people to contemplate it. However, that has consequences because, in framing this, we have to give attention not just to what we would like to do, but also to what Europe will require to be done. The third reason why I was not excited about this is broader and did not flow from anything said to me by the officials, who are strictly neutral in political terms. It flowed from my politics: I am a unionist and believe in the United Kingdom. Faced with this, one’s instinct is that we should act in accordance with what exists elsewhere. Furthermore, on the downside, if we go for a particular advantage for Northern Ireland this will give rise to resentment in other parts of the United Kingdom. That will happen in this case too and has already done in that the matter has been raised with regard to Wales and Scotland. I held that reservation quite strongly 17 years ago but I hold it less so today. When you look at the constitutional mayhem going on around us, it is a bit difficult to dig in for a purely unionist position when there are so few people in office—and elsewhere—who are paying any attention to that position or, indeed, the interests of the United Kingdom as a whole.

I leave my history behind at this point. I will not go on to the detail of the Bill. It is very focused, which is good, and I hope that all its technicalities will operate smoothly as and when it comes into effect. I am sure that if there are any technical problems they will be dealt with, but there are still some major issues which one has to have regard to. This is not a magic bullet. It may or may not be very beneficial but it is wrong to think that it will cure problems by itself. Some of the points raised by the noble Lord, Lord McAvoy, are appropriate here. Going back to the Azores case, if this was implemented there would have to be very significant reductions in the block grant to Northern Ireland to satisfy Europe. We cannot get round this—as used to happen so often with the issue of the Barnett formula—by having a private deal with the Treasury that perhaps nobody knew very much about. This is a European issue which will have to be dealt with very effectively. When it comes into operation there will be a significant reduction, against the background of the last few years when the Treasury has been withholding significant sums from the block grant because of failure to deal with welfare and other issues.

The reduction is difficult to quantify. We will not know until the time comes and there will, no doubt, be a bit of an argument about it. It might not be as bad as it could be, bearing in mind that corporation tax nationally comes down to 20% next year. Coming down from 30% to 12.5% or 10% would be a very huge reduction in the block grant. A reduction from 20% to 12.5% or 10% would not be quite so bad. So the problem may not be as big as it might be. On the question of it not being a magic bullet, we have to bear in mind that corporation tax is not the chief determinant of investment: there are other factors as well. In the briefing paper produced for us, there is a reference to the Varney report in which it was said that:

“In the most recent survey”—

at the time the report was produced in 2007—

“the level of corporate taxation was ranked sixth in importance as a criteria for investment location, behind transport and logistic infrastructure, labour costs, telecoms infrastructure”.

Those were regarded by businessmen as more important than the issue of corporation tax, which underlines the need to be a little bit cautious about it.

We frequently refer to the benefit that the Republic of Ireland has received from its low corporation tax but we should remember that that benefit did not come immediately. It had corporation tax at a low rate for a long period without it coming through in increased FDI. That happened only in the late 1980s after the low tax rate had been in operation for over a decade, I think, before any significant benefits started to roll through.

The helpful note that has been produced for us by the Library has on page 8 a nice little summary from the OECD of its survey on Ireland. Referring to when the low rate of corporation tax started to pay off, it says:

“That began in 1987, with the fiscal and monetary consolidation that aimed at bringing the deficit down”.

It also refers to:

“The social partnership arrangements, which delivered tax cuts in return for wage restraint”.

The paragraph concludes:

“Alongside the tax cuts, expenditure restraint was also important”.

I find it quite interesting that this started to pay off once the Republic started to have sensible financial and fiscal arrangements. We hope we are on the way to sensible fiscal arrangements but we have not quite got there yet. I might come back to that later.

There is another general issue. We hope that the reduction in corporation tax is going to provide investment and that investment will then pay off in increased employment. If this is going to happen on a large scale, there will have to be some capacity available. Here is where the references that were made to rebalancing the economy become crucial. It has been the case for a long time that the public sector in Northern Ireland is far too big. The figure that was given was that it provides for 30% of employment. If you look at gross domestic product, it is nearer 70%. This is not healthy. This does not provide for a good economy. If we are going to hope for private investment leading to employment, we need to have people available for that. You are going to have to find ways to shrink the public sector if this is going to be successful. If you are not taking measures to shrink the public sector, you will quickly run into problems in terms of not attracting people to come and do business because there are not likely to be sufficient skilled people there to meet the demands of business.

We cannot keep putting this issue behind us or pretending that we can avoid dealing with it. We have known for decades of the need to deal with the large public sector. It is something that we tried to make a start on when Mark Durkan and I negotiated the programme for reform and reinvestment 16 years ago. Unfortunately, when direct rule returned in 2002, the officials told the incoming Ministers that the whole thing had been wound up and nothing further needed to be done. That was very far from the truth. Lots more needed to be done and many of the things that we were planning or thinking of doing still have not been done. I know that the parties in the Executive have a lot on their plate at the moment but I want to remind them that they really have to tackle the issue of a public sector that is far too big.

One advantage of reducing the size of the public sector can be seen in the recent expansion of employment in Wales, which was particularly high in the recent figures. Part of the reason for that was the cuts in the public sector. There were not so many juicy, well paid jobs in the public sector and consequently more people started thinking about starting their own businesses. Of course, it is from new small businesses that most employment will be generated. I hope that we see something done on that front.

Finally, I want to come back to something that was implicit—and explicit—in some of the things I have said, and that is the implications for elsewhere in the United Kingdom. If this is carried into practice—and, indeed, even before that—there will be pressure from Wales and Scotland for similar powers. I find it very difficult to see how the Government will be able to resist that. It is undesirable because it will mean that different parts of the country will be in competition in terms of tax and investment, although to an extent that happens already, certainly on the investment side.

One of the merits of the Bill is the way that it is closely focused on being available to companies that are genuinely regional and where there is a genuine employment. The provisions for keeping out the “brass plate” will limit the extent to which there is too much competition between regions, if this becomes available elsewhere. So I think that the Bill, in the way it is drafted, is possibly better suited to be followed in Wales and Scotland than, perhaps, earlier proceedings were. However, that leaves the problem of the English regions. That is a huge problem that should not be avoided. People in England will not be happy if they feel they are being unfairly treated. There is too much danger of that and too much feeling to that effect already in existence, and we should not feed it any further. We should be thinking more about it. The simple way is to encourage the Chancellor of the Exchequer to accelerate his programme of national corporation tax reductions, and we might end up—the noble Lord, Lord Alderdice, thought that this might never come into operation—with it never coming into operation because the corporation tax has been reduced so far throughout the United Kingdom as a whole that there is no need for it. That would be a very happy result.

--- Later in debate ---

[Lord Browne of Belmont (DUP)]

My Lords, I congratulate my noble friend Lord Hay of Ballyore on an excellent maiden speech. During his long public service, he has continually sought to achieve consensus between the two communities in Northern Ireland and he has had a great deal of success in that. His fair-mindedness, negotiating skills and ability to remain calm when faced with adversity will enable him to make a useful contribution in this House.

I wholeheartedly support the Bill and it is fitting that it will complete its parliamentary stages on St Patrick’s Day. I am not suggesting that we will be celebrating the Bill in 1,000 years’ time, but it has the potential to transform Northern Ireland’s economy in the long term and to ensure a level of prosperity that the Province has not enjoyed before. Although today is the end of the parliamentary process, this is far from the end of the corporation tax story. To quote Sir Winston Churchill,

“this is not the end. It is not even the beginning of the end. But it is, perhaps, the end of the beginning”.

Indeed, what a long beginning this has been. The campaign for the devolution of corporation tax for Northern Ireland in its present form dates back a decade. I thank the business groups that have supported the campaign to build a political consensus on this issue for many years. Their work helped to build support for corporation tax devolution not just among Northern Ireland’s politicians but among key Northern Ireland Office and Treasury Ministers. That support proved invaluable when difficult times came.

I pay particular tribute to Northern Ireland’s First Minister, Peter Robinson, who played a very significant role in championing this cause in the Northern Ireland Assembly. I also thank the present Government for taking the initiative on this and responding to the united political call from the Northern Ireland parties. I am sure that at times it would have been easier to accept the Treasury orthodoxy on such matters rather than to take a new policy initiative. Despite any doubts that it may have had, the same Treasury did not hesitate to commit itself to drawing up the Bill. I know that the policy of corporation tax devolution has not been enthusiastically supported by the Labour Party but I must acknowledge its role in ensuring the Bill’s smooth passage through Parliament.

Strictly speaking, the Bill does not devolve corporation tax powers to the Northern Ireland Assembly but allows the Assembly to set the Northern Ireland rate of corporation tax, with every other aspect of the regime remaining the responsibility of Her Majesty’s Revenue and Customs. That is why I think that those who have some concerns about the Bill on constitutional grounds are wrong. The Bill does not in any way undermine the union between Great Britain and Northern Ireland. Indeed, if this policy proves to be a success, it will mean that Northern Ireland will make an increased contribution to the United Kingdom economy. That can only be good for Northern Ireland in particular and for the United Kingdom as a whole.

There are others who argue that Northern Ireland will not reap the rewards of a lower rate of corporation tax but will pay too heavy a price in the reduction of public expenditure. Time does not allow for a comprehensive rebuttal of this argument but I will briefly make the following observations.

First, most economists agree that a reduction in the corporate tax rate is one of the most effective policy tools to achieve a rebalancing of the Northern Ireland economy towards the private sector, which in my view is an essential prerequisite for future economic prosperity. Convincing evidence is provided in a recent study by Ulster University’s Northern Ireland Centre for Economic Policy, which has estimated that the lowering of the corporation tax rate to 12.5% from April 2017 would result in the creation of 37,500 additional jobs by 2033. In simple terms, that means more jobs and better jobs. It means more money circulating in the local economy, and a higher standard of living and a better quality of life for everyone in Northern Ireland. In the longer term, it means that we have the capacity to fund public services at the level many of us would wish to see.

A lower rate of corporation tax is good not just for foreign direct investment but for our indigenous businesses. While a reduced level of corporation tax for Northern Ireland is not in itself a panacea for all our problems, the Bill as drafted provides useful safeguards on several technical issues. The separate arrangements for large companies and SMEs and the exclusion of profits from investment and certain other activities seem eminently sensible. This should discourage tax avoidance through brass-plating and encourage employment-creating trading activities and foreign direct investment.

Secondly, the experience of the Republic of Ireland would indicate that a lower level of corporation tax has been one of the key drivers of its economic success. It is no coincidence that, even at their lowest economic ebb, this is the one policy that the Republic of Ireland’s Government have refused to give up.

Thirdly, it must be recognised that this policy will involve difficult decisions about reductions in public expenditure. In my view, the Northern Ireland Executive will have to prioritise interdepartmental discussions to arrive at a budget agreement to facilitate the earliest possible implementation of the rate cut.

I do not pretend that significant issues and challenges do not remain, both in terms of agreeing all the final details and in relation to the other measures that the Northern Ireland Executive will have to put in place to ensure that the policy is a success. I am confident, however, that these challenges can be overcome.

After today, the next phase is the rollout of this power: it will pass to the Northern Ireland Executive to take forward. We now need the Executive to agree what the Northern Ireland corporation tax rate should be, from when it should apply and over what period it should remain in force. In these areas, with some compromise on all sides, I believe that agreement can be reached.

My party’s preference would have been for a 10% corporation tax rate, but it is prepared to go along with the emerging consensus that the rate should be 12.5%. The earliest possible date for the introduction of this rate is April 2017. Given that we have waited so long for this power, the rate should be introduced as soon as possible after that date. A quick decision will enable Invest Northern Ireland to go out and sell the policy to those investors for whom a low headline rate—

[Lord Trimble]

I thank the noble Lord for giving way. He is talking about the desire to have quick decisions on this. Did I miss something? Did I miss him saying when the implementation of the Stormont House agreement would be sorted out through fully providing for welfare reform and implementing it? I did not hear that.

[Lord Browne of Belmont]

I am saying that this cannot be implemented until all these things are sorted out.

Finally, I hope that there will be a political consensus that the lower corporation tax is not merely a short-term experiment but a policy that will be in place for many years. That is what is needed to give the long-term confidence to businesses and investors that Northern Ireland is the place to do business. The Bill will provide a sound basis for the development of a productive economy fit to survive in the very competitive global economy. It is a good example of positive co-operation between the Northern Ireland Executive and the Westminster Government and I trust that it will be one of many in the coming years.

--- Later in debate ---

[Lord Newby]

I am not sure that is a threat in respect of Northern Ireland. I disagree with the noble Lord about both the principle of devolution and its effect. The SNP is at 55% in the polls today but, if I were a betting man, I would say that it will not be at 55% in the polls in 10 years’ time when we have seen how it manages taking responsibility for Scotland’s own income. It seems to me that one of the great weaknesses about the current settlement in Scotland is that the Scots Nats or the Government in Scotland wait to get a cheque from England but, however big it is, it is not big enough, and they do not have the responsibility for raising the money themselves. Now, they will have significantly greater responsibly for raising the money, and that will mean that they have to take more responsibility. I think that is wholly beneficial. I just disagree with the noble Lord, I am afraid.

The noble Baroness, Lady Blood, asked about building societies and credit unions. The effect and the design of the scheme is that in order to attract genuine economic activity, some mobile trades and activities are excluded, including lending and investing. The rules in respect of lending and investing do not distinguish between types of entity, so banks and building societies are treated on the same basis for that purpose. In respect of credit unions, the Northern Ireland corporation tax regime applies only to trading activity in order to encourage genuine employment. The income from the loans that credit unions make to their members is not currently taxed as trading income, so credit unions do not pay corporation tax on that income. Given those special rules already in place, this income from loans will remain outside the Northern Ireland corporation tax rules. Perversely, to bring the profits within the trading income rules, and so within the Northern Ireland regime, would likely result in them paying more tax. I do not think that credit unions are being disadvantaged by this.

[Lord Trimble]

I am going slightly off the noble Lord’s point on credit unions and back a little bit. I think it is a mistake to rule out financial services. Northern Ireland missed out completely on the changes that have taken place in financial services in the United Kingdom over the last 20 years. We do not have a significant financial service sector at all, yet that sector is much more profitable than nearly all the other sectors of economic activity in the United Kingdom. You are keeping the most valuable service sector, in which we do not have any significant representation, away from us. If you want to rebalance the Northern Ireland economy that really ought to be up at the top of the list.

[Lord Newby]

I am afraid that the Government have not taken that view in the way they have produced this. They have thought about it and decided that they did not want to go down that route.

The noble Lord, Lord Shipley, talked about the broader impact of the measure and of APD on the rest of the UK. I agree with him—he will not be surprised to know—in that these things need to be dealt with under a constitutional convention. Nobody could claim that the devolution picture across the UK is anything other than rather piecemeal and the time is long overdue for us to try to bring a bit more coherence to it, not least in terms of the English question.

The noble Lord, Lord Empey, talked about the necessity for the parties in Northern Ireland to agree on the budget reduction. Everybody agrees that the budget reductions should have been embarked on earlier, but the process has now started and we are determined to encourage and support the Executive in the future as they grapple with these issues. We are totally clear that the Executive must balance the budget and, to do that, welfare reform must go ahead.

The noble Lord, Lord Forsyth, ranged widely over our constitutional issues and problems. He did not mention that Yorkshire Day is in the middle of the Summer Recess and therefore I will be denied the possibility of getting a big set of powers devolved to Yorkshire, for which I am extremely sorry—but we cannot have everything. I think the noble Lord’s characterisation of the extent to which this would complicate the system and make life difficult for businesses was slightly overdone. The rules we are introducing for larger companies are based on existing OECD principles which companies already operate. As he pointed out, the design seeks to retain coherence within the corporation tax regime as whole. Only one variable is being affected and the whole system is being administered by HMRC, with which all the companies already have relationships.

The noble Lord, Lord McKenzie, asked a number of detailed questions, some of which I hope I can deal with. He asked whether the notional profit attributable to back office was creditable in the rest of the UK tax computation. This notional profit forms part of the attribution of trading profits to the Northern Ireland regime, so will not feature as mainstream—to use the language of the Bill—profit; that is, non-chargeable at the UK rate.

European Banking Union: EUC Report

Lord Trimble Excerpts

Thursday 24th January 2013 Lords Chamber

[Lord Trimble]

My Lords, it is a pleasure to follow the noble Lord, Lord Harrison, and his admirable presentation of his sub-committee’s report. I also want to congratulate him on the way in which he has handled his chairmanship of that sub-committee.

I want to focus initially on two of the major issues in the sub-committee’s report. The first relates to what the noble Lord has already referred to as the incomplete nature of the EU proposals for a banking union. The committee had pointed to the need for the single supervisory mechanism, proposals for which were published in September 2012, to be joined by a common resolution mechanism and a common deposit insurance scheme.

The single supervisory mechanism was agreed by heads of government at the December European Council meeting but will not, as I read it, be operational until some time in 2014. The Council also called for work on proposals for directives on recovery and resolution and on a deposit guarantee to be accelerated so that the directives could be agreed by the end of March 2013, enabling the Commission to bring forward a proposal for a single resolution mechanism in the course of 2013. I must say that that timetable seems remarkably optimistic and I look forward to what the Minister has to say on that point. Parenthetically, I suspect that the two different timetables were deliberately chosen so that the German voter would not be scared off.

Another major concern of the Select Committee was that the UK should secure a mechanism that would ensure that the eurozone members would not be able to dominate the non-euro members. Initially, there was understandable scepticism about the Government’s prospects of achieving this, so we should congratulate the Government on having achieved substantial progress on it. As Commissioner Barnier said in a speech just after the December Council meeting:

“According to the new voting modalities, any EBA decisions will have to be approved by a majority of countries outside the Banking Union”.

I am always fascinated by the use of this term “modalities” in a European context because it does not really tell you anything about what the mechanism actually is. However, looking at other material, it would appear that this requirement for approval by a majority of countries outside the European banking union will be contained in amendments to the European Banking Authority’s regulations, so that there is a clear legal basis for it there.

That is just the key decisions in the EBA. What about other decisions? The Financial Secretary to the Treasury, Mr Greg Clark, in his letter to my noble friend Lord Boswell, said that the double majority, “will also apply to key decisions including those relating to binding technical standards that will apply to firms across the single market”. He says that this is a, “supplementary requirement to existing voting arrangements”. Can the Minister clarify this? I have not seen anything that indicates how this supplementary requirement is actually inserted: what is the legal mechanism that brings this supplementary requirement into place? Furthermore, Greg Clark says that this will not be a permanent arrangement because the requirement will be reviewed if there are four or fewer euro states.

Commissioner Barnier’s speech says that it was the UK, the Swedes and the Czechs who sought a level playing field in the December meeting. That puzzles me slightly. Is Barnier’s list complete? I would have thought that we had more than three supporters on that and am particularly curious about the position of Denmark.

Our committee, in accordance with its usual practice, confined itself strictly to the banking union and considered that in a consensual manner. It did not go into other developments and related matters that might be slightly more controversial, but I shall tiptoe into those areas where the committee refrained from treading. Banking union itself will not be enough; it will need a fiscal union and an economic policy union. These matters are coyly mentioned in the December Council conclusions as,

“further integration of the fiscal and economic policy frameworks”.

Eventually, these will require treaty change. However, probably at an earlier stage, by one means or another, it will require what the Germans call a transfer union. At the moment, how and when that will kick in is shrouded in mystery, but it will have to. Some of us had the pleasure of meeting the Bundestag’s EU committee here a few weeks ago. Its chairman emphasised to us that Germany was prepared to accept the burdens that would flow from the banking union and, in response to a question from my noble friend Lord Flight, said that he recognised the balances that had accrued through the “target” system.

On all these matters, my doubt is principally whether the safeguards that our Government have achieved can be sustained. For those who believe in “ever closer union”, the achievement of that goal must now be focused on the eurozone, with the non-euro countries either a temporary expedient or a long-term aggravation.

If the euro survives and if the “outs” move to being “ins”, as most of them are obliged to do, it is probable that the views and interests of the ins will dominate the operation of the single market. Unless our safeguards are embodied at treaty level, it is difficult to see them surviving generally—and certainly when the review kicks in after the number drops to four. How we then respond will depend on what we think is the value of the single market, a market with which we have an adverse trade balance, which takes a minority and declining share of our exports while imposing costs on our global business activity, and which, we must remember, is even now a social market rather than what most of us in the UK would call a free market.

My other doubt is whether the Council and the Commission are heading in the right direction. Many years ago, when I had the pleasure of being a member of Sub-Committee A, we did a report on the euro 10 years on. This was before the credit crunch struck. In preparation for that report, we spent a fair amount of time with witnesses on the possible vulnerabilities of the euro—of course, very little of this went into the report because it was essentially speculative. Those who gave opinions to us generally agreed that the eurozone could be vulnerable if struck by a serious, asymmetric shock. The crisis which followed was such a shock. I remember one witness who mentioned this possibility also saying that we must remember that a country can take a lot of hurting. He explained this by reference to Italy, where, in the 1860s, the Mezzogiorno, or the Kingdom of the Two Sicilies which it was before that, was rapidly integrated into the new Italian state on terms which left it locked into poverty and low development in contrast to the prosperous north. Even 150 years after that integration, there is no sign of that uneven relationship changing. Today, there is the prospect of the European Union’s Mediterranean countries becoming effectively an enlarged Mezzogiornio, in a crisis which was caused partly by the euro but from which the euro prevents escape.

I would say to those pressing for banking union and the other unions that flow from it, “Don’t reinforce failure. Don't subject the social fabric of the Mediterranean countries to this awful strain”. They, and maybe some others, too, need a better model for the future.

Northern Ireland: Corporation Tax

Lord Trimble Excerpts

Monday 15th October 2012 Lords Chamber

[Lord Newby]

The Government absolutely acknowledge that Northern Ireland is a unique case. That is why, while the whole issue of regional aid in the EU is being looked at at the moment, the Government are working very closely with Northern Ireland officials to consider how best to make the case for Northern Ireland receiving assisted-area coverage over and above that which would normally be provided for the rest of the UK.

[Lord Trimble]

My Lords, will the Minister tell me whether the Government have obtained assurances from the European Commission that it will not regard this as unlawful state aid? If they take that view, there is absolutely no point in taking it. In view of this issue, can he also say whether it would not be better to accelerate the Government’s programme for reducing corporation tax generally?

[Lord Newby]

My Lords, the Government are reducing corporation tax and in a relatively short period it will be down to 22%, which makes the differential between Northern Ireland and the Republic that much less than it was in the past. I can assure the noble Lord that, as long as the Azores principles are followed, this will not constitute a call on state aid.

Shipping: Tax Revenue

Lord Trimble Excerpts

Wednesday 18th January 2012 Lords Chamber

[Lord Sassoon]

My Lords, I am surprised that there are any suggestions of some cosy deal. After all, this was a tax introduced by the noble Lord’s Government. He now says that he might have done a cosy deal. It has put British shipping ownership on a level playing field with other countries in Europe; it involves state aid, and the EU at some stage will review it. If anything, the complaint that we get is that other countries take unfair advantage of the EU dispensations.

As to what the other House has to say, I am sure that noble Lords will not need reminding that it was as recently as 1628 that this House stood up to another place on the question of tonnage and poundage and got us into frightful trouble, not least with the attempted impeachment of the Duke of Buckingham, who put forward the proposal. So I am certainly not going to cross swords with another place on this topic.

[Lord Trimble]

I listened with interest to the Minister’s reply to the noble Baroness, Lady Kramer. He said that the tax, by reducing the amount payable so far below what would be payable in corporation tax, led to a huge increase in tonnage. Does that not indicate that there ought to be a similar movement in corporation tax generally and that it would be hugely successful?

[Lord Sassoon]

My Lords, what it indicates is that tax competition and not having tax dictated on some uniform basis from Brussels is something that we will defend to make sure that where appropriate we can take advantage of that. We will have the lowest corporation tax regimes in the G7 and then one of the lowest in the G20. That will make our industry highly competitive on tax.

Currency Markets

Lord Trimble Excerpts

Wednesday 2nd February 2011 Lords Chamber

[Lord Sassoon]

My Lords, the European stability mechanism is the permanent mechanism that will replace the temporary arrangements and there is a commitment among European leaders to complete the design by March 2011. Even though we are not in the eurozone and will not be a member of the new stability mechanism, we have been invited to participate in the design. My right honourable friend the Chancellor confirmed to President Juncker, I think on 7 December, that the UK would take up that invitation to participate in the design.

[Lord Trimble]

My Lords, will Her Majesty’s Government be prepared after 25 February to support the Irish efforts to renegotiate the interest rates on the finance made available to Ireland, as that would be preferable to a default, which would almost certainly be the alternative to such a renegotiation?

[Lord Sassoon]

My Lords, I think that we had better see how this plays out. It is encouraging that the European financial stability fund was able to make a successful bond issue at the end of last month. There was something like €45 billion of demand, which, in the technical phrase of the markets, was considered a blow-out—a hugely successful deal. That brings into question whether the terms can in any way be softened, but we had better wait to see how this evolves.