Corporation Tax (Northern Ireland) Bill

Baroness Laing of Elderslie Excerpts

Wednesday 4th March 2015 Commons Chamber

[Shabana Mahmood]

With respect to the hon. Lady, the whole scope of the Northern Ireland regime under the Bill relates to trading profits. Credit unions do not pay corporation tax on their trading profits, so this Bill does not impact on them. I am not sure how many ways there are of saying that; I feel that the different formulations of the point have probably been covered. If the credit unions did pay corporation tax on their trading profits, we would be having a different discussion. If Members wish to see a devolution regime for Northern Ireland that includes activities other than trading profits, so that corporation tax would be paid on investments, income and so forth, that is a big call to make. If provisions were to be applied but limited to credit unions alone, it would mean carving out an exception to the regime. Let me say that that goes beyond the context of the agreement struck between this Government and the Northern Ireland Executive—the agreement that we have supported and the agreement that is the subject matter of the Bill. I would have a huge amount of sympathy if credit unions found themselves caught because they did pay corporation tax on their trading profits, but that is not the case, so—

[Madam Deputy Speaker (Mrs Eleanor Laing)]

Order. The amendment has been discussed and withdrawn. We had a lengthy debate on it and we do not have a lot of time for this part of the debate, so we must stick to what exactly is in the Bill—and nothing more.

[Shabana Mahmood]

I am grateful, Madam Deputy Speaker, and I will move on to the rest of my remarks.

--- Later in debate ---

[Ian Paisley]

The hon. Lady makes a good point—it is key. This tax is not just about investment in Belfast, Londonderry or key cities; it is about investment in the whole of Northern Ireland. The Prime Minister recently stated that he wanted to make the United Kingdom the “factory of Europe” and attract more jobs into the UK, and I hope he was speaking for every part of the UK. I hope he wanted to see those investments coming across not just to London and the south, but to all of the UK, because that is what we really need—we need more investment. I know that the hon. Lady wants to see investment in her constituency. My constituency is carrying what is going to be the single largest job loss in Northern Ireland in several years, with the closure of the JTI Gallaher factory in 2017. I want to see those jobs filled. I want to see opportunity created whereby more investment will be happening in my constituency and more factories will be brought there. If the current Government are returned, I hope that they will add meat to the bones of that call to turn the UK into the factory of Europe by bringing jobs, not only to the hon. Lady’s constituency, but to mine and, indeed, to all our constituencies. I hope we see a balance in the investment that is going to be made.

In an earlier intervention, the hon. Lady also called for a reduction in VAT, especially on our tourism trade, and I fully support that. Tourism is one of the key areas where we are trying to grow our economy and attract new business investment, with new hoteliers and new companies. If we can reduce VAT in that sector, we will see it grow. Again, we compete with the Republic of Ireland in that sector, but it has a lower tax rate and that damages us. We really need to try to make progress on that.

[Madam Deputy Speaker (Mrs Eleanor Laing)]

Order. I know that the hon. Gentleman will be very careful in sticking to the narrow confines of the Third Reading of this Bill. I appreciate that the points he is making are tangentially attached to the Bill, but I am sure that, in concluding, he will be referring entirely to the Bill.

[Ian Paisley]

Thank you for that prompt, Madam Deputy Speaker. I was actually at the point of conclusion, and I thank you for reminding me that I do have to conclude. I know that hon. Members are captivated by my oratory today and want me to continue, but I must desist and so I shall leave those points with the House.

[Mark Durkan]

I will probably differ in some emphasis and some recollection from the hon. Member for North Antrim (Ian Paisley), but I wish to begin on a point of absolute harmony, in offering thanks to the hon. Member for Tewkesbury (Mr Robertson) and all the members of the Northern Ireland Affairs Committee, who tilled this hard ground over quite some time, some years ago. The hon. Member for Tewkesbury has rightly been generous in acknowledging the role played by his colleague, the right hon. Member for North Shropshire (Mr Paterson), and I will do so, too.

The devolving of corporation tax to Northern Ireland has not always been the point of constant unanimity that it appears to be today. People did have different approaches and different concerns about it; back when we were negotiating the Belfast agreement or Good Friday agreement some of us wanted fiscal discretion as part of the devolved package, whereas most parties did not. My party was in the very small minority of those that did, and we were particularly clear about the corporation tax side of things. When we did get our institutions up and running, some of us argued the need for devolving corporation tax so that we could do more to maximise the north-south potential for inward investment on the island of Ireland, but many people resisted that idea of working with the south on inward investment. For that same reason, those people were very iffy about the idea of devolving corporation tax, as they felt that somehow it was going to separate Northern Ireland from the Union and be a chink in Unionism. I am very glad that, because of a variety of different experiences, positions have adjusted and moved on in that regard.

Reference has been made to the Varney review. When Sir David Varney was conducting the review of corporation tax issues under the previous Government, he made it clear that he was hearing different views from different parties in Northern Ireland and, in particular, from different Departments and from different Ministers. In fairness to the hon. Member for East Antrim (Sammy Wilson), he acknowledged that at times he had different views and different emphases on this issue, as it is understandable that a Minister of Finance and Personnel would have. I served in that office—I see that the right hon. Member for Belfast North (Mr Dodds) is in his place, too—so I am conscious of the fact that cautionary pieces of advice need to come from that office about what some of the consequences might be. When I was in that post, I used to tell people that as the Minister of Finance and Personnel I did not suffer from depression but I was a carrier. So I can accept that Ministers of Finance and Personnel perhaps did need to sound some cautionary note, but this seemed to go beyond those Ministers; I am glad that we now have a much stronger position on the devolution of corporation tax.

We also need to be clear that the devolution of corporation tax does not put the north—does not put the Assembly—on a par with the corporation tax powers of the Oireachtas. Although it allows the Assembly to set the rates for certain qualifying businesses, it does not allow it to decide who the qualifying businesses are, and the Assembly has no control over any of the other rules that attach to that. The Oireachtas has a very different arrangement. Even when moves are made in the Oireachtas on the “double Irish” situation, which are long overdue and right, we also see a targeted use of things. A bit like this Government’s use of the patent box, the Irish Government have introduced the knowledge box. So there are other ways in which they are going to target competitiveness, and incentivise particular industries and sectors.

That is one issue I wish to address at this point in examining the overall impact of the Bill, because too often the focus in Northern Ireland has been that devolving corporation tax would allow us better to compete with the south. We need to recognise that the competition landscape within these islands has changed. I acknowledge that a regional economic dynamic has been provided under this Government, through initiatives such as enterprise zones, city deals and growth deals, which are creating some drive, regional economic traction and city economic traction. If Northern Ireland relies just on corporation tax and does not look to some of those other tools that are helping to drive regional and local economic growth, we will lose out.

I represent a city where many people go to work across the border for companies that are benefiting from the 12.5% corporation tax rate. That proximity—this is in our travel-to-work area—does not mitigate the fact that my constituency has the highest registered unemployment of all the 650 constituencies represented in this House, which shows that a reduced corporation tax rate alone is not a magic bullet and does not solve everything. As has been said, including by the hon. Member for North Antrim, the south of Ireland’s approach is not just about corporation tax alone; it is about investment in infrastructure and in education, not least in third-level education. Even this week, as we see that the Irish Government’s revenues are up and things are shifting there, and they are looking at and talking about possibly adjusting the spending and tax profile, the Tanaiste, Joan Burton, is emphasising that if money can now be spent, it has to be focused on infrastructure and on education, particularly at the third level.

We see that emphasis in the south, but not in the north. We need to recognise that, with regard to the Stormont House agreement and the wider landscape, all that glisters is not gold. The fact is that the Assembly and the Executive will have a difficult Budget landscape over a number of years and there will be a price on the block grant. That was touched on by the hon. Member for Birmingham, Ladywood (Shabana Mahmood) when she referred to the letter from the Treasury to the Bill Committee—unfortunately, it arrived after the Bill Committee had completed its considerations. The letter, while reflecting the fact that negotiations with the Executive are ongoing, sets out a number of changes that will need to be made to the funding arrangements of Northern Ireland. I am talking about how the block grant will be set and how the Barnett formula will operate. More time needs to be taken to consider those wider consequentials and the implications for the devolved Budget.

In the Stormont House negotiations, I did question why we were not discussing the implications of a corporation tax rate cut or what the implications would be for the block grant. I was told by the First Minister that the rate cut was not an issue, that it would be modest and graduated and that it did not really need to come into our wider discussions about the strong budgetary pressures we were under. But that does not seem to be the case. His understanding and his reassurances were not reflected in the terms outlined by the Treasury Minister in the Bill Committee or in this letter and its attachments. There was an assumption that there would be a gradual working adjustment. In other words, there would not be a full hit in relation to the devolved envelope. But the Minister, both in Committee and in the letter, made it clear that the hit would be up front.

I joined the hon. Member for East Antrim—I understand that his absence is to do with the unfortunate bereavement experienced by the hon. Member for Strangford (Jim Shannon)—in questioning the arrangements. We asked about the working implications of the Executive’s Budget year on year and of the setting of the block grant. We wanted to know whether adjustments would have to be made to reflect higher or lower tax takes. In the letter from the Minister, which was sent on 16 February, we see that those adjustments may be made two or three years later, whenever the full tax yield is made. That creates uncertainty. Given that corporation tax is, as the Institute for Fiscal Studies has pointed out, sometimes volatile, there could be further implications that we should acknowledge. We should not say that we do not understand them or that they were someone else’s fault. We need to go into these things with our eyes open.

Let me turn now to the wider position of the Executive in relation to the operation of corporation tax. Under the Bill, the Treasury retains not just ownership of all the rule-making and interpretive powers, but the commencement power in relation to corporation tax. We know that the timetable is 2017, but, as we heard from the Minister in Committee, the Government will exercise that commencement power when they are satisfied that the Executive has a sustainable Budget.

Over the past couple of years, the Treasury has made it very clear that it judged the sustainability of the Executive’s Budget on whether the Assembly would pass welfare reform legislation. That legislation may not have been to the Assembly’s taste or of a devolved design, but they would have to pass it as a way of proving that they had a sustainable Budget. In 2017, the issue will be whether the Treasury will use that same power to impose policy choices on the Executive. In the Bill Committee, I specifically asked the Minister that question. Let us take the example of water charges. We know that the Executive have consistently tried to prevail on the Administration in Northern Ireland to move to direct water charges in one form or another. When I was a Minister, the then Chief Secretary to the Treasury, Paul Boateng, wrote to us at the Executive twice, asking that we make that commitment. The Executive, on my proposal, refused to do that. Various other ruses have been attempted. During the period of direct rule, Northern Ireland Water was essentially set up on a conveyor belt to privatisation. The question is whether the Treasury would abuse that power and say, “Just like we used to say that you had a sustainable Budget only when you had absorbed what we wanted you to do on welfare reform, we are saying now that you only have a sustainable Budget when we see you levying water charges, raising revenue in other areas or changing your policy in relation to student finances.” It could be linked again to welfare reform. After all, we are now locked into a welfare cap. Luckily, we are being given a lot of leeway in how the welfare cap operates at the minute. If the truth be told, the deal that was reached on welfare reform as part of the Stormont House agreement—

[Madam Deputy Speaker (Mrs Eleanor Laing)]

Order. I will say to the hon. Gentleman the same as I said to the hon. Member for North Antrim (Ian Paisley), who spoke immediately before him: I have not been very strict in keeping him to the exact words of the Bill, but, as he knows very well, he is beginning to stray a little. I trust that, in concluding, he will address precisely the points in the Bill that relate to Third Reading.

[Mark Durkan]

I am sticking very much to the thrust and the purpose of the Bill. The Bill is presented as part of a suite of measures coming from the Stormont House agreement. That suite of measures included issues in relation to welfare reform. After all, we were told that there would be no Corporation Tax Bill unless there was agreement on welfare reform, so what I am saying is entirely consistent. Ministers have referred to these other measures when they have addressed this Bill, as have other hon. Members. The point goes to something that is in the Bill, which is the control that the Treasury will have over the commencement of this power and whether it uses that to impose other policy choices on the Assembly. Given that the welfare cap will be in place in the next Parliament—if it is supported both by the Government and the Opposition—it could well be a part of the working reference of the Treasury when it comes to make a judgment on Budget sustainability. In fairness, the Minister made the point in Committee that the judgment would be made on the sum of the Executive’s Budget parts and on a range of issues, but not on specific measures. He would not rule out it being used in that way. Again, in terms of due legislative diligence, all of us must have regard to how this might operate in practice. I am talking about not just some of the detailed rules as they affect businesses but how the overall Budgetary situation of the Executive is affected. There is no point in our popping corks about the legislative power over corporation tax that the Executive and the Assembly will have if we are not also alert to the very real budget constraints and the hard choices that might be imposed with that.

--- Later in debate ---

[Naomi Long]

The hon. Gentleman has said on a number of occasions that, as a result of the Stormont House agreement, one obligation was to sign up to welfare reform. Does he not agree that, more correctly, what was agreed was that we had to come up with a package on welfare reform that we could pay for? As it happens, that package was parity with a little bit of flexibility—

[Madam Deputy Speaker]

Order. Interventions are meant to be short. The hon. Lady has already spoken. It is perfectly in order for her to make an intervention, but it must be short, especially as she has, quite rightly, taken up the House’s time this afternoon. I politely indicated to the hon. Gentleman who has the Floor that he might consider drawing his remarks to a close. He chose to argue with me on the points I had made. I will speak less politely to him if he does not adhere to what I have said. He has spoken for a considerable time this afternoon. He is in order. He has the opportunity to conclude his speech. I am not saying that he must finish immediately now, but I am sure that he will give thought to other people in the Chamber.

[Mark Durkan]

I have no wish to argue with you now, Madam Deputy Speaker, but I must say that I was not arguing with you previously. I was simply clarifying the position and the background, as you have not had the privilege of sitting through all the debates on what was deemed relevant to the Bill and the wider Stormont House agreement.

The Executive and the Assembly will have to absorb the Bill’s wider implications. There are implications for the economy and for businesses, too. We have heard from many hon. Members that businesses are well seized of the need to try to take advantage of that. We have no problem with the regime on the balance between the rates and the rules, but we want to ensure that there is no undue assumption that the devolution of corporation tax to Northern Ireland alone will transform our economy. We need more investment in infrastructure and higher education and following the decisions in the Stormont House agreement it is not clear whether our borrowing power, which was originally designed for strategic capital, is now being used to pay for a voluntary exit scheme. There is an opportunity cost as regards the wider economic investments.

I do not wish to use the term long-term economic plan, but without addressing some of the other issues, including providing tools that compare with city deals, growth deals, enterprise zones and so on, and without a new level of commitment on third-level education and infrastructure, the Executive might well be getting the novelty of devolved corporation tax without strategic economic perspectives that are other than short term in nature.

[Madam Deputy Speaker]

I thank the hon. Gentleman for his courtesy and for not arguing with me.

Question put and agreed to.

Bill accordingly read the Third time and passed.

[Dan Jarvis (Barnsley Central) (Lab)]

On a point of order, Madam Deputy Speaker. I should be grateful if you confirmed how this House could express our condolences to the family of Konstandinos Erik Scurfield, a constituent of mine who has been reported killed in Syria. Erik was a former Royal Marine who travelled to the region because he was horrified by Islamic State’s brutal atrocities. His parents have asked me to pass on this brief message:

“We are devastated to confirm the death of our son in Syria where he went to support the forces opposing Islamic State. His flame might have burned briefly, but it burned brightly, with love, courage, conviction and honour, and we are very proud of him. We would like to request that we be allowed to grieve in peace as a family, without intrusion at this difficult time.”

Three weeks ago, I raised this matter with the Foreign Office but I have not received a response. Given the serious nature of this issue I ask for more guidance on how I can best secure a response from Ministers so that together we can underline the grave dangers that face anyone who travels to Iraq or Syria.

[Madam Deputy Speaker]

I thank the hon. Gentleman for his point of order. Let me first say on behalf of the whole House that we send to his constituent’s family our most sincere sympathy at the loss of this brave young man. The hon. Gentleman knows that his point of order is not a point for me to deal with from the Chair. I am sure that those on the Treasury Bench will have heard what he said, and if he has not had a timely reply to a question he asked of a Minister, he ought to have. I trust that that message will have gone out loud and clear to the relevant Minister.