Corporation Tax (Northern Ireland) Bill

Jim Shannon Excerpts

Tuesday 27th January 2015 Commons Chamber

[Jim Shannon (Strangford) (DUP)]

It is a pleasure to speak in this debate, and I thank the Government for bringing the Bill before the House under the Stormont House agreement. Obviously, the DUP is in favour of the Bill. We have concerns about its delivery, but we are committed to the devolution of corporation tax. I thank the right hon. Member for North Shropshire (Mr Paterson) for his contribution. I understood it was his baby back when I entered the House. He always says it was a team effort, but certainly every conversation we ever had when he was Secretary of State was about corporation tax. It is good to see it being delivered; I am sure he is especially pleased.

The power to set our own rate of corporation tax could be a game changer for the economy, if done right, and could help to create thousands of jobs. My hon. Friend the Member for East Antrim (Sammy Wilson) said that 37,500 jobs could come out of it. I am not sure how accurate that figure is, but if that is the potential figure, there is clearly an opportunity here to do something significant, diminishing our reliance on the public sector and generating wealth for our citizens. For years now, we have faced difficult economic circumstances, with people forced to tighten their spending and unemployment rising, and this has the potential to deliver what we need.

I made it my business to speak to business men—mostly in my constituency—and gauge their opinion about the devolution of corporation tax, and there was a general feeling in favour. They were keen because they could see the benefits coming through to them, but they saw that it was a 10-year plan and that it might take some time to get to where we wanted to be, and they had concerns about how it would be delivered over that period. They also had concerns about the planning system in Northern Ireland—the hon. Member for South Down (Ms Ritchie) mentioned fast-track planning. We have to do something because the planning system is so slow and cumbersome it defies belief.

Although unemployment rates are better in Northern Ireland than in the Republic, we have always struggled to compete with the latter’s attractive corporation tax level, as the shadow Secretary of State pointed out earlier, and it is little wonder, given that its tax rate is 12.5%, compared to our 21%. The ability to set our own tax rate will make that a thing of the past and put us in a better place to compete with the Republic of Ireland, as well as with our Scottish, Welsh and English counterparts. Competition is vital for any economy and ours is no different, so naturally anything that will assist us is most welcome. Devolving corporation tax has the potential to do that.

Allowing us to set our own rate of corporation tax is supported by all five parties in Northern Ireland, as well as the parties in this place. Clearly the benefits are recognised by all. As the Secretary of State has said, it would provide a major incentive for domestic businesses to invest further in Northern Ireland and significantly increase foreign direct investment. That is what we want: real jobs for our people. Given that we share a land border with a jurisdiction with significantly lower corporation tax, this measure has the potential to create thousands of new jobs and stimulate growth in Northern Ireland’s private sector, leading to a stronger, more stable and more lucrative economy.

We have already witnessed change in the last five years in Northern Ireland. In fact, we have already seen a large number of foreign and domestic businesses opening and expanding into our Province. That is great, but we need more opportunities and better employment. We want to encourage more businesses to open up and enjoy the benefits and fantastic work opportunities that Northern Ireland has to offer. Belfast has been described as a small city with a big heart, and it certainly is the up and coming place to invest. That said, however, sometimes big businesses need that little bit of extra motivation. If a low corporation tax rate does not help them to make their minds up, I do not know what will. It would certainly put us on a much more even playing field with the Republic of Ireland, with which we share a land border.

I want to make a quick comment about connectivity and the importance of the air corridor between Heathrow and Belfast City and Belfast Aldergrove. We want to ensure that it is put in place in such a way that we can be part of growing the economy. Just last night, the talk on the news back home was about the new rail links between Belfast and Dublin—to increase their connectivity and, I would suggest, take it away from Northern Ireland. I am concerned that we need to match our neighbour when it comes to those things.

There is no doubt about the benefits that devolving corporation tax will bring, but there are several things we need to consider before its implementation. Fortunately, we have until 2017 to make this a reality. That gives us the time to ensure that when corporation tax is devolved, we have the necessary resources in place to take best advantage of it. My main aim is to see unemployment fall. I believe that the best way forward, coupled with lower corporation tax rates, is for the Department of Employment and Learning to develop a way for students to get real jobs. That might mean creating more apprenticeships, promoting particular skills and helping young people to get experience in the workplace through courses in schools and techs.

Our colleges are working to try to ensure that people are qualified, experienced and able to take up employment opportunities, but I sometimes think that the further education colleges and businesses—with the opportunities that will come off the back of this—need to work more closely together. I understand that we have a dearth of engineers in Northern Ireland. Again, something needs to be done about that. So many young constituents come to me with concerns about getting jobs or houses, because although they have hard-won degrees, diplomas and certificates, they cannot get the necessary experience. I have no doubt that if further education colleges and schools create policies to march alongside tax policies, including on corporation tax, we will see much lower unemployment rates among our young people. That has to be a priority.

I also want to see real reductions for businesses. The week before last, I was talking to a business man who runs a very successful company in my constituency, Mash Direct, which employs 170 people—I understand that the Secretary of State took the opportunity to visit the factory. The company produces simple but attractive foodstuffs and has increased its work force. However, he told me that it was cheaper for him to import vegetables rather than grow his own—he has his own fields round there and is also co-operative with the farmers in trying to ensure that the products he uses for his factory are grown locally. However, he can buy vegetables from south America for less than it costs to grow them in a field in Newtownards. That is ludicrous. Devolving corporation tax will help him to compete better, and that is an advantage. While being ever mindful of better rates for businesses, we need to ensure that there is something in place to protect those who have these issues.

The agri-food business is important in my constituency. Pritchitts, Willowbrook Foods and Rich Sauces are all companies that have thrived over the last few years, employing almost 1,000 people between them. We also have the Akin pharmaceutical industry. These are businesses that have grown over the last few years, and the change in corporation tax will help that growth to continue, which is their ambition, and to employ more people.

I have been approached by many business owners in my constituency, some of whom use their buildings and are delighted at the announcement on devolved tax power, while others are extremely concerned because they do not use their premises. There needs to be some sort of protection or exemption clause for such people. That needs to be considered in the next two years, because we cannot expect business owners to pay corporation tax on vacant properties; that would be unfair. Instead of promoting the economy and creating more jobs, it could have the reverse effect, particularly when Northern Ireland is made up of so many small and medium-sized enterprises—30,000 micro-businesses to be precise, which is 89% of our community. Although we want to encourage big business, we do not want to forget about those who account for such a large part of our economy.

Let me express one more concern that I feel needs to be addressed before implementation in 2017. This is not something that will be unique to Northern Ireland, as it has been raised across the United Kingdom, but I am referring to the issue of holding companies. The hon. Member for Amber Valley (Nigel Mills),who spoke in the diverted profits tax debate in Westminster Hall, asked me about this matter. The issue is clear: we do not want to see a brass plate on an office that is lying vacant; we want to see jobs. It is the jobs that grow the economy and bring in the wages, which then brings money to the Treasury through tax. That is what we want to see. This is an issue of great concern.

A company may come into the United Kingdom and open a holding company in Northern Ireland. This means that it could put any profits made elsewhere back into the Northern Ireland branch, saving on corporation tax. Concern about that was expressed in the Westminster Hall debate. Big US companies such as Starbucks, Google and Amazon have all been accused of tax dodging entirely or of paying considerably less than they should. What steps will be taken to ensure that this same practice does not happen with corporation tax in Northern Ireland?

Undoubtedly, I believe that the benefits outweigh any drawbacks, but in order fully to profit from this proposal, the issues I have raised need to be addressed. I am hopeful that, with this legislation, Northern Ireland can become even more successful and really begin to compete in the business sector on the world stage.