Loans to Ireland Bill

Lord Dodds of Duncairn Excerpts

Wednesday 15th December 2010 Commons Chamber

[Mr Osborne]

I give way to the right hon. Member for Belfast North (Mr Dodds).

[Mr Nigel Dodds (Belfast North) (DUP)]

I am grateful to the Chancellor, whose comments have clearly provoked a big reaction.

Corporation tax is a big issue in Northern Ireland. It worries people there that the Irish Republic wishes to retain its 12.5% corporation tax rate. We in Northern Ireland are arguing for a cut in our rate, but the Secretary of State for Northern Ireland tells us that that will cost us some £310 million of our block grant. In a way, we will be subsidising the Irish Republic to keep its corporation tax low, and penalising Northern Ireland if it wants to reduce its corporation tax. The Chancellor must take that into account in the context of this package of measures.

[Mr Osborne]

As I said to the House on a previous occasion, I did not think it right—others may take a different view—for one sovereign nation to try to dictate the tax rates of another sovereign nation. I did not think that that was a precedent that we particularly wanted to set. I entirely understand the competitive pressure that the Irish corporation tax rate puts on Northern Ireland, but ultimately it must be for the Irish Parliament to determine its own tax rates. It is, of course, having to take some very difficult measures to preserve the corporation tax rate in the Republic.

I know that there is a discussion to be had about the corporation tax rate in Northern Ireland, and about other measures that might be taken there. A document has been submitted this week. I hear what the right hon. Gentleman says, but let us have that discussion with the Secretary of State for Northern Ireland and Northern Ireland Members.

--- Later in debate ---

[Mr Nigel Dodds (Belfast North) (DUP)]

It is a pleasure to follow the hon. Member for Christchurch (Mr Chope). He mentioned corporation tax, which I shall come to shortly. However, it is worth saying first that what is proposed is a generous act on the part of the Government and the people of the United Kingdom. Of course there are good, economic reasons why what is proposed should be considered in the national interest. As has been pointed out, there are strong arguments about Northern Ireland’s position, the involvement of banks from the Irish Republic in Northern Ireland’s economy, the exposure of British banks to Irish banks, and so on, which are reasons why we should engage in the loan.

However, it would be remiss of me and the people for whom I speak not to point out that the loan is being made merely months before the 90th anniversary of the secession of the 26 southern counties from the United Kingdom. For probably the vast majority of that time, and certainly in the past 30 or 40 years, politicians and others in the Irish Republic have spent most of their time denying the relationship between southern Ireland and the United Kingdom. However, the loan and all that has been said prove the interdependence of the Irish economy and the Irish Republic with—and, to a large degree, their dependence on—the United Kingdom. There are those who go around saying that the United Kingdom should keep out of their affairs and all that, but I think they now realise that in many ways the dependence is very great, and not just on Europe, but on the United Kingdom in particular.

It is also worth spending a minute or two recapping how we came to this position. For many years, people referred to the great Celtic tiger that was the Irish Republic’s economy, and that includes those now in government, as has been pointed out. Those who raised issues about the way in which that economy was lauded were criticised as being driven by petty political considerations and told that their criticisms were not justified. There were those of us who pointed out that there were domestic issues to do with the great concentration on property. However, a recent editorial in The Guardian summed up the position well:

“Politicians kept consumer demand buoyant with generous public spending, while rewarding developer friends with public works contracts. Ireland’s narrow elite ran the economy like a casino and awarded itself free chips. No one, save a few lonely economists, had much incentive to call time on the party. By 2007, around one in five Irish jobs depended in some way on the property market.”

The international mistake was to join the euro. Of course the problems are not entirely down to that, but the economic tools that could have helped to control some of the economic excesses, and some of the issues that arose as a result of the bursting of the property bubble, were not available to the Irish Republic as a result of its membership of the euro. Those tools include devaluation and the ability to cut interest rates. So when the crisis came, the Republic was virtually powerless to do anything in that context. That is well known.

We in Northern Ireland have had our disputes with the Irish Republic, but relations are now much better than they used to be, and we do not take any satisfaction from the crisis that has enveloped it. Someone asked where the Irish Republic stood in relation to recent debates on Europe. People will remind us in this House of the Irish Republic’s attitude during the long years of terrorist activity in Northern Ireland, when the Republic became a safe haven for terrorists and refused to extradite wanted criminals to Northern Ireland for justice. Some of our constituents are now saying, “Why should we help them now that they are in this situation?” They also remember the Irish Republic’s role in the formation of the IRA, back in 1969. They say, “We see all these inquiries, but what are we doing about that?” That is understandable, because lives were lost and families were bereaved as a result of the activities of Governments of all shades and opinions in the Irish Republic. All of them played a role, whether Fine Gael, Fianna Fáil, Labour or the rest of them.

Having said all that, we recognise that the Irish Republic needs to receive this loan at this critical time, for the reasons that have been set out. Two of the banks are owned by the Irish Republic and are active in Northern Ireland, and a quarter of all the personal accounts of people in Northern Ireland are in those banks. We have also heard about the exposure of British banks to Irish Banks, as well as the wider trade issues, given that 40% of trade in Northern Ireland is carried out with the Irish Republic. All of that means that, if the situation were to deteriorate even further, we would be in a very difficult situation in Northern Ireland. On balance, therefore, we will not vote against the Government, and we have made it clear that we support the Bill.

There are wider issues relating to the implications of the bail-out of other countries, which we shall discuss in Committee. On corporation tax, the Irish Republic should of course have the right to set its own tax rates; that is not the argument. The argument is that Northern Ireland is at a competitive disadvantage as a result of the lower rate in the Republic, because of the land border. The Irish Republic is our greatest competitor for foreign direct investment. For us to get the equivalent benefit, we are told that we would have to take a further cut in public expenditure of £310 million. In these circumstances, when a subsidy loan is being provided to the Irish Republic, the case for Northern Ireland should be looked at. Why should we be hit immediately with that cut when the Republic will be given years to pay back its loan, giving it a competitive advantage?