Northern Ireland: Corporation Tax

Lord Lexden Excerpts

Monday 15th October 2012 Lords Chamber

Asked by

[Lord Lexden]

To ask Her Majesty’s Government whether, following their recent review, they propose to devolve responsibility for corporation tax in Northern Ireland to the Northern Ireland Executive.

[Lord Newby]

My Lords, a joint ministerial working group on rebalancing the Northern Ireland economy is currently examining the issues associated with the potential devolution of corporation tax. This group has made good progress but there remain some crucial areas where differences of opinion between the Northern Ireland Executive and Her Majesty’s Government still exist. The group is due to meet again later this week to continue the discussions.

[Lord Lexden]

I thank my noble friend for his Answer. As this prolonged review finally draws to a close, will he confirm that the Government remain wholly committed to rebalancing the Northern Ireland economy in order to enlarge private sector wealth creation? Will he tell us the last issues that still remain to be resolved by the ministerial group? If the Government decide not to transfer corporation tax to the Northern Ireland Executive, what contingency plans do they have to stimulate the private sector in other ways?

[Lord Newby]

My Lords, I can confirm that the Government are committed to rebalancing the Northern Ireland economy. The remaining issues, not surprisingly, are financial, and essentially there are two. The first relates to the initial reduction of the block grant, which follows from any devolution of corporation tax to Northern Ireland. There is something called the Azores criteria, which means that if a devolved Administration take full fiscal responsibility for a tax change, they must face a reduction in their block grant equivalent to the current corporation tax take from firms based in Northern Ireland. The second point is about how you deal with the ongoing adjustment over time to take account of inflation. At this point, it is far too early to say what will happen if the working group does not reach a positive conclusion.