Autumn Statement

Lord Lexden Excerpts

Thursday 4th December 2014 Lords Chamber

[Lord Lexden (Con)]

My Lords, I shall confine my remarks to the part of our country that matters most to me—Northern Ireland. The responsibility for setting corporation tax rates there could now be devolved to its power-sharing Executive and Assembly as a result of an extremely important announcement in the Autumn Statement. The announcement has been long awaited. Widespread consultations were initiated more than three and a half years ago when the Treasury published a paper to pave the way for a detailed examination of, in its words,

“the extent to which a phased reduction in the rate of corporation tax could support a rebalancing of the economy”.

The rebalancing of the economy is, of course, one of the principal objectives of this Government’s policy. Nowhere is a significant rebalancing needed more than in the Province, which has for so long been overwhelmingly and dangerously dependent on the public sector. The Treasury’s work on the issue of corporation tax devolution was completed some time ago. I pressed for an announcement as soon as possible. I am glad that it has at last been made.

Many of the Province’s politicians and economic experts believe that Northern Ireland needs rates of corporation tax significantly lower than the rest of our country, welcome though the Chancellor’s steady reductions in the tax over years have been. That is because Ulster faces severe competition for the inward investment that it needs so badly from its neighbour across its border, the Republic of Ireland, which has a 12.5% rate of corporation tax. Substantial inward investment and the new private sector jobs that it could create are vital if the rebalancing of the Northern Ireland economy is to be achieved. The Government estimate that low rates of corporation tax in the Province could lead to the creation of some 50,000 new jobs in the years ahead.

The devolution of corporation tax does not command universal assent in Ulster, but the majority of the Province’s political parties and large numbers of its business leaders favour this immensely important proposal. The Northern Ireland Chamber of Commerce said yesterday that,

“our politicians must grasp this opportunity”.

With the opportunity comes a severe challenge. The immediate consequence of special low rates of corporation tax would be the reduction in the revenue generated by them, which would lead in turn to the reduction in the block grant which the Northern Ireland Executive receive. So, as my noble friend Lord Empey, chairman of the Ulster Unionist Party, who cannot be in his place today, has often reminded me, careful consideration would need to be given to the manner in which low rates of corporation tax were phased in if they were devolved. A gradual introduction over several years would seem to be the right course.

The Government will be aware that yesterday’s announcement in respect of Northern Ireland will stir keen interest in Scotland and Wales. The Smith commission ruled out the devolution of corporation tax to the Scottish Parliament. Nicola Sturgeon, however, is unlikely to let the matter rest there. In Wales the Silk commission recommended that the tax should be devolved to the Welsh Assembly if Northern Ireland was given it. The Government will need to consider these repercussions, remembering always their overriding duty to preserve the unity of our country. Unfortunately, and through no fault of the Government, the corporation tax announcement does not come at a propitious moment in the political fortunes of the Province. Its power-sharing Executive are in turmoil. One consequence of that turmoil has been a £100 million loan from the Treasury to cover the current deficit. The Chancellor was right to say that the Executive must demonstrate that they are,

“able to manage the financial implications”,—[Official Report, Commons, 3/12/14; col. 314.]

of corporation tax devolution. That is a fair and proper condition to stipulate.

Cross-party talks are now taking place under the chairmanship of my right honourable friend the Secretary of State for Northern Ireland. I hope that the financial and other issues that are now seriously jeopardising the work of the Northern Ireland Executive will be diminished to the point where the Chancellor’s welcome announcement can be the subject of serious cross-party discussion in the Province. Those who seek to impede Northern Ireland’s search for economic progress will not be readily forgiven.