Northern Ireland: Economy

Lord Shutt of Greetland Excerpts

Wednesday 19th October 2011 Lords Chamber

[Lord Shutt of Greetland]

My Lords, I congratulate the noble Lord, Lord Lexden, on securing this splendid and important debate. I am grateful to your Lordships for the quality of their contributions. Noble Lords have travelled down memory lane but in so doing have provided tremendous insight into the journeys and experiences that have ultimately brought them to this House. It is a privilege to listen to so many wonderful contributions.

The coalition Government’s commitment to rebalancing the Northern Ireland economy is one of the key objectives we share with the Northern Ireland Executive. The recent announcement by the Chancellor that air passenger duty in Northern Ireland would be reduced and then ultimately devolved to the Assembly shows that we are prepared to act decisively and creatively in order to keep the economy moving. I believe we all agree that the Northern Ireland economy is overreliant on public sector spending. The situation is understandable—one of the sad legacies of the Troubles is that the economy stagnated in Northern Ireland while it grew elsewhere. The support of the public sector was necessary, but both now and in the longer term relying on those levels of public spending is unsustainable.

The Northern Ireland Executive and Invest Northern Ireland have had some notable successes in attracting investment in recent years, with new entrants to the Northern Ireland market such as the New York Stock Exchange and Citigroup and the expansion of existing businesses such as PricewaterhouseCoopers—all creating jobs which add value to the Northern Ireland economy. However, these successes are not enough. Northern Ireland still has some way to go and, for that reason, the Treasury consultation paper on rebalancing the Northern Ireland economy set out some radical proposals for discussion.

The business community has made the case that a reduction in corporation tax to a level similar to that in Ireland would kick-start inward investment and growth, sending a resounding message that Northern Ireland was open for business. Those responsible for attracting inward investment in the Republic are adamant about the role their business tax regime has played in ensuring that even during the global economic downturn Ireland remains at or near the top of the global rankings for attracting inward investment and jobs. The head of the Irish economic development agency has said that the 12.5 per cent corporation tax rate is the “cornerstone” of Irish industrial policy.

However, we need to be cautious—as has been repeated here—because low corporation tax is not a silver bullet. Infrastructure, education, training and the planning regime all play a key role, too. The Exchequer Secretary has written to the First Minister and Deputy First Minister about the creation of a working group to further examine issues raised during the consultation period. The work of that group will be vital in gaining deeper insight into the potential costs, benefits and administrative hurdles associated with a tax reduction. We must not try to pre-empt the outworkings of that process. No decisions have yet been made, but we all look forward to the insight that the ministerial group will give to the issue.

I will now endeavour to pick up the points raised during the debate. The noble Lord, Lord Lexden, referred to the working group and hoped that I would add something on it. The noble Baroness also referred to it. It is only in recent days that the invitation was put to the Northern Ireland Executive asking them to nominate Ministers to serve on a group. Their decision was to come up with four Ministers—the First Minister, the Deputy First Minister, and the two Ministers responsible for finance and for trade and industry. The point was made about business as usual and getting on with life in the way in which others would. The four Ministers have been put up. The Executive were asked, “Who would you like to serve on the group?”. It was not even asked of them, “How many would you like? Who would be the appropriate people?”. The Executive have chosen those four people because of their function. They will, of course, be able to report back to the Northern Ireland Executive. Three parties who also have jobs in the Executive are not among those four people. In effect, it is the people themselves on that Executive who have come up with the four people who they think are right to serve on that group.

[Lord Kilclooney]

As to the cost of reducing corporation tax in Northern Ireland, the Chancellor of the Exchequer during his most recent visit to Northern Ireland said that reducing the tax could mean a reduction in the block grant of £400 million. This committee will now consider what would be the cost of the tax reduction. Is it not surprising that various businesses and organisations supported the reduction of corporation tax without even knowing how much it was going to cost the people of Northern Ireland?

[Lord Shutt of Greetland]

There is work to be done, which is why the committee has been set up to look at the detail of how this would work. Think about this: in this jurisdiction, we have income tax rates of 20 per cent and 40 per cent, and 50 per cent for people earning in excess of £150,000. In the Republic, the tax rates are 21 per cent and 40 per cent. In this jurisdiction, we have VAT of 20 per cent. In the Republic it is 21 per cent. It is even stevens.

On corporation tax, our rate is at 26 per cent, being reduced to 23 per cent, but in the Republic it is at 12.5 per cent. The Republic has held discussions with Europe as to how to endeavour to solve its troubles. Of course, it was under great pressure not to have that low rate of corporation tax. I find it instructive that the Republic has fought tooth and nail to retain a 12.5 per cent rate. I turn to the noble Lord, Lord Bew, who has been moving on this issue. The Republic’s clear view that that 12.5 per cent rate has been so important concentrates the mind. I understand that.

The noble Lord, Lord Alderdice, asked whether the Northern Ireland Executive are up to the job. It is not for me to take a view on whether people are up to the job. They have been elected and, under the system there, various people have executive roles. I am led to believe that we will not have to wait that much longer for a programme for government. On rebalancing the economy, the discussions are not a done deal, but if the rebalancing on corporation tax can take place, that may well energise them to look at other areas where the Executive can do what they can do to rebalance the economy.

Five sets of people are involved: much depends on the devolved Government, what they can do and the powers that they have, including with what is clearly a well-thought-of organisation, Invest Northern Ireland; there is also what this Government can do, although because of devolution that is somewhat limited—that is one reason why this idea has come from the Secretary of State; there is the involvement of Europe; there is the use of the cross-border entities, particularly on tourism; and, very importantly, there is the inventiveness of the private sector itself, which is a point that has already been made by several noble Lords.

I was very impressed by the contribution of the noble Lord, Lord Black of Brentwood. I am always impressed by that which I do not expect and do not know about which arises in debates in this House. On culture, the city of Derry/Londonderry will be the city of culture in 2013. Bearing in mind the detail of what the noble Lord had to say, I felt that he could well be placed as a consultant to the Northern Ireland Executive on cultural matters.

The noble Lord, Lord Empey, referred to food and was the one person who said that this was not about bother in Northern Ireland but about the economy of Northern Ireland. It is not for the UK Government to say where Invest Northern Ireland’s priorities ought to be. The noble Lord makes the very valid point that for so many reasons it is clearly an area that should be looked at as a possibility for investment. Of course, it would be for the Northern Ireland Executive to take that view.

I am concerned about the time. My time is up. If there are any specifics and anything that I have been asked about to which I have not responded, I will endeavour to do that. It has been a splendid debate on the possibilities of what can be done, based on the rebalancing report and splendid introduction made by the noble Lord, Lord Lexden. I hope and believe that so many of the contributions will be noted by Her Majesty’s Government as we go forward.

House adjourned at 9.25 pm.