Northern Ireland Secretary Peter Hain and Irish Foreign Minister Dermot Ahern yesterday launched a new document on north-south co-operation called the Comprehensive Study on the All-Island Economy.
The all-island approach seems to have the support of the north’s business community, if not that of the DUP and the Ulster Unionists.
It seems to me that the unionist parties’ problems with the document amount mainly to a semantic objection to the term ‘all-island economy’, rather than any concern about its concrete proposals. After all, they themselves support a corporation tax cut to match the level in the Republic, something which arguably has far more potential to disrupt the union than anything in the Comprehensive Study.
As the Irish Times points out, the document is notably circumspect on the taxation issue:
There is currently a debate in Northern Ireland about the potential for fiscal measures, such as a reduction in the rate of corporation tax in NI and R&D tax credits to stimulate economic growth. For example, business organisations, such as the Confederation of British Industries (CBI) Northern Ireland and the Industrial Task Force, have argued that reducing corporation tax would stimulate economic growth in Northern Ireland. The Economic Research Institute of Northern Ireland is preparing research on the potential benefits to the NI economy of reducing corporation tax and the Assembly’s Preparation for Government Committee has recently made a number of recommendations in relation to fiscal measures, amongst which it accords top priority to a reduction in corporation tax.
Whilst indicating that “an effective financial incentive must … form the basis of a policy of economic renewal [and] is a necessary component of economic success” the Committee concluded that it is unlikely to be sufficient on its own and that support policies also have an important role to play.
It is argued that lowering Northern Ireland’s headline corporation tax rate would generate an in-flow of foreign direct investment, stimulate growth of indigenous enterprises, have a positive spill-over effect, and help to redress the balance between NI’s private and public sectors, while being tax efficient.
Following on from recent political developments, further discussions on economic measures are planned at Government level. Given that any decision to introduce further fiscal initiatives in NI is a reserved matter, it now falls to the UK Government to consider the next steps. (Comprehensive Study, p51/52)
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