Budget Battles 2: Stormont debates tax-varying powers

There was a very interesting debate yesterday in Stormont over whether the Assembly should seek tax-varying powers.

A motion in favour was proposed by Sinn Fein’s Jennifer McCann:

It should be noted that the debate is not solely about income tax. The
Assembly must cast the net wider than that. It must be bold in its
approach and consider such incentives as targeted tax reliefs for rural
businesses, the manufacturing sector and small and medium enterprises
(SMEs). Many hold the view that tax-varying powers could also help to
offset investment problems that are created by industrial derating.
Initiatives such as plastic-bag tax or other green levies could be
considered, some of which — the plastic-bag tax, in particular — have
been successful in the South. The Assembly could also examine taxes on
inheritance, real estate, gambling and vehicles.

The DUP’s Peter Weir made it clear that his party was opposed to such powers, although in favour of a corporation tax cut:

The Department of
Finance and Personnel and its Committee have done a great deal of
detailed work in making a case for a specific cut in corporation tax.
We should stay focused on the tax relief or tax credits that may result
from a cut in corporation tax. If we widen the debate to take in the
nonsense of a wider tax variation, we will lose focus. We will lose the
opportunity to make that strong case for a reduction in corporation
tax. I oppose the motion.

Dr Stephen Farry took the opposite view of the corporation tax issue, in what I thought was one of the stronger contributions:

Some Members have already mentioned corporation tax. If there is to be
a reduction in corporation tax in Northern Ireland, we will have to
have tax-varying powers; that is the way in which the Treasury would
envisage that happening…

…British Government policy may nominally be committed to regional
convergence, but it is clear that successive British Governments have
prioritised London and the south-east of England as the main driver of
the overall UK economy. That area is viewed as something to be
protected at all costs, and it seems that the Government are happier to
keep the regions of the UK financially dependent, rather than give them
the powers to make a real difference and to make their economies and
their financial situations sustainable. Therefore, the real challenge
of the Assembly is to stand up to that and demand the powers to make a
real change.

The SDLP’s Declan O’Loan supported the motion in principle, although he raised some questions about the timing:

Without greater fiscal flexibility, we are
limited in the steps that we can take to address difficulties such as
the poor state of our infrastructure or the fact that our gross value
added (GVA) remains 20% below the UK average. Sharing this island, as
we do, with a successful economy and distinct tax regime clearly adds
urgency to those issues that affect our competitiveness as a region. In
recognition of such challenges, my party has for several years been
calling for greater fiscal discretion for the Assembly. Moreover, SDLP
leader, Mark Durkan, played a central role in negotiating the low-cost
borrowing facility of the reinvestment and reform initiative (RRI), to
which I will return.

To put this
debate in context, the present finance agenda is loaded quite heavily.
With ongoing consider­ation of the rates system, the independent review
of water and sewerage, the comprehensive spending review, the Varney
Review and a slowdown in public sector spending, this debate may be
important, but securing additional powers may not be the most pressing
item on the agenda.

Roy Beggs opposed the motion on behalf of the UUP:

We need to create more business opportunities and more real work
opportunities for everyone so that we can survive the long-term changes
that are occurring as the Barnett formula starts to converge the
current expenditure levels in different regions in the United Kingdom.
We must ensure that, whatever we do, we encourage real jobs in the
private sector. We must not do anything that will threaten those jobs.
New taxes will not create new sustainable jobs.

DUP Finance Minister Peter Robinson also opposed the motion, although his stance was maybe slightly more nuanced than some of the other unionist speakers:

We are operating within a complex public expenditure framework, and
unfavourable consequences are often associated with what might seem a
simplistic policy action. As well as my concerns about the principle
behind tax-varying powers, I do not believe that the timing is right.
It is prudent to await the outcome of certain exercises, such as the
rating review, before considering a motion as complex as this.

It seems that while there’s general support for a corporation tax cut in the North, there’s no agreement about what that would require in terms of wider fiscal powers. Perhaps, the Varney Review will make things clearer. No doubt, the parallel debate in Scotland will also have an impact.







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