The DUP renewed its call for a cut in Corporation Tax during Gordon Brown’s visit to Stormont last week.
While I agree that Northern Ireland needs to emulate the Celtic Tiger, I do wonder whether they have thought through the implications of this move.
The point that I made about the Ulster Unionist’s similar call in April still stands:
Lower corporation tax in Northern Ireland or Scotland will be politically untenable in England, unless it goes along with cuts to Westminster’s subvention to public spending in both countries. That would add up to a major weakening of the union.
The suggestion that lower corporation tax is desirable is therefore a very significant admission for a unionist party to make.
If anything, I think the point is stronger now that the West Lothian question has blown up and the priority of Westminster politicians has shifted from buying off Scottish nationalism via the Barnett formula, to buying off English nationalism. (See for example these stories about Gordon Brown and Menzies Campbell, both of whom have a personal stake in the West Lothian issue, which on this occasion is perhaps at odds with the intrerests of their constituents.)
The local business community’s approach to the issue was telling:
Following yesterday’s (Monday) meeting between Mr Brown and the Business Alliance – an umbrella body representing all the north’s main business organisations – the chairman of the delegation, former CBI chairman David Dobbin, said he remained optimistic that advances could be made on the tax front.
However, Mr Dobbin said the delegation chose not to raise the issue of corporation tax, believing the success of the campaign is largely reliant on political progress.
"The tax issue was very much the elephant in the room, but we decided to keep our powder dry rather than present Mr Brown with an easy opportunity to reject the proposal," Mr Dobbin said. (Irish News, via Nuzhound)
Peter Hain’s response appeared to confirm that the cost of cutting corporation tax would have to be funded in Northern Ireland itself:
Mr Hain warned that cutting corporation tax would lead to budget black holes elsewhere.
He said: "If we were to follow the popular demand, there would be a revenue shortfall to the Treasury. How are you going to raise that money? Are you going to whack up the rates? The Assembly should have a serious look at this." (Belfast Telegraph)
It seems to me that this proposal is only likely to become reality if Northern Ireland attains a degree of fiscal autonomy that would add up to a major dilution of the union. This presumably is one reason why the SNP advocates a similar policy in Scotland. I know the DUP claims to be a devolutionist party, but is it really that devolutionist?
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