Corporation Tax (Northern Ireland) Bill — House of Lords, 2015-03-17
Topic: Macroeconomics
John Warren Shipley (Liberal Democrats, Centre to centre-left): My Lords, I, too, congratulate the noble Lord, Lord Hay of Ballyore, on his excellent maiden speech. I strongly welcome the opportunity to speak in this debate. Quite often, matters relating to only Northern Ireland, Scotland and Wales come to your Lordships’ House and it is important that we put them into a UK context. I agree with my noble friend Lord Trimble. These matters relate to the integrity of the UK as a united kingdom To be clear at the outset, I fully support this Bill. It is the right thing to do. As my noble friend Lord Alderdice said, it is about responsibilities as much as powers. I welcome the fact that the responsibility for setting a level of corporation tax can be given to the Northern Ireland Executive and Assembly. The reason I support the Bill is that Northern Ireland has a land border with the Republic of Ireland. That seems crucial when considering powers over corporation tax. I accept, too, that the land border is also relevant in considering other taxes such as air passenger duty; I have no difficulty with APD being a devolved matter for Northern Ireland. Of course, in all matters of devolved taxation, it would be for Northern Ireland to decide the level, and if there is no need to reduce a tax level or if that proves to cost too much, then the Northern Ireland Assembly would not have to do that. It is all about the responsibility that it carries I want to concentrate on two issues in my remaining few minutes. First, there is the principle of no detriment to other parts of the United Kingdom. Secondly, there is the need to understand better than I think we do what is happening in a constitutional and financial sense across the various parts of the United Kingdom In terms of this Bill, I read the debate in the House of Commons and do not wish to revisit the points raised there, except to say that great care must be taken in relation to the inward investment consequences of any lowering of the rate of corporation tax and of any consequences which might be thought to distort competition with the rest of the UK. However, I am satisfied by the evidence given by Ernst & Young on corporation tax. It said—I took this from the Library Note—that it is actually sixth in a list of factors determining where companies invest. Transport and logistic infrastructure, labour costs, telecoms infrastructure, potential for productivity increases and the legislative and regulatory environment are all said to be more important. It may not be necessary to worry too much about the practical consequences of devolution as long as we have structures in place that can assess the impact of a lower corporation tax rate on competition, inward investment and all aspects of potential profit shifting from the rest of the UK to Northern Ireland One possibility—my noble friend Lord Trimble talked about this—of the devolution of the powers to Northern Ireland is that Scotland or Wales may want the same powers over corporation tax. That is more likely to be the case in Scotland, but it is rightly still a reserved matter in Scotland. As both Scotland and Wales share a land border with England, the wishes of England in relation to corporation tax in Scotland and Wales must be part of any further debate on that. In my view, England’s agreement must be sought on any devolution of corporation tax rates for Scotland and Wales I said that there are two issues I want to concentrate on. First, there is the no-detriment principle. I want to raise the question of air passenger duty. In the case of APD, I understand that there is no detriment to the rest of the UK in Northern Ireland having the power to reduce APD—there is no land border with the rest of the UK. But there clearly would be a detriment in the case of Wales and Scotland, where a land border means that passengers can move very easily across them. In Scotland, the power to vary APD is being devolved. It is a critical issue for those parts of England close to Scotland—or to Wales, should it get APD powers—where the viability of services could be at stake. The reason for that is this: just a small movement of passengers from one airport across a land border to another can make a crucial difference to the viability of some existing air services. This can matter. My point on there being no detriment is that it needs to be taken very seriously because it matters to the integrity of the United Kingdom. I noted that, in 2012, it was a key part of the Scotland Act. It is less obvious to me today that the importance of no detriment is fully understood. In the case of the devolution of APD powers to Scotland, I do not think that it is fully understood A second aspect of no detriment is that those parts of the UK that secure the right to lower what hitherto has been a standard national tax should make up the loss to the rest of the UK. We have discussed that in this debate. I hope we will ensure that the fiscal consequences of this are understood, agreed and then properly applied. I make it clear that I support all that happening, but it does have to happen That takes me to the block grant. Under the Bill, the Northern Ireland Executive and Assembly’s budget will be reduced to make up for the lost income to the Treasury. That seems to me to be the right approach, but it begs another question: is the block grant right in the first place? I ask this because there are stark differences in the amounts that each part of the UK receives in its public spending. Treasury figures for 2013-14 published last November show that Northern Ireland has per capita spending of £10,961. To be clear, that sum may be entirely justified. However, the part of the United Kingdom that receives the lowest amount is the East of England, with £7,950. That is a per capita difference of £3,000. In addition, Scotland and Wales get more per capita than any part of England, including London. As we move towards devolving more powers over taxation, should we not also understand better than we do why there are such very wide discrepancies in these public spending figures? I think that we simply must, as we devolve more and more My final point relates to the legacy paper recently published by the All-Party Parliamentary Group on Reform, Decentralisation and Devolution. It says that: "Amidst the accelerating devolution of power, it will be important to have regard to those functions that must be retained partially or wholly at the UK centre, if it is to remain a cohesive state" It concludes by recommending that a constitutional convention should be established to ensure that, "the process of reform will be open, inclusive and stands the best chance of securing a UK wide settlement, fit for the long term" That would be, it says, "in addition to the implementation of commitments to transfer powers across the UK" Therefore, what is planned now would continue. Such a convention would operate independently of government and would include members of the public as well as political parties, local authorities and the nations and regions of the UK. I think that, in the context of this Bill and many of the debates and discussions that we have had, and no doubt will have in the future, the proposal to establish such a convention is very wise. I hope that the next Government will be able to give such an initiative their full support. I say that because I believe that it matters to the future integrity of the United Kingdom.