Corporation Tax (Northern Ireland) Bill — House of Commons, 2015-01-27
Topic: Macroeconomics
Ivan Lewis (Labour, Centre-left): The hon. Gentleman’s party has long advocated the devolution of corporation taxes in Scotland, but the fact is that it did not push very assertively for that during the Smith commission negotiations. Equally, Scotland has enough to do getting on with the very considerable devolution package on which there is tremendous consensus The point I want to make to both hon. Gentlemen is that the idea that the devolution of corporation tax is a panacea is a fundamental mistake. I will develop that argument further; astonishingly, it was noticeably absent from the Secretary of State’s speech. The PricewaterhouseCoopers report "Corporation Tax—Game changer or game over?" found that the devolution of corporation tax would be "no magic bullet" for Northern Ireland. It concluded that there was "no evidence that the Republic of Ireland’s low Corporation Tax, by itself, attracted the high levels of foreign direct investment…that fuelled the Celtic Tiger economy." When the Secretary of State did a lap of honour and a hastily arranged photo opportunity in Lisburn earlier this month, she failed to address a number of issues—she has repeated that failure today—that her successor and those on the Treasury Bench will not be able to duck. Any responsible Westminster Government and Northern Ireland Executive will have to address these issues before 2017 First, the current Government’s commitment to the final transfer of powers is highly conditional. The agreement states: "The powers will only be commenced from April 2017, subject to the Executive demonstrating that its finances are on a sustainable footing for the long term including successfully implementing measures in this agreement and subsequent reform measures." Sometimes, the Secretary of State does not emphasise that high level of conditionality Secondly, should Northern Ireland reduce its corporation tax rate to that of the Republic of Ireland, it would lose at least £300 million from its block grant. Budgets would have to be cut. In the awful event of the Tories being re-elected, that £300 million cut would increase substantially as a result of the promised return to 1930s levels of public expenditure Thirdly, slashing and burning the state, rather than having a long-term plan to rebalance the economy, is opposed by all Northern Ireland’s parties. Fourthly, severe cuts to school, further education, higher education and adult skills budgets, as well as reduced funding for infrastructure, would moderate the potential benefits of reduced corporation tax. It is investment in skills and infrastructure that will make the biggest difference to private sector jobs and growth, alongside corporation tax devolution Fifthly, the Secretary of State has failed to acknowledge the plain truth that significant reductions in corporation tax must be used to stimulate investment, not to inflate excess profits or pay at the top. As my right hon. Friend the Leader of the Opposition said on his visit last week, Northern Ireland faces no greater challenge than inequality. My party is seeking to address that through the independent Heenan-Anderson commission, which is attracting much support and interest in Northern Ireland The cost of living crisis has hit Northern Ireland’s families hard. Northern Ireland consistently records the lowest rates of private sector pay in the UK. One in six workers are classed as low paid and a quarter earn less than the living wage. Wages have fallen by £1,683 a year since 2010. One in five children in Northern Ireland live in poverty. Northern Ireland continues to have the highest claimant count of any region in the UK—at 5.7%, it is double the UK rate Unless this legislation is carefully managed to ensure that it does not benefit only those at the top, it will not only fail to enhance growth, but perpetuate the horrendous inequality that is leaving too many people in Northern Ireland at the margins of the economy and of their communities. It will also be important, as the hon. Member for South Down (Ms Ritchie) said, to ensure that the whole of Northern Ireland benefits from the legislation—not just Belfast, but Derry/Londonderry, Strabane, Portadown and Newry Finally, it would be the ultimate folly if in 2017, as Northern Ireland was preparing to align its levels of corporation tax with the Republic of Ireland, the UK was exiting the European Union. No part of the UK would suffer more than Northern Ireland from the inevitable impact on economic co-operation between the north and the south We will enable the passage of the Bill in a spirit of transparency about the potential gains, but with an awareness of the risks. Not only is that the responsible stance for a party that seeks to govern the country in four months’ time; it is right because we have a duty to be honest with the people of Northern Ireland about the difficult choices that lie ahead. The Executive are right to make private sector jobs and growth top priorities as they strive to build a better shared future, but they are also right to reject the slash-and-burn approach to the state that is being pursued with such relish by this unfair and incompetent Tory-led Government An incoming Labour Government will not only balance the books in a responsible way, but work with the Northern Ireland Executive to pursue an active industrial strategy that will boost private sector jobs and growth, while tackling the chronic worklessness and poverty of those at the margins of the economy and society in Northern Ireland. We will transform the economic pact between Westminster and the Executive by setting goals to expand the creative industries and other sectors that build on Northern Ireland’s strengths. A shared aim should be to encourage young people who go away to study and travel to return home to Northern Ireland when they are ready to settle down. That will be possible only through the creation of well-paid, high-skilled jobs The Bill opens up new opportunities for Northern Ireland, but it will require political leaders to make difficult choices and to ensure that the potential gains benefit the many and not the few. As I have said, the devolution of corporation tax is not a panacea, but if handled properly, it could be part of a new economy that works for working people and leaves far fewer people behind. Ultimately, that is how the Bill will be judged.