Wed 3rd Jul 2013
The Moment of Opportunity
By Sir George Quigley
Huge strides have been made over the past year towards the devolution to Northern Ireland of the power to vary corporation tax. Four weeks ago the Government delivered fully on its promise to publish a Consultation Document on Rebalancing the Northern Ireland Economy, the bulk of which is devoted to examining mechanisms for changing the corporation tax rate.
The Document is wholly different in tone and content from much of the material which has issued from the Treasury over the years. It unequivocally recognises Northern Ireland’s vulnerable economic position and the role which a radical reduction in corporation tax can play in generating the growth dynamic which our economy so desperately needs.
Having been closely involved with the campaign for reduced corporation tax since the beginning, when the previous Government was adamant in its refusal to devolve the power, I am in no doubt that this great prize is now within Northern Ireland’s grasp. Very importantly, in the Secretary of State, Owen Paterson, we have within the Cabinet a totally committed champion of the idea, who is working tirelessly to achieve it.
For Northern Ireland, against all the odds, to gain the ability to deploy this powerful economic weapon would be a truly revolutionary development. The Northern Ireland Executive bears a huge responsibility for our future. It can succeed only if it has the tools to do the job. It deserves to be given them.
Key to restructuring our economy is the transformation of Northern Ireland into a major platform for the production of goods and services for export to the rest of the world. In part these exports will come from growth in companies already here. Some of these are even now very successfully capturing world markets. Others are showing the capacity for innovation which promises, over time, to translate into solid export potential. A low rate of corporation tax will give a huge boost to all these companies and to the wider business base.
But no matter how strong a superstructure we erect on the business foundations already here, we will still not have the critical mass to produce a step change in our economic performance. Hence the need for Foreign Direct Investment (FDI). The views expressed by the eminent American economist Jeffrey Sachs on the Irish economy are equally relevant for us. Small economies, he said, can develop domestically only a very small fraction of the modern technologies needed to support an advanced economy. FDI can supply that need. But it also provides foreign savings to augment domestic savings and it gives us access to the marketing channels of multinational firms. Sachs asserts bluntly that high income levels in small countries depend on successful export-driven FDI.
In an era of cutthroat competition for global investment, a competitive rate of corporation tax is an indispensable part of the policy package to stimulate such investment. A former senior official of the Industrial Development Authority in Dublin, referring to the major global players attracted to the Republic, said:
‘It is my considered view that none of the companies I have mentioned would have set up operations if we had the corporate tax rate that pertains in Northern Ireland’.
I am convinced that the only thing which can now prevent our achieving these crucial devolved powers is to fail to send to the Treasury, in response to the Consultative Document, a clear message that we want them.
We now have a real chance to start building sound economic foundations for the future and to get on to the new economic trajectory which can hugely extend opportunity in Northern Ireland for the output of our schools and colleges and guarantee a far more secure standard of living and quality of life.
I would therefore urge all who are determined that this will not prove to be a lost opportunity to respond before the due date (24 June) to the invitation for comment in the Treasury Document, which is to be found at hm-treasury.gov.uk