There is confusion over what British chancellor of the exchequer, George Osborne’s stance will be on Northern Ireland’s corporate tax rate, ahead of his Autumn Statement to the House of Commons tomorrow.
Belfast has been lobbying for control of the tax so that it can compete with lower rates in the Republic of Ireland – Northern Ireland currently shares the UK rate of 21 percent, while south of the border the rate is 12.5 percent.
Most sources say that Mr Osborne will announce that Northern Ireland will be given the power to change its rate - a big call to make, especially since London recently indicated that it has no plans to grant similar powers to Edinburgh.
Other sources report that Mr Osborne will mention his commitment to devolving power – but stop short of changing the current system.
David Cameron is on record as saying that there is a strong case for allowing Northern Ireland to set its own corporate tax rate.
Scottish hangover
Corporation tax was one of the issues that the Yes side pushed in the recent Scottish independence referendum. While the No campaign suggested that breaking away from London would cause economic chaos, supporters of a Yes vote argued that independence would allow the country to lower its corporation tax rate, attracting foreign companies.
Granting new concessions to Northern Ireland would lead to renewed calls for Scotland to be granted the same power. Last week the Smith Commission, which was formed in the wake of the September vote to examine the issue of Scottish devolution, recommended that Edinburgh should not be allowed to set its own corporate tax rate.
The Scottish First Minister, and leader of the Scottish National Party Nicola Sturgeon has supported the proposed change, she told The Independent: "I very much hope Northern Ireland is given control of corporation tax [this would] demonstrate very clearly that the Smith Commission proposals, welcome though they are, do not include the range of the key job-creating powers we need.”
If that power is granted to Belfast tomorrow, it will be difficult for Westminster not to do the same in Scotland. This would mean that there would be two corporate tax rates on the island. If Scotland made cuts, England would face the same problem that Northern Ireland are currently facing – sharing a border with a country who are offering a more competitive rate.
Playing politics
This story should be framed in the context that there is a general election looming in the UK, and Wednesday's Autumn statement is the last one before voters take to the polls next May. Mr Osborne has commented that he will not announce any pre-election giveaways - but the Northern Ireland issue could give the Conservative Party a boost in the polls.
If the ability to change corporation tax is given to Northern Ireland, the measure would not be enforced until May 2015. The concession could lay the foundations for an electoral pact between the Democratic Unionist Party (DUP) and the Conservative Party - who could promise the Northern Irish party that they will ensure that the measure is pushed through after the election.
The DUP currently has eight seats in Westminister – making them the largest Northern Irish party in the UK parliament.
