I think that is a very unfair criticism of previous Ministers of the Environment who presided over that very system for many years and who are here. Yes, we hold that portfolio at the moment and, yes, we have made significant moves and improvements. What we did not agree with was the attempt to abandon planning criteria on the basis of the say-so of the First Minister and the deputy First Minister by designating a particular area. We thought that would lead to controversy, and the resistance to it came not only from the SDLP Minister but from many stakeholders, including many economic representatives, who were very sceptical about this strange approach. There are straighter and better ways of improving the planning system in Northern Ireland and of making it more efficient and more effective.
Many people have raised the issue of Northern Ireland’s competitive position compared with the south of Ireland. We need to remember that the sort of factors at play in the south of Ireland’s very successful drive for inward investment and its successful growing of its indigenous companies to become increasingly global players—to be acquired and, indeed, to conduct acquisitions themselves—go beyond just the corporation tax regime. They include the very significant long-term investment
in further and higher education—not just at university level, but at the level of the institutes of technology. Many people are going to graduate from the technical universities as well, and this has happened alongside heavy investment in infrastructure and a very responsive and better managed planning system to deal with the needs of companies. The planning system in the south might have been long and delayed for some infrastructure projects, but when it comes to industrial projects, it has moved with a fleet of foot, and Northern Ireland does not compare well with that.
Like others, I believe that corporation tax on its own is not a silver bullet, a magic bullet or any other type of bullet. We in Northern Ireland are not meant to like bullets nowadays, but we sometimes find ourselves talking about them in contexts such as this. The fact is that we need to consider other policy measures as well. The Executive will be put under some strain by the budget scenario that they will face over the next few years when it comes to the other drivers that will be needed to maximise the benefits of corporation tax in a way that would compare favourably with the success of the south.
Mine is a border constituency. The Foyle constituency contains the city of Derry, or Londonderry as some Members would be quicker to call it, and many people in the constituency work in businesses across the border. The right hon. Member for North Shropshire referred to investments in Letterkenny. Many of my constituents work there, and there is strong cross-border co-operation. Something that is good in Letterkenny is good for Derry, and something good in Derry is good for Letterkenny.
There are firms that are paying 12.5% in corporation tax, but that does not mean that we have full employment in Derry. Some Derry firms are in nearby Donegal, and firms there that are Derry-based and originated in Derry employ many Derry people. A peripheral border region will face other infrastructure challenges, and the corporation rate on its own will not deliver high employment.
We must ensure that the Bill does not create unnecessary complications or confusions for the firms that would benefit from it, or create reputational problems for the region and its governance. The Chairman of the Select Committee, the hon. Member for Tewkesbury (Mr Robertson), wanted to know whether some clauses would be taken on the Floor of the House during the Committee stage or whether the entire Bill would be dealt with upstairs, but, in any event, we shall need to go through all the detail. I agree with the hon. Member for Bury South (Mr Lewis) that the Bill requires the fullest and best possible scrutiny, so that we do not find ourselves surprised or confused by what may emerge later, whether it is the behaviour of businesses or the response from the Treasury or Her Majesty’s Revenue and Customs. We may be confronted by patterns and practices that we did not anticipate, or that we assumed would be dealt with by measures in the Bill.
The Bill introduces not just the capacity to devolve corporation tax in the sense of allowing the Assembly to set a different headline rate, but a whole calculus in relation to the effects on the block grant. There is what could almost be called a new ecosystem of company definitions: for instance, the Bill defines Northern Ireland regional establishments, Northern Ireland small and medium-sized enterprises, and Northern Ireland rate
activity. All that will clearly provide a field day for the accountants and others who will have to work their way through it and take companies through it, but we, as legislators, will have to be careful when dealing with those terms. We shall need to understand how they will operate in practice, and how they will be interpreted. We shall need to know how the relevant profits will be measured, not least the relevant intellectual property profits.
The Bill states that the Government—the Westminster Government—will retain full control of allowances and credits, and I can see the case for avoiding an arrangement whereby the regional Government would be responsible for both the headline rate and for allowances. The devolved Government might well be susceptible to particular pressures from particular sectors for specialised allowances. That could create more difficulties and confusion, and it could also create a risk of some regional disrepute. There is, rightly, an increasingly worldwide movement in favour of more transparency in respect of tax matters and the conduct of taxation. We in Northern Ireland are not in the business of trying to create twilight zones in relation to tax adherence, and we recognise the need for a proper balance.
Today a tax dodging Bill campaign is being launched by a very active alliance that includes Action Aid, Christian Aid and Oxfam. The aim is to broaden efforts to create greater transparency in respect of corporate taxation, to establish new standards, and to bring about the introduction of a Bill in the next Parliament. I support the campaign, and was involved in many of the preliminaries. I must make clear that there is no tension or contradiction between supporting the principles of that campaign and supporting Northern Ireland’s capacity to set its own differential rate of corporation tax.
Other Members have talked of the need to balance the economy, Growing our indigenous private sector while also attracting more inward investment and investment from industries that can partner our local companies is hugely important, and the corporation tax measures can open some windows for us in that regard. However, it is not just a question of rebalancing the economy; we must rebalance the region. The west of Northern Ireland—not least my own constituency—is clearly lagging behind in terms of both infrastructure and employment. We must ensure that, we well as the corporation tax rate, we have other instruments that have been properly developed. We need infrastructure investment to underpin shared growth across the region, and we also need significant advances into tertiary education.
People refer to corporation tax as a game-changer, but most people and businesses in my constituency are clear about the fact that the single biggest game-changer for us would be an expansion in higher education. That is not just needed to enhance the university status of the city of Derry; it is needed in Northern Ireland, which is, in effect, exporting a university campus every year. Given what is happening in the south of Ireland, the north will lose out very badly if it decides that corporation tax is the only thing on which it wishes to compete with the south. We are not competing with the south, or indeed this country, on further and higher education.
However, we also need to recognise this is not just about competing with the south. There has been almost an obsession with Northern Ireland’s competition with the south in relation to corporation tax. We need to
recognise that the game is changing when it comes to competition in cities and city regions. Important things are happening on this island. For instance, enterprise zones have developed and taken on a different life. As we have heard from the Opposition, it is not a question of “Life on Mars”, or a return to the 1980s. Enterprise zones have had different effects in different areas, and some have been more vibrant than others. More and more Opposition Members want them in their constituencies, along with city deals and growth deals.
Cities and other locations in Northern Ireland are not just competing in economic terms with parts of the south, but with places on this island as well. Alongside the latitude on corporation tax, I should like the Executive to pursue the idea of creating their own version of city deals, and recruiting support from the Treasury and any other support that is needed from Whitehall. That is what happened in Scotland in connection with the city deal for Glasgow. Therefore we could, and should, be developing more tools, rather than leaving everything down to corporation tax alone.
The hon. Member for East Antrim (Sammy Wilson) and others raised issues to do with the financial sector, and I think it is right that there are limitations and qualifications there. People would have been very sceptical if a corporation tax measure for Northern Ireland had meant that the banks were freely able to move their brass plates or some of their offices purely to avail themselves of lower corporation tax. I do not think people in Northern Ireland would want that, and certainly people elsewhere would not want it. Would it happen? Well, we suddenly saw at one point during the Scottish referendum campaign that banks were saying they might move, depending on the result. That would have been the first bank run in history in which the banks were going to move yet the money was going to stay, but that was what was being talked about, so there is reason to believe that might happen.
We will have to tease out in Committee or at another time some of the questions around the financial sector and other sectors in terms of the interpretations and implications of what does or does not count as a back office. Similarly, questions have been raised around what we have been told about the calibration that will be done in relation to allowances and credits, so that, for instance, the film industry and other creative industries may be told that there will be a clawback of some of their other allowances and credits if they are in Northern Ireland, to take account of the benefit they are getting in terms of corporation tax. We need to tease out whether people actually have to have those benefits and receive them before the clawback will take place, or whether they will be told that on paper they could benefit from that as they are in a different corporation tax environment and that therefore they are in a different environment as far as the allowances and credits are concerned. So the question of when some of these things are triggered or kick in is important.
There are similar issues in relation to the impact on the block grant. If we are going to start with assumptions being made as to the opportunity cost in revenue terms of the lower rate of corporation tax for Northern Ireland, this issue arises: once we know what it actually
is, will adjustments be made year on year to the block grant, so that if less is forgone in one year than was anticipated, that will be made up in next year’s block grant? Similarly, will more come out of the block grant if there is deemed to have been more uptake in relation to the corporation tax differential? We need to tease out more detail.
The credit union movement is very dear to many people in my constituency. The credit unions are strong in my constituency. They pay corporation tax and they would like to think that they will not be counted as benefiting from the lower rate, because they are rooted in the community and exist totally for, and are dedicated to, the community, so they will not be salting away profits in an egregious way. They will not be abusing the system, and they want assurances that they can be protected and that they will not be treated in the same way as the banks in terms of the protection against any possible undue benefits going to the financial sector.
On procedure, the hon. Member for Tewkesbury (Mr Robertson) has made the point that he would like this Bill to be taken on the Floor of the House. I believe it could be, and certainly significant clauses could be taken on the Floor of the House, so that if and when issues arise in a few years’ time, none of us has the excuse of saying that we did not know and we were not in on that. I am not afraid of the questions that arise from the Scottish position, the Welsh position or anything else, so I do not agree with those who say we should just take this away in secret Upstairs, and that we cannot afford to answer any questions that might arise. I think we can address those questions.
It is my belief that, as this plays out, Northern Ireland will end up with lower rates of corporation tax but probably not for long, because I think a deal will be done in future that sees corporation tax devolved in some form or other to Scotland, and I think that on the back of that there will be strong pressure to say that the corporation tax rate in England must come down further. The Government who have produced this Bill are a Government who have reduced corporation tax throughout this Parliament, as the Secretary of State said in her opening remarks, and I cannot believe that they will not be committed to trying to reduce corporation tax if they are in government in any future Parliament—and of course they would use the lower rate of corporation tax in Northern Ireland and Scotland to drive that measure and catch the Opposition in the same way as they think they caught the Opposition today.
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