I am pleased to be able to speak in support of the Bill. Much has already been said and I do not want to repeat the points that have been made; rather, I want to set out the reasons why I believe the Bill will be good for Northern Ireland. I also want to sound a note of caution on those issues to which we will need to give some thought here in Westminster and in the Assembly, in order to ensure that we maximise the Bill’s impact on economic growth.
We are all aware of the need to rebalance the Northern Ireland economy. At the moment, we are more reliant than any other part of the United Kingdom on the public sector, and our private sector often struggles to be competitive because of particular disadvantages. For example, the private sector companies that compete internationally are often at a significant disadvantage because of energy costs. So there are a number of issues that put us at a competitive disadvantage compared with our nearest neighbours, but despite that, we are one of the best-performing regions in attracting foreign direct investment, and we do an excellent job of getting those companies to come to Northern Ireland.
One of the issues that corporation tax might assist us with is ensuring that with those companies come not just back-office jobs but jobs with good salaries, and good profits that will then be out-turned and benefit the wider economy. So there are real opportunities to change the kind of foreign direct investment we can attract and to build on the reputation we have been able to grow overseas for being a good destination for investment.
As others have said, Northern Ireland is unique in having a land border with another country, the Republic of Ireland, which has a much lower rate of corporation tax. It is right that we should seek to be competitive with that country, but we should also not forget that we
have other advantages that it may not. So we should not always seek simply to balance our taxes against its taxes; we should look to be competitive on a range of fronts. When companies are coming to make their investment, they will look at not only tax regimes, but a host of other issues that will influence their decision. I want to focus briefly on some of those towards the end of my remarks.
Devolving corporation tax rate-setting powers to the Northern Ireland Executive, when complemented by other measures, has the potential to help transform our economy, increasing growth, productivity and exports. So the Bill is a timely move to facilitate that growth. When the Northern Affairs Committee dealt with the issue, we found strongly that not only business, but local politicians, particularly those represented in the Executive but also some outside the Executive, were in favour of this measure. I must pay tribute to the hon. Member for East Antrim (Sammy Wilson), in that, although he has been sceptical about the issue, he has today given reasons why there needs to be caution about the fiscal modelling on which people have based their projections for the future. Although we may be able to address corporation tax, we cannot control the global economic picture, which will also dictate the amount of foreign direct investment we can achieve. So we should not set our sights too high in terms of the number of jobs that that may create. We have projections we can use as a basis and we can look at the evidence from other regions, but we have to accept that other factors will influence how big an impact this measure will have.
It is important that we weigh those factors carefully when setting the rate—that will be a matter for the Assembly, which will need to give them due consideration. I agree with other Members who have said that we would want to do that quickly, I also think we need to carry out due diligence in setting the rate, to ensure that we know exactly what it will cost the Northern Ireland Assembly in block grant and exactly how we will manage the bridging period between making the cut to the block grant and seeing some reward from the economic investment that will follow. We will also need carefully to examine the long-term impact this measure will have on the wider economy. So although it is good that we are making these moves today—I commend the Secretary of State and her team for upholding their part of the Stormont House agreement at this stage, while, almost simultaneously, the Assembly is today upholding one of its parts of the agreement on the budget issues—I hope we will see an opportunity for the Assembly to take more responsibility over its financial measures.
I also wish to commend the Secretary of State for her work on the Bill, which will ensure that if the Assembly does not show a responsible way forward on the budget and if we are not able to get our finances in order in the next few years, this move will not go ahead. It is quite simple: we cannot continue with a situation where we make promises beyond the money we have to fulfil them and where we make commitments on public sector expenditure that are not covered by the block grant or by revenue raising that is available to us already. We need to get our financial house in order, so that we are able not only to make the corporation tax reduction, but convince the people of Northern Ireland that we have the capability to manage our finances in a way that is for their benefit. There is a gap between what the
politicians would like to be able to do and what the Northern Ireland public trust them to do, particularly on financial matters. That gap needs to be closed quickly over the next few years, by dealing with the budgetary matters before the Assembly both today and over the next few weeks.
It is important that after the Stormont House agreement we have bought some more time in which to be able to make those transformations to the economy, but all parties will have difficult decisions to make. Where the money comes from to pay for the corporation tax devolution will be one of a number of difficult decisions that will have to be taken. Whatever the colour of the Westminster Government after the next election, it is clear that nobody is arriving with a pot of gold and none of us can expect that huge amounts of money will be available that are not available now for public sector investment. I accept that some in this House wish it were otherwise.
It is hugely important for us to be realistic in our projections and in the promises we make to the public we represent, and to recognise that corporation tax is only one of a number of avenues we can pursue to grow our private sector. A low rate of corporation tax alone will not attract all the investment needed to grow Northern Ireland’s economy. Other corresponding measures will need to be taken in order to make Northern Ireland an attractive place in which to base a business or company, so let me briefly discuss some of them. Some are relevant to Westminster, whereas others will ultimately be dealt with by the Assembly. It is important for us to consider them, because that mix will allow companies to have the confidence to come to Northern Ireland.
The first and foremost issue is stability and good governance. The Stormont House agreement offered us an opportunity to deal with some of the issues associated with political stability, but, as hon. Members know from my response, I believe many of those were, unfortunately, parked and could still be the undoing of the good progress made thus far. I want local parties to commit to dealing maturely with those issues, which are politically sensitive, so that we do not have the kind of situation we have had recently, where lots of years of talking to companies and encouraging them to come to Northern Ireland and consider us as an inward investment opportunity are written off on the basis of a few nights of rioting, which is projected worldwide and damages our reputation irrevocably.
We need to have stability and maturity around political decision-making. The opportunity is there for that to happen, and I hope that all parties will grasp it. They should stop the petty arguments over peripheral issues and try to pull together to create the sort of stability that is beneficial for business, public sector growth, and small and medium-sized enterprises. Those SMEs suffer greatly when we have traffic disruptions as a result of bomb alerts and bomb hoaxes. Such an incident happened in my constituency just this week. The whole city, including the train service and local roads, was brought to a standstill. We cannot afford for that to continue, so we must deal with the politics to bring about that stability.
We also need to ensure that there is good governance. As I have said, the Stormont House agreement has given us an opportunity to look at right-sizing our civil service and to do so in a way that will not force people
into compulsory redundancy. That agreement was good for Northern Ireland, but we still have to find other employment for people, which is where corporation tax could play an important role.
There are other issues to consider. Members have mentioned infrastructure and planning, and, as a civil engineer, it would be wrong of me not to address that matter. We need not just significant investment in that area, but reform, because we cannot deliver the infrastructure investments that are needed in Northern Ireland with the current amount of money that we receive from the block grant and the emphasis that the Assembly gives to the matter. Some restructuring will be required if we are to ensure that our infrastructure is not an impediment to further economic growth.
We also need to consider issues of connectivity. The challenge rests not just with the Northern Ireland Assembly, but with the Treasury and other Departments here at Westminster. The hon. Member for East Antrim mentioned the fact that, for a long time, Northern Ireland was a driver for the UK economy. In my constituency, we had the largest shipyard anywhere in these islands and the world’s largest roadworks. We were not in any way regarded as peripheral because, at that time, connectivity was largely through ports, and we had an excellent port in Belfast. The situation has now changed and most of our exports go by plane. We are reliant on air transport. Heathrow is the main cargo hub for the UK and the main cargo export point for goods and services going from Northern Ireland. Unless we resolve the situation at Heathrow, no amount of reduction in corporation tax will encourage people to invest in Northern Ireland.
We need to retain our connectivity to London, and also through London and beyond to other business destinations so that we are not remote for those who wish to come and invest and do business in Northern Ireland. It is crucial that decisions about airport and runway capacity in the south-east are resolved, because it is a matter of importance for the country as a whole and for Northern Ireland in particular. Being on an island and off an island, we are absolutely reliant on air transport for our connectivity.
It would be remiss of me not to mention air passenger duty since I have repeatedly complained about it. We are double taxed with air passenger duty, which has an impact on our connectivity and on the cost of doing business. Although the problem needs to be addressed UK wide, it has a much greater impact on Northern Ireland than on any other region. We have no alternative way to make our way to London, to the main hub, other than to use air transport, and we are penalised for that because of the lack of through carriers. We have to pay air passenger duty twice: once to get to London and then onwards to whatever destination we take.
Another area of concern is brass plating, which the Bill tries to address. Northern Ireland does not want to become simply a front for companies that are doing business elsewhere and creating economic growth and employment elsewhere but benefiting from the low tax regime in Northern Ireland. There is no benefit to us or to the UK from that. We want to encourage companies that will set up their main operations in Northern Ireland and create employment and real economic growth. Those companies will not be the only ones to benefit; all of the firms that service those companies that pay the corporation tax will also potentially benefit from being
able to attract those larger companies in. It is important that we deal with actual economic activity, and I welcome the fact that work has been done on that.
Another brass-plating issue of interest to me and to the hon. Member for Foyle (Mark Durkan) is international tax transparency. I do not want to stand over any system that would allow people from other regions to create a false front in Northern Ireland that would result in money being taken out of other economies in need of funds, whether they are in the third world or other parts of our own country. That is not good for international development, and it is important that there is tax transparency at the heart of the measure. We want real investment and real economic growth, and we want real jobs to be created as a result. I am glad that that has been acknowledged and considered in the Bill.
Something else that is required is skills. If we do not have the right skill set we will not be able to attract the quality jobs that we seek to attract, and it is hugely important that we do that. My colleague, Dr Stephen Farry, is doing that very effectively through the Department for Employment and Learning, and there is a mechanism that would allow a small levy—about 0.6%—to be placed on those companies that benefit from the corporation tax reduction. The levy could be ring-fenced to pay for skills investment. Companies could draw down some of that money for in-house training and partnership training with universities, and the remainder could be used for other skills investment. That should be a consideration in the way in which the Bill is structured. No one will want to benefit from our tax laws if they have to pay something towards investment in skills unless they intend to have employment and training as part of the work they do when they come to Northern Ireland. Those are the kind of added-value jobs that we need and want, and some form of skills levy would be helpful to avoid brass-plating and to support the Executive’s emphasis on skills investment and development.
Finally, the Chairman of the Select Committee on Northern Ireland Affairs, the hon. Member for Tewkesbury (Mr Robertson), discussed the importance of differentiation in Europe as a way of attracting new business to Northern Ireland. People come to Northern Ireland because they see it as a good stop-off point between, for example, the US, the south American countries and the European Union. They see us as a gateway to European markets. When we debate the European Union in Parliament let us not forget that many of those who locate their businesses in Belfast, Derry and other places do so because they see Northern Ireland as part of the EU and a good way to make those connections. We need to be careful when we talk about withdrawing from the EU—I have no problem with differentiation within the EU—as we need to be conscious of the impact that that would have, despite what we may do on tax regimes.
All those things are important. Some of them are in the gift of Westminster; some are in the gift of the Assembly. However, we have taken an important first step with this Second Reading. As we proceed with a detailed consideration of the Bill I trust that we can look at how we ensure that we experience the maximum benefit in Northern Ireland. I stress again that unless we have a stable, integrated future in Northern Ireland it
will not be an attractive place for large businesses. When the due diligence is done, one of the most important considerations is stability. We need to create that stability as a starting point, and from there this measure will give us an opportunity to make prosperity part of the package that the peace process can deliver.
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