[This article was first published in the Belfast Newsletter on Tuesday 25th July 2023]
Fifty years ago, Hungarian sculptor and professor of architecture, Ernő Rubik, launched his eponymous Cube, with one in every fifteen people on the planet having owned one. Its immense popularity means that its simultaneous complexity and simplicity have become a metaphor for tricky situations – perhaps none more so than the conundrum of Windsor Framework, resurrection of the Stormont Executive, our perennial budget deficit, and our economic under-performance. In resolving this puzzle, one winning move that should be deployed is devolution of Corporation Tax powers.
A decade ago FSB led the calls for this policy change, at a time when the UK’s CT rate was 28%, whereas our neighbours south of the border were paying just 12.5% - a huge differential. At that time, a majority of FSB NI members were NOT incorporated, so didn’t pay Corporation Tax, but the majority also thought that devolving the powers and cutting the rate was exactly the right thing to do for Northern Ireland; a policy recommendation made not out of self- interest, but because it was right for the economy.
We had many allies in that campaign who came together under the banner ‘GROW NI’, including all of the main business organisations, academics, and other stakeholders. Each of the five Executive parties also pledged their support – captured on video at the time to make sure these weren’t just fair-weather commitments!
That lobbying eventually led to the ‘Corporation Tax (NI) Act of 2015’ - a hugely significant achievement. Sadly, the collapse of the Executive in 2017 meant it was never implemented, however, not only is all not lost but, in fact, the time is now absolutely ripe, as devolution of many tax powers has matured in recent years, with both Scotland and Wales securing different powers as befit their needs. Here, the confluence of Windsor Framework, NI budget deficit, and the need to restore Stormont and give it the means to balance its books by growing the economy, make Corporation Tax-varying powers one of the key measures we should secure.
Brexit, the NI Protocol, and even the Windsor Framework do, indeed, mean that Northern Ireland holds a different position from all other parts of the UK; but just like freeports and investment zones, we should aspire to ensure our differences give us a competitive edge. We share an island with an economy where the CT rate is now exactly half that of ours. If investors are to be attracted, that differential means we are badly hampered in competing, irrespective of other market access opportunities. Giving effect to powers over CT would help make good on the Prime Minister’s ambition ‘to make Northern Ireland the most exciting economic zone on the planet’ – but, without them, we remain destined to languish in the slow lane and fail to make the most of our potential.
In parallel, is the embarrassment of the NI budget deficit. Much has been made of the need to raise more money locally, yet to do so from the population of the UK region with the lowest disposable income, without making genuinely transformative changes, would be folly. However, just as with the final twists of the Rubik cube, where all falls into place so, too, could economic transformation be achieved by investing in a reduced rate of Corporation Tax to provide the means to grow the economy - allowing more money to be raised locally and many societal issues such as our chronically high economic inactivity, lower business start-up, and poor productivity to be addressed.
Our position, with unique access to two of the largest markets on the planet; thousands of potential workers available if we implement strategic interventions such as childcare; high quality tertiary education capable of delivering the skills needed for incoming investors; underpinned by a highly competitive rate of corporation tax could, Rubik-like, let order emerge from chaos and see Northern Ireland become both the leading UK investment destination as well as an energised location for indigenous businesses.
FSB has never wavered in its commitment to the policy but, with the imminent NI Investment Summit in mid-September, now is the time to act. The process required is a simple legislative Order at Westminster; so the opportunity exists in the first week of September, when Parliament returns, to make this transformative change and help business to play its part in growing the economy so politicians can have the resources and the confidence to re-engage and transform this place for a generation.