Ó Muilleoir needs UK treasury to keep North’s block grant steady

Fresh warnings that a Brexit could result in a "drying up of investment" in the North will be a powerful incentive to the Northern Ireland finance minister this week as he campaigns for "meaningful negotiations" on corporation tax with UK treasury officials.

Irish businessman and former European commissioner Peter Sutherland is the latest to warn that investors could shun Northern Ireland in favour of European Union member states if the UK exits the EU.

It is against this backdrop that finance minister Máirtín Ó Muilleoir, who travels to London on Thursday, believes the UK treasury wants to have its cake and eat it when it comes to how much it will cost the Northern Ireland Executive to introduce lower rates of corporation tax.

As part of the deal to devolve corporation tax powers to the North, the treasury – under European Union rules – must reduce the £10 billion-plus block grant it gives Northern Ireland each year.

If everything goes to plan the North’s new rate of corporation tax of 12.5 per cent will be in place from April 2018. But, based on latest UK government estimates this could shave in the region of £275 million off the Northern Ireland block grant in the years 2020-2021, a figure Ó Muilleoir is extremely unhappy about.

‘Not fair’

He has written to the UK chancellor

George Osborne

to tell him the current proposals by the treasury are “not fair”.

His department recently signed a memorandum of understanding with the UK Revenue to put the administrative preparations in place for the lower rate of corporation tax. But Ó Muilleoir is now warning: “The precise deduction to the block grant is the remaining outstanding issue.”

His over-riding concern is that, while the introduction of lower rates of corporation tax promise to deliver “substantial economic benefits, including higher levels of foreign direct investment, more and better jobs, and an increase in productivity” , it also needs to be “affordable” for Northern Ireland.

Ó Muilleoir is confident that “reducing the rate of corporation tax is both achievable and affordable” but there may be some distance to go before the UK treasury is singing from the same hymn sheet.

If he had his way, Northern Ireland would not only be in control of setting corporation tax rates but also the likes of income tax levels, VAT, stamp duty, airport passenger duty and potentially other key fiscal levers.

He is the first Sinn Féin finance minister in the North: it is also Ó Muilleoir’s first ministerial position and he has made it clear that he intends to seek “more fiscal autonomy” for Northern Ireland than some of his predecessors perhaps have done in the past.

Ó Muilleoir’s society-focused mission statement echoes many of the aspirations set out in the Executive’s new programme for government framework, which is open for public consultation until July 22nd.

The framework is a wish list of what the Executive would like to achieve between 2016 and 2021 and top of its ambitions are aspirations for the local economy.

“We prosper through a strong, competitive regionally balanced economy,” is the first priority identified by the Executive.

The North’s business community has welcomed political leaders’ commitment to growing the economy and has pledged to play its part in helping the Executive to achieve these aspirations.

But David Gavaghan, CBI Northern Ireland chairman, believes there is a lot of work to be done.

“The business community will ultimately create the jobs we require, while businesses also have a key part to play in raising the aspirations of our young people.

“We need to raise our game in tackling educational underachievement and provide all our young people with the attitudes, behaviours and skills needed to succeed in life and work.”

Future growth

“There are other significant challenges ahead, including the delivery of critical infrastructure, which will underpin the future growth of the economy.”

The newly-elected president of the Northern Ireland Chamber of Commerce, Nick Coburn, has said it also wants to "help drive through measures to help businesses and the wider economy in Northern Ireland to grow".

All Ó Muilleoir needs to do now is get the UK treasury on board and keep his fingers crossed that a Brexit does not burst Northern Ireland's corporation tax bubble.