Owen Paterson wants Belfast to have the same low corporation tax as Dublin
By Tim Montgomerie
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We sometimes talk about the subsidy that Scotland receives from the rest of the UK via the Barnett formula*. But the part of the UK that receives by far the most public sector intervention is Northern Ireland. Public spending accounts for over three quarters of the economy in Northern Ireland (in large part for many obvious historical reasons). In a speech last night, in Belfast, Owen Paterson, Secretary of State for Northern Ireland, put the figure at a Soviet 77.6%.
Mr Paterson spent most of his speech arguing that the province should embrace the same kind of welfare reforms that Iain Duncan Smith is enacting over here, in London. He made a robust case for paying off Labour's debts. A smaller welfare state and reduced borrowing can only be part of the solution to Northern Ireland's unbalanced economy, however. It's at least as important that Northern Ireland's private sector grows.
In pursuing this aim Owen Paterson has convinced George Osborne to establish a ministerial working party to examine whether the NI Executive and Assembly should have freedom over the rate of its corporation tax. This isn't a small matter. Businesses have flooded into southern Ireland in recent years because it has a much lower corporation tax rate than in the 'Six Counties'/ Ulster. NI has a big enough handicap because of the legacy of the Troubles. A high corporation tax makes it extra hard to compete with the south.
The rest of the UK can't pay for Northern Ireland forever. Owen Paterson's corporation tax policy might not only be good for the unemployed of Armagh, Lisburn and Newry but, in due course, might become a model for Edinburgh and Cardiff and initiate tax competition across the UK.
* Iain Stewart MP recently argued that the talk of the subsidy might be misplaced.