Corporation tax: Where next for Northern Ireland’s economy?
Foundations laid for the potential lowering of Northern Ireland’s corporation tax have all but eroded in recent years, however, it should not be completely dismissed if the necessary transformation of Northern Ireland’s economy is to take place, writes David Gavaghan.
For any of us who had the good fortune to know Sir George Quigley, he was without peer in this realm. In many respects he was Northern Ireland’s version of TK Whitaker, albeit he would never have been comfortable with such a mantle.
One of my early encounters with him was over his far-sighted ambition to persuade the UK Government that Northern Ireland should have a devolved corporation tax. Laudable as I thought this ambition was, I suggested to him that this would never happen, having spent 25 years working in London, including a secondment from Hambros Bank to the Department of Trade and Industry where I advised ministers on mobile FDI projects across the UK. Well, little did I know about the persuasive and tenacious powers of this remarkable man and his able co-conspirator, Eamonn Donaghy. Those two were the kernel of a remarkable and unique alliance of Northern Ireland business interests. They all came together to campaign, lobby and cajole all in pursuit of this transformative measure, believing that it had the potential to lift and rebalance the economy of the region. Many of us believe it still can.
Sadly, having finally brought this momentous opportunity to the point where it was within reach in 2015, this once in a lifetime opportunity slipped through our hands. The dissolution of the Executive three years ago meant that its final delivery was held in abeyance. Now, within the first three months of our reinstated Executive, finally re-formed under the New Decade, New Approach (NDNA) document, we have seen the potential burying of Sir George’s heroic work.
Regrettably, the two key ministers tasked with direct responsibility to grow our economy, have not quite been singing off the same hymn sheet and it would appear there was very little consultation with the business community. From my perspective, where I too was integrally involved in keeping the corporation tax flame lit when the baton was passed to me as Chair of the CBI in Northern Ireland (2016 and 2017), this is a sad day.
However, the world is moving on. Ireland is busy developing a new global strategy to ensure that its economy remains competitive, albeit recognising that its low levels of corporation tax cannot last forever. The UK Prime Minister more recently, surprisingly, recognised that, despite all the bravado of repositioning the UK economy as “the Singapore of the West”, reducing corporation tax to 17 per cent was not a politically savvy move. In declaring that it will remain at 19 per cent, it makes any such move in Northern Ireland more expensive to implement at a time where there is already a challenging budgetary climate.
Having said this, perhaps the Executive, collaborating closely with the business community, could implement a transition over say five years with incremental reductions in corporation tax of 1 per cent per annum from April 2021. Hopefully, if successfully implemented, increased tax revenues would ensue to meet the budgetary burden and perhaps, more important than anything else, it sends a signal to the world that “we are truly open for business”.
Irrespective of any future decision, we need to focus on the fundamentals that will transform the Northern Irish economy. There are perhaps no new magic wands. I believe that we need to promote vigorous growth of our two principal cities. In the case of Belfast, with a population currently of circa 0.32 million, it needs to grow to 0.5 million people (within 20 years), reinforcing its status as the second city on the island of Ireland, whilst Derry’s population currently circa 0.11 million should grow to 0.25 million.
Creating greater and speedier connectivity across the handful of principal conurbations on the island of Ireland is fundamental in order to compete against the rise of the megalopolises across the globe. The age of the train has returned. It is noteworthy that the NDNA deal potentially contemplates “a high-speed rail connection between Belfast, Dublin and Cork, creating a spine of connectivity on the island”. More work needs to be done to ensure that the benefits of this major investment in infrastructure are felt more widely across Ireland. Many successful countries are actively pursuing similar policies.
Sir George would readily welcome these ideas; he had the vision for another great concept, the Eastern Economic Corridor and the emerging all island economy. Our Victorian forefathers did so much to create the solid foundations for a modern Ireland in the 20th century. We urgently need to develop a sustainable footprint/blueprint for the next generation and subsequent generations where the combustion engine will be as old fashioned as ‘beggar your neighbour’ tax policies.
We are now in a new era, it is a time for new thinking.
David Gavaghan is Founder of Aurora Prime Real Estate and former Chair of CBI, Northern Ireland.
