The Corporation Tax (Northern Ireland) Bill had its second reading in the House of Commons today. The Secretary of State for Northern Ireland, Theresa Villiers and the Shadow Secretary of State, Ivan Lewis of Labour set out the positions of their respective parties.

The Bill will allow the Northern Ireland Assembly to set its own Corporation Tax rate, allowing it to be more competitive with the 12.5% rate set in the South. The government and the NI Executive believe that cutting the tax will help tackle long-term problems in the Northern Ireland economy helping to rebalance the economy and boost jobs and growth.

Areas of interest that were discussed today included sectors that were excluded and exemptions within those sectors.  See summary below.

Details

Secretary of State Theresa Villiers set out the arguments in favour of the devolution of Corporation tax.

- Villiers stated that the coalition government has cut the corporation tax rate across the UK from 28% to 21% but repeated the government’s belief that NI was a special case within the UK as it shares a land border with Ireland, where the rate of corporation tax is 12.5%.

- She cautioned that the devolution of corporation tax was not the answer to all financial challenges of Northern Ireland stating that the NI executive must continue to ensure that the economy has the appropriate level of skills and infrastructure to take full advantage of the measure. She stated that a review of the planning system in NI would be useful to help infrastructure projects progress.

- Villiers stated the bill formed a key part of the Stormont House Agreement and as such the government had shown its commitment to its side of the deal by introducing the legislation. This was a reference to the need of the NI parties to continue to adjust their budget and make the necessary cuts in order for the devolution of corporation tax to progress smoothly.

- She argued that any delay to the bill would be a ‘major mistake’ and stated that she expected the bill to pass before the dissolution of Parliament.  She welcomed the ‘U turn of the leader of the opposition’ a reference to Ed Miliband’s assurance in Belfast that he would support the devolution of Corporation Tax powers. 

- Villiers stated that this bill would help to secure Northern Irelands future and encourage peace and prosperity enabling it to take another step a in the process of normalisation.- Villiers drew attention to the fact that large parts of the financial services industry, including banks, will not qualify for the Northern Ireland rate as profits arising from lending, investing and reinsurance can be moved to a different geographical area without significant trading activity taking place there. However, in response to MP Sammy Wilson, Villiers drew attention to the exceptions which enable certain financial organisations can take advantage of the lower rate.  This was a reference to the "back office" activities that will qualify institutions for the lower rate of tax.

Shadow Secretary of State for Northern Ireland Ivan Lewis set out Labours position which appeared more cautious than that of the government. He stated that corporation tax was not a panacea and argued that the Secretary of State had not been straight with the people of Northern Ireland.

- Lewis drew attention to a PWC report which found the devolution will not be a ‘magic bullet’ for Northern Ireland citing a lack of evidence that the measure will make a meaningful difference.

- He went on to challenge the Minister on certain issues sating that the devolution of corporation tax was ‘highly conditional’ on the NI Executives progress something he argued Villiers did not ‘emphasise’.

- The cut to the block grant of £300 million was he argued an attempt by the government to slash and burn the state rather than seeking to sensibly rebalance the NI economy.  A cut to funding for skills and infrastructure was he argued a threat to the devolution process. 

- He said the measure must be used to stimulate growth not just to inflate the profits of corporations. He said Northern Ireland continues to suffer the highest inactivity rate in the UK with economic recovery still faltering and youth unemployment stubbornly high. 

- Inequality was he argued the greatest threat to the NI economy stating that NI already has the lowest rate of private sector pay in the UK with 1 in 5 children living in poverty.- He said Labour would support the bill and that they would not seek to divide the house ‘today’ but cautioned that the bill required further scrutiny and said further consultation on the bill would be essential in the future.

Other contributors included Owen Paterson a former Secretary of State to Northern Ireland, Laurence Robertson Chair of the  Northern Ireland Committee, Sammy Wilson of the DUP, Margaret Ritchie & Mark Durkan of the SDLP.

- Patterson saw this bill as a similar achievement to that of the Belfast Agreement saying this bill had the potential to transform the NI economy.  Where once the NI economy was 77.6% dependant on the public sector lower corporation tax provided the private sector with a great incentive to grow saying he was delighted that Labour had come on board.- Margaret Ritchie welcomed the move but questioned the Minister saying she wanted to ensure the measure would benefit the whole of the North and  every town and city in it  not just Belfast.

- Sammy Wilson stated that Northern Ireland once as driver for growth in the UK badly needed the devolution of corporation tax to effectively compete with the Republic- Laurence Robertson stated that setting a lower rate of corporation tax had become a ‘cornerstone of Republics industrial policy’ and had greatly benefitted the south whilst drawing foreign direct investment away from Northern Ireland. However, the Republic do not see the measure as a threat he stated and have largely  welcomed the move.

The Bill now moves on to Committee Stage and  the government aims for the legislation to be passed by April with the devolution of powers to follow.  We will continue to monitor the Bills progress and update you with relevant information.