Durkan: Corporation tax alone is not a ‘magic bullet’

Mark Durkan.
Mark Durkan.
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SDLP Foyle MP Mark Durkan has said that corporation tax on its own is not a ‘silver or magic bullet’ and that other policy measures – including a City Deal for Derry and the expansion of Magee – must be considered if the North West is to prosper in the future.

Speaking during this week’s House of Commons debate of the Corporation Tax (Northern Ireland) Bill, Mr Durkan said:

“The first time that the issue of capacity in relation to corporation tax was raised came up in the negotiations leading up to the Good Friday Agreement in 1998. Some of us said that we wanted to build in capacity for fiscal discretion, particularly in relation to corporation tax and some other taxes that had an economic impact. That was certainly the SDLP’s position.

“The argument was put back on the table by the Business Alliance between late 2002 and early 2003, but it particularly came back into play with the restoration of devolution in 2007. Some of us raised the issue again during all those negotiations in 2005, 2006 and 2007, but there were no takers or backers for it.

“Perhaps if we had achieved the devolution of corporation tax much earlier, we would have been much further down the road when it came to all the benefits it can offer. We are told that all this opportunity and prosperity can come on the back of this corporation tax differential, so would it not have been much better if we had done this years ago – at a time when we had a much healthier budget management situation for the devolved Executive?

“Many people have also raised the issue of Northern Ireland’s competitive position compared with the south of Ireland. We need to remember that the sort of factors at play in the south of Ireland’s very successful drive for inward investment and its successful growing of its indigenous companies to become increasingly global players go beyond just the corporation tax regime. They include the very significant long-term investment in further and higher education – not just at university level, but at the level of the institutes of technology. This has happened alongside heavy investment in infrastructure and a very responsive and better managed planning system to deal with the needs of companies.

“I therefore believe that corporation tax on its own is not a silver or magic bullet. The fact is we need to consider other policy measures as well.

“Other MPs have also talked of the need to balance the economy, Growing our indigenous private sector while also attracting more inward investment and investment from industries that can partner our local companies is hugely important, and the corporation tax measures can open some windows for us in that regard. However, it is not just a question of rebalancing the economy; we must rebalance the region. The west of Northern Ireland – not least my own constituency (of Derry) – is clearly lagging behind in terms of both infrastructure and employment. We must ensure that, we well as the corporation tax rate, we have other instruments that have been properly developed. We need infrastructure investment to underpin shared growth across the region, and we also need significant advances into tertiary education.

“People refer to corporation tax as a ‘game-changer’, but most people and businesses in my constituency are clear about the fact that the single biggest game-changer for us would be an expansion in higher education. That is not just needed to enhance the university status of the city of Derry; it is needed in Northern Ireland, which is, in effect, exporting a university campus every year. Given what is happening in the south of Ireland, the north will lose out very badly if it decides that corporation tax is the only thing on which it wishes to compete with the south. We are not competing with the south, or indeed this country (England), on further and higher education.

“Cities and other locations in Northern Ireland are not just competing in economic terms with parts of the south, but with places on this island (Britain) as well. Alongside the latitude on corporation tax, I should like the Executive to pursue the idea of creating their own version of city deals, and recruiting support from the Treasury and any other support that is needed from Whitehall. That is what happened in Scotland in connection with the city deal for Glasgow.

“It is my belief that, as this plays out, Northern Ireland will end up with lower rates of corporation tax but probably not for long, because I think a deal will be done in future that sees corporation tax devolved in some form or other to Scotland, and I think that on the back of that there will be strong pressure to say that the corporation tax rate in England must come down further. The government who have produced this Bill are a government who have reduced corporation tax throughout this Parliament, and I cannot believe that they will not be committed to trying to reduce corporation tax if they are in government in any future Parliament.

“Importantly, we therefore could, and should, be developing more tools, rather than leaving everything down to corporation tax alone.”