George Osborne’s pledge to give the Northern executive new powers to set its own corporate tax rate is as lacking in detail as it is highly conditional. But it still heralds a step-change in Britain’s business tax policy as it seeks to mimmick Ireland’s successful pursuit of foreign direct investment.

In his Autumn statement, Osborne said London recognised “strongly-held arguments” for devolving corporate tax powers to Northern Ireland and suggested this could be done before the election next May. However, he said this would be done only if the Northern parties settle entrenched divisions over budget cuts.

“The current talks will see if that’s the case.”

Perennial political squabbles on the executive prompt doubt as to whether a deal will be done, but that is not really the point. Osborne’s manouevre - and the prospect that corporate tax in Belfast would be cut from the 21 per cent UK rate to match 12.5 per cent in Dublin - presents several knotty questions.

Rhetorically at least, there is great support south of the Border for moves to strengthen the “all-island” economy and help wean the Northern economy off its dependence on public expenditure. Yet there are limits. It is clear that a big drop in the Northern tax rate would be designed to intensify North-South competition for investment. The Coalition would hardly enthuse if jobs destined for Donegal suddenly went to Derry. They’re all for all-Ireland improvement, but not for the seepage of investment projects over the Border.

IDA Ireland

A lower tax rate would certainly be a boon to Invest NI, the agency charged with enticing big companies North. But how great a challenge would it pose to IDA Ireland? In the business world the argument goes that IDA Ireland’s real forte lies in bringing in advanced tech and pharma projects from the likes of Google, far fewer of which go North. If the Republic’s technological advantage is clear, so too is the fact that the contentious deployment of tax strategies is more advanced. Dublin is a world centre for inward investment, Belfast is not.

But wages tend to be lower in the North, meaning there would be an opportunity as the tax rate goes down for Invest NI to build up its base. The agency is perceived to be strong in manufacturing, a sector in decline in the Republic.

Brexit

There are other issues. Osborne’s statement all but establishes the principle in Britain that devolved authorities would have the right to set their own business tax rates. Consequent pressure from Scotland is inevitable, and it is difficult to see how London could spurn it. This, in turn, could lead to copycat claims from Wales.

That all adds up to a far bigger challenge from Britain to Ireland’s dominance of the great investment game. But that’s not the whole story. Amid ructions in the Tory party over Europe and the UKIP threat, doubt persists as to whether the country is on its way out of the EU. A “Brexit” would present all kinds of ugly scenarios for Dublin. Yet it might strengthen the sales pitch that an investment into Ireland opens a nexus to Europe that a British project would not provide.

For the moment, however, it is clear that British efforts in this space are stepping up.