English taxpayers could benefit in the long run from Northern Ireland being allowed to set a lower corporation tax rate than the rest of the UK, the government has claimed.
Northern Ireland Secretary Owen Paterson, who has championed the plan to devolve the tax raising power to Stormont, told a Westminster committee he believed it could eventually reduce the vast sums of public money poured into the region.
He accepted the tax move might spark demands from deprived parts of England to be allowed the same job-creating tool, but argued Northern Ireland was a unique case.
Mr Paterson said Northern Ireland was burdened by the legacy of the Troubles, shared a land border with the Republic which has a low tax rate, while three-quarters of the Northern Ireland economy was reliant on the public sector.
Pressed on the high level of economic deprivation in parts of England, he said: “I entirely agree with you. I represent North Shropshire, which is not a very wealthy part of England.
“I am fully aware of the need for more prosperity across the UK.”
British chancellor George Osborne has already announced that corporation tax will be cut across the UK to 23 per cent by 2014. But Mr Paterson is pressing for Northern Ireland politicians to grasp the opportunity to take on the power to gradually reduce their rate to compete with the Republic’s level of 12.5 per cent.
He said the move could be the “step change” needed to revive the area’s weak private sector.
Mr Paterson said Northern Ireland citizens receive more per head from the public purse than their English equivalents, and argued that developing the region’s economy could reduce the disproportionate burden on the British treasury.
He told the Northern Ireland affairs committee: “I think what I would say to your and my constituents is, there is already huge asymmetry in spending.
“Tax and spending are two sides of the same coin. Your constituents are contributing to a massively higher rate of public spending in Northern Ireland: 25 per cent more than your guys get and mine get.
“We all understand why. And your constituents and mine have stood by Northern Ireland through some terrible times.
“The point I am making is Northern Ireland doesn’t want to be dependent like this, the First Minister has said that himself last week.”
He added: “And by giving them this tool we will grow the economy, we will grow tax revenues in Northern Ireland and we will reduce the dependency on the taxes of your constituents.
“I think we have a very valid case that our English constituents will gain. Our English constituents, they stood by Northern Ireland through 40 years of violence and you have this unique problem of a common land border with the Republic, who have 12.5 per cent.
“I think we have a perfectly valid story to say we have stood by Northern Ireland through all the problems of security, we have stood by Northern Ireland embedding the peace process.
“We’ve got to stand by Northern Ireland for a further stage, with this very special arrangement, to help Northern Ireland grow its economy and become self-sufficient.”
PA