Posted on Tuesday 4 September 2012 by Ulster Business

NIO 04

Owen Paterson pictured meeting GAA officials at a recent engagement

The initial reaction to Owen Paterson’s tenure as Secretary of State for Northern Ireland coming to an end has inevitably focused on the issue of corporation tax.

Paterson – who has been promoted to Environment Secretary in David Cameron’s Cabinet reshuffle – was such a vocal cheerleader in the lobby to grant Stormont the power to vary Northern Ireland’s rate of corporation tax, that such a jump to conclusions was inevitable.

He has been replaced in the Northern Ireland role at Westminster by former transport minister Theresa Villiers.

Paterson’s promotion away from the Northern Ireland Office has been taken as confirmation in many quarters that the long, drawn out discussions over allowing Northern Ireland a 12.5% business tax rate in line with the Republic of Ireland and below the UK’s 24%, is almost certain to come to nothing.

The MP for North Shropshire had himself gone quiet on the issue in recent months, a potential indication Westminster had gone cold on the idea.

First Minister Peter Robinson has also spoken of his frustration over Treasury officials’ apparent desire to stymie the bid by adding costly new caveats to the process.

Initial estimates that, under EU law, Stormont would have to shoulder a £250m-£300m cut to the block grant in order to pay for the impact a 12.5% rate would have in lost tax receipts to UK coffers, have since swelled to in excess of £500m.

Mr Robinson told Ulster Business over the summer that while the economic case had been made successfully to grant Northern Ireland tax varying powers, it was now a political decision that would come down to whether the Prime Minister and Chancellor George Osborne want to give it the thumbs up.

Perhaps tellingly, Theresa Villiers made no overt mention of corporation tax in her first official statement as Northern Ireland Secretary.

The MP for Chipping Barnet said only that she was “acutely conscious of the need to continue our efforts to rebalance the Northern Ireland economy” and planned to immerse herself fully in the issues over the coming days.

Business leaders here have, however, not given up hope that a corporation tax deal can be salvaged.

CBI Northern Ireland chairman last week told business journalists that he “refused to accept” it was a dead issue.

Mr Coulter said he hoped to highlight to Chancellor George Osborne at a meeting next week that the Treasury’s original March 2011 red paper on the subject provided a very workable framework to make it happen.

That document, which Mr Coulter said in his day job as a corporate lawyer he would regard as a “head-of-terms” or commercial pre-agreement, did not include the subsequent add-ons by Treasury of a £105m indemnity against profit shifting and a £50m annual administrative charge.

He remained single minded today, commenting on the cabinet reshuffle that “players may change but the game remains the same”.

“We thank Owen Paterson for his undoubted contribution to the corporation tax debate. This change should not however detract from this important debate. We look forward to working with the new secretary of state for northern Ireland in securing a lower corporation tax for Northern Ireland,” he said.

Other business leaders struck a similar tone as they welcomed Ms Villiers to the role.

IoD NI chairman Mervyn McCall said: “We hope she will bring fresh impetus to the campaign to vary the rate of corporation tax in Northern Ireland, and continue the strong commitment and action her predecessor gave to the issue.

“The IoD still views a reduction on corporation tax as one in a range of important measures to safeguard the future economic prosperity of the region.”

And commenting a matter of minutes after the announcement of her appointment, Glyn Roberts, chief executive of retail association NIIRTA, said: “NIIRTA had an excellent working relationship with Owen Paterson both in opposition and government and he deserves considerable credit for advancing the whole issue of devolving Corporation Tax to the Northern Ireland Executive.

“We look forward to working with Theresa Villiers and would encourage her to make a priority of moving forward the current talks on Corporation Tax and indeed working with devolved Ministers on establishing Enterprise Zones in Northern Ireland.”

Further reaction and heavily loaded statements of welcome will likely follow, but given the strength of the corporation tax movement, much of the non-political dialogue is likely to have a similar tone.

That unified stance suggests Ms Villiers will get short shrift if she is the one asked to do the dirty work and inform Northern Ireland’s politicians and businesses that Number 10 and Number 11 say no on corporation tax.

Ulster Unionist Party leader Mike Nesbitt was quick off the mark in urging the new Secretary of State to clarify whether she will be supportive of the devolution of the powers to vary corporation tax to Northern Ireland as her predecessor was.

It is a clarification everybody in business will be eagerly awaiting.

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