Northern Ireland

"You want it, you got it but you gotta pay for it'

union Jack cake

Lowering corporation tax has been the Holy Grail sought by business leaders in Northern Ireland for many years.

With the visiting Chancellor George Osborne talking about it as "one of the biggest ideas out there", this once mythical prize seems remarkably close.

The Treasury consultation on the proposal runs to the end of this month. Mr Osborne is unlikely to say anything at Stormont on Friday that would prejudge that process, but those looking for positive signs will be pleased.

Those opposed to the idea will have their fears increased.

First of all, he is here. He comes the week after David Cameron. There is little point in sending the Prime Minister and Chancellor to Northern Ireland to hype up an issue which they plan to bury.

His language in his first interview on the subject on BBC Radio Ulster did not suggest that he had any lingering doubts about proceeding. If anything, he turned the table on the local politicians to effectively put their money where their mouths are.

To paraphrase: "You want it, you got it, but you gotta pay for it."

He highlighted the "particular argument in Northern Ireland" which is essentially a legacy of violence (which has skewed the economy towards the public sector) and a land border with the Republic (which has a much lower business tax).

It is clear from what the Prime Minister has said before - all but suggesting that Northern Ireland is a communist state - that this government wants to shrink the public sector and grow the private sector. The lever to help them do that, they appear to think, is lowering business tax.

The Chancellor said it was the "biggest idea". In fact, he did not reference any others. And when you read the Treasury's consultation paper on rebalancing the economy, you discover that the section on alternatives is pretty thin.

Where the Chancellor talked tough was on the price Northern Ireland must pay by taking a slice out of the block grant from Westminster.

He said it was "not a question of negotiation, but a question of getting the right figure". He suggested that there was a definitive and objective figure that could be pointed towards and that this was not a "matter for debate".

But politics is all about negotiation. Accountancy presents itself as a science, but read any set of company accounts and you discover that all they legally claim to be is a "true and fair opinion" of the state of affairs.

So, too, for corporation tax. Deciding the cost requires a formula. There may be no negotiation over the final figure, but there is a hell of a negotiation to be had on the formula.

European law says the cost of the tax cut must be taken off the block grant. Local politicians say that means "net cost", in other words you take off what is lost in business tax but add back in what is gained in terms of income tax, consumer taxes and reduced benefits.

It is the amount of adding back that the Treasury disputes.

So when George Osborne says he is here to ask people if they "want to do this even if it costs" - he is aware that the negotiation has begun.

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