Time is right for a debate on fiscal powers

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The first independent review of the scope for devolving additional tax, spending and borrowing powers to the Northern Ireland Assembly, has been launched by NICVA’s Centre for Economic Empowerment.

The report, produced by advisors PwC, follows the Economic and Integration Pact for Northern Ireland, agreed between OFMdFM and the Prime Minister ahead of the recent G8 summit. That pact commits the UK government and the Northern Ireland Executive to “examine the potential for devolving additional fiscal powers.”

Fiscal Powers: A review of the fiscal powers of the Northern Ireland Assembly concludes that Income Tax, Stamp Duty, Air Passenger Duty and Landfill Tax, could be potential candidates for devolution. These taxes collectively contribute an estimated 22.3% of Northern Ireland’s tax revenues and the report also suggests that other ‘minor’ taxes and some excise duties may be suitable for devolution.

However, the report warns that enhancing Northern Ireland’s control of taxation poses practical challenges, as any increase in revenues from devolved taxation would be offset by an equivalent cut in Northern Ireland’s block grant. The report also says that accurately calculating how much tax is due in Northern Ireland and how much is collected requires a level of accuracy in revenue assessment not currently available. The cost of administering enhanced tax devolution could be significant and needs further investigation and the experience of Scotland in establishing a separate revenue agency should be carefully considered, the report says.

This video from the launch event features interviews with Minister for Finance and Personnel, Sammy Wilson MLA; Esmond Birnie, Chief Economist at PwC in Northern Ireland; Sinn Féin economy spokesperson Daithí McKay MLA; devolution expert Alan Trench; and Seamus McAleavey, Chief Executive of NICVA.

Speaking before the launch of the report Seamus McAleavey, NICVA Chief Executive said: “Northern Ireland’s economy continues to lag behind the UK and the status quo offers little prospect of improvement in the short to medium term, particularly for the most disadvantaged.

“It is time for fresh thinking and our aim in commissioning this report is to help inform debate on the scope to take control of additional economic levers.”

He continued, “While Commissions have been set up in Scotland and Wales to examine the scope for additional fiscal powers, this is the first comprehensive review of Northern Ireland’s powers. “We believe the report provides an excellent starting point for politicians and civil society to begin this debate.”

The report was launched at the MAC in Belfast by Sammy Wilson MLA, Minister for Finance and Personnel. Speaking at the Launch Minister Wilson MLA said, “Fiscal devolution is a huge issue for both the Executive and Assembly and this report will no doubt help in providing an informed and balanced contribution to that debate.

“We remain committed to securing additional fiscal powers only when we believe they offer a powerful economic lever that could help address specific issues which would stimulate our economy, and enable us to respond in a more tailored way to the social and economic challenges that we face here.

“It is also important to recognise the progress that has already been made in this area - the Corporation Tax issue has been significantly progressed; the power to set our own rates of Air Passenger Duty has been devolved; and an exemption from tax on fossil fuels used in the generation of electricity has been achieved.

“The Economic Pact published at the time of the G8 a couple of weeks ago included a commitment from both the Executive and the Government to examine what further fiscal devolution might be appropriate for Northern Ireland. “This requires very careful consideration and analysis to ensure that we make the right decisions for Northern Ireland.”

Commenting on the report findings, Dr Esmond Birnie, PwC Chief Economist in Northern Ireland said: “Scotland and Wales have been subject to comprehensive reviews of devolved taxation and these have resulted in proposals for substantial devolution of tax varying powers.

“England has now seen the Heseltine report which proposes substantial devolution to the English regions. Northern Ireland remains the only part of the UK not to have undertaken such a review and I hope that this report will help to start that debate. Fiscal variation will not be a game changer but it could improve accountability and be a useful addition to the existing levers of policy.”

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