North needs to tackle 'division' as well as tax rate

BELFAST BRIEFING:It is the issue nobody wants to talk about but it could save millions

THERE IS a new show in town this week and its working title is: “Can six men in suits change economic life as we know it in Northern Ireland?”

The event made its debut at Belfast Lyric’s Theatre last week with Owen Patterson, the North’s Secretary of State in the lead role. He was supported by five other men in suits representing Northern Ireland’s key business organisations and firms.

The plot revolves around a fresh push by a new business coalition, Grow NI, to secure a lower rate of corporation tax – it is currently 26 per cent as opposed to the Republic’s 12.5 per cent.

The cast of Grow NI includes all of the North’s key business organisations, a number of leading accounting firms and individual companies.

This is not the first time the debate about the local rate of corporation tax has been in the limelight. Over the last 10 years, corporation tax has been a constant headline when it comes to discussion about the North’s economic performance – or more appropriately lack of performance. The latest revival of this debate has been inspired by the publication of a consultation paper by the UK Treasury which examines the case for devolving setting the rate to the Executive.

Last week, Grow NI launched its campaign to mobilise support in Northern Ireland to persuade the UK government to do just that. There was drama, suspense, even a hint of romance in the air.

Eamon Donaghy of KPMG told an audience of more than 100 business and political leaders: “We are closer now than ever to realising the long-held aim of gaining the power to reduce corporation tax, which can help rebalance the NI economy, grow the private sector and create long term, sustainable, well paid high quality jobs.”

Grow NI has until June 24th when the consultation officially closes to make its case to the treasury and Downing Street.

In the meantime, some believe there is a need to look closer to home to find the solution to the problems the economy faces.

New forecasts published by Northern Bank this week show revised annual growth forecasts down to 1.1 per cent for 2011 and 2 per cent for 2012.

It has, however, said that the “probability” of the local economy falling back into recession has fallen to 15 per cent from 25 per cent in last quarter. But it warns that the local economic recovery has been “far from spectacular”.

This helps to underline the view of Duncan Morrow, chief executive of the North’s Community Relations Council that more than just a change to corporation tax levels is needed to build a different economy.

In Morrow’s opinion, “division” is the economic issue that nobody appears to be talking about. “Rightly, we are hearing a lot about reducing corporation tax. But there is not the same degree of priority being attached to addressing division, which costs Northern Ireland at least a £1 billion each year.

Mark Magill, a senior economist with Oxford Economics, says the crisis in public finances might actually be the catalyst which forces a change in the status quo.

He argues that if, for example there was more collaboration across the education system the Executive could save up to £80 million. “In terms of duplication in the provision of services, if Northern Ireland was able to deliver unemployment and sickness public services at the same cost per head as Wales, which also has a high unemployment and economic activity rate, it would represent an annual saving of £1 billion,” Magill states.