The United Kingdom's chancellor of the exchequer, George Osborne, has used his Autumn financial statement, the last before the general election in May, as an opportunity to woo voters with the promise of modest tax concessions and changes to stamp duty to make home ownership more affordable for house purchasers.
But his conditional offer to parties in Northern Ireland, to allow the Northern Ireland executive set its own corporate tax rate if they agree to settle their differences and accept budget cuts, has come as a surprise.
Whether the parties rise to the challenge and accept the offer, remains to be seen. The proposal comes as Britain has lowered its corporate tax rate, which was 28 per cent in 2010 to 21 per cent today, with a further percentage point reduction planned next year.
A lower rate in Northern Ireland – closer to the 12.5 per cent rate in the Republic – would enable it to compete more aggressively to attract foreign direct investment, and to boost private sector employment in an economy dominated by the public sector. But if Northern Ireland is offered a lower business rate, can Scotland be denied similar treatment? In which case IDA Ireland would face intense competition in the battle for inward investment, and at a time of increasing uncertainty about Britain's future in the EU.
Mr Osborne has sought to penalise multinational companies that engage in tax avoidance measures: by moving profits out of the UK to lower tax jurisdictions, like Ireland, to minimise their tax bill. And he has also changed the rules for British banks, no longer allowing them to offset in full past losses against future profits.
Otherwise, he said, “some banks would not be paying taxes for 15 or 20 years”. The taxes raised will be used in part to finance cuts in stamp duty, which Mr Osborne says should benefit 98 per cent of home buyers. But in Britain, as in Ireland, with house price inflation outstripping wage growth, the change will do little to make home ownership more affordable.