Thursday, November 16, 2006

Peace payout won't suffice in the north of Ireland says economist

James Stinson:

A one-off 'peace dividend' from the British treasury won't be enough to put Northern Ireland on a par with the Republic or richer parts of Britain and the rate of corporation tax must be lowered if the region is to prosper.

The claims are made by Mike Smyth, a respected commentator on the north's economy, in Business Insight today, ahead of an industry-backed report into the issue due for release tomorrow.

The north's politicians have been in talks with British government officials in recent months over a 'peace dividend' package which Chancellor Gordon Brown claims is worth billions of pounds.

Most of that will fund major infrastructure improvements.

However, Mr Smyth says this alone won't bring about the "step change" needed to make the region more prosperous and sustainable.

While the treasury is resisting calls for Northern Ireland to break from Britain and charge a lower rate of corporation tax, Mr Smyth says this should be an integral part of any final political deal.

He says it would cost the treasury less than expected, it would not break EU rules and that Northern Ireland deserves special treatment.

"If a lasting political deal is to be achieved then it must be underpinned by an effective economic package," he says.

"What is the point of achieving an historic rapprochement between republicanism and unionism if it cannot deliver a better life and living standards for all the people of Northern Ireland?"

Corporation tax has been much talked about as a way of delivering faster growth in the north's economy.

While the region is doing better than it was, it still lags behind the Republic and Britain. Average wages are lower and the region depends heavily on the public sector.

Corporation tax is a tax on business profits. While Britain and Northern Ireland have the same rate, it is twice that levied in the Republic.

This is often cited as a having been a key factor in the transformation of the Republic's economy.

"If the Northern Ireland economy is to reach its potential just as the Republic has done then what is required is a level playing field in terms of attracting foreign direct investment," Mr Smyth said.

"At the last count there were more than 20 of the largest US companies with their European operations established in the Republic of Ireland.

"There are none in Northern Ireland – and there never will be under existing policies."
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