PricewaterhouseCoopers has produced a report on reducing corporation tax in NI which will give credence to the Finance Minister’s position that £280 million in lost public spending may not be worth it.
Once again, however, NI politics is left focusing on a single issue when there are far more significant ones in play. In education, we focus solely on transfer at 10-11; in governance, we focus solely on quango reduction (another topical one currently); on water, we focus solely on heads rolling; on the economy, we focus on corporation tax. It is a whole lot more complex than that.
For me, Esmond Birnie (once an MLA himself but now cured) makes the key point for me: “It would seem that much of the FDI which Northern Ireland attracted during 1998-2008 did not contribute much towards the goals of raising productivity and providing wealth creation.”
In other words, there is no point in encouraging foreign direct investment if it is all about costs reduction rather than profit generation.
Esmond Birnie is very a good thing, in my opinion. If you haven’t watched his recent presentation and Q&A to the NI Assembly finance committee (its on video at the BBC) then you should – I thought it was really interesting stuff. I would like to see him take over as head of whatever replaces ERINI after Victor retires.
Thanks Slug – yes, Esmond Birnie is someone who actually knows what he is talking about. No wonder they couldn’t find room for him among MLAs…
Except if there is more private sector work with it comes a shift in behaviours and attitudes, employees will pick up a different skill set and culture when working in the private sector than public, more thinking about how to better manage money and spends that comes – or actually must come – within the private sector; so, over time there could be slight cost reductions from a hit on terms and conditions of employees; but, with that a much needed shift in mindset – towards efficiency – getting more punch out of the pound. Hopefully employees, particularly the younger generation, will have a more market-orientated outlook, which doesn’t happen when working in the public sector.
A shift in mindset is what NI needs, not more public sector regulatory-based work – and risk free block grant spending.
Another thing – the Executive could issue water charges and collect that money directly (removing water money from the block grant) therefore freeing up that spend which could then in turn be used to cover the reduced corporation tax – basically subsidising the reduced corp rate; such a policy option would at least give our MLAs a sense of responsibility by belonging to a decision of their own making – a commitment to see economic growth through for the younger generation – it might also place a bigger burden on the MLAs to work harder to get more out of the block grant.
Such a hard and risky policy option would show that money doesn’t grow on trees and the cake is finite – it might make politicians here realise that risky decisions can pay off in the end, or they can fail.
However, much like Ireland did to kick start its Celtic Tiger growth, our MLAs needs to know that there is a time for risky policies to be debated, esp ones with the aim of furthering economic growth.
One thing is for sure – in the end our MLAs can’t have their cake and eat it – that is to say demand both a reduced corporation tax and the same level of public spend – the cake needs to be cut in other ways for that to happen. It seems they don’t want to take such difficult decisions let alone even be caught holding the knife!