It is well known that, if Northern Ireland chooses to reduce its Corporation Tax rate, it suffers a consequent reduction in public spending to “make up” for this advantage over the rest of the UK.
Somewhat bizarrely, this internal matter for the UK and obvious issue of basic fairness has made it into the “Brexit” debate, with some Brexiteers mischievously and frankly erroneously suggesting that somehow leaving the EU would mean the reduction would no longer be necessary.
It would absolutely still be necessary.
The arrangement long pre-dates the European Union; in fact, it pre-dates the War. In 1938 the UK Chancellor, Sir John Simon, agreed to meet any shortfall in Northern Ireland’s expenditure for as long as it maintained the same level of welfare provision and main taxation. This is known as the “parity principle”, and it is under this principle that Northern Ireland would have to pay any difference in welfare provision or taxation (such as reduction of Corporation Tax) out of its own budget.
Given that Scotland and Wales now also have devolution, the importance of that parity principle is greater now than ever.
If a reduction in Corporation Tax would take £250 million from the NI budget inside the EU, it would take £250 million from it outside the EU too. It is a UK principle – something you would think Brexiteers would know about.
So let us hear no more of that particular Brexit fantasy!