Tax rate cut is just what the North's ailing economy needs
Published 24/03/2011 | 05:00
PITY poor IDA Ireland as the agency tries to entice executives overseas to invest here. Knocking on doors from Atlanta to Zagreb seems to get a tad more more difficult every day.
While doubt swirls around Ireland's economic future and the long-term sustainability of our 12.5pc corporation tax, Northern Ireland is set to get the power to compete head-on with the Republic for multi-national largesse.
There was a time when it seemed that our low rate was written in stone but those days are long gone and it is easy to imagine foreign executives deciding that a few extra percentage points on the corporate tax rate is a worthwhile cost for the economic stability, lower salaries, lower income tax and lower house prices offered across the border.
What is bad news for the Republic is almost certainly good news for Northern Ireland where the economy remains completely dominated by the public sector and massive transfers from Westminster. A low tax rate backed by the British government's firepower could be just the ticket to transform Northern Ireland's economy from the UK's laggard into an economic powerhouse once again.
The North has an interesting industrial legacy and it is not too difficult to believe that given the right set of circumstances, it could once again become the home to a strong manufacturing sector just as the Czech Republic has done despite decades of stifling communism.
Yesterday's budget was interesting in many other ways as well. Almost alone in the world, George Osborne is sticking to his austerity drive without the IMF breathing down his neck. While we have to change or die, Mr Osborne is slashing spending as his counterparts in Europe and the US continue to chatter ineffectively.
This is an arduous process; growth is slower than expected while the deficit remains stubbornly high but it appears that this Tipperary baronet is not for turning and the UK will continue to plough the lonely furrow -- a decision that means our largest export market will remain depressed for sometime as it tries to cut its way out of the country's worst recession since World War II.
Mr Osborne's policies may not be too popular at home but many of his innovations are likely to appear very sensible to Irish eyes and be copied here sometime in the future.
Among the most obvious was his sensible decision to merge income tax and National Insurance; expect to see it at a tax office near you sometime this decade.