'Disappointment' at outcome of Varney review

The Finance Minister has expressed his disappointment, on behalf of the Executive, at the outcome of Sir David Varney’s Review of taxation in Northern Ireland.

Speaking this afternoon, the Rt Hon Peter Robinson MP, MLA expressed his dissatisfaction at its findings:

“The outcome of the Varney Review published today is disappointing.  All of the main Northern Ireland parties, along with business interests, presented a strong case to Sir David on the need to grant Northern Ireland a dispensation on corporation tax. However, we have always urged caution about the potential outcome of the Review.”

The Varney Review was established in March this year to assess the extent to which the headline corporate tax rate dissuaded foreign investment from locating in Northern Ireland.  Many stakeholders have argued that the low rate of tax on profits in the Republic of Ireland (12.5%) places Northern Ireland in an unfavourable location. It is the only region of the UK with a land border to a low-tax economy.

The Executive, in its July 2007 submission to the Varney team, set out a case for offering a lower rate of corporation tax in Northern Ireland. This would act as a catalyst for economic growth and transformation. A low rate of business tax is a major factor in the decision-making process of multi-national companies.  

In addition to the geographical proximity to a low-tax economy, the Executive also highlighted the need to address three decades of lost investment opportunity.  

“For more than three decades Northern Ireland has suffered in its ability to attract foreign investment,” Mr Robinson said. “Resources available for economic development policy were diverted towards law and order issues and the image of the region certainly dissuaded inward investment.”

In his written statement today, the Chief Secretary announced the establishment of a second review. This will identify policies and incentives for strengthening and sustaining private sector growth, investment and employment in Northern Ireland. This further review, which will conclude before the US/Northern Ireland Investment Conference next May, will include direct and regular input from Executive officials.

The Finance Minister made it clear that the further review would only be worthwhile if it addressed Northern Ireland’s economic priorities:

“We will continue to argue the case for a reduction in corporation tax. The issue will not go away.

“We have been assured that this further review will be meaningful. However, it will only be of value if it produces tangible policy initiatives to assist the transformation of our economy. A fundamental, objective assessment of the needs of the local economy will be essential.  

“The Executive, in its draft Programme for Government, has placed economic development at the heart of its policy agenda. We need to ensure that we focus policy interventions on maximising economic growth. This forthcoming review must highlight the additional measures that we need to take forward.

“Executive Ministers will discuss their collective response to Sir David’s first report at their scheduled meeting tomorrow,” Mr Robinson added.

Notes to Editors:

On 22 March 2007, following representations from the Northern Ireland political parties, the Chancellor announced a review to report on: ‘How current and future tax policy, including the tax changes announced in the Budget 2007, can support the sustainable growth of businesses and long-term investments in Northern Ireland.’

The Review conducted meetings in May, June and July with key stakeholders in Northern Ireland. A call for evidence was launched on 1 June 2007. Some 45 organisations and individuals submitted evidence to the Varney Review team.

The Report of the Review team can be accessed on the HM Treasury website at: www.hm-treasury.gov.uk/media/1/3/varney171207.pdf

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