I am giving evidence to the Northern Ireland Affairs Committee of the House of Commons this afternoon.
The subject under discussion is the proposal that Northern Ireland have a tax rate of 12.5% to copy that of the Republic of Ireland.
The timing could not be more appropriate for somebody who opposes the idea, as I do. As I have made clear, I take no pleasure in the state of the economy of the Republic, but it is very apparent that the economic policies that it has pursued over an extended period of time have been wholly misguided with regard to tax, and other issues.
But, I also know that I am likely to be asked about my alternatives. These are relatively easy to offer. Those promoting this idea for Northern Ireland have said it is their intention to make it attractive as a profit centre, rather than as a low cost centre. Quite why they didn't say they wanted to create a tax haven, which brings in no new jobs or real economic activity I don't know, but that is quite clearly what this means, if unpacked. And, as is being seen in the Republic of Ireland, throughout the Crown Dependencies and in the wider tax haven environment, this model for an economy is failing, almost universally. Ireland is bust. Jersey, Guernsey and the Isle of Man are all running substantial deficits, and illegal corporate systems, and have no clue how to fill the gap. Cayman is going cap in hand for permission to borrow. So is Bermuda. The tale goes on, and on.
The simple truth is that you cannot run an economy without creating real wealth. Real wealth has not and never will be created from financial speculation. Aristotle made that point some time ago. He was right at the time and he is right now. Labour generates wealth by the application of its skills to the natural resources of the world. Finance merely facilitates the process. That is not to denigrate finance. It is important. But by itself it is not capable of generating wealth, and cannot be the basis for an economy.
In that case, to base an economic policy upon the attraction of profit, and not on attraction of high quality labour generating activity is sheer folly. This policy exploits an artificial factor of production - the temporary ability to create legal advantage. Just how temporary that can be is all too readily apparent in the case of the Republic.
Real activity is the basis for real growth. That requires three things now:
1. The stimulation of demand. Nothing else will bring recovery to Northern Ireland.
2. Undertaking a Green New Deal for Northern Ireland.
3. Investing in people and infrastructure in Northern Ireland. It’s already good. It can be better still.
This is the basis real growth.
Playing with tax rates is frippery for accountants wanting to make a quick buck.