‘Northern Ireland needs to be got on to a new economic trajectory’

[Published: Monday 23, July 2007 – 07:55]

Dear Sir David,

We welcome the setting up of the Review into tax policy in Northern Ireland which you are leading. The purpose of this letter is to express strong support for the case which has been made from within Northern Ireland for the alignment of the corporate tax rate there with the 12.5% rate which applies in the rest of Ireland.

You will have available to you the detailed arguments which have been advanced on behalf of the tax change. We confine ourselves here to underlining some key points with which we are in complete agreement.

1. Northern Ireland is unhealthily reliant on the public sector to sustain its present level of economic activity. On the conventional measure of regional wealth, it remains stuck at 20% below the U.K. average and is also falling steadily behind Ireland. The productivity gap with the rest of the UK and with Ireland has been widening and the poor level of productivity in the service sector in particular reflects the low value added nature of much of the new employment created.
2. Northern Ireland needs to be got on to a new economic trajectory. There is no empirical evidence that this will be achieved by simply continuing to focus on the supply side drivers – innovation, enterprise, skills and infrastructure. Ireland's experience demonstrates that being competitive on tax is a critical success factor. Those of us with experience of Ireland are in no doubt that the Celtic Tiger would simply not have happened in the absence of a low tax regime and that it remains a vital factor in maintaining momentum.
3. The development of a vibrant island economy promises gains for both parts of the island. The distortions inherent in the differential corporate tax rate within the island impede that development. Instead, there is a gross economic imbalance between North and South, one heavily globalised and export orientated; the other largely public sector driven and small firm dominated.
4. The rebalancing of Northern Ireland's economy calls for a greatly enlarged higher value added private sector. While some of the necessary growth will come from within, much has to come (as it did in Ireland) from accessing global investment flows. It would be bizarre to suppose that, while tax competitiveness was a necessary element in attracting the foreign direct investment (FDI) which was central to the success of the southern part of the island, it is irrelevant to the necessary enlargement, from FDI, of the private sector in the Northern part.
5. Without the quality of policy innovation displayed by the governments, it is inconceivable that politically inclusive devolved institutions could have been restored. It would be tragic if, through lack of equally courageous innovation on the economic front, the opportunity is missed to ensure the long-term stability provided by strong economic foundations.
6. We do not underestimate the difficulty inherent in introducing a differential corporate tax rate for Northern Ireland. But there is much to be weighed on the other side. For instance,
• Northern Ireland is emerging from a period of acute conflict and it is vital that it should be given the means to transform itself and create a future characterised by new opportunities and new perspectives. All in these islands have a huge stake in successful transformation.
• Of all the UK regions, Northern Ireland exhibits public sector dependency in its most acute form, to the extent that its private sector would need to grow by over 40% for it to achieve the same public/private sector balance as other over-dependent regions.
• Sharing, as it does, an island location with Ireland, the factors influencing Northern Ireland's economic future cannot be considered apart from that fact, particularly given the express desire of both governments to work towards the economic convergence of both parts of the island. This simply will not happen while there is such a disparity between the returns which shareholders can expect. As indicated earlier, the failure of the convergence agenda will be to the detriment of both parts of the island.
7. The recent political settlement in Northern Ireland represents probably the most significant development on the island since the early 1920s.
   To deny the Executive the ability to capitalise on this breakthrough and take Northern Ireland in a new economic direction towards sustainability would represent an enormous missed opportunity for the totality of these islands as well as for Northern Ireland itself.
8. We believe aligning corporate tax rates on the island has a crucial role to play in achieving that new direction.
9. A small delegation from amongst those signing this letter would be happy to meet you to discuss this issue further if you think this would be helpful.
10. This letter is signed by us in our personal capacities.

Yours sincerely,

Lord Ballyedmond (Chairman, Norbrook Laboratories Limited)

Roy Barrett (Managing Director, Goodbody Stockbrokers)

Sir Christopher Bland (Chairman, BT Group)

Richard Burrows (Governor, Bank of Ireland)

Liam Connellan (Past President, The Irish Academy of Engineering)

J Brian Davy (Chairman, Davy Stockbrokers)

David Dilger (CEO, Greencore Plc)

David Drumm (Group Chief Executive, Anglo Irish Bank)

Lord Eames

Mark FitzGerald (Chairman & CEO, Sherry FitzGerald Group)

Sir Niall FitzGerald (Chairman, Reuters and former Chairman/CEO Unilever)

Jim Flavin (Exec Chairman DCC plc)

Dermot Gleeson (Chairman, AIB Group)

Pat Gunne (Managing Director, CBRE)

Dr WG Hastings (Chairman, Hastings Hotels)

Dr Maurice Hayes (Member of Irish Senate and former Northern Ireland Ombudsman)

Baroness Jay

Ronnie Kells (Chairman, United Drug and Director, Readymix plc)

Baroness Kennedy, QC

Dr John A King (Former Chairman, Warner Chilcott plc)

James M Lyons (Former Special Adviser to President

Clinton/Economic Initiatives Northern Ireland)

David McCann (Chairman, Fyffes plc)

Michael McDowell SC (Former Tanaiste)

Kieran McGowan (Chairman, CRH and former CEO IDA Ireland)

Harvey McGrath (Chairman, Man Group plc)

Sir Roy McNulty (Former Chief Executive and Chairman, Short Brothers plc)

Senator George Mitchell

Sean Mulryan (Chairman, Ballymore Properties)

Dr Martin Naughton (Chairman, Glen Dimplex Group and Chairman, Inter Trade Ireland)

Padraig O'Ceidigh (Chairman, Aer Arann)

Dr Eddie O'Connor (CEO, Airtricity)

Jim O'Hara (General Manager, Intel Ireland and Vice President, TMG, Intel Corporation)

Dr Gerard O'Hare (Chairman, University of Ulster Foundation)

Michael O'Leary (CEO, Ryanair)

Sir Anthony O'Reilly (CEO, Independent News & Media plc)

Terence O'Rourke (Managing Partner, KPMG Ireland)

Sir John Parker (Chairman, National Grid)

Lord Patten

Maurice Pratt (CEO, C&C Group plc)

Sir George Quigley (Chairman, Industrial Task Force)

Derek Quinlan (Chairman, Quinlan Private)

Lochlann Quinn (Deputy Chairman, Glen Dimplex)

Lord Rana (Hon. Indian Consul to Northern Ireland and Chairman, Andras House Ltd)

Sir Desmond Rea (Editor, Economic Outlook & Business Review)

Lord Rees-Mogg

Mitchell B Reiss (Former US Special Envoy for the Northern Ireland Peace Process)

Sir Gerry Robinson (Chairman, Motohospitality UK Ltd)

John Ronan (Director, Treasury Holdings)

John Whelan (CEO, Irish Exporters' Association)

Dr Padraic White (Chairman, Enterprise Council of West Belfast and Greater Shankill and former Managing Director, IDA Ireland)

Dr T K Whitaker (former Irish public servant)