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Corporation tax in NI: Chancellor says devolution 'dependent on talks' Corporation tax in NI: Chancellor says devolution 'dependent on talks'
(35 minutes later)
The chancellor has announced that any decision on devolving corporation tax to Northern Ireland will be dependent on the outcome of the all-party talks.The chancellor has announced that any decision on devolving corporation tax to Northern Ireland will be dependent on the outcome of the all-party talks.
George Osborne said the power could be devolved "provided the Northern Ireland Executive can show that it is able to manage the financial implications".George Osborne said the power could be devolved "provided the Northern Ireland Executive can show that it is able to manage the financial implications".
He added the government would introduce in this parliament if the talks succeeded. He added if the talks succeeded, the government would introduce devolution legislation before May's election.
Corporation tax is what companies pay on their profits.Corporation tax is what companies pay on their profits.
Supporters of devolution said the move would give a major boost to the economy, but sceptics said it would hit public spending with no guarantee of success. More competitive
Mr Osborne made the announcement in the House of Commons as part of his Autumn Statement.
At the moment, corporation tax is levied at a rate of 21% in the UK, although that will be coming down to 20% in April.At the moment, corporation tax is levied at a rate of 21% in the UK, although that will be coming down to 20% in April.
In the Republic of Ireland, the rate is just 12.5% which makes it more competitive when it comes to attracting foreign investment. In the Republic of Ireland, the rate is just 12.5% which makes it more competitive than Northern Ireland when it comes to attracting foreign investment.
Supporters of devolution said tax-cutting powers would give a major boost to Northern Ireland's economy, but sceptics said it would hit public spending with no guarantee of success.
Mr Osborne made the announcement in the House of Commons as part of his Autumn Statement.
He told MPs that the government recognised "the strongly held arguments for devolving corporation tax-setting powers to Northern Ireland".
Welfare reform
However, he said Northern Ireland's political leaders had to prove they were "able to manage the financial implications" of such a move, referring to the ongoing all-party talks that began in Belfast two months ago.
The talks, chaired by Secretary of State Teresa Villiers, are aimed at reaching agreement on a range of unresolved issues, including disputes over flags, parades, the legacy of the Troubles and welfare reform.
The five main parties have clashed over welfare reform in recent months, with Sinn Féin and the SDLP objecting many of the cost-cutting measures that have already come into force in England and Wales.
Unionists have argued that Northern Ireland must take difficult decisions to balance its budget, but nationalist and republican MLAs have said that many of the reforms will disproportionately disadvantage some of the most vulnerable people in society.
Spending cuts
If a deal is done at the all-party talks, Mr Osborne said the government would introduce legislation to devolve corporation tax before the next General Election, expected to be held in May 2015.
Stormont would then have to pass its own legislation, setting the rate and the precise rules, which will take up to two years.
European rules mean that any benefit Northern Ireland gets from a tax cut would have to be offset by a reduction in the amount it receives from the annual UK block grant.
That would probably mean at least £200m a year would have to be cut from public spending.
Last month, Prime Minister David Cameron said the argument made by Northern Ireland politicians for devolving corporation tax was strong.
'Huge gamble'
However, the Green Party in Northern Ireland has said any potential cut to the rate of corporation tax in Northern Ireland would be "unfair and ill-advised".
Assembly member Steven Agnew said: "The Green Party does not believe government should hand this power to Stormont at this present juncture, given the problems executive parties have had already managing their budgets.
"This is a huge gamble with public money and flies in the face of what should be happening in terms of raising revenue."