Opinion

Newton Emerson: Stormont's economic conversation focuses on spending, not on raising revenue

Newton Emerson

Newton Emerson

Newton Emerson writes a twice-weekly column for The Irish News and is a regular commentator on current affairs on radio and television.

Sinn Féin finance minister Conor Murphy said there was no time for 'radical rethinking' in his draft budget. Picture by Hugh Russell
Sinn Féin finance minister Conor Murphy said there was no time for 'radical rethinking' in his draft budget. Picture by Hugh Russell Sinn Féin finance minister Conor Murphy said there was no time for 'radical rethinking' in his draft budget. Picture by Hugh Russell

There was no time for “radical rethinking” in his draft budget, Conor Murphy told the assembly on Monday, in response to a DUP question.

The Sinn Féin finance minister did not know how much money the Treasury would give him until November 25, months later than expected. Even then he received only a one-year settlement instead of the multi-year settlement necessary to make long term plans. The secretary of state did not sign that sum off until December 10 and the DUP would not let the executive discuss it, for some unexplained reason, until this week.

Covid explains the mixture of urgency and delay from London. There is also clearly brinkmanship at work over Troubles legacy funding.

But allowing for that and the executive’s limited powers, the draft budget still revealed how Northern Ireland’s economic conversation remains a half-conversation: almost all talk is of spending, with almost none about tax.

Murphy’s presentation to the assembly consisted of complaining he has barely enough money to keep pace with inflation, let alone to “kick-start economic recovery in the context of Covid-19 and Brexit”; followed by boasting he has frozen the regional rate for households and businesses - Stormont’s only significant taxation power. There was no serious objection from other parties. They all share this cargo cult policy of divvying up cash without taking any responsibility for raising it. The blind spot is general, extending well beyond present difficulties. Consider how debate on a united Ireland and the subvention - the difference between spending and tax - focuses overwhelmingly on spending.

In London, there has been time for radical rethinking ahead of the UK budget in March. Ironically, it has revolved around two levers within Stormont’s reach: corporation tax and a personal wealth tax.

Chancellor Rishi Sunak is considering a rise in corporation tax as a safe and fair way to start rebuilding the public finances, because it would only apply to businesses making a profit. Supermarkets have had an obvious Covid windfall and there are many other examples. Taxing these businesses to help others get back on their feet would be a transfer from the winners to the losers of the epidemic.

Stormont spent years arranging the devolution of corporation tax, only to lose interest at the final moment. However, the power has been on the books since 2015 - the assembly just has to pass a resolution to use it.

There was no mention of this in Monday’s debate, even as a theoretical possibility. Instead, members discussed how to continue the rates holiday for all businesses, “small, medium and large”, to quote Murphy. This is a subsidy to the winners and losers, transferred from every other call on Stormont’s budget. Terms can be adjusted and large retailers have voluntarily repaid their rates relief so far but that is just twiddling with money going out, with no notion of bringing it in.

Sunak has reportedly ruled out a wealth tax after the idea provoked horror from the Conservative back benches. Too many voters in the south east of England would have been caught by the proposed £500,000 per person threshold, thanks to the value of their houses. That had been the appeal to party strategists, as it would be a huge transfer to new northern Tory seats and also begin to rebalance the intergenerational wealth gap pricing young people out of housing.

These arguments are not as incidental to Northern Ireland as they might seem.

Domestic rates are a wealth tax, currently split around 50/50 between Stormont and councils and raising about 2.5 per cent of the executive’s budget.

Rates are fully devolved. The executive could decide to raise far more through them and set thresholds that target the wealthy, second home owners, speculative landlords and empty property. At present, the value of a house over £400,000 is disregarded in bills - a benefit to the wealthy. The classic objection to property taxes is the impact on low-income people in large houses, such as retirees or the long-term sick, yet they can be easily exempted, as shown by existing rates relief.

In his budget statement, Murphy mentioned the need for more money for social housing. There would be no more progressive way to find it.

Of course, there was been little time in recent months to implement radical new policies but there is always time to suggest them, especially when relevant powers are available. A crisis should provoke these conversations. Only in devolution’s cargo cult is it another reason to avoid them.