NI fiscal devolution: Is there a case for increasing Assembly's tax-raising powers?
THE Northern Ireland Executive is responsible for most of the spending that happens here. But it has barely any powers to raise tax.
In fact it has some £16.5 billion it can decide how to spend every year – and that’s setting aside Covid-19 spending. About 90 per cent of that money comes directly via the block grant from the UK Government.
The only significant ‘self-generating’ tax resource available to the Executive comes from domestic and business rates, at around £1.5 billion. But even this doesn’t go directly into the Executive coffers to fund public services. It’s shared with District Councils. So that’s a pretty small slice of the pie being generated locally for local spending.
Is there a case for increasing those tax powers which the Assembly currently has? To perhaps raise revenues to support local public services? Or to reduce or reform taxes to increase the incomes of selected groups? Or to improve incentives for people to work or for businesses to invest?
These are the issues that are at the very core of the work of the Independent Fiscal Commission for Northern Ireland. Established in March this year, our job is to consider the case for increasing the fiscal powers of the Assembly by providing evidence-based and wholly independent advice on options for the possible devolution of taxes from Westminster.
That work has involved us engaging with local political representatives, leaders from business, unions and the third sector, and experts in the field. We have spent time analysing the fiscal journeys of Scotland and Wales, both of whom have progressed much further in terms of tax devolution than Northern Ireland. And we have looked in detail at more than 20 different taxes.
Our work has made clear there are potentially big rewards, but also significant risks associated with further fiscal devolution. It’s going to be important for us to provide advice on the scale of those risks and rewards as we assess the options and implications of enhanced fiscal devolution.
Stakeholders have stressed three things in our engagement with them. One is the importance of looking at both tax increases and tax decreases.
The second is the need for politicians to display the political maturity needed to manage additional responsibilities. And the third is the importance of public engagement and education. Our report will support public understanding and debate about tax powers, as well as providing advice to local decision makers.
While Northern Ireland has much to learn from the experiences of Scotland and Wales, the context here is different.
For example, the land border with the Republic, and lack of land border with the rest of the UK, means that we need to take seriously the possibility of devolving excise duties on alcohol, tobacco and petrol, in a way which commissions looking at the Scottish and Welsh situations did not.
We are working on an interim report which will make an initial assessment of devolution options, and are aiming for a final report in the Spring.
As with any commission of this kind we can only offer our best analysis and advice. In the end the decision on whether any additional powers are devolved, and indeed exercised, is for political representatives both local and national. The work of the Fiscal Commission will support them in making informed decisions.
If you want to have your say contact us at: info@FiscalCommissionNI.org
Paul Johnson is Fiscal Commission NI chair