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Brendan Mulgrew: Why the Fiscal Commission report reads like a pipe dream

The Fiscal Commission for Northern Ireland has published its final report examining the potential for devolving additional tax raising powers to Stormont. Picture by Mal McCann

IN his online news piece covering the launch of the final report of the NI Fiscal Commission into the potential for the devolution of powers of income tax, the BBC’s John Campbell begins: “Income tax powers could be devolved to Northern Ireland by 2027 if there is political agreement to do so, an independent commission has concluded.”

That lofty ambition and aspiration is soon brought back to earth, just two sentences later where John reminds us, bluntly, that “The Stormont Executive and assembly is not currently functioning.”

The chairman of the Fiscal Commission, Paul Johnson, acknowledges that launching this report, which deals with a weighty and very important matter, at a time when the Executive is not meeting, seems incongruous and he is right.

However he is prepared to put some faith in our politicians that they will actually take time to fully consider the content of the report and says: “It is our hope that all the parties will take the opportunity to consider our report as they prepare for the resumption of devolved government.”

At a simple level. the arguments against devolving income tax is very basic. The parties can’t even form an Executive at the moment, and when they have been in a coalition Executive in the past, they have gone out of their way to avoid the difficult issues, including revenue raising.

The Executive has options to increase the size of the public purse, but the low tax/high spend common policy approach has always been dominant. We give prescriptions away to everyone no matter how well off, the same applies to travel on public transport and a winter fuel payment.

The parties have pledged, proudly and in unison, not to introduce water charges. The ability to vary rates levels has not really been imaginatively applied in a way which draws more funds from the more well off home-owners.

Even a simple measure such as a levy on online bookmakers, which exists across GB and the Republic and could yield tens of millions per annum to the Executive, has not been pursued, with no explanation as to why not. In fact. one of the last actions of the outgoing Assembly was to pass a gambling review law, in which the Department for Communities proactively chose to ignore the online levy issue, without a hint of an explanation why.

The political concession around devolution of corporation tax was finally granted as far back as 2015, but has never been acted on. Yes. it is complex, it involves weighing one consideration (reducing tax as a means of attracting investment) against others (making up the differential from the Executive funds), but has any consideration been given, by politicians or civil servants? There is no evidence to suggest so.

The Fiscal Commission reflects that thinking, reporting that across Northern Ireland concern was expressed about the stability and ability of the Executive.

In looking at our Celtic neighbours, some income tax varying powers have been devolved to Scotland and Wales and it could be that this halfway house also suits us, if and when we actually get a Government in place. So in theory, if the NI Executive is initially granted delegated authority over stamp duty, or some element of PAYE income tax, they could build up, in parallel with the Civil Service, some experience and expertise in handling such financial matters.

That theory only plays out if the parties actually use the powers, something they have been reluctant to do in the past.

Far too often our political parties are content to stand behind consultations, policy documents, equality impact assessments, without actually creating new law, or amending existing regulations. Proclaiming an ambition to deliver this, that and the other without expending politic capital doing so is actually doing the electorate a disservice.

That assertion applies to local as well as central Government. In its bold Agenda 2035 document Belfast City Council pledged that the city would house an additional 66,000 people in the next 13 years. Really? That is a fine ambition and an economically sensible target, something we can all get behind. But is it a realistic ambition?

We know that housebuilding targets are regularly missed. There are huge unaddressed problems in our planning system, in our water and sewage infrastructure.

Economist Richard Ramsey reported last week that across Northern Ireland the first quarter of 2021 saw the fewest number of completed dwellings for a quarter year in five years. The lowest number . . . so what did the words in a policy document mean? Anything?

On the wider picture, we can argue for the devolution of tax raising powers, and even have faith that the Executive could effectively mature into the role of executing those powers.

But until we have an actual Government formed, and for as long as words on paper trump difficult decisions actually being taken, the last week’s Fiscal Commission report reads like a pipe dream.

It is up to the politicians to convince us otherwise and so far, they are failing the test.

:: Brendan Mulgrew is managing partner at MW Advocate (www.mwadvocate.com). Follow him on Twitter at @brendanbelfast

:: Next week: Paul McErlean

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