Opinion

Newton Emerson: Devolving taxation could prove more challenging for DUP than nationalists

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 has announced a Northern Ireland Fiscal Commission to look at tax varying powers. Picture by Hugh Russell.
Sinn Féin finance minister Conor Murphy has announced a Northern Ireland Fiscal Commission to look at tax varying powers. Picture by Hugh Russell. Sinn Féin finance minister Conor Murphy has announced a Northern Ireland Fiscal Commission to look at tax varying powers. Picture by Hugh Russell.

If we are going to have an argument over devolving more tax powers to Northern Ireland, the first question should be what is taking so long.

It is well over a decade since the first landmark reports on the subject were commissioned for Scotland and Wales. Steady delivery has followed: Wales got its finished report in 2012, a law to enact it in 2014 and the full or partial devolution of stamp duty, business rates, landfill tax and income tax by 2019.

Sinn Féin finance minister Conor Murphy has just announced a Northern Ireland Fiscal Commission and asked it to produce “a broad report to look at the tax varying issues that should be available to us”, with a view to acquiring as many powers as possible.

This was a promise in the 2014 Stormont House agreement, repeated in Fresh Start and New Decade, New Approach. The DUP signed all three of those agreements, yet it has reacted with horror to Murphy’s statement.

Paul Frew, DUP chair of the assembly’s finance committee, said “a Sinn Féin minister looking at tax-raising powers” will send “shock-waves through the business community and every householder in this country”.

Frew said existing powers should be looked at instead.

It is particularly striking for the DUP to wobble over this part of Fresh Start in the same week Arlene Foster cheerfully confirmed an Irish language act will go ahead before the next election.

Of course, any threat to language legislation would imperil the executive.

For the DUP, tax devolution is an apparently safe wedge issue that lets the party portray itself as financially responsible. But this has to remain a sham fight: if any powers were devolved, there would be an expectation on the DUP to cut taxes, meaning a reduction in Stormont’s income. Better not to have the power at all on the pretext of others putting taxes up.

Frew’s comments reveal this debate is not as it is often perceived.

The DUP spins itself as low-tax and conservative while governing as a high-spending populist cargo cult. A powerless Stormont enables it to hold these positions simultaneously and the DUP likes to keep it that way.

When Sammy Wilson was finance minister in 2013, he said Stormont should not follow the Welsh example because “we want to run a low-tax economy”.

How is that possible without powers to cut taxes? As finance minister, who else did Wilson think might put taxes up?

Sinn Féin’s position is even more complicated and conflicted.

The easy criticism of republicans is that they are also high-spending populists who run away from fiscal responsibility.

However, Sinn Féin began squaring this circle when it supported the devolution of corporation tax in 2015.

Under fire from left-wing rivals, the party said it would always be in favour of transferring powers from Britain to Ireland.

Sinn Féin took this political risk because it was under increasing scrutiny in the Republic. To be taken seriously as a potential coalition partner, it had to show it could accept uncomfortable policy choices, at least in theory.

Southern scrutiny over Sinn Féin is now relentless and Murphy’s announcement should be seen as a response. Even before the Fiscal Commission report is published, after the May 2022 assembly election, Sinn Féin can say it is examining every revenue-raising option. The report will only be the start of another ten years of debate on implementation, if Scotland and Wales are any guide.

What might look to the DUP like a nicely timed distraction from Brexit is badly timed for low-tax posturing. Covid has accelerated a deep public and political shift towards support for higher taxation in recent years.

Brexit also affects how taxes would be devolved. The impact on the block grant of using a transferring power is largely a matter of negotiation between Stormont and the Treasury. The EU also has a say on anything that might be considered state aid, which falls under the Northern Ireland protocol. London and Brussels could be generous if negotiating with a cooperative Stormont partner but a party obstructing the sea border is not going to be offered tax cuts on the cheap.

There has long been a hope that fiscal devolution will lead to more so-called ‘real issue’ left/right politics. This is laughably naive. Taxation goes to the heart of the key constitutional question of who is prepared to make Northern Ireland work. As with Brexit, nationalism could end up looking less challenged by that question than the DUP.