Reduced Corporate Taxes May Help in the North's Struggle With Finances

Like most of the world today, Northern Ireland is facing an uncertain financial future. But unlike most countries, it is an unsettled society, just emerging from 40 traumatic years of tragedy after tragedy. Although Northern Ireland now has its local, self-governing assembly, the purse strings are still controlled in London where the new conservative government is taking severe steps to limit spending while keeping the government running.

Naturally, as with all political parties, the leaders will favor their own constituencies and come down harder on those who did not support them.

The new British leadership owes nothing to the people of Northern Ireland. None of the eighteen recently elected Northern Ireland members of London's parliament belong to the party in power. In fact, eight of the elected members are Nationalists or Republicans officially committed to a United Ireland by joining the six Northern Ireland counties to the Republic in the South.

The population of the United Kingdom is approximately 61.5 million people. England has 51.5 million, Scotland 5.2 million, Wales 3 million, and tiny Northern Ireland 1.8 million. The center of British power and leadership is in London and to most government and community leaders, Northern Ireland is simply a problem. It is largely the attention and support from Irish America that mandates London's actions in Northern Ireland.

It is generally agreed that Northern Ireland cannot sustain itself as a separate entity. Therefore, since the six counties were partitioned from Ireland in the early 1920's, the British government has funded its public sector costs. As a result, nearly one third of all jobs are in public service. In most countries that number is about 20 percent. It has also been estimated that almost 70 percent of the North's economy is generated by London spending. Obviously these are not sustainable conditions and the suspicion is that the new Conservative government, faced with damaging deficits, will try to bring change.

Prime Minister David Cameron has warned of "painful decisions" that must be made, that will mean cutting, "some things that we genuinely value." He claims he has a "duty to cut back." This year, for instance, government spending in Northern Ireland has been cut by over $800 million. Perhaps not so much by American standards but massive to the Northern Ireland ministers who make the cuts at home.

The Belfast Telegraph newspaper reports that Peter Hain, former Secretary of State for Northern Ireland, has warned that public spending cutbacks will be an "absolute disaster" for the North - with potential dangers for the peace process.

The Conservatives are now working on the 2011 budget, which will be published on Oct. 20.

The silver lining in all this, is the distinct possibility that what are now called "Regional Assemblies (including Northern Ireland, Scotland and Wales) might be allowed to set their own corporate tax rates in order to attract new investment from both the United States and the rest of Europe. Leading businessmen in Northern Ireland - most notably Sir George Quigley, a Unionist and former Chairman of the Ulster Bank, have advocated for several years that in order to compete with the Republic, Northern Ireland must have the same tax rate. Ireland's corporate tax rate is 12.5% while in the North the tax rate ( the British system rate) is 28 percent.

Although Unionists have for years fought any sort of equalization with the South, the Belfast Telegraph reports that Executive Minister Arlene Foster, a hard-line Unionist member of the DUP, confirmed that despite negotiating with her department, 21 potential investors had located in the Republic because taxes were lower in the South.

Equalization steps might be difficult over the short term in the South, but any moves to bring North and South closer would be welcome.