The Commission, established in March last year by the Finance Minister, Conor Murphy, had been tasked with examining the case for increasing the fiscal powers of the NI Assembly, and making recommendations on powers which could enhance the NI Assembly’s fiscal responsibilities.
Commission Chair Paul Johnson, said:
“As a Commission, we have established that there is a strong case for devolving certain tax powers to Northern Ireland to go alongside the extensive powers the Executive currently has over public spending. Devolving additional powers would increase the accountability of the Executive to the people of Northern Ireland and provide additional tools to boost the economy, raise or reduce the taxes of local people and change behaviours."
“While this period, with no Executive in place, might feel like an odd time to be launching our report, tax devolution won’t happen overnight. It will require time to consider, to build consensus and to plan carefully. 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.”
In terms of the report’s recommendations, Mr Johnson said:
“We recommend partial devolution of income tax under which the NI Assembly would have a degree of control over the rates, and potentially bands of income tax, but where administration would continue to be carried out by HMRC.”
“Importantly, this would grant the NI Assembly the ability to raise revenues, reduce taxes or vary the progressivity of its tax system, without taking on the added complexity and the significant administrative and compliance burden that full devolution of the tax would bring. If income tax devolution is actioned we recommend that the apprenticeship levy be devolved in parallel.”
“We also recommend the full devolution of stamp duty land tax, landfill tax and air passenger duty. We recommend that if these taxes are devolved, the Executive should establish a local revenue authority to administer them. This will increase the accountability of local politicians in respect of these taxes and provide for greater policy flexibility and innovation, while also building institutional capacity in Northern Ireland.”
In terms of the devolution of corporation tax in Northern Ireland, Mr Johnson stated:
“Our report recommends that there is value in the Executive completing the devolution of corporation tax, but we set out a number of key issues which, in our view, should be resolved before this can happen. In particular, this would need to be done in close cooperation with the UK Government, with an understanding over how additional powers would be used and an agreement over how any cut to the main rate of corporation tax would be paid for.”
The Commission had also considered the potential for the NI Executive to seek the devolution of excise duties. Mr Johnson explained:
“Given the existence of the land border with the Republic, and their relevance to devolved health and transport policies, we consider that there would be value in the NI Executive seeking devolution of excise duties for fuel, alcohol and tobacco, but over the longer term. We identified complex administration and compliance issues and further detailed work is required to determine exactly how devolution of such duties could be operationalised and the relevant costs involved.”
More generally Mr Johnson said:
“There is no technical barrier to devolution of a number of other taxes over the longer term, but if Northern Ireland is to move towards more tax devolution it is our view that it should start with no more than one major tax, income tax, and some smaller taxes, and progress from there”.
The Commission’s report also makes recommendations on the principles which should underpin the delivery of increased devolution and how any new powers could be practically operated. These include: how NI’s block grant should be adjusted to account for devolved revenues (both at the point of devolution, and also going forward); the need for fiscal insurance and new borrowing powers to allow the Executive to respond to revenue risks; how new responsibilities such as revenue forecasting should be managed; and the process for introducing new taxes.
Mr Johnson said:
“The agreement between the NI Executive and UK Government on how fiscal devolution is actually managed is the bedrock for success. Being clear on precisely how the block grant is impacted, and the tools to help the Executive manage any new powers will be key.”
Mr Johnson concluded, saying:
“Our Commission has been clear from the beginning. While there are benefits to be had from fiscal devolution in terms of political accountability and tailoring local policies for local needs, increased fiscal devolution comes with risks. If revenues were to grow more slowly than in the rest of the UK then Northern Ireland could lose out. And it is possible to make policy mistakes.”
“While it must be remembered that Northern Ireland is only at the beginning of a potential fiscal devolution journey, it is our view that the constituent parts could be put in place to realise significant increased fiscal devolution to Northern Ireland by 2027/28, as per the framework outlined in our final report.”
“Ultimately, whether devolution happens or not remains a choice for politicians both in Northern Ireland and the UK, but it is our view that some tax devolution could be an important step towards a more accountable devolved government for the people of Northern Ireland.”
Notes to editors:
1. Access a copy of the final report here and a copy of the launch event presentation here.
2. The Terms of Reference for the Fiscal Commission NI state that the Commission should:
* Review the case for increasing the fiscal powers to the NI Assembly, advising the Finance Minister on powers which could enhance the Assembly’s fiscal responsibilities, increase its ability to raise revenues to sustainably fund public services, and provide additional policy instruments.
* consider the need for additional budgetary tools to manage any increased financial responsibility.
* carry out research and put forward recommendations to the Minister of Finance that are realistically implementable within the NI context and drawing from the experience of Scotland and Wales, including what has worked well, and where challenges have been encountered in those administrations. This should include the potential costs incurred and realistic timescales of any new powers proposed.
* consider how the spending power of the NI Block can be protected if more powers are devolved.”Individual interviews with Paul Johnson, Chair of the Fiscal Commission NI will be facilitated after the event.
4. For queries email: press@FiscalCommissionNI.org or contact Darrell McCullough on 07816 126874.
5. Follow us on Twitter @fiscal_ni.