Lord Kilclooney – 2016 Parliamentary Question to the HM Treasury

The below Parliamentary question was asked by Lord Kilclooney on 2016-03-16.

To ask Her Majesty’s Government what is their revised estimate for the reduction in block grant paid to the Northern Ireland Executive after the introduction of 17 per cent Corporation Tax in Great Britain and 12½ per cent Corporation Tax in Northern Ireland.

Lord O’Neill of Gatley

The government has legislated to introduce a Northern Ireland rate of corporation tax, so the Northern Ireland Executive must now press on with the reforms necessary to put its finances on the sustainable footing required to complete this process.

The Northern Ireland Executive block grant would then be reduced by the amount of tax revenues foregone by the government as a result of devolution (due to direct and behavioural effects). Alongside this, the Executive would retain all revenues from the NI rate of corporation tax.

The government’s latest estimate of the impact on the Executive’s budget assumes that the NI corporation tax rate is set at 12.5% from April 2018, and also takes into account UK corporation tax main rates of 19% for the financial years 2018-19 and 2019-20 and 18% in 2020-21. On this basis, there is an estimated cost to the Executive in 2020-21 of £275m.

These estimates will be updated in due course to take into account the government’s further reduction in corporation tax to 17%.