Joe McHugh (Donegal North East, Fine Gael)
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I thank the office of the Ceann Comhairle for facilitating this motion today and I thank the Minister, Deputy Bruton for coming to the House to take it.

Rebalancing the Northern Ireland Economy was published by the British Treasury in line with the British Conservative Party general election promise to shift the emphasis of the Northern Ireland economy from the public sector to the private sector. It sets out proposals for fundamental economic reform. Its big-ticket item is the suggestion that Northern Ireland be designated as a distinct economic enterprise zone within the UK thus facilitating a 12.5% corporation tax for Northern Ireland. This would be a deviation by 13.5% from the UK corporation tax rate of 26% from April 2011 to 2014, which is a reduction of 1%. It also proposes tax credits for research and development, annual investment allowances, training credits and a national insurance holiday. It has been well received at Stormont. The Northern Ireland First Minister, Peter Robinson, MLA, said "It is not in the interests of Northern Ireland to be dependent on the [British] Exchequer for further new growth within our own economy". Sinn Féin's response has been very muted to say the least.

It is a consultation paper that invites submissions within the next three months. The paper has potentially enormous implications for enterprise, employment and trade on this island and in this 26-county State. It is a two-sided coin; the sovereign governments must decide if they want Northern Ireland and the Republic of Ireland to compete against each other or if they want Northern Ireland and the Republic of Ireland to compete together. If the governments chose to compete together the proposal to bring Northern Ireland corporation tax in line with our rate makes sense and is an advancement. If this is to happen, a common enterprise platform requires a common cost base and a common approach to enterprise support by State agencies. Invest Northern Ireland and the Northern Ireland Department of Enterprise, Trade and Investment offer more attractive grant assistance packages to investors than the packages offered by IDA and Enterprise Ireland. Electricity costs, wage costs, transport costs and indirect taxation are lower in Northern Ireland.

The British Treasury document that is the subject of this debate does not address these matters. If Northern Ireland retains its low-cost base and its attractive grant assistance packages the Republic of Ireland and not just the Border region will suffer. Where does the Government go from here? The Treasury document proposes to overcome the EU Azores ruling barriers to regionalise taxation rates by designating Northern Ireland as an economic enterprise zone.

In July 2010 the Fine Gael Border forum proposed that the Dublin and Stormont Governments should agree on a spatial definition of a cross Border area. Fine Gael proposed that the North-South Ministerial Council should then develop a dedicated technical structure within its own budget and facilitate the development of an integrated plan for regional investment.

The all-Ireland framework document written by former Minister, Mr. Dermot Ahern and former Secretary of State Mr. Peter Hain in November 2006 supplements Strand II of the Good Friday Agreement. The Hain-Ahern document notes that taxation is an important factor in economic competitiveness and declares that companies should be encouraged to redesign logistical strategies and treat Ireland as one commercial zone rather than two separate entities.

If that bilateral agreement and Strand III of the Good Friday Agreement have any meaning, the Irish Government must engage fully and assertively with the British Treasury on these proposals. The programme for Government sets out the new Government's ambitious agenda for the Border region and for the all-Ireland economy. We need the Cabinet's Government economic management council on which the Taoiseach, the Tánaiste, the Minister, Deputy Noonan and the Minister, Deputy Howlin, sit to discuss these matters and have a robust debate in the House on this issue.

The fundamental question I am asking tonight is how we compete with the proposed changes in Northern Ireland and put our agenda forward. We have to anticipate these changes which seem to be coming and set the IDA up in such a way that we start looking at things differently and treating the economic challenges we have in the South. The Border area is a pertinent challenge in itself. We have to consider the possibility of having our own consultation document within the Border area.

Richard Bruton (Dublin North Central, Fine Gael)
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Deputy McHugh went a good deal further in his statement than the content of the joint consultation paper issued by the British Treasury. There is an unduly defensive approach to the idea of Northern Ireland developing a stronger private sector and a fear that it will be an entirely negative story. The truth is that a stronger growing economy North and South would create mutual gains. We have to consider this issue in a more positive manner than simply asking how we can defend ourselves from a more competitive Northern economy, in terms of tax and other policy instruments.

That is at the heart of our programme for Government, in terms of how we can improve and develop our sectors. As the Deputy knows, the programme contains proposals to improve our tax mix and to reduce our rate of VAT and PRSI to strengthen the hands of companies competing at home and abroad. We have to be conscious that there is now a deliberate policy of developing a stronger domestic set of policy instruments in Northern Ireland which will have an impact. Competition is good for trade. We have to be aware of the issue but our overall strategy is to see the common development of the North and South.

Many of our efforts concern how the two Governments have co-operated under the Good Friday Agreement on a win-win basis. I agree that we need to monitor this matter closely and that there are areas where we are uncompetitive. There is a continuous debate about the flow North and South. We have to be conscious in framing our excise policy, VAT policy and so on of the potential for an impact on those who are living in Border areas and are vulnerable to swings from the currency and tax mix.

The view of the Deputy is one upon which I will reflect. We need to attune our strategy to a changed environment. It is a more positive opportunity than one about which I would be defensive. There are mutual gains in a stronger Northern economy with a stronger private sector where we can build mutual strengths. We need a sector which is growing strongly on our doorstep because our recovery will be export led. The more activity being developed by independent and strong economic policies in Northern Ireland, the better for all of us.

I welcome that the Deputy raised this issue. It is good that it was flagged. I may not have been briefed enough to respond to all of the issues he raised. I will reflect on what he said and respond in a fuller way directly to some of the issues which are not addressed in the reply provided to me.