The Independent Fiscal Commission for NI today met with Finance Minister Conor Murphy, to provide an update on the publication of its final report: ‘More Fiscal Devolution for Northern Ireland?’
The Commission, established by the Finance Minister in March last year, has completed its investigations into the potential for Northern Ireland to increase its fiscal powers. It will publish its full findings in May. However, the Commission used today’s meeting as an opportunity to provide the Finance Minister with insight into its key recommendations.
Commission Chair Paul Johnson, said:
“The NI Assembly already enjoys a high level of spending autonomy and controls most of the spending on public services here. However, other than rates on businesses and households, it has no substantive powers to vary taxes.
“Our interim report, published in December, looked in some detail at over 20 different UK taxes in order to determine which might be the best candidates for devolution to Northern Ireland.
“The taxes which we prioritised for more detailed consideration were: Income Tax, Fuel, Alcohol and Tobacco Duties, Stamp Duty Land Tax, Air Passenger Duty, the Apprenticeship Levy and Landfill Tax.
“Briefing the Minister today, we confirmed our final report will recommend that Income Tax is suitable for devolution to Northern Ireland. However, we pointed out that full devolution, that is full powers over allowances such as the personal allowance and reliefs, as well as local administration of income tax is not required to reap the main benefits of devolution.
“Rather, partial devolution, with powers over income tax rates and, potentially, bands would be effective in giving the NI Assembly a major new way to raise revenues, reduce taxes for its citizens or vary the progressivity of its tax system. This is possible without the disproportionate complexity and the large administration and compliance burden that full devolution of such a big tax would bring.
“We informed the Minister that it is the Commission’s position that if Income Tax is devolved, the Apprenticeship Levy should also be devolved – given the local policy responsibility for skills and the administrative synergies that can be achieved alongside Income Tax devolution.
“We also confirmed the case for the full devolution of a number of smaller taxes, including Stamp Duty Land Tax, Air Passenger Duty and Landfill Tax. We pointed out that, if these taxes are devolved, it is our view that the NI 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.”
Commission members also discussed the potential for the NI Executive to seek the devolution of Excise Duties.
Mr Johnson explained: “In terms of Excise Duties for Fuel; Alcohol and Tobacco, we remain of the view that there could be value in the NI Executive seeking devolution, but over the longer term. It is clear from our investigations that complex administration and compliance issues do exist and more work is required to determine how such duties could be operationalised, the costs involved, and there is a need for further engagement with business.
Mr Johnson said the Commission had also carefully considered a number of overarching issues including the risks and rewards associated with tax devolution and how the prioritised taxes could be best operationalised.
“The Fiscal Commission has been clear from the beginning that while there are benefits to be had from fiscal devolution, in terms of improved accountability of the NI Assembly to the local electorate and the potential to implement local policies for local needs, it does come with real risks.
“Our analysis shows that, hypothetically, had Northern Ireland devolved income tax 20 years ago, for example, the NI budget would have been favourably impacted in the early years, but then significantly adversely affected, in the years following the financial crash. That’s largely because income growth has been poorer in Northern Ireland than in the rest of the UK over the latter period. While not a measure of what will happen in the future, this drives home the message that devolution comes with both risks and rewards.
“For this reason, our final report will also contain a detailed analysis of the various budgetary management tools and safeguards which will be critical to ensuring that the risks of fiscal devolution can be managed effectively.
Mr Johnson concluded, saying:
“We welcomed the opportunity to update the Finance Minister on our final report which will provide a framework for an incoming NI Executive. It will show in detail why we think elements of income tax, as well as Stamp Duty Land Tax, Air Passenger Duty, the Apprenticeship Levy and Landfill Tax are suitable for devolution. It will also show how those taxes could be introduced locally and how devolution can be operationalised effectively between the NI Executive and UK Government. It will set out the principles which we believe should govern any agreement between them.
“Ultimately, of course, the decision on whether any additional powers will actually be devolved, and indeed exercised, must be for political representatives, both national and local, and the citizens they represent.
Notes to editors:
- For further information on the NI Fiscal Commission see: /
- 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.”
- For queries, contact: press@FiscalCommissionNI.org