Corporation Tax: Credit Unions

Oral Answers to Questions — Finance and Personnel – in the Northern Ireland Assembly at 2:45 pm on 9 March 2015.

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Photo of Michaela Boyle Michaela Boyle Sinn Féin 2:45, 9 March 2015

1. Ms Boyle asked the Minister of Finance and Personnel how credit unions and mutual building societies could benefit from any changes to corporation tax. (AQO 7747/11-15)

Photo of Simon Hamilton Simon Hamilton DUP

Credit unions already benefit from special corporation tax rules that mean that, where a credit union makes a loan to its members, the related income is not subject to the tax. Those rules would not be altered by the Corporation Tax (Northern Ireland) Bill. More generally, and in order to manage the potential for artificial profit shifting, certain tradable activities, including those related to lending, leasing and certain types of insurance, are to be excluded from the Northern Ireland corporation tax rate. Nevertheless, mutual building societies and other firms that may be affected by those exclusions can elect to have back-office activities included in a new Northern Ireland regime. Furthermore, all organisations that service the local marketplace stand to benefit from the significantly increased activity that a lower rate of corporation tax will bring.

I have plans to engage with representatives of local credit unions and the Progressive Building Society to discuss how a lower corporation tax rate can deliver benefits for them, for their members and for Northern Ireland more generally.

Photo of Michaela Boyle Michaela Boyle Sinn Féin

I thank the Minister for his response. I am sure that you will agree that we must secure a good, fair deal on corporation tax, one that delivers for SMEs and works for all our people. From your perspective, can you give me more detail on how we can ensure that that can be achieved?

Photo of Simon Hamilton Simon Hamilton DUP

The Member's question appears to be about SMEs more broadly and not specifically on credit unions and mutuals.

I am aware of the issues that have been raised about credit unions and mutuals. In the next 24 hours, I will be engaging with the Progressive Building Society, which is our only building society based in Northern Ireland. I also plan to engage in some way or other with credit unions in the next number of weeks.

A lot of SMEs in Northern Ireland would not benefit directly from a reduction in corporation tax because of the way in which they are structured, but the hope and the expectation, based on the evidence, is that the creation of 37,500 net new jobs over the next 10 years and a growth in our economy of around 10% will assist all businesses in Northern Ireland, whether they are small, medium-sized or large enterprises and whether they are indigenous firms, firms that already invest in Northern Ireland or firms that are investing because of a lower rate of corporation tax. It is that growth in the economy, with more jobs and more high-paying jobs, that we hope will benefit all businesses in Northern Ireland. Some of the larger firms that are already here and some of the indigenous firms that will see the release of additional capital into their accounts as a result of a lower rate of corporation tax will take a decision to invest and to create more jobs. It is that sort of virtuous circle that we hope to achieve by lowering the rate of corporation tax.

Photo of Sammy Wilson Sammy Wilson Shadow DUP Spokesperson (Treasury)

Does the Minister agree with me that the previous question illustrates the Alice in Wonderland world that Sinn Féin is living in at present? Either the Member does not know that her party has reneged on the Stormont House Agreement, and no corporation tax will be devolved to the Assembly as a result —

Photo of Roy Beggs Roy Beggs UUP

I take it that that is the question.

Photo of Sammy Wilson Sammy Wilson Shadow DUP Spokesperson (Treasury)

Will he outline to the Members opposite just what the consequences are of their disgraceful and dishonest behaviour this morning?

[Interruption.]

Photo of Roy Beggs Roy Beggs UUP

Order. The Member has asked a question.

Photo of Simon Hamilton Simon Hamilton DUP

I thank the Member for his question. He is right: there was an air of unreality coming from the opposite Benches in asking a question about the benefit of devolving and lowering corporation tax in Northern Ireland for small to medium-sized enterprises here. As the Member, the House and, more importantly, those outside the House will appreciate, the devolution of corporation tax was dependent on getting a Budget agreed, which we did, and getting welfare reform legislation through the House, which was proceeding. Devolution of corporation tax was contingent on both those things happening. Given the actions of Sinn Féin in welshing on the agreement that was made at Stormont House and at Stormont Castle, the welfare reform element is clearly not happening now. My party — the Member's party, our party — has kept its side of the deal. We stand by every word and number in the Stormont House Agreement and the Stormont Castle agreement because of the many benefits that those agreements brought to Northern Ireland, not least the fact that they were securing the rate of corporation tax and our ability to lower it.

From his membership of another place, the Member will know that that Bill has been proceeding through that House at a pace. It was likely to come onto the statute book in the next number of weeks. The campaign that we have been waging, for I do not know how many years, was about to become successful. It seems that, moments and days away from grasping what some people thought was the impossible, Sinn Féin, which I thought supported the devolution of corporation tax and lowering of the rate of corporation tax to bring those 37,500 new jobs to Northern Ireland and increase our economy by an estimated 10%, is now going to back away from that opportunity, and we are going to lose the opportunity of a lifetime to change the Northern Ireland economy for the better.

It is up to Sinn Féin to explain not only why it has welshed on the agreement on welfare reform but why it has walked away from corporation tax, which is the inevitable result of what it has done today.

Photo of John Dallat John Dallat Social Democratic and Labour Party

I am more than keen to return to the question of corporation tax and how it can be used to affect credit unions. The Assembly has a good relationship with credit unions. Will the Minister perhaps tell us, or at least undertake to look at, how the millions of pounds that are invested by credit unions and banks could be lent to people in the wider world who depend on payday loans, loan sharks, moneylenders and others, who rip them off?

Photo of Simon Hamilton Simon Hamilton DUP

I am not surprised that the Member does not want to talk about corporation tax because his party is no better than Sinn Féin in that regard.

Photo of Simon Hamilton Simon Hamilton DUP

There is no sense of shame from me or anybody on this side of the House today. We have stuck to our word and to what we agreed. I do not think —

Photo of Roy Beggs Roy Beggs UUP

I ask that all remarks be made through the Chair, please.

Photo of Simon Hamilton Simon Hamilton DUP

Certainly, Mr Deputy Speaker. I am more than happy to say that my party has stuck to every word and number that it agreed to in the Stormont House Agreement. To be fair, it took Sinn Féin several weeks to back away from the agreement. It was several hours before Mr Dallat's party backed away from what was agreed at Stormont House.

I am content, however, and prepared to work with credit unions, building societies and anybody else to deal with the issues that the Member raises. Perhaps as a result of the discussions that we will now inevitably have with credit unions because of this issue, an opportunity — an unwitting opportunity, perhaps — may present itself to discuss other opportunities for that movement. In fact, in recent times, the Minister for Social Development and I have discussed how we might assist the credit unions to move to another level. He may wish to continue to discuss that with me at this minute, if he is not distracted by other matters.

Photo of Robin Swann Robin Swann UUP

May I return to the main subject? I declare an interest as a member of Slemish n' tha Braid Credit Union. The FSA undertook a review of the powers and abilities of credit unions in GB within the last two to three years. Does the Minister see any opportunity for the powers that were devolved to credit unions in the rest of the UK coming to Northern Ireland credit unions?

Photo of Simon Hamilton Simon Hamilton DUP

Responsibility for credit unions rests with the Department of Enterprise, Trade and Investment. I was a member of its Committee at that time. It was a period when a lot of financial institutions were having difficulties, and there was an attempt to get the cover of the protection scheme for savings. That required regulation by what was then the FSA. One of the other objectives at that time was to be able to expand what credit unions in Northern Ireland are able to do and the products that they are able to offer. Compared with their counterparts in mainland Britain, they are unable, or have not traditionally been able, to offer current accounts, mortgages and those sorts of financial products. I think that there is a view that it would be beneficial, even if some credit unions do not want to offer those things, for the option to be there for them.

I would certainly support that expansion of their role.

The Member has declared his interest as a member of a credit union, and I am sure that he is not the only one in the House. Around 20% to 25% of people in Northern Ireland are members of a credit union, yet across the water it is around 4%, so the opportunity to offer those additional financial products is much greater in Northern Ireland. That could address some of the issues that Mr Dallat raised in respect of people having to borrow from moneylenders and having low levels of financial capability in Northern Ireland.