Select Committee on Northern Ireland Affairs Minutes of Evidence


Examination of Witnesses (Questions 260 - 273)

THURSDAY 22 NOVEMBER 2001

MR PAUL BOATENG, MP AND MR ANDREW FIELD

  260. If those representations had been made much earlier, would that have had an impact on the decision which has been taken as regards the aggregates tax in Northern Ireland?
  (Mr Boateng) I am bound to say, of course, it would have had an impact on the pace of developing and thinking. It would have been bound to have done and it might have been there would have been greater evidence for our thinking and it would not have been necessary for this Committee to have convened this inquiry. That might well be the case. But what I would say is that the discussions we have now had have been extremely helpful and extremely fruitful and are reflected in the development of our thinking.

  261. Could I move on to fiscal neutrality. The aggregates industry in Northern Ireland made the point that 20 million tonnes is produced, 5 to 6,000 jobs, but they also estimated that £35 million would be taken by the Exchequer, and the Sustainability Fund would only benefit something like £14 million, so their argument at the present time is there is a difference as regards the return to Northern Ireland because of the special circumstances. How would you see that?
  (Mr Boateng) I really do think that the Barnett Formula is the block upon which the relationship between central government and the constituent parts of the United Kingdom is based, and I cannot see that it would be in anyone's best interests to undermine that block, that pillar, in terms of the way in which the Sustainability Fund was distributed. I just do not think that is an option. It will be important that the executive and the Assembly determine how their proportion of the Fund is spent and I believe it has the potential to be used in ways which will be highly beneficial. I cannot comment on the figure you have given of the cost, particularly arising from public works, because I have not seen it before and I do not know the basis upon which it has been arrived at, but we do think the estimate of between 5 and 6,000 jobs which you mentioned being lost is not actually founded on the evidence. Indeed, I do not think Mark Durkan would rely on that figure, because the figure he was showing was in the region of 1,000, and we think that may be about right, it may be a little less, but certainly nothing in the region of 5 to 6,000 jobs.

  262. I think maybe I put that wrong. At the present time in Northern Ireland those involved in the construction and aggregates industry is 5 to 6,000, I was not saying that 5 to 6,000 jobs would be lost, although they did make the point there could be up to 4,000 jobs lost at one time in the evidence which was given. Really the point I come back to is the question of fiscal neutrality as regards the aggregates tax. The indication seems to be that even with national insurance contributions there will be a loss to the revenue in Northern Ireland.
  (Mr Boateng) I think the truth of the matter is, it is just not simply possible to say what the effect will be on any one part of the United Kingdom. It is revenue neutral across the whole of the United Kingdom. Much will depend on the number of people employed, the levels of pay. What we know is that the NIC reductions will reduce the cost of jobs across the piece and one would expect it to have some beneficial impact in Northern Ireland. The extent of it one cannot actually judge accurately.

Chairman

  263. When you were at this meeting with the Finance Minister and others, was the Barnett Formula mentioned?
  (Mr Boateng) I cannot remember. I think he was much too polite!

  264. There we go! Let me tell you I would be astonished if it was not raised with you because the feeling they have there is that it is operating more and more and more in disfavour to Northern Ireland. I must add that ten years ago when I was Finance Minister, it was so much to our benefit that I ordered no one ever to mention it in case the Treasury noticed we were doing rather better but times change.
  (Mr Boateng) Indeed.

  265. The point which was made to us by David Trimble on Monday when we were there, and Mark Durkan was there as well, not in relation to this but in relation to general matters on taxation, was that they were being disadvantaged by the Barnett Formula at the moment, and I think there is very good evidence of that. In particular, it has been represented to us, and I would like your comments on this, that in a way if nothing changes and the levy is introduced in the way at the moment it is planned to introduce it, Northern Ireland will be discriminated against twice. Firstly because of the points we have made, and then again because they will not, through the Barnett Formula, get back the proportion of the levy from the national insurance equation which they will have "earned". They produce 10 per cent of all the aggregates which are quarried in the United Kingdom, whereas under the Barnett Formula they are going to get 3 per cent back. You must have heard the figures 3, 4, 5, 6. David Trimble says, "I have told Gordon Brown this, I have told every single minister I have ever met—3 per cent goes to Northern Ireland, 4 per cent to Scotland, 5 per cent to Wales, 6 per cent to England." In those circumstances, with the much higher proportion of the aggregates industry in Northern Ireland per head of population compared to the others, is it not right they will be discriminated against doubly if you do not change something?
  (Mr Boateng) That is one way of describing the impact of the Barnett Formula. You could describe it in that way if you wanted to make that case, and they do make that case, they make it very powerfully, and one would not expect them to make any other case.

  266. That is the Barnett Formula in general, now I want to take you to the Barnett Formula in particular because you have said if this redistribution occurs over the Sustainability Fund, it will be through the Barnett Formula, so what do you say to the assertion that as they produce 10 per cent of what is going into the Sustainability Fund to get only 3 per cent back under the Barnett Formula will be doubly unfair?
  (Mr Boateng) What one says about the Sustainability Fund is that it is designed or predicated on the basis the Barnett Formula would be applied in order to distribute it. If it were to be structured in another way, it would have another effect. I hear what the Committee says and I get the message and it is obviously something that you would want us to take into account in terms of future decisions in relation to the Fund. I hear that.

  267. It is not in dispute, is it, that 10 per cent is the figure of the aggregates—
  (Mr Field) I believe that is correct.
  (Mr Boateng) That is right, yes.

  268. And it is not in dispute they will get 3 per cent of the Sustainability Fund back?
  (Mr Boateng) It would be interesting to look, and I have not, at a theoretical model of the Fund. If it was designed in such a way as to distribute the Fund in proportion to the amount that each of the constituent parts of the United Kingdom contributed to aggregates, I would be interested to see what the impact would be. It would also be interesting to hear what your colleagues in other constituent parts of the United Kingdom and on other Select Committees would have to say to me if I were to take that route. But the point is made and I hear it.

Mr Clarke

  269. Certainly there is an acceptance, is there not, that if 10 per cent of aggregates is being removed then the need for the Sustainability Fund is greater? Surely if the percentage given matched the percentage taken out, more work could be done to repair the natural environment after quarrying, which would be a good use of the Sustainability Fund. It seems to me that if 10 per cent is going in and 3 per cent is coming back, then some parts of the United Kingdom are being beautified or the Sustainability Fund is being used for different environmental projects which are not having a positive effect on the damage done within the Province.
  (Mr Field) There was one other option which was considered, which was there could be a UK-wide Fund, and that was an option which the Government did put forward but all of the devolved administrations took the view they would rather have their own share of the Fund and use it in the way they wanted to rather than to have access to a UK-wide Fund which was not devolved in any way.

Chairman

  270. Did that include the Northern Ireland Assembly?
  (Mr Field) Yes.

  271. Was it the Assembly at the time or was it the Northern Ireland Office?
  (Mr Field) I honestly cannot say.

  272. There is a rather significant difference there! As you know, the Northern Ireland Assembly tends to come and go a little, so you might like to check that, otherwise it would have been remiss of people. Minister, I think it has been a very useful session, certainly for us, I hope for you too.
  (Mr Boateng) It has been extremely useful to us.

  273. I am delighted to hear your mind is not closed, I knew it was not, I just hope you can open one or two doors and one or two minds when you get back to that great building in which you work. Thank you very much indeed.

  (Mr Boateng) Thank you very much, Chairman.





 
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