‘Devolve national insurance, not corporation tax’

A LEADING economist has suggested National Insurance could be devolved to Holyrood as a compromise to Scottish Nationalist demands to control corporation tax.

Angus Armstrong of the National Institute of Social and Economic Affairs put forward the idea as he and devolution expert Professor Alan Trench warned of the perils of devolving corporation tax.

The two experts clashed with SNP Dundee MP Stewart Hosie giving evidence to the Commons select committee in its latest inquiry into the impact of devolving taxes to Holyrood.

Dr Armstrong warned MPs over the “volatility” of corporation tax and said Scotland had to consider “whether by being a lower tax region you can attract more resources into your area”.

He told MPs he understood why Northern Ireland wanted to control corporation tax because of the lower rate in the neighbouring Republic.

But he added: “In the context of Scotland I do wonder whether there aren’t other ways of encouraging better corporate behaviour, whether it is the employers’ side of national insurance, which is basically a payroll tax and which has a high yield and is more stable and might be a better way of thinking about this.”

Prof Trench claimed one of the difficulties with devolving corporation tax was to do it in a way “that does not create an incentive to brass plating – a shifting of corporate transactions [without a transfer of jobs or tax liabilities]”.

But Mr Hosie, a candidate for deputy leader of the SNP, said changing corporation tax is “quite a powerful tool” for growth. He said any agreement to devolve the tax to Northern Ireland would see the arguments against devolution to Scotland “disappear like snow off a duck”.