Mark this anniversary by setting NI economy free

There will be some fine-sounding speeches. There will be some processions and photo opportunities. And perhaps, inevitably, there will be some pictures of Joe Biden quietly nodding off about a minute into the whole celebration. Over the course of next week, plenty of the world’s attention will be focused on Northern Ireland as it celebrates 25 years since the Good Friday Agreement brought an end to the Troubles that had plagued the region for decades before.

Of course, that is an occasion worth marking. Peace is always to be celebrated, and it is certainly a lot better than the alternative. And yet we should not kid ourselves that, by itself, the cessation of conflict, and the laying down of arms, has transformed the province.

Northern Ireland remains one of the poorest regions of the UK, and far less prosperous than its southern neighbour. In reality, the best way to celebrate the anniversary of the agreement would be to set its economy free. Simply by matching the corporate tax rates on the other side of the border, and pushing through incentives for entrepreneurship and investment, it could be one of the richest parts of Europe. But that is not going to happen without a fundamental change of direction.

This week will provide ample opportunities to reflect on how much it has changed for the better since Tony Blair and Ireland’s Bertie Ahern signed the agreement on April 10 1998. At the time, it was far from certain it would hold, and yet, although there have been some inevitable bumps along the way and some fractious arguments, there has been no return to the brutal community warfare that scarred both Ulster and the mainland during the 1970s and 1980s.

The problem is this, however. Northern Ireland is not exactly a huge economic success and peace, by itself, has not magically improved its prospects. Some of the figures are scary.

It runs the biggest budget deficit of any region of the UK, hitting an eye-watering 19pc of GDP in 2019-20, and now running at £5,000 per person. Its GDP per capita is only £25,000, again far lower than anywhere else in the country. It consistently ranks as the slowest growing of the four nations within the UK. Admittedly, it is not saddled with the banana republic economics that dominate Wales and Scotland. Indeed, the economic debate is often more sensible in Belfast than anywhere else in Britain, although admittedly that is not saying very much any more. And yet it is hardly doing as well as it could. Ireland’s GDP per capita of £100,000 is artificially inflated by the number of multinational corporations racking up “sales” in the country to take advantage of its low taxes. Even so, there is no real question that the northern part of the island is a lot poorer than the south, and many other parts of Europe as well.

We could start fixing that if we wanted to. But how? First, and most obviously, we could set the corporation tax rate at 12.5pc, the same as in the Republic. It has been under discussion for years, but it is becoming more and more painfully obvious all the time that taxing companies at twice the rate they would have to pay if they based themselves just a few miles away across a completely open and frictionless border is completely crazy.

Rishi Sunak’s demented decision to lift the UK corporation tax rate to 25pc, from 19pc, has only made the problem worse, and will hurt the competitiveness of Northern Ireland more than any other part of the country. If it was cut to 12.5pc, with a pledge to at least match whatever the Republic was charging, then it would immediately become a far more attractive place to do business.

Next, offer a tax break to anyone setting up a new business too. We could set the level of capital gains tax for anyone starting up a company there at zero, compared with 10pc for the rest of the UK, and lift the lifetime limit to £10m from the current £1m.

It is not hard to imagine that a few people setting up new enterprises might decide that Belfast was just as good as Birmingham if they paid a little less tax there. Finally, we should be offering generous incentives and tax breaks for companies making inward investments in the province. Northern Ireland is not likely to be the manufacturing hub it was in its industrial heyday ever again but there is no question that it could be attracting a lot more factories and research centres than it does right now.

The Troubles cast a long shadow over the Northern Irish economy. No one wanted to run a business during a terrorist campaign. It was not worth the extra costs and the danger to staff. However, a quarter of a century is a long time.

The economy should have performed a lot better than it has done since peace was restored. Indeed, in the 2020s it should be in a better position than ever. It has full access to the British market and it now has full access to the EU’s Single Market as well. Even better, under the latest trade agreement it has access to the booming economies of the Pacific rim through the UK’s membership of the CPTPP. No one else has all of that. Northern Ireland could be a booming statelet: a green (or orange according to your preference) Singapore. However, that is not going to happen without the right policies.

All the political leaders gathering to mark the 25th anniversary of the agreement could save us the platitudinous speeches – and try setting its economy free instead.

‘Northern Ireland remains one of the poorest regions of the UK’