Official Report: Minutes of Evidence

The Chairperson (Mr McKay): We will move on to the Programme for Government targets. David, Theresa Villiers recently said that the devolution of corporation tax:

What are those work streams?

Mr David Sterling (Department of Finance and Personnel): We have been led to believe by the Secretary of State and others that the Prime Minister will offer the First Minister and deputy First Minister the power to vary the rate of corporation tax by the time of the autumn statement, which is scheduled for 3 December. In the background, we are engaged with officials from Treasury and HMRC on a variety of issues. The most significant of those is the development of legislation that will go through the House of Commons. HMRC is working on that at the moment. We are not directly involved in that. I would not say that we are being excluded, but it is a matter for HMRC. We are being assured that the legislation that will allow that to happen is ready to go to the House of Commons, and it will go through with a reasonably quick passage such that it will be on the statute books early in the new year.

Assuming that the power is offered, we will need legislation to go through the Assembly on a similar track. That work will need to be done, and there is no reason to believe that it cannot be done. There are also state-aid issues, which, again, HMRC and Treasury are leading on on our behalf with Europe, although we have been involved in some of the discussions on that. Some issues in and around the cost of this have still not been totally nailed down, and there are some issues in and around how the costs will be calculated that we have not reached agreement on as yet. To put that in context, I was talking to one of my colleagues in the Scottish Government yesterday. They are getting the power to vary landfill tax and stamp duty from next April, and they still have not got agreement on how their block grant will be adjusted. If we get the power to vary corporation tax, it is unlikely that we could do it before 2017-18. So, there is still a lot to be done if that power is taken and then applied.

The Chairperson (Mr McKay): One of the PFG targets is on air passenger duty (APD) for long-haul flights. That target has been achieved, but the Department, along with the Department of Enterprise, Trade and Investment, was to come back on the air connectivity study stage 2. That seems to have been put on the long finger for some time now. Could you give us an update on where that is and on how big a priority the complete devolution of APD is for the Minister?

Mr Sterling: I will need to come back to you. When I left DETI, the air connectivity study was under way. I am not sure where it has reached, but I will find out for you. APD is one of a number of fiscal measures that we are looking at, and the intention is to bring advice to the Minister shortly on what we believe are the pros and cons of further devolution of different fiscal measures, of which APD is one.

The Chairperson (Mr McKay): Members, are there any other questions?

Mr Cree: I have one that is slightly askew. I know that the report was done some time ago, because it refers to things happening in April, June and so forth. The small business rate relief scheme is due to end in April, but there is a feeling that perhaps it should be extended beyond that. Has anything been done, or is anything being done?

Mr Sterling: It is built in to the draft Budget. It will be extended for a year.

Mr Cree: Is it a runner?

Mr Sterling: Yes.

Mr McCallister: Do they extend it for a year and then review it again?

Mr Sterling: I do not know the intention beyond that, but I am pretty sure that small business rate relief is built in to the draft Budget. Put it this way, if I am wrong, I will let you know very quickly.

Mr McCallister: I have a quick question. You said that, if corporation tax is devolved, it would be at least 2017-18 before we could vary it. What would be the big delay in that lead-in time if it is devolved at some point next year and there is legislation in Westminster and here to do that?

Mr Sterling: It is just about getting the detailed system design in place so that it can be applied. There is quite a lot of work still to be done. Putting in the primary legislation will be an important step towards that, but there is an awful lot more work to be done before HMRC will be in a position to apply a lower rate here and firms will be able to avail themselves of it.

The Chairperson (Mr McKay): David, thanks very much for your time this morning.