Sir David Varney publishes Review of Tax Policy in Northern Ireland

In March 2007 the Government asked Sir David Varney to undertake a review looking at how tax policy can support growth in Northern Ireland, and to report back to the Chancellor. Sir David publishes his report today.

Sir David concludes that implementing a different corporation tax rate for Northern Ireland, as compared to the rest of the UK, does not offer the best way forward for building a strong investment strategy for Northern Ireland.

The report notes that the Northern Ireland economy has historically been reliant on public sector investment for its growth, but that political progress over the last ten years to transform Northern Ireland to a peaceful, stable society has already helped attract inward private sector investment. The restoration of devolution on 8 May is a major turning point and incentive for such further inward investment.

Sir David, therefore, recommends a strategy to develop private sector investment in Northern Ireland based on maximising the benefits of the competitive advantages that already exist in Northern Ireland, including current financial investment incentives, and realising the potential further to improve this competitive advantage.

The report recommends further improvements in basic and technical skills, reducing the size of the public sector and improving efficiency, better university and business collaborations; and promoting trade and investment across government, working with Invest Northern Ireland, the Irish Investment and Development Agency and UK Trade and Investment.

Publishing his report, Sir David Varney said today:

"I have reviewed all the evidence carefully and visited both Northern Ireland and the Republic of Ireland. While there is not a clear and unambiguous case for changing corporation tax in Northern Ireland beyond the UK-wide measures announced in the 2007 Budget, I am convinced that, in the light of the successful peace process, Northern Ireland can potentially emulate the economic success of the Republic.

I am encouraged by the commitment to economic growth shown by the UK Government, the Northern Ireland Executive and the Irish Government as well as by the private sector. I hope that my report will provide a positive contribution to the development of economic policy in Northern Ireland."

The Government today announced a second review by Sir David Varney building on the first review and focusing on identifying further measures to promote private sector investment. The terms of reference are:

"In the light of Sir David Varney's review of Tax Policy in Northern Ireland, published on 17 December and the Northern Ireland Executive's draft Programme for Government and draft Budget published in October 2007, Sir David Varney will undertake a second review. Building on Sir David's earlier analysis and agreement from all parties about the unique circumstances of Northern Ireland (in relation to the opportunities provided by the peace process, the need to strengthen the private sector, to create increased employment opportunities and to reform the public sector) this review will explore in more detail how to expand the private sector and to enhance Northern Ireland's competitiveness. In this context, the review will look at incentives for supporting the sustainable growth of businesses, investment and employment in Northern Ireland and the implications for reducing the historic dependency on the public sector. This will include examination of incentives for growth in Northern Ireland that fall within the responsibility of the Northern Ireland Executive and the UK Government." Sir David will aim to report in good time for the US Investment Conference. He will be supported by a small secretariat and will receive direct and regular input from Northern Ireland Executive officials.

Welcoming the report, the Chancellor, Alistair Darling, today said:

" I welcome Sir David Varney's report, which provides a professional and in depth analysis of the case for a lower rate of corporation tax in Northern Ireland. The Government accepts his finding that there is no convincing case for such a change. The Government also endorses Sir David's findings that the Northern Ireland economy is already benefiting from the peace process and that there is substantial scope, which Sir David has outlined, for building on this in the future. Against this background I am today announcing that there will be a second review by Sir David Varney to identify policies for promoting the private sector to inform policy development and reform by the UK Government and the Northern Ireland Executive."

Commenting on the report, the Chief Secretary, Andy Burnham, today said:

"I welcome the emphasis which Sir David has put on economic and public sector reform in Northern Ireland. Sir David has recognised the substantial reforms and commitments made by the Northern Ireland Executive in their draft Programme for Government and draft Budget; and the important role which the Irish Government is playing in the implementation of the St Andrews Agreement and the May 2007 economic and financial package. The Government looks forward to continuing to work closely with the Northern Ireland Executive and Irish Government for the benefit of all in Northern Ireland in the future."

Notes for editors

1. In March 2007 the Government commissioned Sir David Varney to carry out a review of taxation in Northern Ireland. His Review examines the case for a differential rate of corporation tax in Northern Ireland, as well as other business tax issues. In placing tax in the context of wider policies to support business and investment, the Review also considers opportunities and challenges for the restored devolved administration.

2. The terms of reference for the review are: How current and future tax policy, including the tax changes announced in the Budget 2007, can support the sustainable growth of businesses and long-term investment in Northern Ireland.

3. The full report can be found at the Treasury's website:

The Varney review

4. Biography of Sir David Varney:

Sir David Varney (born 1946) was the chairman of HM Revenue and Customs from its establishment in April 2005 to the end of August 2006. After graduating in Chemistry from the University of Surrey, David Varney joined Shell in 1968. In 1990 he was appointed Head of Marketing, Branding and Product Development for Shell International Petroleum and in 1991 was appointed a Managing Director of Shell UK with responsibility for downstream activities. He was appointed a Director of Shell International Petroleum in 1996. In June 1996 Varney joined BG (formerly British Gas), as Chief Executive designate of the proposed BG plc and was appointed Chief Executive the following year, overseeing the successful demerger of Lattice plc. He was Chairman of mobile phone operator mmO2 between 2001 and 2004. He was also Chairman of Business in the Community and is president of the Chartered Management Institute.

5. Following the ending of his chairmanship of HM Revenue and Customs, Sir David Varney has produced a review of public service transformation.

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