Examination of Witnesses (Questions 260
THURSDAY 22 NOVEMBER 2001
BOATENG, MP AND
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
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.
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
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 met3 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
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.
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
(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.
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.