Liz Truss’ plan to entice 200 UK businesses to resume trading in Northern Ireland by offering them tax cuts has been scrapped amid opposition from Rishi Sunak over the costs of the scheme.
The Foreign Secretary had drawn up plans for an ‘economic stimulus package’ and trade ‘green lanes’ designed to make the territory attractive to businesses based in the rest of the UK, despite continuing problems with the UK’s protocol. ‘North Ireland.
While Boris Johnson has repeatedly stressed that he is ready to trigger Article 16, an emergency clause which would suspend the protocol completely, Ms Truss believed that her plan could temporarily calm the situation in the hope that a political agreement could be reached on border controls.
She presented the ideas in a letter to Mr Johnson last month. But a source in Whitehall said the Treasury did not “buy” the proposals or believe they would work. Another source denied that the proposals were ever officially discussed with the ministry.
The Whitehall source said the package of tax cuts should be “huge” to encourage the 200 businesses that have suspended business in Northern Ireland over protocol issues to return. Ms Truss is said to have ‘bet’ on suggestions that Mr Johnson was keen on a stimulus package to ease concerns over short-term trade.
The package was intended to help reverse the diversion of trade which ministers say has taken place due to the controls and bureaucracy imposed by the protocol, with the flow of goods between Northern Ireland and the Republic resuming as that trade between Northern Ireland and Great Britain fell.
Those interested in the scheme wanted to ensure that UK businesses considered it “worthwhile” to trade in Northern Ireland, by creating incentives for them to do so.
Another Whitehall source who confirmed the idea had been killed said: “Tax cuts are legally tough and Northern Ireland got a lot of money from the new deal last year. Throwing money at Northern Ireland wouldn’t necessarily solve the problem.
“Involuntary trade war”
The source said tax relief in Northern Ireland could also spark “an unintended trade war if the EU retaliates through tariffs” and other measures. A government source added that government spending per capita in Northern Ireland was already “much higher” than spending in the rest of the country.
The proposal has not even been discussed with the Democratic Unionist Party, which is in regular talks with ministers over the problems caused by the Northern Ireland protocol.
A DUP source said: “No proposals have come to us. We haven’t seen anything in particular.
“Our view is that in the absence of an agreement with the EU, it is essential that the government act quickly to take unilateral action in accordance with the powers available to it under Article 16.”
The demise of Ms Truss’ plan comes as Mr Johnson insisted he was still willing to trigger Article 16 if the UK and EU could not resolve an ongoing dispute over checks at the borders of goods that travel from Great Britain to Northern Ireland but should not travel. forward in the Republic of Ireland.
The protocol moved regulatory and customs controls to the Irish Sea, with Northern Ireland remaining in the EU’s single market for goods. EU customs codes are applied in its ports.