TaxCorporate TaxDUP deal: What’s likely to be on the agenda?

DUP deal: What’s likely to be on the agenda?

With Theresa May seeking the DUP's backing to form a minority government, what are the key issues likely to be on the agenda for the negotiations?

DUP deal: What’s likely to be on the agenda?

Ever since the General Election resulted in a hung parliament and loss of a majority for the Conservative Party, the prime minister has been locked in negotiations with the Democratic Unionist Party (DUP) to agree a deal that would see the DUP giving its backing to the minority government on key issues.

With the negotiations behind closed doors, neither party has given much away in terms of the deal being struck or issues on the table.

So, what is the DUP likely to be pushing for during the talks?

In 2015, ahead of the General Election held on 7 May, the DUP released The Northern Ireland Plan, setting out how the party would take advantage of a hung parliament to “strengthen the UK and to seek the best deal for Northern Ireland”.

“Political commentators have consistently stated that the DUP could be crucial in what looks likely to be a hung Parliament,” stated the plan. “The DUP will use such a position to negotiate on behalf of Northern Ireland.”

The DUP didn’t get its chance in 2015. The Conservatives won with a 12-seat majority, eliminating any need for additional support to form a government. Yet, the DUP now has an opportunity to resurface these policy ambitions and push for concessions from Theresa May’s party.

But, what were the key issues in 2015 and are they still relevant two years on?

The DUP’s overriding economic priority was to “make Northern Ireland an economic powerhouse”. In order to do so, the party set out a number of requests from Westminster, including demands relating to tax policy and national debt.

Brexit

The DUP has long been an advocate for leaving the European Union, and was in favour of holding the Brexit referendum in June last year, in which 55.8% of Northern Ireland voted to remain. With Brexit negotiations originally scheduled to start on 19 June, it could well be the issue that makes or breaks a deal with the Conservative Party.

The DUP supports a soft Brexit, and maintenance of a “frictionless” border with the Republic of Ireland. Key Brexit priorities outlined by the party have included arrangements to facilitate ease of movement of people, goods and services; a comprehensive free trade and customs agreement with the EU; and the ability to opt in to EU funds “where proven to be cost-effective and add value”.

However, the DUP backs removing the UK from the jurisdiction of the European Court of Justice, which would mean leaving the single market – something over which Theresa May will breathe a big sigh of relief.

Investment

The DUP highlighted investment in infrastructure as a key priority in 2015 in order to “prepare Northern Ireland for the future”. In the 2017 manifesto, the party expanded on this, citing improved digital and transport connectivity as key factors in building a “world class economy”. Some of the areas likely to be under discussion are funds to introduce high speed internet connectivity across Northern Ireland and capital investment to help create a £1bn tourism industry.

The DUP has also pushed for assistance from the UK government with attracting foreign direct investment in both the 2015 plan and 2017 manifesto, making it a strong possibility for inclusion in the negotiations.

Tax policy

In 2015, the DUP pledged to push Westminster for “more satisfactory terms” in relation to corporation tax, with the party committing to lowering the corporate tax rate from 2017. The Corporation Tax (Northern Ireland) Act 2015 devolved power to the Northern Ireland Assembly to set the rate of tax for certain trading income, with a 12.5% rate now expected to enter into force in April 2018, bringing the rate in line with the Republic of Ireland.

The DUP’s 2017 manifesto supported the corporation tax rate reduction, but pushed for reducing it to “at least 12.5%”. As the UK tax rate is set to reduce to 17% by 2020, the low rate in Northern Ireland becomes less favourable. Could the DUP push Theresa May to delay the UK reduction, or even take it off the table completely? Such a move would be deeply unpopular with UK businesses, but the reduction as currently planned could impede the DUP’s goal to build an economic powerhouse in Northern Ireland.

In 2015, the DUP outlined that it would want UK-wide tax policy improvements to encourage economic growth. This was retained in the 2017 manifesto, although the party has been vague as to what these improvements would entail. As such, they are not likely to be a deal breaker in the discussions.

What now?

The Conservative Party is set on a deal with the DUP. Such is the party’s haste that Number 10 prematurely announced agreement of a deal last week, only for the DUP to refute the claims. While Brexit is likely to take up the majority of time during the negotiations, pensions, winter fuel allowance, air passenger duty and VAT on tourism businesses are all other areas on which the DUP could wield influence.

With the Queen’s Speech now set for 21 June, does this mean announcement of a deal is imminent? It certainly appears so, however, with Labour at the ready to present an alternative proposal and gain cross-party backing, the General Election fallout is far from over.

And then we broach the next question: even with DUP support, how long can a minority Conservative government last?

Place your bets for another trip to the polls way before 2022.

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