Osborne rules out UK pressure on Irish corporation tax

The government does not intend to ask Ireland to raise its 12.5% corporation tax rate in return for Britain's support for a bail-out of the Irish economy, Chancellor George Osborne has told MPs.

In a Commons statement on 22 November 2010, Mr Osborne confirmed that the UK has offered a direct loan to the Irish Republic in addition to contributing to a multilateral loan, and that negotiations were continuing on the details of conditions attached to these deals.

He said: "On corporation tax, I think it is well known that this has been the subject of discussion in some European capitals but not here.

"We believe countries should be free to set their own tax rates."

But, he added, the Irish government had to make some "very difficult decisions" about its fiscal package and that was a matter for them.

"Ireland is a friend in need and it is in our national interest that we should be prepared to help them at this difficult time," he concluded.

Shadow chancellor Alan Johnson said Labour was "in principle content to support a role for the UK in assisting Ireland to secure economic stability".

But Mr Johnson quoted the chancellor as saying in 2006: "We should look and learn from across the Irish Sea. What has caused this Irish miracle and how can we in Britain emulate it?"

The shadow chancellor told MPs: "One lesson from Ireland should be salutary, exaggerated rhetoric affects confidence and loss of confidence can lead to economic disaster."

Tory backbencher Andrew Tyrie, chair of the Treasury Select Committee, told Mr Osborne: "I think the public were shocked to discover the UK was going to be bailing out a eurozone member, not just through the IMF or through bilateral loans, but through the European stabilisation mechanism - that is, through the EU budget."

Asked by another Tory MP, David Nuttall, to guarantee that the interest rate charged on the loan would be "substantially higher" than the cost of borrowing for the Treasury, the chancellor replied: "We are not seeking to make a buck out of this. We are seeking to help our friend."