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First Ministers present Brown with taxing problem

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Tom Griffin (London, The Green Ribbon): Is the real story behind Alex Salmond's trip to Belfast not so much the creation of a Celtic alliance but the emergence of Ian Paisley as an Ulster nationalist - and not a Unionist at all?

At first glance, the two appear unlikely allies, yet it has become clear in recent weeks that they share a growing agenda. "There are things Wales, Scotland and Northern Ireland have in common that if we go to the British Government in harness, we will get more out of them," Paisley said recently. He is likely to prove sympathetic to Salmond's call for a revival of formal ministerial meetings between the UK Government and the three devolved administrations, which could become the forum for demands that seriously complicate Gordon Brown's balancing act over the West Lothian Question.

But the key development is the emergence of a consensus in Northern Ireland in favour of matching the Republic's 12.5 per cent corporation tax rate, in the hope of emulating the success of the Celtic Tiger economy. Led by some of the North's most prominent businessmen, and backed up by a study from the Economic Research Institute of Northern Ireland, this demand has won support across the political spectrum at Stormont and from Bertie Ahern's government in Dublin. Brown has responded by offering a review of Northern Ireland's tax regime by the former chairman of Her Majesty's Revenue and Customs, Sir David Varney. But indications that Varney will reject their case have made Northern Irish ministers more open to co-operation with Scotland. This problem may be one reason why Brown cut the UK-wide rate of corporation tax in this year's budget. However, advocates of regional variation argue that further UK-wide cuts would not deliver sufficient growth in the south of England to justify the associated loss in revenue.

For Scottish and Irish nationalists, the case for regional differentiation is an obvious opportunity. What is remarkable is the extent to which it has been embraced by staunchly unionist DUP ministers. As the BBC's Mark Devenport has noted , the growing demands from Northern Ireland and Scotland bring significant risks from a unionist point of view. One might have expected the DUP to be more concerned about the threat of an English nationalist backlash that would undermine both Brown and the union. Paisley's apparent indifference to that risk has led some to suggest he is not so much a unionist as an 'Ulster nationalist.' That may be putting it too strongly, but there is no doubt that there is a new and unexpected dynamic emerging in Stormont that may yet affect the future of the whole UK.

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