Britain tells Northern Ireland: Set corporate tax if you can break political deadlock

LONDON (Reuters) - Britain pledged to devolve corporation tax setting powers to Northern Ireland as soon as next year but only if Belfast can break a political deadlock on budget cuts, a condition described as "breathtakingly arrogant" by nationalist Sinn Fein. Northern Ireland shares mainland Britain's 21 percent corporate tax rate, much higher than a 12.5 percent rate across the border in Ireland that has helped the country become one of the largest recipients of U.S. foreign direct investment. All sides of Belfast' devolved government - where power is shared between nationalist and unionist parties following three decades of sectarian violence - favour lowering the corporate tax rate to help boost employment in the province. But the parties have been unable to break an impasse over welfare cuts due to be implemented this year, prompting Britain to call all-party talks two months ago that are also aimed at settling other contentious issues like parading and the flying of flags that still divide the communities. British finance minister George Osborne said Belfast had to show that it can manage the financial implications of devolved powers and that the talks "will see if that's the case." "Sinn Féin will not be taking any lectures from George Osborne, the architect of the most vicious attack on public services since the inception of the welfare state," finance spokesperson, Daithí McKay, said in a statement, accusing Osborne of "breathtaking arrogance". "We are not going to implement Tory policy in regard to welfare cuts." Northern Irish First Minister Peter Robinson, who warned in September that the devolved government was not fit for purpose, said it was not unreasonable for Osborne to be sure he is placing the powers in a stable political environment. But the Democratic Unionist Party (DUP) leader immediately blamed the conditional nature of the pledge on the refusal of Sinn Fein and fellow nationalist SDLP party to agree to its welfare reform proposals. "If this opportunity is lost they will have to explain why they failed to behave in the best interests of our people and why they have rejected the opportunity to create up to an additional 50,000 jobs here," Robinson said in a statement. Prime Minister David Cameron's Conservatives could seek to court Unionist lawmakers in the Westminster parliament if, as some opinion polls currently show, no party wins an absolute majority in Britain's May 7 election. "Today's statement has raised the stakes in the cross-party talks and made it even more vital that the parties reach an agreement in the short time we now have," Cameron's representive in Belfast, Northern Ireland Secretary Theresa Villiers, said. (Writing by Padraic Halpin in Dublin, additional reporting by Ian Graham in Belfast; editing by Guy Faulconbridge)