Northern Ireland budget crisis threatens tax devolution deal

By Ian Graham BELFAST (Reuters) - A dispute over social welfare cuts in Northern Ireland on Monday threatened to unravel a 2014 political deal to cut the province's corporation tax to better compete with Ireland for foreign direct investment. Irish nationalist party Sinn Fein blocked a social welfare reform bill, a major part of last year's Stormont House Agreement which included corporate tax cuts and the creation of new institutions to look into historical crimes in the province. Politicians have said the collapse of the agreement could bring down the power-sharing government, part of a 1998 peace deal that ended three decades of tit-for-tat killings between nationalists, who want a united Ireland, and unionists who want Northern Ireland to remain part of Britain. Hours before a vote on the welfare bill, Sinn Fein Deputy First Minister Martin McGuinness announced his party was withdrawing support, accusing the Democratic Unionist Party (DUP) of Northern Ireland's First Minister Peter Robinson of reneging on commitments made in December. Ministers in Belfast have been trying to win control of the tax for years so that they can reduce it from the standard British rate of 20 percent to nearer that in the Irish Republic where the 12.5 percent level has helped to attract some of the world's largest technology and pharmaceutical companies. McGuinness said he was withdrawing support because Robinson's DUP was only agreeing to partial protection of existing social benefits claimants and no protection for future claimants. Robinson said he was "completely dumbfounded" at the accusations. The representative of British Prime Minister David Cameron in the province, Northern Ireland Secretary Theresa Villiers, said the development was "deeply concerning". The leader of the province's second largest pro-British party, the Ulster Unionists, said the disagreement had the potential to bring down Northern Ireland's government. "They are bringing, potentially, the entire house down," Mike Nesbitt said in a statement. (Editing by Conor Humphries and Louise Ireland)