SUBGROUP ON THE ECONOMIC CHALLENGES (Evidence session) Thursday 3 August 2006 Members in attendance for all or part of proceedings: Witnesses: The subgroup met at 10.05 am. (The Chairman (Mr Molloy) in the Chair.) The Chairman (Mr Molloy): I have apologies from Mr Paisley Jnr. Mr Easton is attending in his place. Mr Dallat is here in place of Ms Ritchie, and Mr McElduff is in place of Mr McLaughlin. Mr Easton: Mr Chairman, I will have to leave at about 12.00 noon as I have another engagement to attend. Dr Birnie: I have to leave at 11.15 am, but I hope that a substitute will replace me. The Committee Clerk: Members should try to avoid leaving in the middle of an evidence session. The Chairman (Mr Molloy): Are members content with the draft minutes of the meeting of 1 August? Members indicated assent. In matters arising, the Committee on the Preparation for Government (PFG) has moved back the deadline for the preparation of the subgroup’s report by one week until 25 August. Additional Chairpersons have also been appointed. The Alliance party has nominated Naomi Long, and the Ulster Unionist Party has nominated Jim Wilson. With the agreement of the PFG, they have been added to the list of Chairpersons. The SDLP was to nominate by close of play on 2 August. Mr Dallat: Alban Maginness is the SDLP nominee. Ms Gildernew: Mr Chairman, who are the other Chairpersons? The Chairman (Mr Molloy): Naomi Long, Jim Wilson and Alban Maginness. The Committee Clerk will explain the format for the evidence sessions. The Committee Clerk: There will be four evidence sessions today, so I recommend that you allow 45 minutes for each. The witnesses have all been advised of that. I am aware that, in the past, some witnesses have taken rather longer than 15 minutes to make their presentations, so you might need to speed them along from time to time. With regard to future business, the extra week to complete the report will make all the difference, certainly for the Committee staff. With the original deadlines, the plan was to spend the final week drafting the emerging recommendations and writing the draft report until the very last day. That would have been very tight. I suggest that the subgroup slots in a written evidence session on 15 August, because there will be quite a few written presentations, and the subgroup will not have an opportunity to read and consider them otherwise. That means that the members can look at and discuss emerging recommendations on 17 August. The following week, the subgroup can consider the draft report, which will be the week ending 25 August. If members agree, we can arrange the work plan on that basis. The Chairman (Mr Molloy): Are Members content with that? We should not try to have any more evidence sessions, as we will become overloaded otherwise. We should use the time available to benefit the subgroup in drawing up the draft report. The Quinn Group is not available for the evidence session on 10 August. It has offered to give a written submission instead. The Committee Clerk: Next Thursday the evidence sessions will be with Moy Park, the Ulster Farmers’ Union, Wrightbus and the Department of Finance and Personnel. The Chairman (Mr Molloy): Is the Northern Ireland Council for Voluntary Action (NICVA) the new name or the old name? Mr McElduff: I think that the Northern Ireland Voluntary Trust changed its name to the Community Foundation for Northern Ireland; NICVA remained the same. The Chairman (Mr Molloy): OK. The closed session this afternoon will start at 3.30 pm and last about an hour. We must have a quorum, and we will consider the emerging issues. To date, we have just been taking evidence and we need an opportunity to discuss the issues that have emerged from the evidence sessions. The Committee Clerk: A few members have indicated that they may not be able to make it. Can members confirm their attendance, to make sure that there will be a quorum? Mr Weir: From the DUP, Wilson Clyde and I will be attending. Ms Gildernew: We are good to attend. Mr McElduff: We are absolutely committed. The Chairman (Mr Molloy): Mr Dallat, are you able to attend this afternoon’s session on emerging issues? Mr Dallat: I am. Mr Neeson: I am not able to attend this afternoon, but David Ford will be attending. The Chairman (Mr Molloy): Last time, Mr McNarry made a boast. Mr McNarry: I am not sure. Dr Birnie: I am OK to attend. The Committee Clerk: The afternoon session will begin at 3.30 pm and last about an hour. It is a key opportunity for the subgroup to consider and think about the emerging issues. The Chairman (Mr Molloy): Members will have received the paper on emerging issues this morning. The Committee Clerk: Two papers have been issued this morning: one is a summary of the various evidence sessions; the other is a research paper. I have also asked Paul Moore, who is assisting the subgroup, to prepare a paper. Members will have their own views, but the papers are there to assist them. Dr Gilleece has also prepared a paper, which will be distributed at this afternoon’s session. The Chairman (Mr Molloy): Are we ready for the presentation from Sir George Quigley? Mr Neeson: Sir Gorgeous George. Mr McNarry: Galloway is not coming in here. [Laughter.] Ms Gildernew: Sean, if this relationship develops, will you need to avail yourself of the Cherry Room? [Laughter.] The Chairman (Mr Molloy): Hansard is recording the proceedings! Questions should be related as much as possible to the subgroup’s terms of reference. Short questions will perhaps receive short answers. I welcome Sir George Quigley, Tony Hopkins and Michael Ryan from the Industrial Task Force. If you would like to make a short opening presentation, members will ask questions. Thank you for attending at such short notice. The subgroup considers it important to seek views before it completes its report, which will be debated in the Assembly. Sir George Quigley (Industrial Task Force): Thank you very much. I shall be as brief as I can. There is some ground that I wish to cover. We were absolutely delighted to be invited to give evidence to this important subgroup, because getting the economic dimension right is essential for the future welfare and enduring stability of Northern Ireland. We all hope that the position is swiftly reached whereby local Ministers take the critical decisions on that economic dimension. However, it is vital for the crucial issue of corporation tax, about which I shall speak later, to be decided as an indispensable component of the devolution settlement itself. The credibility of an Executive assuming responsibility, but without the tools to do the job, would quickly be put at risk. I hope that it will be apparent from our presentation that the invitation to give evidence on the subgroup’s three terms of reference has been taken very seriously. I may curtail the oral presentation in the interests of brevity, but I hope that members will all read the complete text. We will be pleased to engage in discussion later to elaborate those points to which I merely allude in the presentation. 10.15 am To address first the major impediments to the development of the economy, the key point is that our economic structure is simply not fit for purpose. The wealth gap with the rest of the United Kingdom persists, with gross value added per head at about 80% of the UK average; in Scotland it is close to the average. At double the UK rate in the past 10 years, job growth has been good. However, our ability to catch up with the rest of the UK is hampered by the worrying negative trend in labour productivity: between 1998 and 2004 there was a drop of 7%, from just over 88% of the UK average to just under 82%. Productivity in the production industries, including manufacturing, improved to slightly above the UK average; however, productivity in the service sector declined from 88% to a very poor 78%. It was in the service sector that the job growth occurred — almost 17%. Manufacturing, however, dropped by 13%. The gross value added of the service-sector jobs is only 72% of jobs in manufacturing. It is clear that the structure of the Northern Ireland economy has been changing, but in precisely the opposite direction to the creation of the high-value-added economy that is the declared aim of Government policy. Restructuring has been taking place through an employment boom in low-productivity jobs. On that basis, the possibility of closing the wealth gap with the rest of the UK — still less of drawing level with the Republic, which has overtaken the UK — is remote. The imbalance between the public and private sectors is not conducive to closing the wealth gap. The proportion of regional output spent by the Government on transfer payments, such as social security, or providing health and education services, is as much as 71% of gross domestic product (GDP). The public sector accounts for 35% of all employment but only 27% of gross value added. It therefore lags behind the wider economy in productivity levels. Public money directly or indirectly supports very strong consumer spending. Simply cutting the public sector, as some suggest, would achieve nothing. It will have to find its appropriate level in a rebalanced economy that has a greatly enhanced market sector. Such enhancement is urgent, since the Government has announced that public-sector growth in the UK is set to drop, first to 3%, and then to 1·9% per annum, from the unprecedentedly high level of 4·9% in recent years. Economies that have to stand on their own feet cannot grow sustainably unless they have sectors that generate growth in net exports. However, the relative dynamism of a region’s export base is also critical. Regions with an above average output of tradable goods or services will also tend to have an above average per capita income, which we do not. Northern Ireland’s manufacturing sales outside the Republic and the rest of the UK amount to only £3·5 billion per annum. Sales of services are unlikely to be more than a small fraction of that. To achieve catch-up with the rest of the UK and to close the wealth gap — and catching up with the average is no great ambition — Northern Ireland needs to achieve a massive increase in the size of its export base. The conclusion is inescapable: Northern Ireland needs a far larger, export-driven private sector with higher value added, higher productivity and higher earning power. We need to be far more deeply integrated into the global economy. However, the existing private sector base lacks critical mass. However much its performance may be enhanced — and it can be enhanced — it cannot on its own get Northern Ireland onto a new economic trajectory, any more than the Republic’s private sector base could have done. We need to attract a much stronger flow of inward investment of the right kind — and I underline the importance of “the right kind” — to achieve the private sector base that I have just described. That will not happen without a competitive corporation tax rate. Failure to succeed on that front will constitute, in your terminology, an insuperable impediment to the development of the economy. Underperformance by the existing base will also impede development. The growth task will fall largely to the companies in the technology and market sectors that have, or can develop, a competitive position. The Industrial Task Force has a great deal to say about the need for companies to understand technological change, develop their international trade capabilities and devote adequate resources to research and development. We recommended that a centre be established to help companies to brief themselves more effectively on relevant developments in technology worldwide. The Government can assist the existing base; Invest Northern Ireland can encourage, stimulate and support. However, in the final analysis, the responsibility for growth must be vigorously and effectively discharged by business itself. I will move on to the second area of the subgroup’s remit, which is to consider the fiscal incentives that might promote foreign direct investment (FDI) and indigenous investment. My first point is that the analysis that I have just given argues for a greatly increased flow of inward investment. As well as embarking on the long, slow task of growing your own timber, you must buy in the capabilities — innovation, skills and marketing outreach — of established, high value-added, technologically driven, profitable companies worldwide. That cannot be done without the ability to compete on corporation tax. Given Northern Ireland’s location on an island, of which the other half is able to offer a headline rate of 12·5% compared to our 30%, anything greater than 12·5% would not be competitive. A report by Goodbody Stockbrokers a year ago was unequivocal on that point: “The 12·5% rate … has been integral in sustaining Ireland’s position as one of the leading recipients of foreign direct investment (FDI) in the world … As an example … in 2003 Ireland received 4·6% of all FDI flows globally. We put this success down to the favourable corporation tax rates offered by the Irish Government.” That is 4·6% for a country with a population of around 3·5 million people. Between 1995 and 2004, the FDI flows to the Republic of Ireland, translated into sterling, came to around £70 billion. That was 25 times the figure for Northern Ireland, which was around £2·8 billion. Some 90% of the Republic of Ireland’s manufactured exports and 70% of its services exports are by foreign-owned companies. Its sales of manufactured goods outside the British Isles amount to almost 14 times the figure for Northern Ireland. FDI flows act on the economy qualitatively as well as quantitatively. Northern Ireland has simply not had that kind of impact or influence on its economy. Unsurprisingly, the Organisation for Economic Co-operation and Development (OECD) economic survey report on the Republic of Ireland in 1999 said that the: “massive inflow of direct investment [had] been the major formative shock influencing the economy in the 1990s.” The International Financial Services Centre is a showcase for the policy. A tax partner in the Dublin office of PricewaterhouseCoopers said recently: “The last big differentiator is low taxation. We would be extremely foolish to throw away that advantage.” I do not hear anybody in the South saying that that advantage should be thrown away. A significant figure in the United States, who is very well versed in Irish affairs, recently wrote me a letter that was very supportive of the corporation tax proposal. He said: “With all of the corporate and financial clients that I advise, the corporate tax rate is at the top of the list when we discuss potential foreign investments.” That gives a low-tax location a real head start in negotiations. A multitude of studies now demonstrate the importance of tax in the decisions of companies, as the decision to locate can often be a fine one, easily affected by differences in taxation. Of course, global FDI ebbs and flows. However, it is crucial that we position ourselves to get a bigger share of what is available. When tax is so important, being competitive on everything except tax will not achieve that. I have seen it argued that our headline, or standard, tax rate of 30% does not really matter because, when tax allowances are taken into account, the effective rate of tax is much lower, and the gap between the rate here and that in the Republic becomes insignificant. However, the published studies do not indicate that. They measure the effective tax rate in the same way as does a company doing its appraisal of various potential investment locations. A 2005 study by one of the prime European research institutions, covering all 25 EU countries, found that the effective average tax rate for the Republic was 14·7%, while that for the UK was 28·9%, which is nearly double. The UK’s was the seventh highest, and the Republic’s was bettered only by Cyprus at 9·7%, Lithuania at 12·8% and Latvia at 14·4%. In fact, the Republic’s headline rate was better than those in either Latvia or Lithuania. That is not to say that a low headline rate is not important, because it is. It is important for successful and profitable companies, which we want in Northern Ireland. Of course, the sheer market arousal effect of a low headline rate is very potent, as the Republic has discovered. There is also a concept that is known as the effective marginal tax rate, and confusion is often caused when that is cited in discussions of taxation as a location factor. It is important to be very clear that, according to the research, the effective marginal tax rate has no statistically significant impact on location decisions. The important fact is the effective average tax rate. I would be happy to discuss those somewhat technical points, because they are important. So far as inward investment goes, being cheek by jowl on the island with a state that is able to attract most of the significant growth and follow-on growth that comes to the island has been, frankly, a serious disadvantage. However, if the tax disadvantage were removed, Northern Ireland would derive immense benefit from sharing the island with a state that is already so globalised. It would not be a huge step for the host of foreign companies who already have the Republic in their viewfinders to widen the lens a little and take in the whole island. It is a delusion to talk of an island economy when there is such a serious impediment to the free flow of investment into and within the island. A strong economic cluster that extends over the whole island and derives strength from the capacity that is available in both parts enhances the ability of both to participate fully in the global trade and investment flows. That could be very relevant, given that some surveys draw attention to the high cost base and skills shortages of the Republic. In other words, this need no longer be a zero-sum game as regards the two halves of the island. It is interesting that neither the Prime Minister, nor the Chancellor nor the Secretary of State, has ruled out changes to corporation tax; that has created the opportunity for the issue to be considered on its merits. To fail to press it to a conclusion would, in the judgement of the Industrial Task Force, be to lose an opportunity to set Northern Ireland on the path to a new economic future. That opportunity is unprecedented and unlikely to recur. Benefits would not only accrue to Northern Ireland; the benefits to the UK national interest of a stable, prosperous Northern Ireland are self-evident. Moreover, stimulating an increase in the tax base by lowering the tax rate, as happened so effectively in the Republic, is the only means of reducing public-sector dependency and curtailing the £6 billion-a-year drain on Exchequer funds. Eleven out of the 14 OECD countries that lowered their company tax rates between 2000 and 2004 increased their corporate tax receipts. For that reason, it is wholly unreasonable to suggest that the Northern Ireland public-expenditure block should be cut by the amount that the Treasury would lose in the short term in corporation tax receipts. The reduction in corporation tax would be a major strategic initiative designed to enable Northern Ireland, for the first time, to stand more on its own feet to the mutual benefit of the Treasury and the region. To take away some of the existing economic props while a more robust structure is in gestation would be counterproductive as well as — particularly in the context of a new Executive — politically unrealistic. If, as we are told, the goal is a more sustainable economy rather than one stuck indefinitely in the rut of public-sector dependency and unable to catch up with either Great Britain or the Republic, a major catalyst, rather than mere incremental tinkering, is required. The Industrial Task Force is not aware of any alternative means that have been suggested for achieving sustainability. 10.30 am I have focused on the relevance of a corporation tax change for inward investment, but it could also be expected to administer a beneficial shock to the existing base. The business bodies at UK national level have been arguing strongly that a reduction in corporation tax is a key factor in enabling business to compete. It would be odd if local businesses were uniquely immune from the positive effects of tax change. The Industrial Task Force has commissioned further work on the corporation tax proposition. This will seek, inter alia, to assess more precisely the economic gain, as well as the likely effect in the short and longer term on the tax yield and on the annual Treasury subvention. Importantly, it will also identify other elements of the company tax regime — in addition to the low headline rate — which have made the Republic highly attractive to FDI. Since the Industrial Task Force sees its role as being primarily to support the thrust of the political parties on this issue — in other words, you — the results of that further work will, of course, be placed at the subgroup’s disposal. The case for achieving economic growth by significantly enhancing fiscal incentives to encourage expenditure on R&D has been examined in a recent report by Prof Richard Harris, commissioned by the Economic Research Institute of Northern Ireland (ERINI). The report suggests that there are more fundamental reasons than cost for firms not investing in R&D. The basic problem is not a resource gap or the cost of R&D, but a capabilities gap, and changing capabilities takes a long time. The report concluded that, on its own, an R&D tax credit — which, of course, would be expensive — is unlikely to remedy the lack of an R&D culture in the Province. That accords with a report on the UK generally by PricewaterhouseCoopers’s London office, which looked at the take-up by SMEs of a range of tax breaks. The report found that most small firms do not change their plans or behaviours because of potential tax rewards. Instead, they see them as a reward for work they would do anyway. Even if it could be demonstrated that such tax breaks are effective, they would be primarily relevant to the existing industrial base. There is no evidence that they would be relevant in the context of the location decisions of FDI. They would not exert significant leverage on the fundamental issue, which is radical economic restructuring. They would, therefore, be no substitute for the corporation tax proposal and would not be directed to, or achieve, its purposes. In the context of fiscal incentives, there has been some discussion on the reduction of fuel duty. I will not go into that as it is covered in my paper, but the argument for it on business cost grounds alone is not on a par with the strategic arguments to be adduced for a reduction in corporation tax. We can deal with that issue later, if the subgroup wishes to do so. Finally, I turn to the construction of an economic package, or a peace dividend, to contribute to economic regeneration. The fundamental requirement is that an incoming Executive should be able to demonstrate that it has the means to make a successful assault on the critical problem — the unsustainability of a grossly unbalanced economy which, despite massive annual transfers from the Exchequer, cannot achieve the average wealth level for the UK. Without a competitive tax rate, the necessary radical restructuring will simply not be achieved. It would be counter-productive to trade such an initiative for other measures, which when viewed in a historical perspective, simply represent more of the same. That is not to say that there is no need for other compatible initiatives that contribute to the restructuring objective. Such initiatives do not necessarily require more money. In some cases, it may be a matter of directing existing resources more effectively. That is why without a detailed examination of the relevant budgets, which would only be possible from within Government, it is difficult to quantify the resource implications of such initiatives. I shall do no more than offer five brief guidelines. First, if the key to a sustainable economic future lies in a major expansion of the market sector, it is vital that Invest Northern Ireland be adequately resourced to match the competition in state aids. To boost the performance of companies in such critical areas as R&D, technology licensing and export marketing, it is important that INI be as well equipped and effective as Enterprise Ireland in the Republic. Secondly, the important untapped source of labour supply, which is represented by our disproportionately large economically inactive population, must be equipped to enter the labour market. There is also a need to upgrade the skill levels of the population. Thirdly, setting firm targets for eliminating the long tail of underachievement in the education system and closely tracking and tackling obstacles to that is long overdue. Making the profile of the education system match our economic ambitions should be part of the ongoing agenda. Fourthly, tourism should be contributing three times as much to GDP as it currently does. Again, firm targets should be in place to make that happen. Finally, with regard to infrastructure, it is important to recognise the big increase in the projected amounts available for capital spending and, therefore, to assess the validity of the balance within those numbers. Indeed, I have heard people argue that one should devise a scoring system for individual projects, because if growing the market sector is to be the centrepiece of economic policy, infrastructure deficits that could frustrate that policy should clearly have priority. I have not dealt with the issue of business rates, because I understand that that is going to be the subject of a separate study. An economic package constructed on these lines could usefully supplement the reduction in the rate of corporation tax and improve the supply-side conditions that enhance the attractiveness of a host location. It is essentially and inevitably more of the same — although its elements could hopefully be more effectively targeted and better delivered than hitherto. It cannot achieve the necessary step change. It is, therefore, no substitute for the reduction in corporation tax, which is needed to attract the global investor without whose help Northern Ireland simply cannot get on to a new economic trajectory. The Chairman (Mr Molloy): Thank you, George. Mr McNarry: Good morning, Sir George. It is good to see you looking as well as ever. That is one secret that you must pass on, never mind anything else. Presentations by business and commerce-related groups have so far laced the flavour of the cocktail that may result in a reduction in corporate tax. Without wishing to be abrupt — I have to ask this, because the question will be asked outside — can the business sector be justifiably accused of using the current political climate of talks to restore devolution to promote selfishly alternative incentives? Is it badgering the political parties, while they prepare for a devolved Government, to extract a special package from the Treasury or Gordon Blair? Mr Weir: Surely you mean Tony Blair or Gordon Brown? Mr McNarry: Whatever I said, I will reverse it. [Laughter.] It is important for those who have chosen to go down the political route to know whether they can pull off a reduction in the corporation tax rate. The same applies to the introduction of water rates, as the public are up in arms about that. There is an expectancy that MLAs would do something about that if the Assembly were restored tomorrow. The UUP would do something about it, but I cannot speak for the other parties. Finally, how consistent with the direct rulers is the Industrial Task Force in its request, or demand, for a reduction in the corporation tax rate? Is it getting anywhere with them, and are they listening? Are they making any promises, saying that it is a good idea and that they will think about it? Sir George Quigley: That is a fair question, and I will answer it in two parts. First, I will deal with your question on whether this is a selfishly driven agenda by the business sector. I can only speak for the Industrial Task Force — but I would be surprised if what I say does not apply more generally. I have been amazed by the extent to which the debate in the business sector has focused on macroeconomic issues. In other words, the Industrial Task Force was driven to this conclusion. It is not the kind of natural conclusion that one would reach, because it is a difficult one, but the Industrial Task Force was driven to it following its analysis. If one simply has to seek more outside investment to make anything of the Northern Ireland economy, and if that requires us to be competitive on the corporation tax rate, as well as on everything else, there is no option but to go for the only weapon capable of delivering the outcome. Business colleagues have said that they are concerned about the economy; therefore, they would be happy if the lower corporation tax rate were limited for inward investment purposes. Northern Ireland businesses would be happy to take the pain of foregoing a lower corporation tax rate for indigenous businesses, provided that we get a weapon that will make this place go forward. Ultimately, more outside investment will benefit everyone, and I have heard people make that point. However, it would be difficult to implement, because one does not want indigenous businesses to be disadvantaged, especially if businesses from outside wish to invest in the same field. I have also heard people make that point. Lowering corporation tax is difficult. However, if it is the only way in which Northern Ireland will get up to the right level of economic performance, and it is the right thing to do, we must go for it. With regard to your question about progress with direct rulers, the Industrial Task Force’s objective was to prevent direct rule wiping the issue off the table before anyone could debate it. We have been successful in that, inasmuch as the Secretary of State, having read our report, said that the issues that it raised were important and merited serious consideration. In other words, he did not tell us that a debate on the issue was out of the question. When we met the Prime Minister — the Taoiseach was also there — he said that it was interesting that the Republic had benefited from it and that we must seriously consider the matter. When we met Gordon Brown — and I met him privately for discussion — he did not say that a lower corporation tax rate was simply not on, but he could have done so. Direct rule ministers are taking the view, and the Prime Minister said this, that if we want the UK Government to radically reform the economy, a lower corporation tax rate is more likely to be introduced if local politicians support the idea. The Prime Minister was not saying that the lower rate was bound to be granted if it were put forward by local politicians; he was saying that if there was a route towards a lower rate, it was that route, not the route of business going to direct rule Ministers and expecting a definitive decision from them. In common parlance, it is all to play for: the door has been left open, and it would be a great pity if the once-and-for-all opportunity to do it were passed over. 10.45 am Mr McNarry: I am grateful to Sir George for his explanation. I take the point of what direct rule Ministers, the Prime Minister and the Chancellor have said to you in not dismissing this. Was there a sense that they would not dismiss it if the proposals were to come from local politicians, but that they would dismiss it if local politicians were not able to put themselves in a position to make those proposals? Sir George Quigley: They were not going as far as that, as that point did not arise in that form. However — and we all hope that this will not happen — if one were in a situation where devolved Government did not prove possible, one would still be left with the big issue: will Northern Ireland simply go into decline because the public sector is not growing and the productivity gap is widening. Where will it end up? The baton would have to be passed on. Mr Michael Ryan (Industrial Task Force): I am one of the businessmen on the task force — and some of you have been to those forums. I have made it clear, with respect to the potential reduction in corporation tax affecting already indigenous businesses, that from a Northern Ireland plc point of view, I would be prepared to accept the fact that it did not apply to my company. My company does not have anything to prove regarding its investment in Northern Ireland over the past 15 years. If the lower rate were to apply to new FDI only, I would accept that. On the other hand, to reinforce this from a business point of view, and with the global economy as it is, we must do something different, even businesses such as ours. As businessmen in the community, we have to deal with the global pressures that force us to reassess our businesses and look for more radical solutions than we would have considered previously. From discussions amongst ourselves, we decided that it was time to try to do something different. If that meant that established businesses would not avail of it, then, from a Northern Ireland plc viewpoint, there are bound to be spin offs, as Sir George mentioned. Even if my company and some of the larger companies in Northern Ireland were to expand, and even if we were to double, it would not make enough difference. We cannot expand with the people who are already here — even if we doubled our business, which would unbelievable for us, and for companies such as Seagate Technology and Caterpillar. New people must come in — how can we achieve that? The Chairman (Mr Molloy): Time is running out, so please keep questions short and answers brief. Mr Neeson: Of all the organisations that have come before the subgroup, the Industrial Task Force is the first to focus on the single issue. Are the other fiscal incentives that are in place working? We have talked about the impact of industrial derating before, but has it had an impact on attracting inward investment? Secondly Sir George, you talk about the rebalanced economy. Who will drive it? Will it be the business sector, the Government or what? Sir George Quigley: In answer to the last question about who will drive a rebalanced economy, I look forward to an economic future when market activity will, hopefully, drive the economy much more effectively. In other words, as I said during my presentation, companies must get up and go and make things happen. They must be ambitious for their futures. In doing so, business contributes not only to Northern Ireland’s economic future, but, because economics, politics and stability are tied up together, it contributes to its political future as well. The Government can do certain things, such as creating a business-friendly environment, which has been a big factor in the South. Other important factors include consistency in policy and infrastructure or, for example, where the Government intervene in training arrangements. However, without a catalyst to bring companies through the door, there is nothing for anyone to work with. The South has had much success in attracting a huge mass of investment. In turn, that success gives everyone in the education system the goal to address how to meet the needs of that inward flow of investment and to get the infrastructure and telecommunications right. There is a strong stimulus to do things right simply because people are battering at the door saying that they have come to invest and that that is what they want. By introducing a driver, the positive forces for the development of the economy are internalised. In considering fiscal incentives for R&D, members may wish to read Prof Richard Harris’s report, if they have not already done so. He makes the point that tax credits alone do not develop a culture attuned to R&D, etc. The impediments have nothing to do with the expense of R&D: it is about getting into the minds of companies that R&D is part of the company breathing process in the same way as training or reaching new markets. There is no evidence yet that tax credits produce the kind of change that we all want. Critically, tax credits would be relevant only to the industrial base that is already here: they would not do anything for bringing in companies. Mr Weir: Thank you, Sir George and colleagues, for your presentation. You have made a persuasive case for the reduction of corporation tax. Let me play devil’s advocate on a couple of points to see your reaction. You stated that the responses from the Secretary of State through to the Prime Minister — or perhaps more appropriately through to the Chancellor — have been along the lines that the serious issues that have been raised deserve serious consideration. Such responses often smack to me of the answer really being no and Ministers not wanting a public row. Or Ministers may feel that although they know that they will not agree to something, there is some merit in holding out a carrot suggesting that it could happen, because that applies additional pressure to restore devolution, which is clearly the Government’s principal objective. If the Government have not closed the door, and clear benefits could flow from a reduction in corporation tax, I wonder why they have not introduced it by now. Secondly, it has been suggested that a reduced rate of corporation tax in one region of a country may breach EU guidelines, as it may constitute state aid. How do you answer that point, and can you provide us with any worked examples within the EU of a country where one region has been given a different tax regime to another? That would be useful if we are to make the case for a reduction in corporation tax. Finally, I see the benefits of a reduced corporation tax for foreign direct investment. However, on page 13 or 14 of your presentation, you say that you believe that a reduced corporation tax would give: “ a considerable boost to the hospitality industry.” Will you explain why that would be, as I am not clear on how that would be of particular benefit to the hospitality industry? Sir George Quigley: As far as the attitude of the Government is concerned, only time will tell. All that business can do is to place the ball properly on the field and give all the support that it can. In this case, the strikers are the local politicians, and I believe passionately that it is they who can get the ball into the net. That will have to be as indispensable a part of a settlement for devolution as the political aspect. It would be totally unfair for an Executive that does not have the tools to do the job properly to be forced to make many unpopular decisions and fail to deliver. Once that happens, the British Government will be over the hills and far away, and the Executive will be left holding the baby. If the Executive were to ask Government for this radical change, Government would simply say that the Executive has its public expenditure block, and it can do whatever it likes with it. We now have the opportunity of a lifetime. Surmounting EU obstacles will be a challenge. However, if Europe wants to do something, it will be done. A compelling case would have to be made. Spain and Portugal have been able to make some changes to their tax regimes. Mr Weir: I appreciate that you cannot expand too much on that issue, but if there were examples of areas where different tax regimes have not been challenged or overturned, it would be useful for the subgroup to know about them. For instance, the Azores has been mentioned. You could perhaps put any examples in writing to the subgroup. Sir George Quigley: There are a few successful examples. We are in a unique position on this island because Northern Ireland is cheek by jowl with a strong player that will always be able to outbid it for really attractive investment opportunities. That type of relationship does not exist in any other part of Europe. Where else has a North/South Ministerial Council? Where else are there interstate bodies, and so forth? We are in a unique position to mount a sustainable argument. We need to get the best possible argument, and we must ensure that it sticks. Mr Tony Hopkins (Industrial Task Force): The timing of this initiative is the key point. I approach this issue from a different perspective; I was at the sharp end during the 1980s and the early 1990s, competing with the Republic for inward investment through the Industrial Development Board (IDB). Almost everything was similar, North and South, although in some ways the North had a better infrastructure, a better economic background and our people were just as talented. However, we always failed on the corporation tax issue. It was a block on every discussion that we had with a major company, and many companies would not even speak to us. At the end of the 1980s, we had a bash at changing the situation. We made valiant attempts with the Treasury, with the backing of the Northern Ireland Civil Service. Although the case was sound, we were seen off because although many aspects were exactly the same as they are now, we had no leverage. Given the precarious nature of our economy — productivity is going down, we are gaining jobs but they are not the right types of jobs to build an economy that can become self-sustaining — the timing of this initiative presents us with an opportunity to do something major and radical. Sir George Quigley: In the hospitality industry, our hoteliers — the people providing facilities and so forth — are competing in an island market. Visitors come to the island, and we want them to spend time in Northern Ireland. However, the service providers are paying UK rates of corporation tax. People in the industry have told me that that disadvantages Northern Ireland. Therefore, it would be very odd indeed if people could not benefit from that type of tax change. If you told people elsewhere in the UK that they could have their tax rate reduced to that level, they would jump at it. 11.00 am Mr McNarry: Did you know that members are now contributing to the economy? This morning, our mileage allowance was reduced. Ms Gildernew: Gentlemen, you are very welcome. It is interesting that you say that any rate above 12·5% would not be competitive. You are basically arguing for the harmonisation of tax rates across the island. I approach this matter from a slightly different perspective. Other contributors have recognised that FDI will not go to rural areas. That investment goes to Belfast and perhaps Derry, but other than that, it will have no impact. Other contributors have said that the Barnett formula may be looked at again and that less money may go to our overall budget. I am concerned about the impact of that on rural areas. How do you see the situation developing if jobs are all located in and around Belfast? Another interesting area was mentioned in the final stage of your report, which addressed education and skills. We all know that numeracy and literacy levels are not what they should be. At the moment, we have smaller classes, and that presents opportunities for more time to be given to individuals in the classroom. That is a huge opportunity for us, but the education budgets are being cut, and we will lose that opportunity to raise the level of educational attainment. The budget for adult learning has also been cut. What impact do you think that that will have? I noticed that you mentioned the lack of skills. You are clearly saying that we must invest more in education, in schools and in adult learning to increase the skills level and get those who are, at the moment, economically inactive into the workplace. We need those people, and we need them to be sufficiently skilled to take up that challenge. Sir George Quigley: Absolutely. That is very important. There are two matters that one is always keeping in tension and, hopefully, in harmony. One is the collective good, for which we must revivify the economy and raise its performance to a high level. We are climbing Everest; we are not just climbing a few thousand feet. At the same time, we must ensure that individuals have maximum opportunities, and that means equipping them with the wherewithal to participate in the labour market. If people do not have numeracy and literacy skills, they are not able to get on the first rung of the ladder. That is very important, but unless we are equally effectively developing labour-market opportunities, there is no point in producing many skilled people and many people who go on to higher education. We must do that in individual terms, but we also want to give those people opportunities. At the moment, far too many people are having to find their opportunities outside Northern Ireland, or they are taking jobs in Northern Ireland that are far below the level at which they could usefully be employed. I agree with you totally about the importance of an emphasis on education. Could I also respond to the point about the location of investment? One very interesting thing about the experience in the South is the extent to which business and inward investment has been prepared to invest all over the state. For example, from memory, something like 50% of projects last year were located away from the Dublin area. One of the most interesting inward investment projects I have seen for a long time was announced ten days ago in the South. A company in the huge Johnson and Johnson group will make stents for people who are challenged in a cardiac fashion, so to speak. That company will undertake development work and production, employing 460 people. Where is that investment going? Cashel. That investment will affect the whole area. Why should investment not go to Enniskillen? Why should it not go to Strabane, Ballymena, Coleraine, or wherever? Ms Gildernew: The difference is that there is a motorway to Cashel, which I pass frequently on the road to Cork. The existing roads infrastructure allows investment in Cork, Limerick and Galway. Liam Nellis presented an interesting slide on high performers and high earners, and another on educational attainment. They were damning. Border areas experienced the lowest levels of educational attainment. Overall, there were very few high earners in the North in contrast to the Twenty-six Counties. From that point of view, Cashel may be a more attractive prospect than Enniskillen will ever be. We do not have the roads infrastructure to get people that far west; that represents a disadvantage. How can rural areas compete and benefit from this increase? I fear that we will be left far behind and that a new economic wasteland will be created: Fermanagh and Tyrone. Sir George Quigley: Let us stuff Northern Ireland with inward investment proposals, and there will be no wastelands. Infrastructure ought to be very carefully proofed, to see where failure to do it would impair economic objectives. If the road system to Enniskillen is going to impair the ability to create opportunities in Fermanagh, it ought to be addressed. We cannot be content with simply saying that in 2020 or 2050, some parts of Northern Ireland are not going to attract investment because people are not adequately educated and the infrastructure is inadequate. That would be an unacceptable proposition. Inward investment will become a driver; without it there would never have been such investment in infrastructure and in second- and third-level education in the South. It is a tremendous driver for change in all areas. Mr Dallat: I taught for several years in the Republic, where there was no selection. Are we still living with prejudice against vocational education? Is that a factor? Are we still exporting our brightest people to the best academic institutions in Britain? How much is that affecting the needs of employers? What can a new Assembly do to break down that prejudice and address the huge problems it has created? Sir George Quigley: Your point about very bright people leaving is well made. I was a member of the Dearing Committee on higher education seven or eight years ago, and I argued passionately in the Northern Ireland chapter — which I got all my colleagues throughout the UK to support — that we needed far more higher education places in Northern Ireland. Absolutely nothing was done about it. It is so obvious a point that it scarcely bears consideration. However, far from doing that, for a long time the universities in Northern Ireland were the only ones in which numbers were capped. Mr Dallat: That is still the case. Sir George Quigley: So here we are. Whereas Scotland has the equivalent of two universities underpinned by a mass of students coming in from outside Scotland, we are exporting people. How can we credibly say that we want to build up a knowledge economy and a region that shines in world terms, when we have not been able to provide the higher education facilities that we need? Also, you are right that the primary level is critical. I do not advocate great schemes, but institution by institution, we must be able to measure progress on a five-year basis until we have no one emerging at age 11 with a reading age of seven and a numeracy age of seven or eight. It is appalling that that is happening; it means that whatever might happen at secondary level, those people are deprived of a future. Mr Dallat: In the short term I get the impression that industry has been saved to some extent by migrant labourers from eastern Europe. It has also come to my attention time and time again that the skills of those people are not matched to the needs of the employers. We heard some examples in previous evidence sessions. The most recent example was of a highly qualified engineer, with additional qualifications in transportation, working in a car breaker’s yard. How damaging is it when the mechanisms in place to assess people create that kind of situation? Sir George Quigley: We are all at the early stages of this. So far, immigration has been relatively low compared to the South, where 8% of the workforce is now from overseas — which is incredible for a country that had net outward migration for years. We are only starting to find out how to use people properly. It has taken 2,000 years to find out how to use the indigenous population properly, so it may take a few more years to find out how to deal with those coming from outside. The Chairman (Mr Molloy): Gentlemen, we are running out of time, so I propose to take three short questions together from Alasdair McDonnell, Barry McElduff and Esmond Birnie. Dr McDonnell: Thank you very much, Sir George. I apologise for missing the first part of your presentation, but I certainly got the gist of what you said. You have already covered some of my points during the extensive questions that you have already answered. For me, the economy ties back to creating employment and to education. How do we tackle underachievement in education in inner-city areas, particularly in Belfast? That is a major drag on the economy. How can we get a bigger slice of the island economy? Should the tax regime be fixed? Are there other options if that is not possible? Mr McElduff: My question concerns political stability and how it might impact on the economy. I invite the Industrial Task Force to offer an opinion on how the continuation of direct rule would be bad for the economy in the North. Dr Birnie: First, to what extent might the corporation tax proposal be vulnerable to the phenomenon of transfer pricing, which has happened in the Irish Republic? Further to that, might the corporation tax advantage be nullified in the future — or even the near future — through moves made with regard to the United States Internal Revenue Service? Secondly, does the Republic of Ireland experience of having a low corporation tax rate genuinely prove the point that it leads to higher R&D? The Southern Irish R&D rate is not notably high. Sir George Quigley: With regard to getting a larger share of the island economy: if we do not get corporation tax, we can nibble at the edges of it. We can try to do more to get companies North and South interacting with one another. InterTradeIreland is doing a very good job, not just in promoting trade relationships. After all, 27% of Northern Ireland’s exports now go to the Republic. That is the same percentage as goes to the whole of the rest of Europe. Much has been done to get the trade interactions going. Again, people in the pharmaceutical cluster in the South and those in the very minute cluster in the North, for example, can be encouraged to interact more with one another. Frankly, the big mover will be the freeing-up of investment flows. That would really open the door 90 degrees, whereas anything else would open it 5% or 10%. It would mean pegging away at more of the same, and that will include more of what InterTradeIreland is there to do. 11.15 am In order to tackle educational underachievement, the situation must be micromanaged. What made the eastern Pacific education system so good was that individual schools related to their communities. They understood that three partners were involved: the parents; the school; and the pupils. Northern Ireland must adopt that same mindset, which is that the school must add value to every single person who comes through its doors. Everybody here would agree that one factor that holds back performance is parents’ and teachers’ low expectations. Our mindset must be transformed. Schools in Northern Ireland that have done very well have adopted some interesting practices. There are schools in Belfast and in Derry that are among the top performers despite being situated in difficult social areas. Those schools do not have — or, according to one’s expectations, should not have — much external support, yet they are doing extremely well. They have adopted many innovative measures, including involving parents through having them take classes in the school and setting up after-school initiatives where kids can do their homework free from neighbourhood distractions. Therefore, we must micromanage rather than settle for the broad-brush approach that leaves it to the system to make things happen. I was asked whether direct rule is good or bad for the economy. Looking back over the past 30 years, which is beyond the memory of some of you, I can think of a number of people who were fully committed to Northern Ireland. Stan Orme was a radical political figure in many ways, but he was absolutely solid on the economy, as was Roy Mason. Both were prepared to do significant things for Northern Ireland, and both fought their corner with the Treasury in order to get special things done here. Those days are largely gone. Direct rule Ministers may be well intentioned and may be doing their best, but decisions will always be taken in line with priorities that are not necessarily Northern Ireland’s priorities. You people are steeped in the local situation; you can say what is right for this place’s future, and then single-mindedly go for it. That is my general answer to the question, so I hope that you will be sitting in the seats of power very soon. As Dr Birnie knows, transfer pricing is pretty strictly regulated internationally. If there were any question, for example, of wanting to adapt corporation tax to transactions between Great Britain and Northern Ireland or between companies, that can be readily done, and the accountants that one talks to say that there is not really an issue there. Moreover, people in the International Financial Services Centre in Dublin worried about companies putting up their brass plate, but doing nothing more than that. I think that means were found to counter that. Good, practical answers exist to all those questions. I was asked whether the situation between the Republic of Ireland and the United States Internal Revenue Service could change. What is great about the inward-investment process is that it is good for both the US and the Republic of Ireland. Shareholders in the United States are getting a very good deal. They make good profits by locating companies in the Republic of Ireland. If any attempt was made to change that, pretty powerful lobbies in the US would say: “No, of course the countries that we go to get benefit, but we get a lot of benefit as well.” One should not underestimate the power of the Irish lobby either in the US. People in Ireland will be very reluctant to see any change. I quoted a personal, confidential letter that I received on the US stance. I cannot reveal the identity of the writer, except to say that it was someone who would have been pretty sensitive to the considerations that Dr Birnie mentioned. As for research and development, it is very difficult to develop a regional system of innovation of the sort to which Dr Birnie alluded. All the experts say that developing such a system is a long, slow process. That is where we must almost jump a stage and latch on to what the big global companies can do on a massive scale. It is interesting that Prof Richard Harris’s report mentioned the importance of an inward investment policy that brought in the big players who, because of their economies of scale and scope, can do research and development on a massive scale. I hope that some of the research and development activity going on and the links being made to local academic institutions would rub off on the indigenous base. However, that could take years of effort. There are few examples worldwide of where it has been done successfully. The Chairman (Mr Molloy): Thank you, Gentlemen. I am sorry that we had to rush at the end of a very important contribution. Thank you for attending. We have your documentation. Perhaps you could send the subgroup any information that you have on examples of the co-operation about which Peter Weir asked. Sir George Quigley: Thank you very much, Mr Chairman, for the reception that you gave us. We will do our best on Mr Weir’s question, although I suspect that there may be little information on the issue. We will be breaking new ground to some extent, but why should we be afraid of that? The Chairman (Mr Molloy): You are very welcome, Gentlemen. I apologise for the overrun in the last session. I hope that we can keep the questions and the submissions in this session short. Mr Michael Kiddle (Northern Ireland Committee, Irish Congress of Trade Unions): The panel is John Corey from the Northern Ireland Public Service Alliance (NIPSA), who is also a member of the Northern Ireland Committee, Irish Congress of Trade Unions (NICICTU); Peter Bunting, who is the assistant general secretary of NICICTU, based in Northern Ireland; and I am Michael Kiddle, chairman of NICICTU for the next two years. Mr Peter Bunting (Northern Ireland Committee, Irish Congress of Trade Unions): I thank the subgroup for giving us this opportunity. It is important that trade unions have an input into the drafting of economic and social policy in Northern Ireland, specifically in an economic context. We are aware of the dysfunctional nature of Northern Ireland’s economy and its almost weekly exacerbation by the loss of jobs. Over the next year, about 1,500 jobs will haemorrhage from the Ministry of Defence, 500 from the Prudential Assurance Company Limited, from Visteon in west Belfast and from other companies — Teletech Europe in Duncairn Gardens looks to be under threat. That will lead to a huge loss of disposable income in Northern Ireland. That loss, allied to the increase in domestic rates, the high energy charges and the imposition of water charges, will have an adverse domino effect on the services sector. The economic outlook in Northern Ireland is gloomy. With that in mind, we set out to have a debate on the economy and have drafted a statement on the economy, ‘Not Old Wine in New Bottles’. In recent years, the same old theories and propositions have been advanced on how to cure the ills of the Northern Ireland economy. We have set out our position in this document. It is all predicated on our belief that it is imperative — and, I must emphasise, on an economic and social basis only — that the Assembly and the devolutionary process be instituted. That will become clear during the presentation. The trade union movement believes that the ills of our economy cannot be solved by direct rule. Direct rule is currently the Treasury’s main vehicle for recouping as much money as it gives to Northern Ireland in the subvention — for example, through the proposed water charges. Our propositions will not be implemented by direct rule; the best way forward is to engage in a devolutionary process, which offers democratic accountability on the economic and social aspirations and objectives. The document addresses a number of issues. The first is the argument that the public sector is too big. Our view on that is simple: the private sector is too small and the public sector is not too big. We primarily believe that the crucial missing link in Northern Ireland is the absence of a wealth- and job-creating sector, an enterprise sector and an innovation sector. There is also a lack of enterprise, and, importantly, the only way to overcome that is by mobilising the human, social, economic and political will. That can only occur with devolution, the absence of which will not create any momentum or dynamic in the economy. Mr John Corey (Northern Ireland Committee, Irish Congress of Trade Unions): To return to the Committee’s terms of reference: the first task is to identify major impediments to the development of the economy. We very often hear that the size of the public sector is an impediment to the development of the economy. At best, it is presented as too large; at worst, it is presented as a drain on the private sector and damaging to the private sector’s interests. One argument is that the availability of jobs in the public sector acts as a disincentive to people seeking jobs in the private sector. The trade unions do not share that analysis. Our submission tackles some of the arguments, and I would like to address four points that I think the subgroup should particularly consider when producing its report. The argument about the size of the public sector in Northern Ireland is such a populist one that it must be addressed and tackled head on. My first point is that GDP comparisons are often made between Northern Ireland and the UK as a whole, and that Northern Ireland compares very unfavourably with the rest of the UK. However, we strongly argue that making such a comparison is not comparing like with like. Compare Northern Ireland to a similar region in the UK — if there is a region that exactly matches Northern Ireland — and one will find that the GDP figures are more comparable. However, other factors are difficult to measure in that, in comparison to the rest of the UK, the size of Northern Ireland’s public sector is also dictated by economies of scale. Northern Ireland must set up an infrastructure of public services, whereas a single region of the UK may not have to set up the same infrastructure — it may have access to services that are on the same land mass. Those comparisons are not valid and should not be used to attack the public sector in Northern Ireland. 11.30 am The second point concerns the number of public-sector jobs in Northern Ireland. Wildly varying statistics are given about those jobs compared to the private sector. The data that we have indicate that the Northern Ireland public sector accounts for 27·1% of employee jobs, compared to 21% in the UK. It could be said that the Northern Ireland figure is higher, but again, that would lead to regional comparisons and comparing like with like. The figure of 27·1% rises to 31·4% if you include reserved functions, such as security and UK central Government Departments. A figure of 60% is sometimes quoted for public-sector jobs in Northern Ireland. That is not a true figure. If every conceivable public-sector job is included, that figure is around 30%. However, the health and education sectors account for 70% of that 30% — those are frontline staff. No matter what argument is made about the size of the public sector, the number of staff in the health and education sectors will not fundamentally change, because the trend is to employ more staff to provide more priority services. It is therefore important that the data and their relevance are understood. We argue that public services should be staffed to meet the public needs, no more and no less. The third point, which is relevant to the Northern Ireland economy, is the trend advocated and pursued by direct rule Ministers and the Strategic Investment Board to shift jobs from public services to the private sector through private finance initiatives (PFI). Of the many instances of that, two current examples come to mind. First, Civil Service personnel work is being shifted to the private sector, with the loss of around 600 jobs. Secondly, the Civil Service accommodation estate is being shifted. Around 76 Government buildings are being shifted to the private sector, with the potential loss of 500 Civil Service jobs. Some have argued that that is part of the so-called rebalancing of the economy; others have argued that it is designed to incentivise the private sector in Northern Ireland. We fundamentally disagree with that: it is our considered view that PFI mechanisms do not ultimately mean better value for money for the taxpayer. However, in the context of the Northern Ireland economy, the use of PFI for public service infrastructure and delivery of the type that I have indicated is not in the interests of Northern Ireland business. The key bidders for those contracts are not indigenous companies. For example, the bidders for the Civil Service buildings include a company called Mapeley. That is a Bermuda-based company that has been criticised by the House of Commons Public Accounts Committee for having a similar contract with the Inland Revenue but obviously not paying tax in the UK on that contract. We are concerned about the process and programme of private finance initiatives in Northern Ireland. Not only do we disagree with PFI from the point of view of how public services should be delivered, it could be damaging to the Northern Ireland economy. It is important that that point is understood and dealt with. The fourth and last point I wish to make in relation to the economy concerns the Review of Public Administration (RPA). The Committee may not have considered that RPA is highly relevant to its considerations on the impediments to the economy or on how matters might progress. However, the relevance of RPA is that it will mean massive change in public service delivery and, potentially, the location of public service jobs across Northern Ireland. Our concern is that the trend will be to centralise jobs in the greater Belfast area as part of the outworking of RPA, and there is already evidence of that. For example, Departments — whatever number may exist, and Peter Hain expressed his views on that recently — are planning to locate in the central Belfast area or in the Stormont Estate. There is a clear statement of policy that two Departments, now based in Bangor, should be moved back to Belfast or to the Stormont Estate. There are major questions about where the policy on the dispersal of public service jobs across Northern Ireland now stands and where jobs will be located as RPA works its way through. Public service jobs have a big impact on local economies. For example, locating 500 public-service jobs in Omagh will impact on the local economy there. Removing them will also have a big impact. There is a major issue in relation to the economy of Northern Ireland flowing from the RPA, reinforcing the need, which we have already expressed, for a proper examination of the RPA process from the point of view of policies on dispersal and equality and its impact on the rural economy as regards the location of jobs. Those are the points that I want to emphasise on the relevance of public-sector issues and the importance of a debate on public sector versus private sector in relation to the economy. Mr Bunting: Following on from that, there is a lack of a manufacturing base in Northern Ireland. Traditional manufacturing industries have been haemorrhaging and in many cases have disappeared. Much play has been made, particularly by the Northern Ireland Business Alliance and many other commentators, on the issue of corporation tax and how we can best drive the Northern Ireland economy. Our view is based primarily on the fact that analysis, which shows that corporation tax has been the primary factor driving the Republic of Ireland’s economy, does not stand up to examination. When the Celtic tiger was born — in the embryonic sense — the corporation tax rate in the Republic of Ireland was 47%. Other than corporation tax, a range of contributing factors have been involved; and, by the way, corporation tax was only reduced over the past seven years when the economy in the Republic of Ireland was well-rooted and was driving forward. The pragmatic view is that such a reduction will not happen in the United Kingdom and Northern Ireland. The Treasury will not allow it to happen because of competition from Wales and the north-east of England, etc. It is a no-no. We advocate having particular criteria under which companies would be rewarded amounts that they would gain from reduced corporation tax in a grant-aided manner. When Northern Ireland advocates a devolutionary process once again, the Treasury will still control fiscal matters. However, the allocation of grants can be within the domain of the Northern Ireland Assembly. Our view is that grant aid should be equivalent to the difference between the corporation tax rates in the Republic of Ireland and Northern Ireland. It should be used as a reward to help companies with R&D or, where possible and where there is a concentration of SMEs, be targeted at the dynamic clustering and networking of suppliers, sub-suppliers, sales outlets, public agencies and cross-border networks. Eighty percent of economic activity in Northern Ireland is accounted for by SMEs. We are saying that that is where such rewards should be placed. They should be based on performance indicators. We believe also in the creation of a range of trade-association run business networks. Businesses would pay a fee to join a trade association in which it could share market intelligence and technology transfer and diffusion. Where possible, the Government would fund technology acquisition grants for SMEs. Only network-registered companies could avail of those Government grants, equivalent to taxes liable in excess of the 12·5% profits. One other criterion would be productivity. If a productivity indicator showed that a company was increasing its exports by a certain percentage, it would also be entitled to receive those grants. This is not just a scattergun approach. Not every company would receive a reduction in its corporation tax. There is no guarantee of results or that jobs and wealth could be created and reinvested. The argument for a blanket reduction in corporation tax is ill thought out and, for some of the reasons that I have given, has many flaws. Esmond Birnie mentioned transfer pricing and the EU approach to harmonisation of taxation. It is better that those decisions come from our democratically accountable Assembly and that grants are based on proper criteria. In public procurement, £16 billion is going to be invested in Northern Ireland. We are of the opinion that within the terms of the relevant EU legislation, tackling social disadvantage and addressing the problem of economic inactivity could be built into that procurement programme. For example, in the Titanic Quarter, if “Bunting Construction Company” wanted to tender for a job requiring 200 craft workers, I would be obliged to take on 50 apprentices from economically disadvantaged communities. The European Union’s Recital 33, which regulates public procurement, outlines a range of measures to tackle disadvantage and long-term unemployment through, for example, training young people. We advocate that within that public procurement policy — which spends public money, after all — the tendering system should have measures built in to tackle disadvantage and to help those who have fallen through the net of the education system. Currently, construction is the only identifiable growth industry in Northern Ireland. In our public procurement subcommittee, we work under the aegis of the Secretary of State and the Central Procurement Directorate. We are also working with the Secretary of State to regulate the construction industry, which is riddled with the “bogus self-employed”. We hope that new revenue regulations to be introduced next year will eliminate some of that. It is also imperative that the apprenticeship system is regulated and will no longer be associated with Jobskills, through which people were paid £40 a week and had no employment rights because they had no employers. In reality, their employer was the Department for Employment and Learning. Michael may comment on that later, but the construction sector must be regulated in such way creates opportunities to improve skills and to learn in the workplace. Learning in the workplace and lifelong learning are crucial to the improvement of skills in the population, particularly among the 47% who left the education system without any qualifications. Lifelong learning, as you aware, is a European phenomenon and was part of the Lisbon Agreement. The British Government are pumping millions of pounds into it. Our difficulty in Northern Ireland is that many employers are reluctant to engage with us on this scheme, whereby their training costs are paid for by the British Government and through the aegis of the trade unions and workplace learning. We have had huge difficulty, and I will give you the example of the Victoria Square site. We could not get agreement to run a workplace-learning project there, even though the contractor employs over 200 or 300 people in construction jobs, particularly as general operatives. We must improve the skills of a huge range of people in Northern Ireland, and we must concentrate resources on sciences and technology in higher education. We should have enough accountants and solicitors by now, and I mean no disrespect to those professions. Sorry, Peter, I am not talking about you. [Laughter.] Mr Ford: He is a barrister. Mr Bunting: Worse again. I do not want to compare Northern Ireland too much with the Republic of Ireland, but we have a land border and we must deal with that. A pharmaceutical company in Clonmel in County Tipperary announced recently that it was creating 460 jobs. For any of you who know Clonmel, it is quite a small town far out and decentralised from many areas. The crucial factor about those 460 jobs is that the company hired 80 people with PhDs to conduct research and development. If, out of a workforce of 460, that company is hiring 80 people with PhDs, there is no danger of it moving to east Asia any time soon. We need that type of inward investment in Northern Ireland. 11.45 am Northern Ireland has had a brain drain, particularly from one side of the community, and that has caused loads of problems. We need to build all-island economic synergies or cross-border economic synergies — whichever description you choose. Transport 21 in the Republic of Ireland is building up the infrastructure on the west coast. We believe that that initiative should be driven forward and that Northern Ireland should avail of it up through Enniskillen, Strabane and Omagh, and as far as Derry/Londonderry. In that context, we would also decentralise our economy towards the western part of Northern Ireland, which, with good infrastructure, would, hopefully, create some degree of inward investment in that area. We should avail of that cross-border dynamic. Northern Ireland must have cross-border economic activity, and we must remove the blockages that inhibit a lot of cross-border activity. I must emphasise that that is an economic and social view and not a constitutional position. We can say that InterTradeIreland is wonderful, etc, but the barriers to that cross-border activity are centred on the lack of labour mobility, transport infrastructure and mutual recognition of skills and accreditations between the Republic and Northern Ireland. As well as that, the system of banking and bank charges is prohibitive. A transaction from the Republic to a Northern Ireland bank incurs quite extensive charges. Those issues must be addressed. Last, but not least, I return to our argument that devolution is imperative. To drive a situation similar to that in the Republic of Ireland, we need to build — I hesitate to use the word partnership, because it is much devalued — a social compact between employers, politicians, trade unions and the community and voluntary sector. The compact does not have to take all from the Republic of Ireland, but should take lessons on the social and economic way forward. Northern Ireland needs to take that approach rather than maintain the adversarial conditions in which a lot of its dealings have taken place, particularly on the industrial front and between the businesses, trade unions and employees. Northern Ireland must get away from the low-pay, low-skilled industry that it has attracted, which really is another failure. Through the Freedom of Information Act 2000, we requested documentation from the four revenue compliance officers in Northern Ireland whose job it is to ensure that employers conform to the minimum wage. On 65% of visits, they discovered that employers were not paying the minimum wage. In Northern Ireland, there is huge exploitation of workers. If that were rolled out to all the industries and areas that the revenue compliance officers could have visited, it would show a shocking picture of horrendous exploitation. NICICTU has huge anecdotal evidence of migrant workers being exploited. Migrant workers are very welcome wherever they work in Northern Ireland. However, there is further anecdotal evidence of the displacement of indigenous workers by migrant workers, with one case involving 50 workers in a factory in Monkstown that makes either radiators or windows. In that sense, the influx of migrant workers also creates a recipe for unrest, social upheaval and racism, so we must be careful. Both the previous Stormont Government and the Assembly had the autonomy to introduce and implement specific employment rights. That is another reason why NICICTU advocates the democratic accountability that is part of devolution. The Chairman (Mr Molloy): Will you take a couple of questions, Peter, because we are running out of time? Mr Bunting: My last point is the lack of emphasis on the social economy; I have already dealt with vocational training. Mr Ford: Peter, you said that you did not believe that the lower rate of corporation tax in the Republic was the primary factor in its economic success. You emphasised support for research and development rather than a blanket reduction in corporation tax. If the Treasury agreed to reduce the rate of corporation tax in Northern Ireland to 12 5%, would NICICTU oppose that in principle or is its opposition based on its pragmatic consideration that it would be easier to attain support for research and development? Mr Bunting: I would oppose it in principle, because, in one sense, it is public money and because of transfer pricing. Money allocated to companies and employers must be results-based: it must be given on the premise that companies will be up skilled, results will improve and wealth and job creation will emanate from the award of such grants. However, David, if the Treasury succumbs to that argument, give me smelling salts and pick me up off the floor. Mr Ford: My second point relates to part of John Corey’s presentation. I accept the argument that in Northern Ireland, the public sector is not too big; rather, the private sector is too small. However, we must consider our history — and I speak as a former employee of the public sector. As a former NIPSA member, I now find myself sitting beside a doctor, looking across at a teacher, while a barrister has just left the room. How do we deal with the perception that, for many people, entering an established profession is the height of attainment? In trying to increase innovation and enterprise in Northern Ireland, how do we avoid people thinking that the best employment routes are into established professions rather than going into business to build the economy? Your general point seemed to be that there should be less dependence on FDI and more on indigenous growth. Mr Corey: I am not sure how to persuade people that the best careers lie outside the professions. Naturally, parents look towards the traditional professions, so they may need more persuasion than young people. I am not convinced that those who enter the professions necessarily enter public services. Many professions span both the public and private sectors. Peter Bunting’s more relevant point is that it seems reasonable to promote particular sectors in education, such as science, engineering and technology. In the past, that would have been done in a more structured way when Government would say that to encourage people to enter the professions, they wished to target resources at university education. Therefore, the economy is tied back into education. I am not sure whether that fully answers your question. It is a difficult issue. I want to return to the question on corporation tax. From a trade union point of view, our primary interest is to secure sustainable, highly skilled, well-paid employment, which would lead to a good economy. We are not convinced that reducing corporation tax in Northern Ireland to the levels of the Irish Republic would automatically improve the economy. In fact, the evidence points to the contrary. If the grant route, rather than the corporation tax route, is used to incentivise investment in companies, that will be in the control of a local devolved administration. If the corporation tax route is chosen, that will be in the control of the Treasury. Northern Ireland would have no control because the Treasury could change its mind. The corporation tax issue requires further examination. The social partnership element of the Irish Republic’s economy, which dates back to 1987, plays a significant role that country’s economic growth. Dr McDonnell: Thank you for your stimulating presentation. How can we tie the economy to the creation of high-paid jobs? How will we tie that into educational underachievement? Although 50% of our young people go to university and are successful, I am worried about the 20% to 25% who fall off the ledge. That is a waste to the economy and to everything that we want to achieve. Mr Bunting: You are quite right. Recently, NICICTU placed an advertisement for a basic administrative position; of the10 to 12 people who applied for the job, five had degrees. We have an educated population, but how do we attract investment? Grants can be given to research and development. The difference between 12·5% corporation tax and whatever profits are made might well be above that. There must be fiscal incentives to attract inward investment and drive the Northern Ireland economy. That must include job creation and wealth creation. We must change the curricula in many of our further and higher education colleges to meet the needs of particular industries, such as biomedical sciences. For example, the Republic of Ireland had “regional colleges”, most of which are now “institutes of technology”. In the Waterford and east Cork area, there is a cluster of pharmaceutical and biomedical companies. Waterford Institute of Technology changed its curricula, particularly in the sciences and technology, to meet the needs and demands of those companies. We may have many highly educated people in Northern Ireland, but are they educated in the right disciplines? There must be synergy between what we want, what type of industries can locate here and whether we have the educated labour market that will feed into that and produce results, particularly in R&D, for the companies that we must attract to Northern Ireland. 12.00 noon Mr Dallat: I was interested in your revelation that you are in discussions about Government procurement policies. I wonder how damaging the effect of software is, particularly when contracts worth very large amounts have displaced SMEs, particularly in rural areas. I understand a personal identification number (PIN) is required to access a website to see when those contracts start. How damaging is that to employees’ rights? When employees lose jobs, they are forced to come back as subcontractors, working for less money under less favourable conditions. What should a new Assembly do to change that? Those measures were sold on the premise of economies of scale. The public were told that they would get a better service at a lower price. I have received evidence that that has been a complete shambles. Mr Kiddle: I take it that you are talking about the construction industry? Mr Dallat: Yes, and the Roads Service. Mr Kiddle: The construction industry in Northern Ireland is fragmented, in that 60% to 70% of people employed in that industry are what we term “bogus self-employed”. Although apprenticeships are being taken up, they are administered through the Department for Employment and Learning’s Jobskills scheme. Apprentices have absolutely no connection with the company for which they are work. Basically, they go to a technical college, which places them with a company that receives grant aid until the apprentice reaches National Vocational Qualification stage 2 (NVQ2), which takes roughly 18 months. During that time, apprentices are used to make tea and are not taught the necessary skills. When they go to the technical college for the day or two on which they are supposed to, often the teacher — whether of joinery, bricklaying, plastering etc — is not there, so a teacher from another department, such as English or history comes and says: “Right, boys and girls, just do what you normally do. I am going to do some marking.” They are not being trained. Once apprentices reach NVQ2, they are thrown on to the scrap heap because the employer, under that scheme, from NVQ2 to NVQ3, is supposed to employ them under proper terms and conditions until they finish. If members want evidence of that, I can provide as much as they want: we get about eight or nine calls a week from irate parents, saying exactly that. The employer then goes to the technical college and picks up another couple of lads. It is mainly boys who take apprenticeships in construction. We have not yet managed to bring young ladies into the industry because of its nature. There is a raft of things that are wrong with the construction industry. We have proposed a new apprenticeship scheme, which would revert to the old four-year apprenticeship. The first year would be spent at a technical college, where apprentices would learn all about health and safety and the essential skills that are lacking in many young people who leave schools today. They also undertake job sampling, involving jobs such as plastering, bricklaying and all the traditional trades. That enables them to pick a trade. After that initial year, a company takes them on from day one for a three-years apprenticeship under a proper contract of employment, which is important because it gives them a sense of belonging and employment rights. That means that they cannot be exploited by an employer and thrown on to the scrap heap halfway through a course. That is very important. Another area that we are considering is whether the year that apprentices currently complete in technical colleges could be done during a young person’s final year at school. Coming up to pupils’ final years, teachers know who will stay to do GCSEs or A levels and move on to the next academic year and who will not. Creating the scheme that I have mentioned would give those people who lack academic skills a vocational area to enter. We are also discussing social inclusion and, particularly, migrant workers. We have already given evidence to the Secretary of State about the exploitation of migrant workers by construction companies in Northern Ireland, and we will continue to do so. Mr Bunting: To come back to what the Assembly could do, the wording of the conditions for awarding contracts is now more subjective. Article 53 of European Council Directive 2004/18/EC provides that public contracts should be awarded “to the tender most economically advantageous from the point of view of the contracting authority” as the determining factor, as opposed to the lowest price offer. If it were in charge of its own future, the Assembly could insist, lobby or decide to put small subcontractors in there as being economically advantageous to Northern Ireland. Mr Dallat: Thank you. That is very useful. Mr Corey: It is reasonable for public procurement policy in Northern Ireland to be tailored to the structure of the local economy and its enterprises. If there is a high preponderance of small businesses, the policy should enable those businesses to compete. I recall having that argument 10 years ago with the Northern Ireland Housing Executive (NIHE) over contracting out work, when NIHE was seeking to privatise its direct labour organisation. We argued that a mixed system must be maintained to allow small local businesses to compete for work. One thing that has changed with public procurement is that it has tended to go with what is perceived to be the lowest price and, therefore, the most economical option. The Chairman (Mr Molloy): We are again running out of time. Members should be concise. Ms Gildernew: As mentioned in your report, cleaning contracts in hospitals were subcontracted and then there was an outbreak of MRSA. It does not necessarily add value to do that; corners can be cut, and it failed in that scenario. Your presentation was very good. We have heard from many economists and capitalists, and it was important to hear your views on the social economy and our responsibility to ensure that there is employment near to where people live. Someone who has a four-hour daily commute from Belfast to Enniskillen has no time or quality of life. They cannot be at home to help their children with homework. We have a social responsibility to ensure that people can have jobs near their homes, including the west. I want to tease out your ideas about the economic corridor along the west coast of Ireland, which feeds into Enniskillen, Strabane and Derry. How much does the infrastructure discriminate against us? If you travel from Limerick through to Galway and on to Sligo, the roads infrastructure starts to fall below standard. Will we miss out on that economic corridor? Mr Bunting: You will certainly miss out on the economic corridor if the infrastructure in the west of Northern Ireland is not drastically improved. I noticed yesterday a few views about improving the road links between Derry, Strabane, and Omagh. Ten years ago, I often travelled from Dublin to Sligo to Donegal or Enniskillen, and I knew when I was in Northern Ireland because of the quality of the roads. That is no longer the case; quite the opposite. I am interested in building the transport infrastructure to attract investment into western — and the rest of — Northern Ireland. It is worth noting that locating everything in the centre of Dublin, for example, has had adverse implications for young people trying to get onto the property ladder and driven up prices in restaurant, bars and retail for everyone. I am also interested in other aspects of decentralisation. A feature of Northern Ireland policy is targeting social need (TSN). As well as the more obvious needs in Belfast, there are many small rural communities across Northern Ireland that are suffering huge disadvantage, such as lack of transport and lack of access to education, night schools and childcare — a whole range of services. Both targeting social need and building the infrastructure of the west of Northern Ireland are vital to attract foreign direct investment and to encourage growth of indigenous employment. We would also like to see Lisahally port developed. That is crucial to the development of the whole north-west area. Mr Beggs: You said earlier that you oppose a reduction in corporation tax, yet it has been pointed out to us that that is a very important measure for attracting new foreign direct investment. We accept that a reduction will be difficult to achieve, but do you accept that it could be the key tool in attracting new foreign direct investment, which would mean new jobs? If it were limited to that, would you still oppose it? With regard to R&D tax credit, it has been widely accepted that it would be a sensible policy. However, it is difficult to change the behavior of small firms, which predominate in Northern Ireland and which may be slow to take up that. You advocate R&D grants. That is a good idea, but how is it to be funded? From our limited block grant, more is now spent on health, education and infrastructure, so from which Departments would you take the moneys required for R&D grants? The Department of Enterprise, Trade and Investment’s budget has been cut. Mr Bunting: That is your responsibility, Roy, not mine. Mr Beggs: At present it is the responsibility of the direct rule Ministers. Mr Bunting: I accept that. Mr Beggs: So which Department would you take money from to provide these grants? Mr Bunting: Northern Ireland is a post-conflict society, and it has not really benefited in a sustainable manner from European funding. It is crucial that there be a peace dividend, and that has to come from the British Government to build up Northern Ireland. That is an economic argument. Either we can remain a drain on the Treasury, or we can become a net contributor to it. It is in Britain’s long-term interest to invest in the development of a sustainable economy. The economic argument is that you have to speculate to accumulate. I am not interested in where the money for the grants comes from, but it must not be taken from Joe Bloggs out there, who is suffering enough. I commented earlier on the lack of disposable income and on the haemorrhaging of the disposable income that is available, which will have an adverse effect on jobs in Northern Ireland, and particularly in the west. So I cannot answer your question, but I shall reflect on it and come back to you. In relation to corporation tax, we believe that businesses here need another source of funding that would encourage R&D, the clustering of SMEs, and the development of business networks, and it must be productivity- and performance-related. Many workers get paid by their results. We are saying to companies that it is not a case of throwing good money after bad, that it has to be performance-related. The proposal on corporation tax would apply to all companies. 12.15 pm We are saying that the benefits of the equivalent of corporation tax should be grant aid for companies that develop R&D and engage in business networks, particularly SMEs, in which market intelligence is shared. There should be benefits for technology transfers, for an increase in productivity or exports, or for job creation. Those should be rewarded with the equivalent of what we are all talking about — the difference between the corporation taxation levels here and in the Republic of Ireland. It is not simply a matter of throwing money away, because there is no guarantee that it will make a difference. If every company avails itself of corporation tax reductions, who can guarantee that it will make a difference to anyone but the individual who owns the company? How does it tackle social disadvantage, create employment or employ those who have gone through the education system for which we have all paid? It does not, unless we get results. Mr Beggs: My question was based on new foreign direct investment. Do you agree that a cocktail of policies may need to be developed to help a diverse range of companies? Mr Bunting: I want to make two quotations; I do not wish to keep reading. A tax wedge is significant, but there is no guarantee that a lower rate of corporation tax will lead to more jobs or to better quality jobs. There was a period in the Irish Republic when there was virtually jobless growth. In the period when employment grew substantially, tax reductions contributed to significant increases in real take-home pay. The tax wedge is the difference between what it costs an employer to employ someone and what that person takes home. The reduction in the tax wedge contributed to employment growth in the Republic of Ireland, especially for the lower-paid. According to the Republic’s National Competitiveness Council: “the low labour ‘tax wedge’ … now represents a competitive advantage for Ireland” through the PAYE system, the tax wedge and what that costs. The Organization for Economic Co-operation and Development stated: “It is clear from the literature review that the effects of taxes on economic performance are ambiguous in some areas, and unsettled and controversial in others.” Clearly there is a whole debate about whether corporation tax is really the panacea for all our ills. I doubt very much that it is. What do we need? We need a workforce educated in science and technology. Invest Northern Ireland’s strategy for 2006-08 says that it is about investment in wealth — it is about investment in wealth and investment in jobs. From our perspective, that wealth should create jobs. We are not alone in thinking that. There are two issues: one concerns where an investment goes — R&D creating sustainable employment is one example; and the other is that Northern Ireland’s infrastructure must ensure easy access and egress to and from the country, but particularly for exports. We have had a conversation with Mr Beggs about this before. Trying to avail ourselves of the Republic of Ireland’s success in cross-border economic activity — I use that term because I know that people are offended by “all-island” — is crucial to Northern Ireland. In the very capitalist world in which we all live, I have never known a situation in which capital is not chasing capital. Capitalism’s very nature is for capital to chase capital. Sir George Quigley said earlier that only 7% of our exports are to the Republic of Ireland. That is absolute madness. We must remove the blockages to cross-border activity, such as labour mobility, banking charges and mutual recognition of accreditations, in order to achieve a flow back and forward. The Chairman (Mr Molloy): We could keep going. Mr Bunting: Yes, we could talk all day. Mr McElduff: Most witnesses have told us that it is in our best economic interests for the political institutions to be restored. I ask ICTU to comment on that view. Mr Bunting: I wish to emphasise that NICICTU makes autonomous decisions in Northern Ireland on matters that affect its policy, and is not impacted on by those decisions made in the Republic of Ireland. Trade union policy is to support the Good Friday Agreement. We believe that the Assembly is crucial to the welfare of the people of Northern Ireland, irrespective of their political or religious affiliation. The fact that the disadvantaged face a domestic increase in rates, the haemorrhaging of jobs, the imposition of water charges, the privatisation of public services and the loss of our manufacturing industry is not all your fault; it is the fault of the global economy. The only way to rectify it — and I come back to the fiscal versus grant-aided argument as well — is by getting our Assembly back up and working on behalf of the people of Northern Ireland. We say that purely from an economic and social standpoint. The Chairman (Mr Molloy): That brings NICICTU’s evidence to a successful conclusion. Thank you very much for your presentation and for answering questions. I am sorry that time has beaten us. Mr Bunting: Thank you, Mr Chairman, for the invitation. ‘Not Old Wine in New Bottles’ is quite a broad canvas, but we are working on several streams that contribute to it. We hope that as it goes forward, as the new phraseology has it, we will send you copies of the more developed strategies in it. The Chairman (Mr Molloy): We keep returning to the subgroup’s terms of reference. Sometimes, we drift into all sorts of variations on its themes. Mr McNarry: Barry McElduff does that. He keeps drifting into discussions on the institutions. There is another Committee for that, Mr Chairman. The Chairman (Mr Molloy): I know, but he is not on it. Dr McDonnell: Barry is only learning; he is only new here. Ms Gildernew: Please do not patronise Barry McElduff when he is not here to defend himself. [Laughter.] Dr McDonnell: One of the reasons that there are economic problems in Fermanagh and Tyrone is that — [Laughter.] The Chairman (Mr Molloy): You may not want this recorded. Mr Weir: It is like one of those “Complete the following in not more than 10 words” sentences. The Committee Clerk: You are still being recorded for Hansard purposes. Mr McNarry: Somebody made a comment about your hairstyle, and that is in the Hansard report. Mr Weir: I cannot see Hansard actually recording this. The Chairman (Mr Molloy): Gentlemen, you are very welcome. Thank you for coming along today. The subgroup is trying to condense as much as possible into the time available. There will be another presentation after yours, and I ask members to be concise with their questions. Would you like to open with a short presentation? Mr Will Haire (Department of Education): Thank you very much. I hope that the subgroup has received our paper. We welcome this opportunity because we believe that the education sector can make a very important contribution to the subgroup’s agenda and to economic development. Former US President Bill Clinton recently emphasised that in a knowledge-based economy, what you earn is based on what you learn. I suppose that that is where the key aspect of our thinking comes from. There are many challenges for education. We must make sure that we make the maximum contribution, providing a base for skills, including numeracy and literacy, and interpersonal skills in schools by how we play our role. Our paper sets out the four main questions that challenge us. First, is the overall performance of the school system sufficiently strong for the needs of the economy? Secondly, are our standards of literacy and numeracy, in particular, improving at the appropriate pace? Thirdly, does the curriculum give sufficient emphasis to the needs of the economy? Finally, and related to that obviously, is the provision for careers, employability and enterprise sufficiently effective? Those are the four areas in which we are trying to provide a lead at the moment. I would like to quickly run though some of the themes. Truly, there are great strengths in many aspects of the Northern Ireland education system. We have a higher percentage of young people achieving two As at GCSE level than England. We have had a drop in the number of pupils leaving school without any qualifications. However, we cannot be complacent about our position. We are seeing England improving faster in some ways and moving closer to us. If you take the whole gamut of GCSEs, England is ahead of us because of our long tail. Another major issue for us is that there are 20 secondary schools in which 20% of pupils, or fewer, get five As at GCSE level. Hence, a lot of the provisions in the Education (Northern Ireland) Order 2006 are trying to address those issues and include a revised curriculum and entitlement framework, and new arrangements for admission to the post-primary sector. A major issue that the Department is pushing ahead on is school improvement. Northern Ireland stands up well internationally on numeracy and literacy skills. We are in the upper part of the Organization for Economic Co-operation and Development studies, which is encouraging. However, once again, we are not improving as fast as we would like, and there are many schools in which we have major problems in numeracy and literacy and where we are not seeing that improvement. Numeracy and literacy are the bases for all skills. We are not getting that done, and it is key. Adult literacy and numeracy problems come from that, and it is a major challenge. 12.30 pm I have a strong feeling that the curriculum that was introduced in 1989-90 pushed us towards focusing on an academic style of education. That fits in with the fact that 50% of young people go on to universities, as our Department for Employment and Learning (DEL) colleagues will tell you. That statistic is very powerful in some ways, but we are perhaps pushing people too far into an academic route. We are concerned that the more professional and technical areas have perhaps lost out, and that some of the skill shortages in areas such as information and communication technology (ICT), construction and engineering may have resulted from the curriculum’s academic focus. We are seeing some radical shifts. The 2006 Order is obviously shifting the curriculum, but we have already lightened the curriculum for 14- to 16-year-olds. DEL and the Department of Education have been working on the vocational enhancement programme, which will create better connections between further education (FE), training and schools. We will use that and other recent packages to establish more effective connections between schools’ pre-apprenticeship work and training and FE. There are encouraging signs from that. There are also encouraging signs that grammar schools are teaching more vocational subjects. The “Learning for Life and Work” strand of the new curriculum is being promoted. The new curriculum entitlement framework means that everyone has access to more vocational courses. It also means that there has obviously been a big investment in ICT. Education for employability is an element of the “Learning for Life and Work” strand, and we are focusing on secondary-level pupils to help them prepare and gain the skills and qualities that they need for their careers. Therefore, a stronger emphasis on career planning has been developed in the curriculum. The Departments are working together to radically review careers education, which has not been good enough. We are also working on establishing better links between enterprise and business. There are already schemes on youth enterprise and connecting with business. The Departments are also working on the certificate in business enterprise so that young people are prepared for work in the business world. I hope that I have given you a quick overview. Those four areas are key to the process. The Chairman (Mr Molloy): I ask members to keep strictly to asking questions. Mr McNarry: To paraphrase the third paragraph of the Department’s submission, you say that, given the extent of the economic problems and changes that were alluded to, the education system must be aware of the importance of its contribution, and so on. The submission then lists the key areas in the future of the economy where schools have a major role to play. For Mr Haire’s benefit, the evidence given so far, particularly from the business and industrial sectors, has clearly shown that they attach importance to education. However, marked in that evidence is decreasing vocational attainment. That remains at a hardy level, which poses the question of tackling underachievement. As permanent secretary, will you assure the subgroup that the reforms being introduced by your Department will satisfactorily address the concerns of today’s captains of industry about the need for vocational skills? Will those reforms address the terms of reference of this subgroup, one of which is to discuss impediments to the development of the economy? I ask because I would not like this subgroup, in light of events that are taking place in education, to suggest that educational reforms could cause a potential impediment to the development of our economy. Mr Haire: It is important to see our reforms as a basket of reforms. Much of the debate has focused on particular aspects of those reforms. The key elements are to have a wider curriculum, to ensure that everyone has access to that curriculum and to ensure maximum quality throughout the system. The 2006 Order is designed to produce a new curriculum across the education process and to create greater flexibility so that people can access a wider range of the courses that business wants. However, it is also about helping young people and their parents choose the appropriate courses at a later stage. All the international evidence indicates that, by the time children reach the age of about 14, business wants them to start focusing on those areas. Up to that stage, the curriculum should be kept broad. That is what the 2006 Order is about. The key element in the process, which has not been debated in Northern Ireland, is that we must empower our schools and focus on quality educational outcomes. We must examine those outcomes and focus our debate more directly, whatever our structural issues. People can access a wider range of the courses that businesses ask for. However, it is also a matter of helping young people — and their parents — to choose the appropriate courses at a later age. All the international evidence indicates that students should start to focus on those areas from the age of 14, and that the curriculum should be kept broad until then. That is what the Education (Northern Ireland) Order 2006 is about. The key element in the whole process, which has not been debated in Northern Ireland, is to empower our schools and to focus on quality educational outcomes. Those outcomes and outputs must be the focus of our debate, much more so than they have been to date. That is the key, regardless of the structural issues. I assure members that these policies are key, and pushing this forward is key to meeting the needs of business. In discussions with the Department, the business world has always welcomed the process being broadened in that way. Mr McNarry: I will not ask the permanent secretary for a response to my question now — unless he can give it — but it would be most helpful if he could respond in writing as quickly as possible. He mentioned contact with business. What education and skills has the business world asked for? It would be most helpful to find out what the business world has asked of the Department and what the Department’s response has been. Mr Haire: I am happy to do that. Often the business world looks for literacy, numeracy and interpersonal skills. Perhaps the question would be better answered by a joint response from my Department and DEL. Mr Weir: Many of us have grave concerns about the headline issues involving educational changes, which some feel will have detrimental educational and economic impacts. Mr Haire, I welcome you to the Committee. I am sure that you are glad that the subgroup’s remit does not include cuts to special needs education, school closures or the future of the South Eastern Education and Library Board. I will focus on a couple of detailed points. As regards performance indicators, much evidence has been gathered on low levels of qualifications. Mr Haire, I would like you to come back with more information. You quoted a few performance indicator statistics. For the subgroup to make a judgement, particularly on trends in performance indicators, it would be useful if you could provide figures on high-level qualifications and on the percentages of people who leave school without any qualifications. The subgroup could consider the annual headline figures for the past 20 years, and the comparative figures for the rest of the UK. If the subgroup is to make recommendations, its research must be academically sound. It must not leave itself open to criticism. Secondly, although universities fall in DEL’s remit, DE works closely with DEL. School-leavers in Northern Ireland still have relatively high achievement levels. Are you concerned that limited places in higher and further education here mean that Northern Ireland simply exports a large percentage of its best people, which weakens opportunities and employment capability? Mr Haire: I would be delighted to give the subgroup a range of statistics. We kept our paper short and did not include too many figures, but I can give you a raft of them. I am familiar with DEL, as I left it only six months ago. That Department produced a detailed paper about a year ago that considered the implications of the flow of students leaving Northern Ireland. Dr Aideen McGinley will be able to give the subgroup a copy of that paper. It is a complex issue. If more places are made available, will more students stay? Why do students leave? The paper attempts to flesh out those questions, and subsequent research will set out the pros and cons of the issue. It is an interesting question. There is no doubt that the loss of talented people from the region is a major issue. The question is: are we losing those talented people because the jobs are not here, or because the right skills are not being encouraged? How do we turn that back? Consider the north-east of England. How many parts of England have lost jobs? The Republic lost many people for a long time. Working out how best to use higher education is very difficult. Pro rata, Northern Ireland produces twice as many doctors than any other region of the UK. That is a wonderful thing to do, but — Ms Gildernew: Is it a case of quantity over quality? [Laughter.] Dr McDonnell: Doctors are very good people. Mr McNarry: It is a pity you stayed. [Laughter.] Mr Haire: Our economy has focused on the public sector and the professions, so our education system has been somewhat skewed. Parents assume that those are safe jobs. If Northern Ireland is to generate wealth, how can that message be got across? That is why I emphasised the need to do a lot of work with industry and business — and parents — on the economic choices that will be available when the public sector gets smaller. Those are important issues. Mr Weir: There are two issues in relation to further and higher education. First, are those sectors sufficiently focused on wealth generation? Secondly, George Quigley referred to an issue that has been rumbling around for years. About ten years ago, when he was a member of the Dearing committee, it was estimated that around 40% of those students who went on to third-level education left Northern Ireland, and, of that percentage, 40% indicated that they would have stayed had there been places available. The fact that there is a cap on numbers in Northern Ireland highlights not only the skills mix that is required to move from university into employment, but the sheer lack of availability of places. Do you have any views on that? Dr Robson Davison (Department of Education): Again, this is outside the Department of Education’s remit, but drawing on my DEL work, the issue boils down to how many of those who leave Northern Ireland are reluctant leavers at the age of 18, and how many choose to leave. The work that Will refers to in DEL would suggest that it is a much smaller proportion than has been advanced in some of the arguments over the years. The percentage of leavers has been going down reasonably steadily. It is still between 25% and 28% of the annual cohort of higher education students. That amounts to there being about 3,500 or 4,000 students a year who leave for higher education in the Republic or in England, Scotland or Wales. It is a question of how many go through choice, and how many go because they cannot get their first-choice place at a local university. That is the core of the issue, and there are different views on the exact proportions. Mr Haire: Remember also that we are coming into the stage in tertiary education of dealing with the problems that we face in primary schools. In the near future, fewer 17 and 18 year olds will enter the system. Before more investment is targeted at universities, that decline must be considered. Ms Gildernew: There are two areas that I would like to cover. I will not refer to the science and technology curriculum, as we have already dealt with it. However, we must focus on primary schools and generating interest at a young age. The subgroup has received some very interesting presentations. John Simpson was here on Tuesday morning and talked about a situation in primary schools, specifically children of five, six or seven years of age whose: “behavioural patterns are no longer appropriate for an educational environment.” He was referring to the youngest children in the education system who are not able to learn and grow there. That is a product of dysfunctional communities. Are measures being taken to support parents and, in order to empower schools, to create more co-operation between parents and schools? Morale in schools is very low. 12.45 pm I am 36. If I was punished at primary school and told my parents, I was punished again. If children are punished in schools now, their parents want to know why they have been chastised. There has been a cultural shift. What is being done to ensure that children are receptive to learning? Last week, InterTradeIreland made a presentation to the subgroup, and it would be worthwhile for you to read it. The presentation said that skills in border areas are the lowest and that educational attainment is lower than elsewhere in Northern Ireland. It said also that, on an island-wide basis, there are far fewer professionals and high earners in the North. The lack of skills in border areas — North and South — must be addressed. The border has been an impediment to attaining skills and being able to make a difference in the value-added economy. Dr Davison: I am surprised at that data. The Noble indicators for educational attainment suggest that the problem is much more urban than rural. There are major difficulties in rural areas, but it appears to be more of an urban problem. Mr Haire: We will consider that issue. Economic activity was mentioned also, where people with skills move away because they are looking for jobs that are not available here. To go back to Ms Gildernew’s first issue, there are big challenges in early years education. Evidence shows that investment in early years is a key aspect. From November, the Department will take over responsibility for early years learning. Previously, it was split between the Department of Health, Social Services and Public Safety and the Department of Education. We invested heavily in nursery and pre-school provision, and indications are that we have met all parental requests for that. About 90% of parents want to take up pre-school places for three year olds onwards. To ensure the best support for pre-school children, the Department’s job is to consider the whole process and the organisations that are involved. The second issue is the enriched curriculum process, the foundation stage, or the stage for P1 and P2 children. Children in Northern Ireland start school at a much younger age than anywhere else in Europe. All the evidence shows that children — especially boys — need a lot of work and training in social skills before they can move on to learning skills. The Department is freeing up that stage and putting in more classroom assistant support to try to help. With regard to formal reading, in the past, four year olds were sat down and given a book, but many children are not ready to do that now. However, there are others who are ready, and there could be more flexibility. The third aspect is extended schooling, which is very much about trying to give schools the ability to have breakfast clubs, after-school clubs and parent clubs to try to help with the school/parent/family breakdown. It is vital that parents are seen as educators and part of the education process. I have visited schools and talked to some parents groups. The parents said that their groups were great, as they had been terrified about coming into the schools, and the parent clubs had helped to break down that fear. It is absolutely vital, and the Department is moving on those areas. It is a challenge. Social issues are affecting schools now, and the schools must address that. New teachers especially must be made aware of the social work skills involved and understand that those skills are much more relevant now than in the more formally structured society of the past. Mr Neeson: Given that there are about 50,000 spare school places in Northern Ireland, how will the Department encourage a more integrated system of education? I am not talking about building new schools, but about sharing resources. Dr Davison was in Carrickfergus recently, where an A-level pilot scheme is due to start. Such a scheme has been successful in Ballycastle. Dr Michael Maguire from the Northern Ireland Business Alliance put forward the scenario of developing responsive education to meet the needs of the developing economy. What is the Department doing about that? Mr Haire: Sir George Bain is conducting a strategic review of education, one aspect of which is to assist the Department. There has not been an effective planning process for schools; the process has been demand-led. The Department has not considered that issue with particular regard to shifting demographics: the impact of a nine-year decline in pupil numbers has not been thought through. Tough and complex decisions must be taken. It is also difficult to decide what is the best level or size of school to produce good quality education, taking into account that the needs of rural and urban areas will differ. Sir George Bain is helping the Department to examine the entire planning process. He is offering various views on that and is considering the best use of sharing. The figure of 50,000 spare school places sounds high, but there must always be some excess capacity in the system because people move around. However, the Department recognises that not only will that figure increase unless the issue is tackled, but that Northern Ireland does not have the right form of school estate to deal with the curriculum and the needs of young people. Various models must be considered to deal with that process. In the past couple of years, both DE and DEL have consciously gone out of their way to build a dialogue with business on the question of responsive education. DEL is setting up sector skills councils that relate to different business areas. Arising from that, we are considering pre-apprenticeships for young people from the age of 14 who might be interested in an apprenticeship or in business. Apprenticeships could be offered in a much wider range of jobs — for example, in financial services — and not only in the classic, more traditional skills. A benefit of that is that it helps people to decide where they want to focus their careers. A big problem with many of the DEL schemes was that they were attended by 16 year-olds who did not know what they wanted. They bounced around trying out various options and were unsettled. You really want them to try to focus earlier, and the Department of Education is working with DEL on that. Dr Davison: Two dimensions of the revised curriculum provide the answer to Mr Neeson’s question. It allows significant flexibility, unlike the 1988-89 curriculum, which was very constraining. For pupils over the age of 14, schools, teachers and principals now have much more freedom, within the revised curriculum framework, to respond to what is happening in their locality and to the needs of their particular district or county. Mr Neeson is correct to say that I was in Carrick, and I found what those in Ballycastle had to say most illuminating. The new curriculum will promote a much higher degree of collaboration in a system that previously strongly encouraged competition. The opportunity for collaboration is being opened up, and, interestingly, in some areas, people are grabbing that opportunity ahead of the actual legislative requirements to do so. The head teachers in Carrick have gone a long way towards setting up a structure that will enable them to look much more creatively at what should be done for 14 to 19 year olds. That model is emerging in other places and it will gather pace over time. Mr Beggs: Your submission contains an interesting statistic: in Northern Ireland, 1% fewer pupils leave school with no qualifications than in England. How can you be sure that the introduction of the comprehensive system will not remove that advantage and create more underachievement? How will you prevent that? My second question concerns the slow pace of change in education to reflect the needs of the economy — and I dare say that that question applies to the Department for Employment and Learning also. I remember being consulted on Curriculum 2000, and I highlighted the importance of vocational education meeting the needs of industry. Why has it taken six years to progress that issue? The pace is ridiculously slow. Your submission refers to a review of careers guidance, with a view to publishing a strategy for an all-age independent careers guidance service. Mr Dallat and I were members of the Committee for Employment and Learning, which identified this issue in 2001-02. Four years later, the Department is still only creating policies. Do you not accept that an independent careers guidance service is more likely to reflect the needs of the local economy? When academics give careers guidance advice, there is a danger that they could promote their academic preferences. Mr Haire: You will want to raise some of those issues with the Department for Employment and Learning as well. Five per cent of young people leave school with no qualifications and that is 5% too many. You asked about the “comprehensive system”, as you described it. The Department of Education’s focus must be on more than structural issues. We must ensure that our education system gives everyone basic, useful and relevant qualifications. We must ensure also that we have a wider curriculum. The narrowness of our education structure has not met the needs of the 5% of young people who leave school with no qualifications. We need a wider range of courses and processes, and we are determined to achieve that. In relation to Curriculum 2000, my understanding is that there was a delay on Key Stage 3 because teachers were unhappy and had concerns about certain aspects. It went back for further consultation — it was very important that it was consulted on fully. That is where the delay came from. The good news is that, for some time, we have used our powers to disapply Key Stage 4 to free that up. We had already started to move. The Department for Employment and Learning undertook a review of careers guidance, which progressed many issues. Last year, Dr Davison, Catherine Bell and I examined those issues, and we believe that much more work needs to be done. Understandably, schools and colleges give careers advice, but they give that within an institution. Somebody has to stand outside the institutional structure and tell young people that there are other options. It is all very interesting. The Education and Training Inspectorate (ETI) examined all the educational institutions in Newry and concluded that there is not enough width. Mr Beggs: Why is the pace of change so slow? Dr Davison: It is an interesting perspective. If half a dozen teachers were brought in here, they might have a different view, which would be that the Department is forcing change far too quickly. However, there is a serious point to be made, and I had better be careful about how I make it. In 1988-89, the Government decided the detail of the curriculum. However, there has been a growing realisation that the imposition of a curriculum might not be sensible, and the Department, therefore, engaged in a long period of consultation on the understanding that, if you want real change, the principals, teachers and boards of governors will deliver it. There was a serious and long period of consultation on the curriculum proposals. 1.00 pm A very significant shift is under way. Mr Beggs and I debated the importance of vocational education in the days of the Committee for Employment and Learning. This is really a response to that long debate about the place of vocational education. The new revised curriculum means that vocational education will have a significant place in all schools for all children over the age of 14. Imposing those changes quickly is attractive on the one hand, but, on the other, it will introduce subject areas into schools with which some of the teaching staff are not familiar. Those schools may need different teachers from those that they have currently; they will need materials, courses and programmes. There are many practical considerations about the ongoing significant shift from where we are now to where we intend to go. Those are not justifications for slowness, but explanations of why, perhaps, matters are different this time. Dr McDonnell: Thank you very much for your presentation, which was short, succinct and to the point. I keep coming back to a point that has been bounced around by several of my colleagues. Sean Neeson mentioned the 50,000 empty school places. How, in practice, do we sort out the tail end of both primary and secondary education? We can sort that out in theory in this or in many other rooms. I believe that we have all failed if 5%, never mind 20%, of our children leave school unable to function properly. I cannot put it any clearer than that. Their reading, writing and counting abilities are limited, and they are almost unemployable or only semi-employable. If we sort that situation out, it will lift the whole system and the top end will, by and large, take care of itself. This question comes down to two things. First, the Department and its agents create leadership and management in the system. Leadership and management are very scarce in some places. I have seen some heartsick schools, which I do not wish to name, be turned around suddenly by the injection of a bit of leadership. The Council for Catholic Maintained Schools (CCMS), which has been quite ruthless in some of things that it has done to help struggling schools, has impressed me. Where are we with that rationalisation? You mentioned 20 schools that are poor performers. I presume that those are secondary schools. Surely to God we can find a mechanism to rationalise those schools. I feel some personal guilt that while I am involved in politics and public administration, there are children who are not getting the education that they deserve. I believe that that situation pulls our whole economy down. If we solve that problem, we will reverse the trend. The bright kids are great, and they will succeed one way or another, even if they need a bit of help here and there. Dare I say it, how do we help the poor child from the Shankill or the lower Falls? Michelle touched on that matter earlier. How do we support children from unstable family backgrounds or those single parents who do not get enough domestic support? Mr Haire: That is an absolutely central issue for us. The boards and CCMS have been asked to support plans for rationalisation, to produce those proposals and to work out how to remove some of those spare places. We have received responses from some boards, and we have asked the boards to continue that work. The Sir George Bain review is also ongoing. The aim of that review is to look at the process and the wider, long-term structures to help support that. That work is key to this issue. Some boards have been worried that some of that work has come out in the press. Dr McDonnell is right to raise the question of how to connect schools to the community. I have spoken to Ms Gildernew about early years provision, the connectedness of extended schools and trying to make those connections between schools and communities in all areas of need, but particularly inner cities. Communities and schools must tackle the issue together. School leadership is essential. We have a very strong investment in the professional qualification for headship to develop leadership in schools. Five hundred school leaders have qualified already; another 500 are in the process. It is often not only the head, but the senior teaching team that can change a school. There are schools in very tough environments where one senior management team is getting excellent results, while others are not. Leadership is a key differentiator, and we must help schools choose, support and develop it. We have not focused enough on that to date, and it is central to school improvement. We must be willing to make those decisions. Dr Davison: That is one of the biggest issues that we face. Mr Haire has tasked me with reconsidering school improvement policy. We must look at it quite radically and consider earlier interventions in cases where, through inspection or data monitoring, we see that standards are falling. We need to give serious thought to the nature of those interventions. Currently, interventions tend to be broadly supportive; we do not adopt an approach involving sanctions. We must think hard about a balance of interventions for school improvement. Certain structural and cultural elements in Northern Ireland make headship difficult. It is difficult to move principals around schools. The CCMS has had a degree of success in doing that, but that ease of movement has not been matched in the controlled sector. All the research suggests that leadership is the key factor in school improvement. The closure of schools is another element. We all know that if the Department agrees a development proposal to close a school, there is a great deal of opposition, even if the standards are not appropriate. Those are significant factors in the crucial question of how we raise standards in schools that are currently poorly performing. Mr McElduff: The skills strategy of the Department of Education and Science is credited with making a major contribution to the Celtic Tiger economy. Are there any particularly strong elements — or perhaps an underpinning philosophy — to that strategy that might guide us in the North to develop a similar, suitable strategy? Mr Haire: Changes since the 1950s and a broadening of Irish education have been key to that contribution. That agenda has been seen across Europe, with broadening the educational process common to all developed economies. The curricular and structural changes that we have described are very much in line with broadening the process. There are very important areas in which we can learn from that agenda. It is about the basics of a broader curriculum and skills; maintaining quality of educational input and content; keeping choices open and varied; and having a range of options for learning. For example, a key element is the introduction of work experience for 14-year-olds. That engages young people who are not attracted by the classic academic education, but who learn by seeing and doing. We are very conscious of the need to be flexible as regards styles of learning. We work with further education colleges and training organisations in conjunction with the schools; hence the vocational enhancement programme. From talking to young people, we see early signs that it is a success. They find it easier to study subjects such as mathematics when they have seen their function in the workplace. Dr Davison: When I talk to colleagues in the Department of Education and Science or to professionals anywhere in the education service in the Republic, I find that they understand that there is an economic purpose to education. I am not sure that that is deeply embedded in the way we look at education in our part of the world. There is still a view — which is not wrong — that education is good for you and that a civilised person must be educated. I am not sure that we adopt the idea that there is an economic purpose to education to the same extent as in that strategy. The curricular changes in particular are designed to open up that breadth of purpose. Mr McElduff: Your presentation dealt very well with that issue. Mr Dallat: In education, millions, if not billions, of pounds are tied up in state-of-the-art science laboratories, music suites and assembly halls. Direct rule Ministers talk about the empty spaces. Surely there is an underuse of that resource that could be directed, not just to the 250,000 people who have been failed by the system, but to local people who constantly need to upgrade their skills to meet the new challenges of industry. Why was the community-school concept, which was started years ago in Monkstown, Ballymena and other places, dropped? Has anyone taken an overview of the huge resources we have and the very limited way in which we apply them? The rising costs of further education are going to leave people in rural areas even more isolated than they are at present. Would it not be more intelligent to talk less about the empty spaces and more about what use could be made of those spaces? Mr Haire: First of all, the Bain review will look not only at school provision but at further education (FE) provision. You are right: they are connected. The FE system uses schools quite extensively in some of its work, and we encourage that. I mentioned the “extended school” concept. Because of their work patterns, parents often want children looked after, but there are other benefits such as homework clubs and other resources that help young people. The Bain review will work to ensure that the best use is made of facilities. That includes sports facilities; AstroTurf pitches are very expensive to run. We have to plan how councils and schools can work together on this. We have also talked to the Department of Culture, Arts and Leisure about it. The advantage for us is that the “extended school” concept answers the need to make sure that schools are viewed as part of the community. I cannot answer your question about the community schools; I do not know enough about the history to say why that was not developed. However, we are trying to examine these issues. The schools are expensive public assets, and we need to use them well. 1.15 pm Dr Davison: I have a couple of points to add. The collaboration that will develop through work on the curriculum provides an opportunity to make more effective use of the existing schools estate. That will involve both schools and further education colleges, and that is a hopeful sign. We also received some funding as a result of the ‘Renewing Communities’ package to test the notion of the full-service school, which is a school that will deliver childcare and health services as well as education. We must make an effort to work with colleagues in other Departments to see whether we can shape that. I was away from schools for a long time, but since my return I have visited a fair number. Although the concept of the community school may have disappeared, many schools that I have visited are aware of the fact that they should use their facilities for the benefits of the wider community. I guess that some are much better than others at doing that, but I see signs from my previous work in schools that they are alive to the possibility. The Chairman (Mr Molloy): We will have to bring this evidence session to a close. You certainly provided the subgroup with much information. Thank you very much for attending, for your presentation and for taking questions. The subgroup will take a brief break before hearing from the next delegation. Mr Haire: Thank you very much. Adjourned at 1.16 pm. On resuming — 1.29 pm The Chairman (Mr Molloy): We begin again. I thank the witnesses from the Department for Employment and Learning (DEL) for coming at such short notice. Perhaps you would make a short presentation, and members could then ask questions. We would like to finish within the half-hour. Dr Aideen McGinley (Department for Employment and Learning): Thank you, Mr Chairman. I thank you for hearing us over your lunch break; we were worried that we would come between you and your lunch. The Department welcomes the subgroup’s invitation. With me is our deputy secretary, Catherine Bell; she is our expert on the skills agenda, further education and higher education, among other things. Chris McConkey is the head of our central management unit; he will keep track of any information that you would like us to provide. I will hand out a one-page summary of the Department’s corporate plan and a one-page summary of the skills strategy. 1.30 pm All the documents referred to in the summaries are available if the subgroup wants them, but we did not want to overload members. Also, we have copies of the addresses and web contacts. The key point that we wish to emphasise is that DEL — and this is down to my predecessors, one of whom is Will Haire — has looked long and hard at the importance of skills in the economy. The Department works in two ways: first, to promote learning and skills and to prepare people for work; secondly, to help people into the workplace by addressing barriers to employment. Therefore, the Department must deal with both ends of the spectrum, trying to promote a well-educated and skilled workforce, while helping those people who find it difficult to get into that workforce to do so. Members should have a copy of our presentation. We will use it as the means to run through the issues. The Success Through Skills strategy, which was launched in February, should be of particular interest to the subgroup. The original inquiry that was conducted by the Committee for Employment and Learning in September 2001 led to the review of further education — FE Means Business — which will be known to many of you. A lot of work in this area emanated from the previous Assembly, and we are delighted to say that, four years on, we have made considerable inroads. The Success Through Skills strategy is a framework on which hangs the work of the Department and the interfaces between DEL and other Departments. I will come back to that later. There are four key themes. The first concerns understanding the demand for skills. We need to be sensitive to what employers and the business sector need so that we can provide the skilled labour workforce that is required. The second theme is about improving the skills levels in the workforce. We do that in a number of ways, such as looking at essential skills, including literacy and numeracy — which the Committee touched on during the evidence session with the Department of Education officials — careers, management and leadership and investors in people. The third theme addresses improving the quality and relevance of what DEL does. It is not enough to provide training: it must be relevant and of high quality. Finally, the fourth theme targets barriers to employment — what we need to do to up-skill people and bring them back into employment through programmes such as Welfare to Work. There are major links between DEL’s work and the ‘Economic Vision for Northern Ireland’, which the Economic Development Forum produced last year. The work of DEL is at the heart of that vision. There are four strands to the economic vision: enterprise; skills and employability; innovation; and infrastructure. The work of DEL touches on all of them — probably not so much with physical infrastructure — so DEL is key to delivering the economic vision. I turn now to the questions posed by the subgroup in its terms of reference. I will not go over the major impediments to the development of the economy at length because I am sure that they have been reiterated in the evidence that has already been given. Northern Ireland has achieved a lot. It has the lowest level of unemployment on record, and record levels of economic growth. However, productivity, competitiveness and levels of innovation remain very low and poor. Northern Ireland is competing in a global market. Not only does that bring focus to the new skills that its workforce needs due to competition from low-cost economies that outsource in countries such as China, it highlights the influx of people to Northern Ireland and the fact that there is a new international labour market. Northern Ireland is losing some of its best people; at the same time, conversely, new people are coming in and providing skills. I am quite sure that, even five years ago, none of us would have thought of the migration issue. There is also the issue of raising skills levels in the workforce. Again, this points to the issues of literacy and numeracy. One in four adults does not reach basic literacy and numeracy levels; that is not a good record. Due to the holistic nature of the problem, DEL works very closely with colleagues in DE. The point was made that if we could deal with this at the earliest possible stage, it would not be an issue. I know that the Committee is particularly interested in the high levels of economic inactivity. At 27%, Northern Ireland’s rate is the highest in the UK. Ironically, the Republic of Ireland has the same level of economic inactivity. That figure never comes out when people talk about the Celtic tiger. Admittedly, the numbers of students mask that statistic and create positive economic inactivity. We recognise that we need to take that seriously. There are other issues to consider, such as skills and deficiencies in the workforce and the fact that one third of the workforce is not qualified to level 2, which is the equivalent of five GCSEs at grades A to C. Twenty-two per cent of the workforce has no qualifications, compared to 13% in the rest of the UK. Just over 40% is qualified to level 3, which is the equivalent of craft level. The facts and figures show us that there are serious issues. Universities conduct over 50% of all R&D and innovation research. Some would say that that is healthy, but we argue that business needs to come up to the mark and that we need to promote private sector investment. We cannot rely solely on universities. The skills strategy provides a framework within which those deficiencies can be addressed. Under that umbrella, we have strategies such as FE Means Business, the social skills strategy, the welfare to work reform, the new management and leadership programme — for which consultation has just finished — and the review of careers education, on which we are working with the Department of Education. Mrs Bell will elaborate on those programmes shortly. Therefore we must look genuinely at what we need to do. The current Training For Success strategy, which is the review of our apprenticeship programme, is also significant. I know that when you look at all the documents, you will be tempted to say that we are good at creating strategies, documents and frameworks. You are quite right about that, but we are now at the point of implementation. We have listened and heard and will continue to do so, but we need to act. One small example of that implementation can be seen in the FE sector, where we are getting to the point at which the colleges are merging and principals and boards of governors are being appointed. However, we are working on all fronts. Indeed, there are four themes across 16 programmes, and because they are all integral to one another, they are being managed using projects in controlled environments methodology. This is a holistic approach: what happens in one strand influences another. Therefore, it is important that we get them to run in parallel. If one does not work, it has an adverse impact on others. We have looked at models for fiscal incentives elsewhere in the world, particularly the North Carolina Community College System. We have found that extremely useful, because it creates a ladder of progression through education. That ladder is embedded in local economic development. In looking at other successful economies, including that of the Republic of Ireland, we found that a skilled workforce increasingly attracts foreign direct investment. Often, the skilled workforce is the tipping point that brings in the investment. It is more attractive than financial incentives, although I am not saying that those are not attractive. We have worked very closely and successfully with Invest Northern Ireland in the past few months on some of the recent investments in financial services and the information and communication technology sector. Companies are interested in a skilled workforce and a good, responsive education skills system. We would argue for fiscal incentives, but in fact, the turning point is investment in things such as skills and workforce development. We can also consider the example of the tax credits for R&D, the business take-up for which is very low. The bureaucracy that is sometimes associated with things such as fiscal incentives and tax credits runs counter to that as an attraction. If the Department could make it easier for companies and businesses by providing them with support that is “free of charge” or heavily subsidised, that would remove an entire layer of bureaucracy. It is worth making the point that, although fiscal incentives are extremely important, general support is sometimes of more value to businesses, with as little bureaucracy as possible. Catherine will pick up on the subgroup’s third term of reference, which focuses on how economic regeneration can be delivered. I will then make a few concluding remarks. Mrs Catherine Bell (Department for Employment and Learning): To allow discussion, I will be as brief as possible. As Aideen said, the Department developed a number of strategies in 2001 that are being implemented now. We know that skills underpin economic success. We have defined skills into three types: first, the essential skills of literacy and numeracy, and, increasingly, ICT; secondly, the employability skills of flexibility, problem-solving and team-working that businesses seek; and, thirdly, specific occupational skills. The Department’s work centres round all three types. If Northern Ireland is to compete successfully, we must raise the skills of the people already in the workforce. Three factors are involved in raising skills. First, — and the figures are horrific — only one person in three has reached the Department for Education and Skills (DfES) level 2, which is the equivalent of five GCSEs. Secondly, we must increase the knowledge base of those people entering employment. Thirdly, it is equally important to reach the people furthest from the labour market — those who are unable to even access it. Also, we want to promote innovation through research. When the Department was developing the skills strategy, employers told us that they wanted us to be responsive to their demands. Government have made significant financial investments in the further education, higher education and training systems. Our infrastructure is good, but poor performance and a skills deficit in our workforce remains. Consequently, we have been refocusing further education under the FE Means Business implementation plan to specifically support economic and workforce development. The overarching strategy sets a much clearer set of goals, with an action plan specifically designed to meet employers’ needs. The budget for the implementation plan is very much focused on workforce and economic development. The first strand of the implementation plan deals with the creation of demand and establishing what employers want, which is very difficult. A Northern Ireland Skills Expert Group has been established, with international membership, including representation from Forfás, which supports the skills expert group in the South, and representation from the USA. The group also includes a director of research from the Sector Skills Development Agency who represents the 25 sector skills councils, representatives from the Confederation of British Industry, the Northern Ireland Institute of Directors and so on. The group helps to identify not only the needs at a regional Northern Ireland level, but opportunities down the line. We are setting up six workforce development forums, which will be employer-led, with colleges providing the secretariat function, for the six new area-based further education colleges. Their role is to identify local and sub-regional demands, so that the supply and education and training sides can respond much more effectively. The second issue is to consider the quality and relevance of education. The Department has divided that into three areas. The first is the FE Means Business programme, and the Department is well on its way to establishing six area-based colleges, giving them the prime aim of supporting workforce and economic development. The second area is to change the curriculum, which involves working very hard with the Department of Education on a vocational enhancement programme, so that young people who do not go on to higher education can leave school or college at 19, not only with a broad education, but with strong professional and technical skills. We are not going to use the word “vocational”, because people think that that route is for the less able and for people who cause problems. In our economy, we need technician training at levels 3 and 4, and employability skills training. 1.45 pm We have charged the colleges to work hard with our universities on product innovation, prototyping and business creation. By September 2007, we will have created six area-based colleges and be well on the way to implementing the FE Means Business programme. Any sophisticated economy has at its heart a strong higher education system. We are looking at the quality and the relevance of our universities’ output in foundation, undergraduate and postgraduate degrees, and trying, as much as we can, to ensure that young people leaving university have had employability and entrepreneurial skills embedded into their programmes of study. The work of the Northern Ireland Centre for Entrepreneurship at the University of Ulster and at Queen’s University was focused initially on science and engineering, and is now being spread across all areas. We have asked the Northern Ireland Higher Education Council to join us in developing a strategy to take account of the economic vision, the regional innovation strategy and our skills strategy. Equally, when it comes to innovation and research, 50% of the money goes into the universities, and we are trying to ensure that what the Department puts in for infrastructure helps universities to ensure that some of the research turns out to be of economic and social benefit, and results in spin-out companies. The last area is the new professional and technical programme, Training For Success, which is currently out for consultation. It focuses on apprenticeship, with the Department of Education introducing a pre-apprenticeship programme for 14-year-olds. We believe passionately that young people should be offered an alternative route; full-time higher education is not the only way to success. However, they have to be able to earn and learn at the same time. The progression will be from an apprenticeship programme to a foundation degree, and then to an honours degree, if they wish, and professional training. We need to enhance the skills of the current workforce. In the professional and technical programme that we have put out for consultation, we have suggested, resources permitting, an all-age apprenticeship programme, so that we can re-skill the workforce. However, we are really attracted to some of what we have seen in England under the heading of ‘Train To Gain’, in which free training at level two is available to the workforce. In areas that are important to the local economy, 19 to 30-year-olds can avail of free level 3 training. For those who are furthest from the labour market, we have been piloting the Pathways to Work programme for incapacity benefit claimants, which is menu-driven and focused on barriers such as health, abuse, or skills problems, so that we can respond more effectively, rather than having a one-size-fits-all approach. We would like to see an expansion of the return-to-work credit so that people who earn less than £15,000 a year can have up to £40 a week to ease the worry of coming off benefits. We want to understand demand, improve quality and relevance, and enhance the skills of the workforce in order to bring in the economically inactive. Those are the strands that the Department is implementing. Dr McGinley: We hope that that shows that DEL has been addressing many of the deficits. As a Department, we bridge education, enterprise and social development. As you have heard, we are working closely with the Department of Education on 14 to 19-year-olds, careers and the Vocational Enhancement Programme (VEP). DEL is working with DETI and Invest Northern Ireland on foreign direct investment, R&D and on establishing the delivery of employer-led skills needs. Finally, DEL is working with DSD on the Welfare to Work programme. We are doing some of the joining up necessary to ensure that this is a holistic approach. The ad hoc and fragmentary nature in the past has been the single most important impediment, although that has been through no lack of will. We hope that the cohesion of the skills strategy will drive the engine of economic growth that we all want to see happen. Dr McDonnell: Thank you very much. I welcome the change that has taken place; it is long overdue. You are relatively new to your position, and I congratulate you and those that have been there longer and have been more involved. It is music to my ears, and to those of most of my colleagues round the table. However, I am more interested in product than promise, and I will have to wait a little while to see what the product is. We talk about creating a skilled workforce, which, as you said, is needed to gain foreign direct investment. We all want a high-wage, high value-added economy, but much of that can happen only through serious, practical R&D that is extracted from the brainpower in universities and used in combination with companies to create product and wealth. There is a difficulty here, but there must be some mechanism to get companies to engage in more R&D. In the meantime, we have to stick with the universities. How can we push forward and achieve more R&D? Secondly, and in parallel with that, is getting proper funding to follow on from the R&D. I am taking about the university spin-off companies, such as QUBIS and UUTech Ltd, which are suffering from gross underfunding and a lack of sympathy. I do not know how much of that is DEL’s responsibility, as it seems to be a twilight zone where everybody and nobody is involved. The sense is that we are wonderful, with brilliant people in universities, and that the fruit should fall from the trees without anyone having to grow it, spray it or cultivate it. There is a gap here, and sufficient product is not getting out because of the lack of capitalisation. How do we get more R&D, and how do we fund and work the university spin-outs, the high intellectual property and the high value-added that flows from R&D? Dr McGinley: You are right. The budget falls between DEL, DETI, Invest Northern Ireland and DHSSPS, which funds a lot of our current research. Recently, we launched the United States-Ireland Research and Development Partnership. It reflects exactly your point about looking outwards and bringing in thinking on medical issues, such as, for example, avian flu, diabetes and cancer. We all work well together, but it makes the task more complex. DEL tends to fund the infrastructure and the universities, to create the physical and other tangible parts of the information and equipment needed. Programme funding tends to come from Invest Northern Ireland and DHSSPS. The two universities are aware that more could be done. There are lot of patents pending, and we must find a way to turn those into something tangible. Recently, Mrs Bell and I spoke to the two vice-chancellors about making things more focused. I welcome the more defined niches for Queen’s University, which is heading down a strong science/academic route, and the University of Ulster, which is heading down the entrepreneurial science route. Also, the two universities are working together — the Northern Ireland Centre for Entrepreneurship (NICENT) project is a case in point — along with QUBIS and UUTech Ltd, which you mentioned. The Government are committed to R&D. We recognise that we need also to stimulate business to recognise that and to get it to product stage. Mrs Bell will tell the Committee about a number of programmes, such as the Higher Education Innovation Fund (HEIF). R&D must have a firm place in the next comprehensive spending review. Mrs Bell: As Dr McGinley said, DEL is responsible for funding the infrastructure. However, DEL is also working with the two universities to examine their contribution to the economy. There is no doubt that universities talk about the generalities of R&D. DEL wants to see R&D leading not only to the creation of spin-off companies, but to investment in our own companies. We want more of our top brains to work in SMEs and to take some of the work to them. Sometimes one could get depressed about the situation. However, considering what UUTech Ltd and QUBIS have produced, and some of the high value companies that have emerged, part of our problem is that we do not celebrate success enough. Success breeds success. In recent months, the University of Ulster has been particularly successful in selling the intellectual property rights to its work on diabetes to a large American company, and it is reckoned that that will generate about £41 million. Not enough has been heard about that. DEL and the universities have a responsibility to build on success. DEL recognises that SMEs are sometimes reluctant to work with a university: it is like going to a GP and being referred to a consultant. The Department is encouraging the colleges and universities to work in partnership, so that product development and innovation will be done in the colleges and the universities will do the blue-skies research. DEL has created a fund to encourage collaboration between higher and further education, so that the skills from the universities can be transferred to the further education colleges. The Department agrees that there must be investment, because we are losing the low-value work. Everyone must put their heads together to tackle that. Dr McGinley: Two examples of such investment are that £94 million has gone into the Support Programme for University Research (SPUR) project, which will run from 2001 to 2008, and over £50 million will go into UK-wide Scientific Research Infrastructure Funding (SRIF) from 2002 to 2008. The money is being invested, but the trick is to ensure knowledge transfer in the third stream. Mr McNarry: In the conclusion to your submission, you seem to be saying, understandably, that although you want to do much more, the Department might not have the money. My reading is that that is a cop out. Everyone could make the point that there is not enough money. I want to hear your reason for including that paragraph. Dr McGinley: Skills are fundamentally important to the delivery of the economic vision, and that has an impact on most Departments. Money allocated to DEL for programmes such as Welfare to Work is ring-fenced, and we cannot interfere, because it is Treasury-oriented. DEL spends almost 85% of its budget on further and higher education and on student support, so there is not much leeway. DEL would like to do much more and has recognised that, internally, it must do more to prioritise in preparation for the comprehensive spending review, and that process has begun. However, we will not be able to do some things. We have dropped programmes that, all things being equal, would have continued to run. For example, Enterprise Ulster and its associated programmes, which were good in their time, have been wound down. DEL had to weigh up the priorities as they related to that type of programme. Mr McNarry: I would love to get into a discussion, but I am here to ask questions. I am concerned about your reasons for going to the trouble of including this in your presentation. What percentage of people who are fit for work are stuck in low-income jobs or part-time work, either not able or not interested — perhaps the most important issue is the latter category — in moving up the promotion ladder? What difficulties do they have? Does the welfare state have a major or minor impact on attracting people to improve their learning and skills? 2.00 pm Dr McGinley: We do not have those figures with us, but we can certainly provide the subgroup with them. Mrs Bell: The fact that people have either low skills or no skills and qualifications — as a proxy, we equate skills with qualifications— is a strong indicator of the problem. We have worked hard to tackle the issue of essential skills. By March 2007, we are charged with putting 18,500 people through the essential skills qualification, which means improving their literacy and numeracy skills. Recent research shows the positive benefit that that has had on esteem, health, and so forth. We will then move those people on to level 2 qualifications. Once someone gains that level of confidence, in many instances, they are willing to invest in their own skills development. It is a question of engagement, which is why it needs to be done through employers and the workplace. Many people have a fear of entering an educational establishment, whether a school or a further education college, so we are trying to work more effectively with community groups. The FE Means Business programme allows colleges to work with quality community groups. Initially, the community groups provide support, mentoring and encouragement to help people to overcome barriers about benefits, childcare, and so forth. Eventually, they can progress to college. Mr McNarry: Problems with underachievement have been identified. Are schools picking up on the situation that you described, where school leavers, rather than employers are aware of what is on offer? Those people are not going to find employment. Mrs Bell: Absolutely. There is a new professional and technical programme. I referred to the apprenticeship programme, but another strand works with young disenfranchised people who either feel that they do not have the academic ability or who perceive other barriers to employment. There is a similar programme for adults. Work so far has been singularly successful; it specifically targets their needs, whether self-esteem, literacy or numeracy, or abuse problems. The programme is also hard-edged in that we will not allow people to be recycled in that environment. We want them to take whatever time is necessary to get onto the learning ladder. However, once they are on the learning ladder, we want them to be employed and studying part-time so that they are earning and learning. We want to see more lifelong learning, where people invest in their own skills. You asked also whether welfare and benefits act as a disincentive. If someone has children, he or she needs to ensure that there is a certain income; people are afraid to lose those benefits. We must ensure that benefits, or any other moneys, are protected, so that people can gain the skills to enable them to work. We want everyone to start on the appropriate step on the skills ladder and progress upwards. It would have been lovely to start the skills strategy at level 3, but we could not do that. Mr McNarry: Is there still a perception that benefits compete with the search for employment? Dr McGinley: Welfare reforms, such as the Welfare to Work programme, are addressing that important issue. We are driven partly by national policy, but it is intended that, in 2008, a new form of income support, which tests the very nature of that question, will be established. We are proceeding also with the Pathways to Work programme in 10 areas of Northern Ireland. We have already rolled it out in six areas. That programme takes an individual look at people’s needs — whether they are lone parents, or over 50 or are on incapacity benefit. It will address people’s needs genuinely, perhaps sending them to counselling or placing them into skills programmes. Last week, I visited a Jobs and Benefits office where the disability adviser and the Pathways to Work adviser were absolutely delighted because one of their disability applicants — a man who had been a scaffolder all his life, but had smashed his knees and was, therefore, incapacitated — had got on to a sign language training programme and was going to become an interpreter. It was great to see the joy and pride that the staff took in getting someone who really wanted to work but needed help with the “how” and the “what”. I should mention also that the review of careers guidance will help to provide a signpost. The Chairman (Mr Molloy): We are running out of time. Mr Weir: I shall be brief. Thank you for your presentation. I join with Dr McDonnell in thanking you for the various programmes that you are operating, despite the constraints under which you are operating. I wish to pick up on two points. I was interested in the remarks that you made about DEL being the bridge to other Departments. One of my concerns is that, because of the departmental structure, economic development touches on — or is central to — a number of Departments. First, I wonder whether you could expand on any structures that exist for liaison and consultation with Departments or agencies to ensure that, in whatever skills programmes you are running, there are appropriate levels of input from those who are affected directly. Secondly, you provided information on the idea of helping to focus universities and graduates on a more business-oriented scenario. The other side of that coin may be less of a problem than it was 10 years ago. It was identified in the Dearing Report and is the extent to which there is still a section of school-leavers at the higher end who cannot find places in universities in Northern Ireland. In particular, there are concerns that, although it may not be as big a problem as it was, the caps that are placed on university places in Northern Ireland mean that we continue to export a reasonable percentage of our best talent. In some, but clearly not the majority of cases, that is because people cannot find a place here, rather than because many students want to leave Northern Ireland. What actions could be taken to counter that problem? Dr McGinley: I will take your first question, and Catherine will take your second. Recently, we have been working increasingly closely with others, including the Economic Development Forum, on which we are represented with the other Departments. We have quarterly meetings with DE and DETI, and regular meetings with DSD, right down to officer level. DEL is represented on all the major strategy groups, such as the regional innovation strategy, and so forth. We work very closely together, and since I have been with the Department, I have seen the blurring of the lines. I have been with the Department for only four months, but since I arrived, a real ethos is emerging about the importance of interdependency. I am not saying that that was because of my arrival, but I assure members that it is getting much better. Mrs Bell: We are working with others on projects concerning 14 to 19-year-olds, particularly with the Department of Education. Robson Davison came from DEL, so there is great co-operation in the programme that we are running together. Similarly, we work with Invest Northern Ireland. The fact that employers are now saying that skills are at the heart of the matter means that INI and DETI are bringing us to the table. I turn to the second part of your question on higher education. Yes, Northern Ireland does lose some young people, but not all the brightest and the best at 18 years of age. However, we undertook research and found that the vast majority of the really able who go away, go to their university of first choice. Our trick must be to attract them back. Those who are reluctant to go away are at the lower level of educational attainment. We would like them to stay in Northern Ireland and work through the further education sector towards foundation degrees. Mr Weir: Despite the Dearing Report, one would suspect that the figures are even higher. No one is questioning the fact that the vast majority of 18-year-olds who leave want to go. I do not think that the situation is very different from that in other regions, because many people want to go to university away from their home towns. Although I appreciate your explanation, I still do not see a strategy to reduce the number of people who leave Northern Ireland because they cannot find a university place. Dr McGinley: Opening up the further education sector through the new area-based colleges has helped that situation substantially, as have foundation degrees. The subgroup became inquorate at 2.11 pm and adjourned at 2.17 pm. |