NORTHERN IRELAND ASSEMBLY COMMITTEE FOR ENTERPRISE, TRADE AND INVESTMENT

 SUBMISSION TO THE REVIEW OF COMPETITIVENESS OF NORTHERN IRELAND BY SIR DAVID VARNEY

1. The Committee wishes to record its utmost disappointment at the key decision of the review in not accepting the need for a reduction, to 12.5%, of the rate of Corporation Tax in Northern Ireland. The general consensus among the Committee was that this decision highlighted that the expected ‘peace dividend’ does not exist and that it is apparent that Northern Ireland will not be treated as a special case.
2. The Committee has serious concerns that the message deduced from the establishment of the second review is that Northern Ireland has some distinctive or even systemic problem as regards competitiveness. The Committee would argue that this is not the case and would caution such an approach on the eve of the International Investment Conference.
3. The Committee notes that this second review is likely, on the basis of the question posed, to focus on the impediments to growth in Northern Ireland, other than a fiscal nature. The framework for analysis is set in the context of the Treasury’s commitment to the five drivers of growth, namely, innovation, skills, investment, enterprise and competition. The Committee believes that this framework comes very much under the policy remit of the Northern Ireland Executive and questions the need for involvement by Sir David Varney on devolved policy matters.
4. The Committee would argue that the Call for Evidence requires respondents to answer questions that have to large extent already been addressed. In this regard, the Committee would refer you to the draft Regional Economic Strategy published by Direct Rule Ministers which is still relevant and four reports by the Committee on the Preparation for Government of the Transitional Assembly (September 2006 - January 2007), sub-group on the Economic Challenges Facing Northern Ireland .
5. The Committee would also refer you to the Committee’s submission to the Varney Review of the Role of Tax Policy in Northern Ireland which addresses the competitiveness issue including the differences between Northern Ireland and other regions, factors affecting growth and investment and non tax interventions to sustain business growth in Northern Ireland.
6. In relation to the overall theme of competitiveness, the Committee would direct you to a report by ERINI on “Outline of the Competitiveness Challenge” for the Republic 2007 which stated that it is difficult to see how, other than in the area of tax, there is a decisive and enduring difference between the two parts of the island of Ireland from the viewpoint of an investor. The Committee believes this statement is justified and that Varney 1 has produced no convincing evidence to refute it.
7. The Committee would support Sir George Quigley’s proposal that there is a need to recall the imperative for 12.5% rate of corporation tax to stimulate regional growth, closing the wealth and productivity gap rebalancing the public/private sector through expansion of the export base. The Committee would refer the Review Team to Sir George Quigley’s submission (Appendix 1) which details his proposals for tackling competitiveness. Among the proposals is the need for Invest NI to focus its attention almost exclusively on companies that are exporting or have the potential to do so. However alongside the proposals, it is also made clear that, without the addition of the power boost which FDI can provide, the ability to build up an export base on the scale and of the nature required will be very severely curtailed.
8. In relation to the important factors for businesses considering moving to or from Northern Ireland, the Committee notes Mr John Simpson’s point that Northern Ireland is in competition with many other regions to attract businesses. “Not only must the issues be ‘important factors’ but they must be demonstrable to very high standards.
9. The Committee understands that the Department of Finance and Personnel has a lead role in relation to this review. In this respect it would be useful for the Committee to know what structural differences, in terms of scope and nature, there are between the first and second reviews.
10. Finally in responding to the Review, the Committee wrote to a number of stakeholders and gratefully received replies from the Federation of Small Businesses, ERINI, Sir George Quigley, ICTU and Mr John Simpson. Due to the time constraints of the Review deadline, the Committee has been unable to fully consider the responses. However the submissions are attached for your attention. The Committee also commissioned a research paper on innovation in Northern Ireland which addresses the innovation questions in the Call for Evidence. This paper is also attached at Appendix 1 for your attention.