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BA 01 08

A Business Alliance Critique of Sir David Varney’s Review of Competitiveness of Northern Ireland


  1. The Business Alliance welcomes the invitation from the Assembly’s Finance Committee to provide a short critique of the Sir David Varney’s Review of the Competitiveness of Northern Ireland, published at the end of April. While we have had limited opportunity to digest this report and secure comments from our members we have outlined below our initial reaction to Sir David Varney’s second report (subsequently referred to as Varney 2).
  2. The Business Alliance is an informal partnership consisting of CBI Northern Ireland, Centre for Competitiveness, Institute of Directors and Northern Ireland Chamber of Commerce and Industry.

Varney’s findings and key recommendations

  1. The Review sets out a fairly well established and increasingly understood position of the Northern Ireland economy, much of which has already been captured in the Executive’s Programme for Government (PfG):
  1. The Review does stress, importantly that the tools to help develop the economy are largely in the control of the Executive (except fiscal incentives) and that substantial resources are available – though the Review fails to assess the level of need particularly in relation to the 20 year of underinvestment during the Troubles. The Review does stress the urgency in delivering key aspects of the Programme for Government (with which we concur strongly) and the importance of focusing investment on economic development priorities (again, something which we concur).
  2. We look forward to the UK government’s response to the Review (in addition to the commitment by the Prime Minister to allow additional asset sales of £1bn to be retained for investment in Northern Ireland). In particular the Review recommends that the UK government set out how it will assist the Executive tackle the stock of people on incapacity benefit – improving economic activity rates is a key goal in the PfG.
  3. However the Business Alliance is disappointed that the Review has little to offer in terms of new strategic recommendations which could help create the ‘step change’ required, and fails to recognise the potential of fiscal incentives to help transform the economy, particularly with regard to skills and innovation.
  4. The Review does urge additional action in a number of areas:

Critique on specific Varney 2 recommendations

  1. In the following Box we have summarised the findings of the Review and provided an initial Business Alliance response.

    Box 1 Summary of Varney 2 findings/recommendations and Business Alliance critique

    Varney Finding/Recommendation Business Alliance critique
    Proposal for an Independent Competition Analysis Board and production of Annual Competitiveness report


    Several recommendations to help tackle high inactivity levels, including implementation of Pathways to Work, integrated delivery, better assessment and delivery of basic skills, and develop the Local Employer Partnerships (LEPs)

    The UK government to set out how it will assist this process


    Importance of prioritisation of skills strategy.

    Importance of improving basic skills by implementation of Bain Review and 14-19 strategy, achieve targets for basic skills and Level 2, review existing strategies and learn from GB and Ireland to ensure they are meeting employer’s needs , and bring all public sector workers up to Level 2 – ‘the pledge’ .
    A general recommendation that more funding should be put in the hands of employers and individuals (to increase choice and quality of training)
    Also series of recommendations to improve intermediate/higher skills:

    Promote apprenticeships, review existing deliver, provide students with better information on demand for skills, explore additional incentives/bursaries, promote partnerships with FDI (ie conversion courses), and seek to attract students back to NI


    More urgency is attached to the planning reform agenda

    Invest NI to work more closely with UKTI to benchmark target markets.

    Work of Invest NI to be reviewed to include role of Ministers, governance, improved working links with UKTI and IDA, and links to other depts/bodies


    The review highlights the importance of innovation and suggests that R&D spend in NI is at levels which one would expect allowing for size/structural differences with the rest of the UK. The Review makes a number of suggestions:

    Support for clusters, promote take-up of existing R&D tax credits, need for permanent third stream of funding for universities, ensure FE sector supports the Regional Innovation Strategy, introduce Innovation Voucher Scheme, and align mainstream research funding/strategy across NI/UK/ROI


    A number of further reviews are identified for consideration:

    Investigate poor take up of Small Firms Loan Guarantee Scheme

    Ensure financial assistance is not market distorting

    Examine barriers to growth and ensure interventions are tailored

    Minimise regulatory burdens

    Public Sector reform

    A number of recommendations focusing at improving efficiency are set out:
    Continue with reform agenda incl the review of the number of Departments
    Use public sector pay process to reduce differential with private sector
    Further asset disposals with proceeds retained in NI for reinvestment
    Transfer certain agencies to the private sector
    Introduce more contestability in delivery of public services and explore reform of public procurement to benefit SMEs
    Investment Strategy should prioritise investment in projects which support economic development
    Consider scope for more private sector involvement
    Could make a valuable contribution – however better to build on what we have. As part of it’s Corporate Plan ERINI is planning to produce a regular report which, with some additional resource, could be developed to provide a comparative document

    Much of this is underway already. While accepting urgency and importance of an integrated approach there is little new here – disappointed that some GB models which have successfully used private and community/voluntary sectors in delivery have not been highlighted as individual support is more likely to be more effectively delivered outside the public sector.

    We are not aware of what progress has been achieved with the LEPs in NI

    We look forward to the UK government’s response to the challenge set.

    The importance that the Review attaches to the skills agenda is welcome – this is at the top of the business agenda. While many of the findings are worthy, the focus is largely on implementation of existing initiatives (we accept delivery is key).

    In principle we support more funding through the individual or employer – we accept that DEL should undertake a review of effectiveness of current delivery mechanisms, and that the Review of ‘Success through Skills’ should include an assessment of the approaches/initiatives underway in GB.

    Business Alliance will be keen to encourage their members to support ‘the pledge’

    We strongly endorse the importance of having high quality, independent careers advice, information and guidance – sufficient resources must be allocated to deliver the emerging careers strategy* Queens University has already announced bursaries for STEM subjects from Sept 08 which is very welcome. We support the recommendation that government should consider how it can incentivise an increase in the number of students studying STEM related subjects.

    We are very disappointed that the Review has ruled out an enhanced ‘training tax credit’

    We strongly support the introduction of ‘conversion courses’ to meet current skill needs

    We understand a strategy to attract back students is already underway as part of a large campaign to encourage talent to come to NI – this is an important short term intervention.

    Much progress has been made with regard to cross-border mobility though barriers still remain

    Strongly supports the planning reform agenda, including the key PfG target relating to the decision time on major planning applications. We welcome the recognition that further reforms and improvements need to be delivered with more urgency. It is critical that NI planning system can deliver speedy decisions. The comment on financial incentives for local authorities does not appear to be appropriate under the existing structures where Local Authorities have only a minor role to play.

    While there may be merit in some/all of these reviews it is far from clear what will be achieved. There is always room for improvement, but it is not clear to Business Alliance members whether these are the top priority areas for review ie addressing bureaucracy and streamlining appraisal processes, encouraging more risk taking, and having client executives on performance related pay would all appear to be more important (some of these issues are recognised by the Review – para 4.25)

    Clearly these issues are important, though many are already being addressed ie MATRIX is already undertaking an assessment of NI’s R&D capabilities.

    We strongly welcome the first time Innovation Voucher scheme which CBI has been calling for since 2006 – we understand that an all-island scheme will be introduced shortly.

    Funding for universities to support R&D is vital, as they play a disproportionately large part in the overall market.

    It is not clear how the aspiration of aligning UK and Irish science funding streams will be achieved.

    We are very disappointed that enhanced R&D tax credit has been turned down as it would undermine ‘the principles of simplicity, consistency and certainty that underpin the success of UK’s scheme’ as well as being legally and practically difficult.

    Overall disappointing with no specific new ideas to create the necessary transformation of the economy and largely recommending a series of further reviews:

    SFLGS has traditionally had a low take up in NI.

    We understand Invest NI appraisals would include an assessment of impact on market

    Barriers to growth are varied depending on the business.

    Minimising regulatory burdens are critical – and a major obstacle to small firms in particular – however increasing employment legislation continues to add a significant burden to companies

    Business Alliance believes there is significant potential to improve the efficiency and effectiveness of public service delivery. Several of these recommendations are welcome.

    We support the need for pay constraint within the public sector (as a start could remuneration levels of new recruits be reviewed) and the need for a more flexible pay regime to reflect NI market conditions. We also strongly support the need to reduce the overall size and structure – the review of the number of departments is a key element of this and we would like to see early progress on the review committed to in the PfG and how service delivery could be enhanced through bold redesign

    We strongly support the need for the increased contestability and believe the Executive should decide at a strategic level which services should be outsourced to deliver more efficient and better services

    Further asset sales have already been identified through the Executive’s Asset Capitalisation Taskforce – with a significant change in the property market the objective of bringing some £2.2bn of assets to the market place within the next three years will be particularly challenging – indeed it may not be value for money in pressing ahead with these asset sales in this timeframe.

    * Careers advice etc – we welcome the importance attached to this area and the need to provide better information to young people on the career opportunities available. It is essential that the new careers strategy includes an additional aim of ‘ensuring that employers have access to the skills which they require to meet their customers’ needs and improving the efficiency of the labour market’ – without this explicit aim there is danger that the real needs of the economy will not be met.

  2. The Business Alliance acknowledges the key messages coming through in the Varney Review, which we would sum up as:

Business Alliance
27 May 2008

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