Crucial next steps facing 'Northern Ireland plc' - Robinson keynote speech
Thursday, 13 September 2007Tough decisions lie ahead as the Executive lays the foundations for economic growth in Northern Ireland, Finance Minister Rt Hon Peter Robinson MP MLA, said today.
In a keynote speech to Northern Ireland’s business community, Mr Robinson made it clear that public spending this time round will take place within a more restrictive fiscal climate. But strategies can be employed by the Executive to lift the Northern Ireland economy still further and everyone will have a part to play.
Addressing an economic briefing session organised in Belfast by the Confederation of British Industry and Stratagem, he said:
“It is already obvious that the Executive’s new Budget and Programme for Government will be devised in a much tighter financial environment than for many years.
“Unlike the previous devolution period, in the early years of the New Labour Government, when there were significant additional resources, this Executive will have to make tough decisions. It is imperative that we get the Programme for Government and our priorities as an Executive right.”
The Minister said that the Executive has agreed that the 2008 – 2011 Programme for Government must address the key challenges facing Northern Ireland. The input and direction from the Executive will be clear when it publishes the draft Budget and Programme for Government proposals next month. The role of the economy will be pivotal.
Mr Robinson pointed to the legacy of lost economic opportunity caused by more than 30 years of terrorism and political instability. Now is the time, he declared, for the Executive to make up for these years of under investment:
“If you were to stand back and look at the key economic indicators today you may think that the local economy is vibrant and robust. Unemployment at just 3.4%, is well below the national average. Employment is increasing at a faster rate than in the rest of the UK and we no longer have the lowest Gross Value Added per capita. But these positive statistics mask some fundamental problems that are likely to act as constraints for economic growth.
“Northern Ireland has fallen far behind the UK in terms of Gross Value Added per capita in recent years. In 2000, Gross Value Added per capita was 82% of the UK average and latest figures from 2005 show it to be 80%. Why is this, given our recent high level of job creation? The explanation is that employment growth has mainly been in low value-added jobs such as retailing and distribution.
“The productivity deficit is a key issue facing us. Creating high value-added employment is the key to reducing this deficit, and central to the drive for high value-added jobs will be enhanced performance in export markets. The domestic market of 1.7 million will not provide a driver for transformational economic growth. This can only come from undertaking economic activity which serves external markets.”
The Minister said that exporting firms have greater productivity, larger premises, higher labour costs and wages and are more involved in research & development. With such firms offering, on average, twice the Gross Value Added (GVA) per head than that recorded for indigenous businesses, foreign direct investment-generated growth is the key to boosting the local economy.
“The fact that the current unemployment rate here is at a record low, now presents an excellent opportunity to change the focus of support to further stimulate export potential. With the Republic of Ireland economy predicted to remain one of the most dynamic in Europe, there are clear opportunities for Northern Ireland businesses to both use the Republic of Ireland as an export market and to establish trading partnerships.”
Mr Robinson said that there was a real need to attract investments that capitalise fully on Northern Ireland’s potential:
“Two sectors, in particular, stand out – Information & Communications Technology and Financial Services. Both these sectors offer relatively high salaries. Within Northern Ireland there have been some recent and encouraging signs of growth, with investments based on availability of skilled labour and costs eg: Liberty Information Technology and Citibank.
“Perhaps surprisingly, the level of innovation with computer services in Northern Ireland is now above levels in other parts of the UK. This is important if the sector is to sustain its relatively strong export performance. Although good, the impact on the economy has been modest to date. But these sectors have the potential to be further strengthened by increased investment flows and also by increasing levels of external collaboration.
“Looking to the future, there is undoubtedly potential for further foreign direct investment in those sectors like the tradeable services that require proportionately more skilled labour. There is also considerable scope in a number of specific sectors including architecture, engineering, business management and consultancy, as well as creative entertainment. Northern Ireland must also build on its existing skills and research base in areas such as bio-informatics.”
The Minister said that improving the demand for local skills would transform the local labour market, but he questioned the adequacy of the skills base which, he said, was sometimes overestimated:
“The number of adults in Northern Ireland with literacy and numeracy problems is unacceptably high. Skills surveys have highlighted concerns at shortages and mismatches. Our local universities do produce large numbers of graduates, but many of the best and most able move away and never return.
“There are also questions about the quality and the commercial relevance of some of the qualifications offered. To maximise benefit businesses should seek to become more engaged with the education and training sector, especially the further education sector.”
In future, Mr Robinson said that the Executive needs to think outside the box with future policy interventions. The draft Regional Economic Strategy points to four key drivers of productivity – infrastructure, enterprise, skills and innovation. These interventions, he pointed out, will also need to be ‘durable’ with assistance and support only happening if it delivers long-term economic benefits to the local economy:
“My ambition is to make sure that these interventions are the highest priority for delivering value-for-money and are consistent with delivering high value-added businesses and employment in order to stimulate economic growth.”
Mr Robinson said that Northern Ireland faced a number of challenges, not least from Westminster, where there was a reluctance to allow Northern Ireland to tackle its problems in a different way from other UK regions.
He said that the current Review of Corporation Tax has the capacity to help make a difference to our economic prospects, but that it would not solve all our problems:
“Whatever Sir David Varney’s report contains, we still face huge challenges in areas over which we have direct responsibility. The Executive has fiscal control in the area of non domestic rates – these are not set at Westminster, but in Stormont.
“The Direct Rule administration brought forward legislation to phase out Industrial Derating by 2011. The Economic Research Institute for Northern Ireland is presently conducting research into the impact of ending industrial derating. And while it would be wrong for me to pre-empt any decision the Executive may come to on this issue, I believe that if we are to make economic growth a priority we must do it, not just in word, but in action.
“This is especially the case in the context of onerous EU State Aid rules which hamper our ability to assist business in new ways. Capping industrial rates may be an inefficient way in which to target assistance, but there are few other opportunities available to us within EU constraints.
“As I have said, they key will be to facilitate the private sector to become more outward-looking, more innovative and more productive… I do not believe that we must accept things the way they are. I refuse to accept that they will never change.”
Notes to Editors:
- The Minister delivered the opening address on the theme of “Prospects for Northern. Ireland plc” at an economic briefing session for Northern Ireland members of the Confederation of British Industry (CBI) today at the Stormont Hotel.
- Brian Ambrose (CBI incoming chair) presided over the event. Following the Minister’s opening address a panel of economic experts, including Alan Bridle (Bank of Ireland), John Simpson (broadcaster and commentator) and Michael Smyth (University of Ulster) shared their views and Quintin Oliver (Stratagem) addressed the members with Mark Durkan MP MLA delivering the closing address.
- In 2004 the Chief Secretary to the Treasury requested that Northern Ireland (NI) produce a Regional Economic Strategy (RES). The RES has been constructed within the parameters of national economic policy. It focuses on raising productivity via the four key drivers: infrastructure; enterprise; skills; and innovation.
- The RES went out to consultation on the 26 January concluding on 19 April 2007.
- The review into taxation policy and economic growth in Northern Ireland is currently being led by Sir David Varney. It will examine: “how current and future tax policy, and including tax charges announced in the Budget, can support sustainable growth of business and long-term investment in Northern Ireland.” The outcome of this will have a central impact on future economic development policy in NI and the outcome of the review is due in the autumn.
- The revision of the RES will await the outcome of the Varney Review. This revision process will also reflect the views received during the consultation process.
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