Report on Strategy 2010 Inquiry Volume 4 (2024)

Volume 4 - WRITTEN SUBMISSIONS RELATING TO THE REPORT

Ordered by The Committee for Enterprise, Trade and Investment to be printed 22 March 2001Report: 2/00R (Committee for Enterprise, Trade and Investment)

COMMITTEE FOR ENTERPRISE, TRADE AND INVESTMENT: MEMBERSHIP AND POWERS

The Committee for Enterprise, Trade and Investment is a Statutory Departmental Committee established in accordance with paragraphs 8 and 9 of Strand One of the Belfast Agreement and under Assembly Standing Order No 46. The Committee has a scrutiny, policy development and consultation role with respect to the Department of Enterprise, Trade and Investment and has a role in the initiation of legislation. The Committee has 11 members including a Chairperson and Deputy Chairperson and a quorum of 5.

The Committee has power:

  • to consider and advise on Departmental budgets and Annual Plans in the context of the overall budget allocation;
  • to approve relevant secondary legislation and take the Committee Stage of relevant primary legislation;
  • to call for person and papers;
  • to initiate enquiries and make reports;
  • to consider and advise on matters brought to the Committee by the Minister of Enterprise, Trade and Investment.

The membership of the Committee since its establishment on 29 November 1999 has been as follows:

Mr Pat Doherty (Chairperson)
Mr Sean Neeson (Deputy Chairperson)

Mr Alex Attwood Mr David McClarty
Mr Jim Wells* Dr Alasdair McDonnell
Mr Wilson Clyde Ms Jane Morrice
Mr Duncan Shipley Dalton Dr Dara O'Hagan
Mrs Annie Courtney*

*Mr Campbell was replaced by Mr Jim Wells on 3 October 2000.
*Ms Lewsley was replaced by Mrs Annie Courtney on 29 January 2001.

TABLE OF CONTENTS

VOLUME 4APPENDIX 5

WRITTEN SUBMISSIONS

Where in any of the following submissions reference is made to graphs, photographs, maps, or extracts from publications which have been omitted, these will be available for viewing by Assembly members in the Assembly Library and by the public in the Committee Office.

Annex 1 - Northern Ireland Economic Council (NIEC)
Annex 2 - Dr John Bradley
Annex 3 - Further submission by Dr John Bradley
Annex 4 - Northern Ireland Committee Irish Congress of Trade Unions (ICTU)
Annex 5 - Institute of Directors (IoD)
Annex 6 - Further submission by Institute of Directors (IoD)
Annex 7 - General Consumer Council (GCC)
Annex 8 - National Energy Action (NEA)
Annex 9 - Office for the Regulation of Electricity & Gas (OFREG)
Annex 10 - Northern Ireland Science Park Foundation
Annex 11 - Ulster Farmers' Union (UFU)
Annex 12 - Further submission by Ulster Farmers' Union (UFU)
Annex 13 - Northern Ireland Food and Drink Association (NIFDA)
Annex 14 - Mr John Simpson
Annex 15 - Federation of Small Businesses (FSB)
Annex 16 - Northern Ireland Textile & Apparel Association (NITA)
Annex 17 - Northern Ireland Tourist Board (NITB)
Annex 18 - Belfast City Council
Annex 19 - Derry City Council
Annex 20 - Unison
Annex 21 - Northern Ireland Hotels Federation
Annex 22 - The Queen's University of Belfast (QUB)
Annex 23 - Association of Northern Ireland Colleges (ANIC)

ANNEX 1

NORTHERN IRELAND ECONOMIC COUNCIL

February 2000

EXECUTIVE SUMMARY

In September 1999 the Northern Ireland Economic Council issuedA Step-Change in Economic Performance?A Response to Strategy 2010in which it set out what it regards as an appropriate template with which to evaluateStrategy 2010. The template contains five elements which an effective economic development strategy should address:

  • A View of How the Economy Works;
  • A Vision;
  • Targets;
  • Recommendations; and,
  • Implementation Mechanisms.

Strategy 2010has all these elements. It contains, at least implicitly, a view of how the economy works, presents a vision, 10 targets, 62 recommendations, and new institutional mechanisms. Thus the Council's discussion as to whether or notStrategy 2010is likely to be effective focuses on the quality of these five elements of the strategy and the degree to which they fit together as a coherent whole.

A View of How the Economy Works

There is inStrategy 2010no explicit and coherent view of the fundamental determinants of economic growth and development, nor reference to the literature on these determinants. What are referred to in the strategy as the "Key Principles" on which the strategy is built - equality and social cohesion, knowledge-based economy, enterprise, outward looking, and self help - might be considered to be the report's view of the key determinants, drivers and relationships. The fundamental underlying issue of productivity growth and its determinants is barely mentioned. The statement of principles must be built on within an underlying framework of the contribution of these factors to productivity growth.Strategy 2010can hence be taken forward by building on the report in this way.

A Vision

The Council welcomes the vision ofStrategy 2010with its emphasis on growth, with success coming through innovation and the knowledge-based economy. It is consistent with the Council's own vision of the type of economy that Northern Ireland should be striving to achieve.

Targets

The ten targets ofStrategy 2010are not related in any particular way either to the vision or to an explicit view of what are the critical determinants of the vision - of how the economy works. They are self contained and tacked on at the very end of the report. This is a major weakness of the report. In the Council's view, more work needs to be done on the targets. For example, productivity should be an explicit target, one that would assist greatly in the strategy being able to meet or exceed its other targets. This is an important omission ofStrategy 2010.

Recommendations

The relationship between recommendations and targets should be clearly delineated - specific recommendations should be tied to specific targets. However, this is not done inStrategy 2010. This lack of clear qualitative and quantitative links, lines of causation and channels of impact between recommendations and targets means that the stretching targets set inStrategy 2010are unlikely to be met. Moreover, proposals and suggestions are not costed nor priorities specified, suggesting that further work needs to be carried out. In other words, the sums needs to be done.

The unprioritised nature of the recommendations reflect the lack of a coherent view of the way the economy works based on economic evaluation and evidence. This is the missing link between the recommendations and the targets that would assist in identifying the key drivers and interventions and in setting priorities, and would act to add up and join up the recommendations. That is not to say that there are not many good ideas contained therein but considerable work is required to turn them into a set of strategic and consistent recommendations capable of fitting together and moving the economy onto a new growth trajectory.

Implementation

A number of new structures - an Economic Development Forum - as well as changes to the existing structures - a new single development agency - are proposed inStrategy 2010with respect to the implementation of the strategy. However, the Council is concerned that the new arrangements may not build upon the success of some of the present economic development agencies. Until these pieces of the jigsaw are fitted together the overall arrangement appears somewhat disjointed and perhaps duplicative. However, the strategy needs to be made more coherent and holistic before implementation mechanisms can be fully decided upon.

The Way Forward

Thus, in the Council's view,Strategy 2010needs substantial further work before we have a solid basis for economic development in Northern Ireland. We can all agree with the vision of a competitive and prosperous economy. There are many good ideas contained inStrategy 2010on how to achieve this vision and the strategy must be considered a useful beginning towards realising it. However, as the strategy stands the Council believes that it will not deliver. It should be considered as work in progress which must be reworked into a coherent whole. In short, a strategy.

Strategy 2010argues that following decisions by the Assembly it will be "necessary to ensure that there is the widest possible understanding of the strategy and the principles underlying it in order to ensure the consenus needed for successful delivery" (p.213). However, the impression given has been that the first draft of the strategy is the last word. Concerns about the content, analysis and feasibility ofStrategy 2010have been voiced not only by the Council but by others who closely follow economic matters in Northern Ireland. Nevertheless, there has been no formal consultation period or public scrutiny. The Council hopes that the Assembly Inquiry will provide the arena for consultation and scrutiny and the platform from which a revised and reworkedStrategy 2010can be launched.

Ultimately, the Council would envisage a finalStrategy 2010which is focused and joined up more tightly around the key drivers of economic growth and capabilities in the economy. The capacity to increase the level of the productive resources at the economy's disposal in land, labour, capital and entrepreneurship is likely to be limited (though inward investment and new firm formation are notable exceptions) so the emphasis must be on making more efficient use of existing resources. This shifts productivity to the fore of economic development policy and since productivity is growing fastest in the knowledge based economy promoting this takes prominence. The critical building blocks of the knowledge based economy are:

  • R&D and innovation policy for the development of new products and processes;
  • education and training policy to provide people with the skills needed to fully participate in such an economy; and,
  • policy to encourage enterprise and entrepreneurship to allow them to prosper from it.

The Council hopes that government is able to take forward and prioritise policy on these fronts within its economic development strategy to help make Northern Ireland one of the economic success stories of the next decade. What is critical is that the fit and coherence of policy across all areas is established through a reworkedStrategy 2010that places economic development strategy within a productivity growth framework, informed by economic evidence and evaluation. Recommended actions and targets should be informed, priorities set, and costings made within this framework. In this way,Strategy 2010could, the Council argues, be much improved.

Introduction

1. This Memorandum presents the views of the Northern Ireland Economic Council (hereafter referred to as the Council) on the proposals outlined inStrategy 2010(Economic Development Strategy Review Group, 1999). The Council note the wide remit of the Enterprise, Trade and Investment Committee's inquiry intoStrategy 2010and wish to assist its deliberations by highlighting issues which have arisen from research undertaken by the Council relevant to this topic. Before discussing these issues the next section presents a brief summary of the role and remit of the Council.

The Economic Council

2. TheNorthern Ireland Economic Councilis an independent advisory body, set up by the Secretary of State for Northern Ireland in 1977. The Council has a wide remit to provide independent advice to the Secretary of State on the development of economic policy for Northern Ireland. The future role and arrangements for the Council are matters for the devolved administration.

3. The Council carries out its role through four series of publications. Reports generally make specific policy recommendations endorsed by the Council. Occasional papers are intended to promote discussion on topical issues while commissioned research monographs are published under the author's name. Finally, Council responses to consultation documents are included in an advice and comment series.

4. The Council also publishes anAnnual Reportand the text of the annual SirCharles Carter Lecture, which the Council sponsors in honour of its first chairman. It also holds seminars and conferences designed to promote debate and the proceedings may from time to be published.

5. The Council is composed of 15 members. There are five independent members, one of whom is usually the Chairman. Five members represent trade union interests and are nominated by the Northern Ireland Committee of the Irish Congress of Trade Unions. Five members represent industrial and commercial interests and are nominated jointly by the Confederation of British Industry for Northern Ireland and the Northern Ireland Chamber of Commerce and Industry. Members serve four year terms, which may be renewed.

6. The Council has a small staff, including the Director, economists and administration support staff. Council publications are normally prepared by the economists but outside consultants are also engaged for particular projects. All publications go before the Council for comment prior to publication. It is the Council which bears final responsibility for their publication but not necessarily for the content or recommendations of commissioned research monographs.

Strategy 2010

7. In March 1999 the Minister for the Economy launchedStrategy 2010, a draft economic development strategy for the first decade of the next century. The wide ranging Terms of Reference for the review of the strategy are contained in Table 1. The Minister's Foreword toStrategy 2010emphasised that, in the first instance, it was "for discussion and debate". In view of the undoubted significance of the proposed strategy the Council agreed that debate and dialogue were needed, and hence in September 1999 the Council issued as an occasional paper its response,A Step-Change in Economic Performance? A Response to Strategy 2010(NIEC, 1999a). This memorandum is based largely on that response, on other aspects of the Council's work relating to publicly funded Research and Development (R&D), linkages, and implementation of current economic development strategy and other events since the response was published, such as the roundtable discussion on the strategy with economic experts held in November 1999.

TABLE 1

Terms of Reference of Review of Economic Development Strategy, Northern Ireland

The Terms of Reference for the review were as follows. It should:

  • encompass the entire economic context and set ambitious but attainable long term goals for the Northern Ireland economy in terms of wealth creation, employment and living standards;
  • range widely, covering not only industrial development matters but other major factors such as education and infrastructure provision, to the extent to which they will influence the rate of Northern Ireland's economic progress;
  • have regard to the Government's policies on sustainable development and equality of opportunity and to the public expenditure background;
  • be linked as appropriate to a regional spatial development strategy;
  • identify the major priorities for action by the Government, particularly DED and its agencies and the private sector, to create the conditions for meeting these goals;
  • provide strong direction for DED and its agencies and the private sector; and
  • be capable of adjustment in the light of future events.

Source: Economic Development Strategy Review Steering Group (1999, p24)

8. It was originally intended that theStrategy 2010report was to be handed to the Assembly as a draft for discussion and debate. Unfortunately while the Assembly was not in place in the months immediately following the publication ofStrategy 2010it is to be welcomed that the Enterprise, Trade and Investment Committee is now able to conduct this debate as its first Inquiry.

9. In its response toStrategy 2010the Council set up what it regards as an appropriate template with which to evaluate the strategy containing five elements which an effective economic development strategy should address. The five elements are as follows.

(i) A View of How the Economy Works

10. The first step in strategic planning is to try to understand and so better influence the economy's actual position in the global market place. An understanding of the economic growth process enables the development of a vision which is realistic and helps to distinguish key inputs, capabilities and outputs in terms of specific targets and recommendations.

(ii) A Vision

11. A vision should clarify the way ahead. It should be a short statement that captures the goal(s) or essence of the strategy. It should be challenging, purposeful, establish priorities, motivate and mobilise those involved, and generate consensus.

(iii) Targets

12. Targets or outcomes are a set of quantifiable economic and social bench-marks against which the success of the strategy can be determined. Two scenarios should be presented in any strategy;a baseline scenario- what would happen if there were no change in policy; and adesiredscenario - the desired values of the target variables in ten years as specified by the strategy. A comparison of the baseline and desired scenario should enable an evaluation of how demanding are the targets. If there is little difference between the two scenarios then only small or marginal changes to current policies might be needed; if there are large differences, then substantive, even radical, change must be contemplated.

(iv) Recommendations

13. Recommendations typically pull the major economic policy levers with a view to realising the targets. Recommendations are the first step in the implementation process. It is critical therefore that they are carefully articulated and well argued, with all the available evidence critically evaluated. Both intended and unintended consequences of a recommendation need to be considered. Recommendations should be focused, feasible, prioritised and consistent. Finally, all the recommendations need to be treated as a whole to ensure that they fit together coherently.

(v) Implementation

14. It is commonplace that well written and argued reports and strategies gather dust on library shelves or Ministers' desks. To prevent such an outcome requires that careful consideration is given to the process by which the recommendations are translated into action. It is important to pinpoint power and responsibility and to ensure that the body charged with a particular task has the necessary tools to deliver on targets. In some instances this may require new institutional arrangements, as well as timetables, regular reviews and/or tightly specified goals. It will also require that careful attention is paid to key constraints (e.g. budgetary limitations) and thus the feasibility of the strategy. Finally strategic planning exercises often foster the illusion of control. In the real world the unpredictable is common so feedback and review must be integrated into the implementation process.

15. Strategy 2010has all these elements. It contains, at least implicitly, a view of how the economy works, presents a vision, 10 targets, 62 recommendations, and new institutional mechanisms. Thus the Council's discussion as to whether or notStrategy2010is likely to be effective focuses on the quality of these five elements of the strategy and the degree to which they fit together as a coherent whole.

A View of How the Economy Works

16. For the strategy to achieve its goal requires an understanding of the way in which the economy works:

  • What are the critical factors?
  • What are the key drivers and relationships?

Developing a view on these issues requires a careful examination of the evidence combined with some prior sense of what is important. Since much of the evidence on how modern economies work is likely to be drawn from outside Northern Ireland, an appreciation of its relevance to the regional economy is required.

17. The development of an explicit view of how the economy works can assist policy makers in designing the strategy and in setting priorities. However, such a view serves other purposes. If it commands widespread agreement across society then it can promote a shared understanding which will assist in the realisation of the strategy. This highlights the need to have a well specified and accepted view, based on evidence.

18. The development of such a view must begin with an examination of what determines economic growth and development. Economic evaluation and research should inform this examination. Competitiveness for an economy is not the same issue as competitiveness for a business - economic policy is not business policy.

19. Baumol et al (1991) for example argues that the prime determinant of economic growth is productivity growth and the three primary determinants of productivity growth are in turn:

  • the investment rate;
  • the magnitude of the effort devoted to basic and applied research; and
  • the education of the labour force and managerial personnel (p.260).

In addition, the authors note that entrepreneurship is important, but not as easily quantified.

20. A focus on productivity as the key to growth accords with the views of HM Treasury in their pre-1999 Budget Report: "[P]roductivity - the quantity of output each of us on average produces - is a fundamental yardstick of economic performance. No economy can grow sustainably unless its productivity improves. And poor productivity condemns a nation to be held back" (HM Treasury, 1998,p.28).

21. Three other recent statements of what is fundamentally important are the United Kingdom (UK) White Paper on Competitiveness (Department of Trade and Industry, 1998a, 1998b), the report prepared by the Economic and Social Research Institute (ESRI) on investment priorities for the Republic of Ireland (RoI) covering the period 2000 to 2006 (Fitz Gerald et al, 1998) and theEnterprise 2010strategy for the RoI (Forfás, 2000). In the case of the UK White Paper on the knowledge-driven economy, the accompanying analytical paper sets out the rationale for knowledge and innovation being the fundamental means by which economic performance can be improved and then works through the policy implications of such a view. Economic policy making in the RoI, informed by economic research, has often focused on education, skills and training as fundamental. The ESRI report carefully considers the additional role of public infrastructure in the growth process and discusses the current stock of such infrastructure and future demand before coming to a conclusion as to priorities.Enterprise 2010puts the spotlight squarely on productivity growth as the key to rising living standards. This can be secured, it argues, by focusing on fundamentals such as productivity-led growth strategies in existing enterprises, establishment of new, high-productivity enterprises, improved education, skills and training, investment in physical infrastructure, and investment in public and private R&D.

22. There is also a wide literature on what has been referred to as social infrastructure or capability. The leading mature economies, such as the US and the UK, experience high levels of productivity, but low rates of productivity growth, and other lower productivity economies can potentially catch-up. However, the degree to which this potential is realised depends upon what is variously referred to as social capability or social infrastructure. Hall and Jones (1999), for examples, see social infrastructure as the "primary, fundamental determinant of a country's long-run economic performance" (p.95). They argue,

[B]y social infrastructure we mean the institutions and government policies that provide the incentives for individuals and firms in an economy (p.95).

[D]ifferences in social infrastructure across countries cause large differences in capital accumulation, educational attainment, and productivity, and therefore large differences in income across countries. (p.114).

The fundamental issue is then how to create the right institutional framework and set of incentives so that appropriate social infrastructure for economic growth results. For example, changing incentives for business by signalling in a credible way that grants, taxes and tax expenditures are to be substantially reduced might give firms the incentive to become more self reliant - more focused on earning a return in the economic sphere from the introduction of new products and processes rather than from the political sphere.

23. There is however inStrategy 2010no explicit and coherent view of the fundamental determinants of economic growth and development, nor reference to the literature on these determinants.What are referred to in the strategy as the "Key Principles" on which the strategy is built - equality and social cohesion, knowledge-based economy, enterprise, outward looking, and self help - might be considered to be the report's view of the key determinants, drivers and relationships. The fundamental underlying issue of productivity growth and its determinants is barely mentioned.

24. This is not to deny thatStrategy 2010does not stress some of the key drivers of a modern economy such as knowledge and innovation. It could be argued that some of the early discussion in the strategy that stresses determinants such as knowledge (pp.38-40) and the consequent shift in demand towards "employees with higher skills and greater flexibility" (p.38) is based on an implicit view of important factors such as innovation, education and training. This is echoed when the strategy profiles those sectors with the greatest potential for growth: electronics; telecoms; software; health technologies; tourism; and tradable services. In virtually all cases the availability of a skilled workforce is one of if notthekey factor affecting growth, while the level of R&D is also mentioned frequently (pp.79-88).

25. The importance of physical infrastructure investment is also mentioned when it is stated, in connection with a target of roads investment, that for "every 1% of GDP invested in infrastructure it is estimated that there is a corresponding improvement of 0.25% in productivity." (p.222). However, the reference here to productivity is the exception that proves the rule.

26. Issues of social infrastructure are embodied inStrategy 2010'skey principles of equality and social cohesion, enterprise and self-help. However, the statement of these principles must be built on within an underlying framework of the contribution of these factors, relative to public and private physical infrastructure, the population growth rate, the employment activity rate, education and training, R&D, innovation and knowledge etc., to productivity and overall GDP growth.

27. In this framework, there is a role for evidence-based economic research, a role that is largely but not entirely ignored inStrategy 2010, which too often equates economic policy with business policy. An internally consistent, coherent, and well argued view of the way the economy works that can command widespread support can inform the establishing of a vision, the setting of targets, and the making of recommendations.Strategy 2010can hence be taken forward by building on the report in this way. This would not be 'paralysis by analysis' but would establish a firmer foundation on which to build the strategy. TheEnterprise 2010strategy for the promotion of enterprise in the RoI (Forfás, 2000), already noted, is a good example of economic research informing strategy making. WhereEnterprise 2010succeeds in this way,Strategy 2010fails.

A Vision

28. The vision captures the goals of the strategy. The vision ofStrategy 2010is:

[A] fast growing, competitive, innovative, knowledge-based economy where there are plentiful opportunities and a population equipped to grasp them (p.129).

The Council welcomes this vision with its emphasis on growth, with success coming through innovation and the knowledge-based economy. In order to fill openings created, Northern Ireland has to train its workforce so that they are able to supply the necessary skills.

29. Such a vision accords with the widely held view that the future of the economy lies in brains not brawn. It is consistent with much of sections 3-7 of theStrategy 2010report which draws attention to the importance of innovation and knowledge for economic growth. It also agrees with the recent UK White Paper on Competitiveness,Our Competitive Future. Building the Knowledge-Driver Economy(Department of Trade and Industry, 1998a). Finally, it is consistent with the thrust of Northern Ireland's current economic development strategyCompeting in the 1990s(DED, 1990), and the Council's own vision of the type of economy that Northern Ireland should be striving to achieve - "a self-sustaining, rapidly growing economy providing a high level of employment" (NIEC, 1997,p.47).

30. Although not stated in the vision, it is not just a matter of creating jobs, but also high paying sustainable jobs. This is, of course, implicit in that a more innovative and knowledge-driven economy will tend to result in a higher standard of living. Furthermore, when the vision is fleshed out inStrategy 2010, it is clear that rising living standards based on durable jobs is an intended part of the vision, since it is argued that an economy that realises the vision will be characterised by "high value-added, high wage, lasting jobs" (p.129).

Targets

31. Coming to a coherent view of how the economy works should help to define, in conjunction with the vision itself, what the targets of the strategy should be - the targets would then relate the vision to the major determinants of the vision i.e. productivity and GDP growth. Targets or outcomes translate the vision into a tangible set of quantifiable outputs that operationalise the vision.

32. The targets need to be consistent with the vision and the determinants of the vision and should be mutually compatible. Selecting the target variables and their desired values requires careful judgement. The values should be both attainable and, at the same time, stretching and demanding.

33. Strategy 2010has ten targets or outcomes (Table 2). They are not related in any particular way either to the vision or to an explicit view of what are the critical determinants of the vision - of how the economy works. They are self contained and tacked on at the very end of the report. This is a major weakness of the report. The targets relate to GDP per capita relative to the UK, wage levels, employment growth, the importance of high technology industries, investment in roads and so on.

TABLE 2

Economic Development Strategy, Northern Ireland, Target Variables, Current and Desired Levels

Target VariableCurrent and Desired Level

Current
(1998-99)

Desired
(2010)

T1

GDP per head as a % of UK

80%

90%

T2

Average weekly earnings as a % of UK

86%

91%

T3

Employment growth

0.5%

1.5% pa

T4

Long-term unemployment as a % of workforce

4.0%

2.0%

T5

Registrations of new businesses per 10k population aged 16 or over

31

40

T6

Level of exports as a % of regional GDP

21%

30%

T7

Share of high-tech industries in total employment

2.9%

6.0%

T8

% employed workforce qualified to NVQ level4

23%

35%

T9

Business R&D as a % of GDP

0.6%

1.5%

T10

Investment in roads as a % of GDP

1.00%

1.5%

Source: Economic Development Strategy Review Steering Group (1999,p.217)

34. As the strategy points out, some of the targets are final outcomes (e.g Northern Ireland/UK GDP per capita), others are intermediate outcomes (e.g share of high technology industries in total employment) and some are inputs (e.g investment in roads as a percentage of GDP). They do however reflect a clear emphasis on growth in employment and GDP per capita, and set targets that will assist in facilitating this growth, via the increase in the importance of high technology industries, increased levels of R&D, and improved educational qualifications of the workforce at National Vocational Qualifications (NVQ) level 4.

35. As already should be clear, in the Council's view attention needs to be paid not only to GDP per capita but also to GDP per employed person or some other measure of overall productivity. As already noted economic commentators are unanimous in making a case for productivity as a target variable for any strategy concerned with the economy. Productivity should then be an explicit target for a Northern Ireland economic development strategy, one that would assist greatly in the strategy being able to meet or exceed its other targets. This is an important omission ofStrategy 2010. It is unlikely that some targets (eg raising Northern Ireland's GDP per capita relative to the UK as a whole) will be met by the year 2010 without more focused attention on productivity growth (since the stretching targets imply a step-change in the performance of the Northern Ireland economy).

36. It might be argued that the target inStrategy 2010on average weekly earnings is a proxy for a productivity target, since higher productivity will be reflected in higher earnings. However, since earnings is a reflection, not a determinant, it cannot be targeted by regional public policy as directly as productivity can. Introducing a productivity target would be more consistent with the focus of the strategy on real economy factors such as employment, exports and real GDP growth.

37. The targets inStrategy 2010refer to the desired values of the target variables in 2010 relative to their current values. However, little attempt is made to forecast what values the target variables would take in 2010 if present policies were to continue unchanged. The difficulty of attaining the desired level of the ten targets - employment, GDP per capita and so on - hence cannot be assessed because their expected values in 2010 on unchanged policies are not presented.

38. Estimating this scenario is vitally important. It assists the policy-maker in deciding where effort, resources and attention should be concentrated in meeting the desired values of the target variables. If one or more of the target variables (e.g. the reduction in long-term unemployment) are likely to reach their desired levels on unchanged policies by 2010, then policy-makers can best devote their attention to those instances where this is less likely to happen (e.g. raising Northern Ireland's GDP per capita relative to the UK as a whole). The implicit assumption inStrategy 2010seems to be that the current values of the target variables are good indications - with some exceptions - of their values in 2010 on unchanged policies. However, in the earlier part ofStrategy 2010a number of factors, such as peace and political stability (p.101) and favourable demographic forces (p.102), are identified which are likely to contribute to convergence with the UK economy. If a baseline scenario were provided then the reader would be in a position to judge how demanding are the targets.

39. In the Council's response toStrategy 2010(NIEC, 1999a) there is some work on establishing a baseline scenario. The Council obtaining from Cambridge Econometrics forecasts to 2010 of the specific values of four target variables. The results are presented in Table 3 for the targets relating to GDP per head, earnings, employment growth and growth of high-tech industries. The baseline scenario suggests that by 2010 three of these four target variables will decline relative to their current levels, while one will increase. In other words, the current level of a variable is not a good proxy for the baseline scenario to 2010. The results in Table 3 demonstrate how demanding the targets in the desired scenario will be to attain, particularly relative GDP per capita. Cambridge Econometrics see Northern Ireland/UK GDP per capita declining from 79.3 per cent in 1996-98 to 74.4 per cent in 2010, due to faster growth in the rest of the UK, compared with a desired level of 90 per cent.

TABLE 3

Economic Development Strategy, Northern Ireland, Selected Target Variables, Baseline and Desired Levels

Current, Baseline and Desired Scenario
2010

Target Variable

Current*

Baseline

Desired

T1

GDP per head as a % of UK

79.3%

74.4%

90%

T2

Average weekly earnings as a % of UK

86.3%

84.3%

91%

T3

Employment growth

0.5% pa

0.7% pa

1.5% pa

T7

Share of high-tech industries in total employment

2.5%

2.1%

6.0%

Source: NIEC (1999a. Table 3.1 p14) and data supplied by Cambridge Econometrics *Average 1996-1998

40. This analysis shows that the targets with respect to GDP per capita, employment growth, share of high technology industries and increased R&D are very demanding. Indeed, it could be argued that they require a step-change in the economic performance of the Northern Ireland economy. One target not base-lined by the Council was the desired reduction in long-term unemployment (as a percentage of the workforce). However, due to substantial efforts being made in Northern Ireland to reduce long-term unemployment major inroads are likely to be made in the near to medium-term. It thus appears that there are grounds for thinking that the baseline scenario on this variable may approximate the desired scenario, given current policy interventions, irrespective ofStrategy 2010.

41. Targets should however relate to intermediate and final outputs not inputs. By and large the ten targets met this criterion. However, in the case of the target concerning road investment, this is clearly an input to an unstated productivity target, not an output, and the target makes no reference to improving public transport, a serious omission in the Council's view. Also, targets should be operational, not aspirational. It is not clear in the strategy which are of the latter rather than the former.

42. Targets should be consistent with the determinants of the vision and with each other.Strategy 2010contains a target of business expenditure on R&D of 1.5 per cent of GDP by 2010 but has no target for public spending on R&D. To meeting this target and be consistent with the target for GDP per capita relative to the UK average, private business expenditure on R&D would have to grow by 10-15 per cent per year to 2010, multiplying by approximately a factor of four. It grew by 9 per cent a year, over the period 1993-1996. If public R&D expenditure stayed as it currently is to 2010, and as is planned over the next three years at least, private expenditure would grow under this scenario from about 50 per cent of all R&D expenditure to 80 per cent, the public contribution falling from 50 per cent to 20 per cent.

43. However, to do their own R&D and to be innovative, companies need access to publicly funded R&D through networking, co-operative research, and skills, training and knowledge transfers from public institutions such as universities, as argued by a recent Council report on publicly funded R&D and economic development (NIEC, 1999d). The Council believesthat university, government department and agency (e.g. health service) R&D expenditure must also be appropriately encouraged with targets for increased expenditure in these areas. Public and private technology transfer (eg via linkages from inward investment - see NIEC, 1999b) and innovation targets should also be set.

44. According toStrategy 2010; "in 1996 Northern Ireland had the lowest proportion of its economically active population in professional, managerial and technical occupations and the highest proportion classified as unskilled in the UK" (p.116). Nineteen per cent of the employed workforce have no qualifications of any kind, and only 42 per cent have at least NVQ Level 3 (Labour Force Survey, Spring 1998). The Medium Term Review 1999-2005 of the ESRI in Dublin (ESRI, 1999) asserts that "The Northern Ireland educational system has lagged behind that in the Republic, especially in terms of retention in upper second and third level". (p.148).

45. The Kennedy Report on further education (FEFC, 1997) argued that in the UK "priority for public funds should be directed to general and transferable vocational education, including key skills, at or leading to NVQ Level 3"(p.59). AsStrategy 2010notes, in contrast to the trend of declining population in Europe over the next decades, the economically active population in Northern Ireland will be increasing and the workforce will continue to be one of the most youthful in Europe (p.102). With appropriate attention to increasing levels of education, training and skills in the workforce, and a strong core of university-trained engineers and scientists, Northern Ireland could enter a period of sustained economic success. Under this scenario, targets relating to education take on dramatic significance. Northern Ireland must set clear and challenging targets for the skills and qualifications needed for competitiveness and hence the Council believes that more focus should be given inStrategy 2010to education and skills targets.

46. In sum, while the target variables in general connect somewhat the vision, they are not in general informed by the critical determinants of the vision and more work needs to be done on:

  • estimating what would have happened in the absence of the strategy so that a baseline scenario can be established;
  • adding the desired level of productivity in 2010 as a target;
  • adding targets for public R&D expenditure and for technology transfer and innovation;
  • adding additional education and skills targets in particular for the percentage of the workforce at NVW Level 3; and,
  • turning the target concerning road investment into a recommendation and amending it to include reference to increased funding for public transport.

47. Despite these caveats it would appear that many of the target values for 2010 are extremely challenging and suggest a step-change in the performance of the Northern Ireland economy. The Council welcomes stretching targets. Raising GDP per capita from 80 per cent of the UK average to 90 per cent by 2010 is especially demanding. This will require, other things being equal, much superior productivity growth performance in Northern Ireland relative to the rest of the UK. It is unlikely that tinkering around the edges will suffice to meet the targets, which must be operational, not aspirational. Fresh ideas will need to be considered, as well as radical decisions and changes to current policy based on a knowledge based agenda for increasing economic growth and well-being, backed up by the necessary resources. As one of the members of theStrategy 2010Steering Group remarked:

If we stay with the old ways we are going to be in very serious trouble in a relatively short time. We have no alternative but to seek radical strategies to attract inward investment, bolster indigenous industries and create a dynamic small business sector. (Kingon, 1999, p.53).

The same commentator has also remarked; "Every single economic development strategy for Northern Ireland in living memory has failed to meet its own targets". It is hence important this time that the strategy has the ability to 'think outside the box' to meet or exceed its targets. Targets must be better defined with respect to the vision and within a more coherently specified framework of the major drivers of economic growth, and recommendations must clearly relate to how to meet or exceed these targets.

Recommendations

48. One of the most striking characteristics of the recommendations is their breadth, both horizontally - across a wide variety of topics from locational to energy policy - and vertically - from strategy direction on the course of public support for industry to the details of the appropriate regulatory regime for out-of-town shopping centres and bed and breakfast accommodation. The recommendations reflect not only the wide terms of reference of the review (Table 1), but also the failure of the strategy to focus on key determinants and priorities within a framework informed by economic research.Strategy 2010makes 62 recommendations, grouped under the five key principles of the strategy, already noted (Box 1). Given so many recommendations, not all of which can be said to pull the major policy levers, and not all of which came out of the work of the sector and cross-sector working groups, the Council's analysis concentrated on assessing the degree to which the recommendations were focused, feasible, prioritised and consistent.

Strategy 2010: The Recommendations

Equality and Social Cohesion

Locational Policy

R1 The cities and towns identified in the DOE's "Shaping our Future" regional plan should e the main focus for the future location of industry. (p.144)

Social Partnership

R2 An Economic Development Forum should be established.

R3 A high powered, high quality research body should be established. (p.146)

Sustainable Development

R4 Businesses should take every opportunity to minimise their environmental impact through measures which will also enhance their competitiveness. (p.148).

Knowledge-based Economy

Skills and Education

R5 The Dearing report should be speedily and comprehensively implemented.

R6 Economic development strategy must inform education and training policy and its funding and delivery mechanisms.

R7 Collaborative clusters of schools, businesses and colleges should be established.

R8 A valued sub-degree level vocational educational programme should be established.

R9 A clearer focus is needed for the Further Education sector.

R10 The current system of careers guidance should be enhanced.

R11 Teacher training should include an industry placement module. (p.150)

Information Age

R12 An Information Age Commission should be established. (p.155)

Innovation

R13 There should be a campaign to promote innovation and good design.

R14 Efforts to increase R&D in indigenous firms should be intensified.

R15 University/business links should be enhanced.

R16 Businesses should look for opportunities to collaborate on R&D.

R17 A separate stream of funding to encourage R&D in universities is needed.

R18 Further funding should be allocated to the Teaching Company Scheme.

R19 Consultation is needed about the coverage of future Centres of Excellence.

R20 There should be a Northern Ireland equivalent of the "Reach Out" fund .

R21 The support structures for spin-out companies should be enhanced.

R22 A programme to promote Northern Ireland as a region associated with quality design is needed. (p.158)

Networking

R23 The Northern Ireland Growth Challenge should further develop its sectoral approach to networking.

R24 The business bodies should co-operate to increase networking. (p.163)

Enterprise

Celebrating Success

R25 The Government should set up a joint working group with the business bodies to consider ways and means of celebrating business success. (p.166)

Rebalancing the Incentives Package

R26 The existing grant regime for inward investment should be maintained unless and until new measures become available.

R27 Northern Ireland should have a special rate of Corporation Tax for new inward investments over a period of 5 years.

R28 Selective Financial Assistance (SFA) should be less readily available to existing firms.

R29 The Assembly should discuss further options for tax incentives with the Chancellor. (p.168)

Priorities for Financial Support

R30 Financial assistance should be prioritised according to characteristics displayed by applicant companies.

R31 A larger share of resources should be devoted to "softer" forms of assistance. (p.173)

Private Equity Finance

R32 The establishment of a venture capital fund.

R33 The development of a Business Angels initiative. (p.176)

The Planning System

R34 No further out-of-town shopping developments for five years.

R35 The Assembly should introduce a rates regime which helps to nurture small indigenous retail businesses. (p.178)

Outward Looking

Infrastructure Linkages with Other Regions

R36 The Belfast-Dublin road route should be developed as a matter of priority.

R37 A centralised plan should be established to develop and budget for Strategic Transport Routes on a UK-wide basis.

R38 Future energy investment decisions should be made in the context of an island of Ireland energy market.

R39 The machinery for the creation of an island energy market should be established as a matter of priority. (p.181)

European Union

R40 There should be a well-resourced, high profile Northern Ireland regional office in Brussels.

R41 There should be a Minister with special responsibility for Northern Ireland's interests in Europe.

R42 A further round of special European Union (EU) funding, with a particular focus on economic regeneration, is necessary to maximise the benefits of peace. (p.186)

Fostering Global Perspectives

R43 Programmes such as the Business Education Initiative and Explorers which provide opportunities for students and business people to gain experience and knowledge overseas should be expanded, and new ones developed.

R44 Tailored training courses in self-presentation should be developed and introduced in all schools and colleges.

R45 Foreign language teaching should be extended throughout the education system and the choice of languages available should be widened.

R46 Twinning arrangements with other regions should be developed.

R47 Northern Ireland should engage more actively in European, UK and, where appropriate, RoI initiatives, in areas such as technology, competitiveness, Information Technology (IT) and education and training. (p.190)

Self Help

Local Economic Development

R48 The Assembly should address the future funding and evolution of local economic development as soon as possible.

R49 A pilot project to explore methods of rationalising local economic development arrangements should be set up. (p.194)

The Rural Economy

R50 Deregulation of the bed and breakfast sector of the tourism industry should be considered.

R51 New technology-driven businesses should be promoted in rural areas.

R52 A technology training programme targeted at those working in the rural community should be devised. (p.196)

Energy Policy

R53 An updated energy policy statement should be adopted.

R54 Strategic investments may require a public/private partnership justifying public investment.

R55 Targets should be set for use of Non-Fossil Fuels for electricity generation, for the achievement of energy efficiency and the use of Combined Heat and Power.

R56 The recommendations of the Government's Utilities Regulation Review should be fully implemented.

R57 The revision of the electricity generation contracts should be brought to a speedy conclusion.

R58 The £40 million fund, held by DED, should be used to buy out generating capacity currently under contract to Northern Ireland Electricity (NIE). (p.199)

The Structure of the Public Sector

R59 The public administration arrangements in Northern Ireland should be reviewed urgently. (p.204)

DED Structures

R60 The recommendations of the McKie report relating to a sectoral approach and to information sharing should be implemented as soon as practicable.

R61 A new single economic development body should be created. (p.205)

The Public Expenditure Dimension of Economic Development

R62 A Northern Ireland Development Fund should be established. (p.207)

Source: Economic Development Strategy Review Steering Group (1999, various pages)

Focus

49. The relationship between recommendations and targets should be clearly delineated - specific recommendations should be tied to specific targets. However, this is not done inStrategy 2010and the Council's analysis of the relationship between the targets and the recommendations finds that in only three cases - increasing the new firm formation rate, encouraging the growth of high-tech industries, and promoting business R&D in relation to GDP - are there clear connections between targets and recommendations. Despite the lack of clear links presented inStrategy 2010it could also be argued that, implicitly at least, connections exist between the recommendations and targets relating to exports and employment growth. However, for two of the targets - the reduction in long-term unemployment and the increase in the employed workforce qualified to NVQ level 4 - there are no directly related recommendations outside of implementing recommended reforms of the educational system such as those of the Dearing Report (NCIHE, 1997).

50. Arguably the two most demanding targets are those which bench-mark Northern Ireland performance against the UK as a whole, particularly the increase in GDP per head from 80 to 90 per cent, because the baseline scenario suggests on unchanged policies that the value of this variable in 2010 will be 74.4 per cent (Table 3). The achievement of the other targets - increased new firm formation, raising the educational qualifications of the labour force, more business R&D, greater penetration of export markets - are clearly very important and necessary conditions for this step-change in economic performance.

51. However, as the discussion above makes clear, it is not at all obvious based onStrategy 2010that these targets will be achieved. Nor is it obvious how the recommendations not related to the targets result in Northern Ireland performing much better than the rest of the UK. This is not to deny that several of these recommendations (such as the emphasis on the knowledge-driven economy) appear to be sensible moves in the right direction. However, Great Britain (GB) is doing the same. Northern Ireland must significantly close a large productivity gap with GB and the RoI, not just keep up. Thus the demanding and ambitious targets bench-marking Northern Ireland against the UK as a whole will be extremely difficult to attain by 2010, based on the discussion inStrategy 2010. Indeed, the lack of clear qualitative and quantitative links, lines of causation and channels of impact between recommendations and targets means that the stretching targets set inStrategy 2010are unlikely to be met.

Feasibility

52. Many important recommendations will be relatively easy to implement - at least a third of them are either existing or recently announced policies. For example, several of the recommendations restate Northern Ireland's existing economic development strategy,Competing in the 1990s(DED, 1990). The recommendation that is likely to be most difficult to implement concerns the reduction in Corporation Tax for new inward investment for a five year period. This difficulty reflects a variety of legal and political obstacles including the precedent it might set for Scotland and Wales. Even if these could be overcome it is not clear that the recommendation would have a major impact on inward investment. A survey by Coopers and Lybrand (1996) showed that the top factors influencing a company's decision to come to Northern Ireland were first, availability of labour and second, skills. However, a permanent Corporation Tax cut, rather than a temporary one, set in the context of reduction grants for initial capital expenditure, would potentially be beneficial, especially to new foreign investors in modern fast growth, high profit and less capital-intensive sectors. It is also a powerful and simple marketing tool for the agency charged with attracting inward investors. The exploration of such tax and grant options such as this between the Assembly and HM Treasury, and the degree to which Northern Ireland should fund any tax loss to the Exchequer, might lead to more feasible approaches to rebalancing the fiscal incentives packages than the specific recommendations ofStrategy 2010.

Priorities

53. Priorities are important because they provide a sense of direction, ideally according to their impact on the targets, of where effort should be concentrated, both in terms of public expenditure and to those charged with administering the policy. This is particularly important when a strategy has 62 recommendations and a number of major public expenditure implications. However, proposals and suggestions are not costed - eg the cost of the reduce Corporation Tax and of implementing the Dearing report (NICIHE, 1997) recommendations - nor priorities specified, suggesting that further work needs to be carried out. In other words, the sums need to be done.

54. The largely ad hoc, unprioritised nature of the recommendations reflect the lack of a coherent view of the way the economy works based on economic evaluation and evidence. This is the missing link between the recommendations and the targets that would assist in identifying the key drivers and interventions and in setting priorities, and would act to add up and join up the recommendations. The strategy should then establish these key drivers - education, R&D, innovation and so on - within an overall framework.

Consistency

55. Too frequently the recommendations do not contain a discussion of the evidence and reasoning on which they are based (eg Northern Ireland should have a special rate of Corporation Tax for new inward investments over a period of five years; no further out-of-town shopping development for five years). Indeed, on occasion the available evidence suggests a recommendation is unlikely to have the desired impact or be inconsistent with achieving a particular target (eg expanding the number of education places yet questioning the growth of the education budget; restricting growth of out-of-town shopping centres when evidence suggests the expansion leads to innovation, growth and increases in productivity and an outward looking focus - all of which contribute to the targets set byStrategy 2010).

56. Because of these weaknesses the recommendations inStrategy 2010are unlikely to deliver the step-change in economic performance which will be required to meet its targets and realise the vision. Indeed as they currently stand they have the potential to plunge the economy into confusion. That is not to say that there are not many good ideas contained therein but considerable work is required to turn them into a set of strategic and consistent recommendations capable of fitting together and moving the economy onto a new growth trajectory.

57. Thus, in the Council's view,Strategy 2010needs substantial further work before we have a solid basis for economic development in Northern Ireland. This work will of course build on the vision and stress on R&D, innovation, education and knowledge inStrategy 2010. It will also build upon the many ideas and suggestions generated by the nearly 300 people who participated in the process of preparingStrategy 2010. Those now have to be welded into a coherent whole. In short, a strategy.

Implementation

58. Issues of implementation are important, as a recent Council report on the lack of full implementation of economic development strategy in the 1990s makes clear (NIEC, 1999c). A number of new structures - an Economic Development Forum - as well as changes to the existing structures - a new single development agency - are proposed inStrategy 2010with respect to the implementation of the strategy. However, the Council is concerned that the new arrangements may not build upon the success of some of the present economic development agencies and that appropriate mechanisms for accountability may not be put in place. Until these pieces of the jigsaw are fitted together the overall arrangement appears somewhat disjointed and perhaps duplicative. The strategy needs to be made more coherent and holistic before implementation mechanisms can be finally decided upon.

The Way Forward

59. We can all agree with the vision of a competitive and prosperous economy. There are many good ideas contained inStrategy 2010on how to achieve this vision and the strategy must be considered a useful beginning towards realising it but as it stands the Council believes that it will not deliver. It should be considered as work in progress which must be reworked into a coherent strategy document that commands widespread acceptance and is likely to meet or exceed its own targets. The Council has put forward what it views as the essential building blocks of a good economic development strategy. It has assessedStrategy 2010against this template and has made a number of suggestions where in its opinion improvements could be made.

60. Strategy 2010argues that following decisions by the Assembly it will be "necessary to ensure that there is the widest possible understanding of the strategy and the principles underlying it in order to ensure the consensus needed for successful delivery" (p.213). This will also assist the Assembly and wider society generally in coming to a view about the strategy and the validity of its recommendations.Strategy 2010was released in late March 1999, but within two months steps were being taken to implement parts of the strategy. There has been little, if any, time for discussion and debate on the strategy, and the impression given has been that the first draft of the strategy is the last word.

61. Concerns about the content, analysis and feasibility ofStrategy 2010has been voiced not only by the Council but by others who closely follow economic matters in Northern Ireland. These include researchers, academics, members of the press and of democratic forums such as the Assembly and Belfast City Council. Nevertheless, there has been no formal consultation period or public scrutiny. Such a procedure would be considered normal for such a vitally important strategy document. Consultation before implementation would be merited, in the Council's view, not only as a matter of good practice but also because there are a number of critical questions and comments concerningStrategy 2010that need to be addressed before the strategy is implemented. The Council hopes that the Assembly Inquiry will provide the arena for such consultation and scrutiny and the platform from which a revised and reworkedStrategy 2010can be launched.

62. Ultimately, the Council would envisage a finalStrategy 2010which is focused and joined up more tightly around the key drivers of economic growth and capabilities in the economy. The capacity to increase the level of the productive resources at the economy's disposal in land, labour, capital and entrepreneurship is likely to be limited (though inward investment and new firm formation are notable exceptions) so the emphasis must be on making more efficient use of existing resources. This shifts productivity to the fore of economic development policy and since productivity is growing fastest in the knowledge based sectors promoting the knowledge based economy takes prominence. The critical building blocks of a knowledge based economy are:

  • R&D and innovation policy to encourage the development of new products and processes;
  • Education and training policy to provide people with the skills needed to fully participate in such an economy; and,
  • Policy to encourage enterprise and entrepreneurship to allow them to prosper from it.

The Council hopes that government is able to take forward and prioritise policy on these fronts within its economic development strategy to help make Northern Ireland one of the economic success stories of the next decade.

63. The Council is dedicated to assist in any way it can in helping achieve this goal. Recent Council research has highlighted some of the practical steps that might be taken to strengthen the economy and which should informStrategy 2010, in areas such as reducing grant dependence (NIEC, 1999c), linkages and inward investment (NIEC, 1999b), publicly funded R&D (NIEC, 1999d, 2000a), and educational planning and reform (NIEC, 2000b). What is most critical, however, is that the fit and coherence of policy across all such areas is established through a reworkedStrategy 2010that places economic development strategy within a productivity growth framework, informed by economic evidence and evaluation. Recommended actions and targets should be informed, priorities set, and costings made within this framework. In this way,Strategy 2010could, the Council argues, be much improved.

REFERENCES

Baumol, W.J., Blackman, S.A.B. and Wolff, E. N. (1991)Productivity and American Leadership.The Long View.Cambridge Mass. MIT Press.

Cambridge Econometrics (1999)Regional Economic Prospects.Abridge Version. February. Cambridge: Cambridge Econometrics.

Coopers and Lybrand (1996)Inward Investment in the British Isles.London: Coopers and Lybrand.

Crafts, N. F. R. (1993)Can De-Industrialisation Seriously Damage Your Wealth?A Review of Why Growth Rates Differ and How to Improve Economic Performance. Hobart Paper 120. London: Institute for Economic Affairs.

DED (1990)Competing in the 1990s. The Key to Growth.Belfast: Department of Economic Development.

Department of Trade and Industry (1998a)Our Competitive Future:Building the Knowledge-Driven Economy.Cm 4176. London: Stationery Office.

Department of Trade and Industry (1998b)Our Competitive Future:Building the Knowledge-Driven Economy.Analytical Paper. London: the Department(www.dti.gov.uk;comp/competitive)

Economic Development Strategy Review Steering Group (1999)Strategy 2010.Belfast: Department of Economic Development.

ESRI (1999)Medium Term Review 1999-2005.Dublin: Economic and Social Research Institute.

FEFC (1997) Learning Works: Widening Participation in Further Education.Coventry: The Further Education Funding Council. Chair; Helena Kennedy QC.

FitzGerald, J., Kearney, I., Morgenroth, E. and Smyth, D. (1999)National Investment Priorities for the Period 2000-2006.Policy Research Series 33. Dublin: Economic and Social Research Institute.

Forfás (2000) Enterprise 2010:A New Strategy for the Promotion of Enterprise in Ireland in the 21st Century.Dublin: Forfás

Hall, R. E. and Jones, C. I. (1999) "Why Do Some Countries Produce so Much More Output Per Worker than Others?"Quarterly Journal of Economics.Vol CXIV, Issue 1, Feb, pp.83-116.

HM Treasury (1998)Steering A Stable Course For Lasting Prosperity.Pre-Budget Report. Cm 4076. London: Stationery Office.

Kingon, S. (1999) "Time for Radical Change".Ulster Business.Volume 9, No 4, April, pp.52-53.

National Committee of Inquiry into Higher Education (1997)Higher Education in the Learning Society Main Report.London: the Committee.

NIEC (1997)The 1997 UK Budget: Implications for Northern Ireland.Report 125. Belfast: Northern Ireland Economic Council.

NIEC (1999a)A Step-Change in Economic Performance.A Response to Strategy 2010.Occasional Paper 12. Belfast: Northern Ireland Economic Council.

NIEC (1999b)Let's Get Together. Linkages and Inward Investment in Northern Ireland.Report130. Belfast: Northern Ireland Economic Council.

NIEC (1999c)The Implementation of Northern Ireland's Development Strategy in the 1990's. Lessons for the Future.Report 131. Belfast: Northern Ireland Economic Council.

NIEC (1999d)Publicly Funded R&D and Economic Development in Northern Ireland.Report 133. Belfast: Northern Ireland Economic Council.

NIEC (2000a)Response to Consultation Paper on Research Funding Allocation Method to be Applied to the Northern Ireland Universities (Northern Ireland Higher Education Council).Advice and Comment Series 00/01. Belfast: Northern Ireland Economic Council.

NIEC (2000b)Response to Learning for Tomorrow's World: Towards a New Strategic Plan for Education Services in Northern Ireland 2000-2006 (Department of Education for Northern Ireland).Advice and Comment Series 00/02. Belfast: Northern Ireland Economic Council. In process

TOP

ANNEX 2

DR JOHN BRADLEY

January 28th,2000

Thank you for your letter of January 24thinviting a submission to your committee's inquiry intoStrategy 2010.

My colleague, Douglas Hamilton, and I wrote a detailed critique ofStrategy 2010shortly after its publication in Spring 1999. Not having access to other forums of debate, and in order to promote a wider discussion of the subject, we published two parts of this critique as journal articles, copies of which are enclosed.

The first article, "Making policy in Northern Ireland: a critique ofStrategy 2010", was published byAdministration, the journal of the Irish Institute of Public Administration (IPA). The second article, "Strategy 2010: planning economic development in Northern Ireland", was published in December by the leading UK regional economic journal,Regional Studies.

Please excuse the fact that this material is not in the format laid out in your "guide to submitting written evidence". However, Douglas and I feel thatStrategy 2010raises such fundamental issues about the appropriate industrial and wider development approach for Northern Ireland that these two longer documents represent the appropriate way for us to respond to your invitation to submit written evidence. The main problem withStrategy 2010is not that it is ill-conceived in parts, but rather that it is systemically ill-conceived and flawed.

Both Douglas and I would be delighted to present oral evidence, if called upon to do so. We are aware that we should be constructive as well as critical, and have been giving much thought as to howStrategy 2010might be revised and extended so as better to address the socio-economic development challenges faced by devolved government in Northern Ireland.

Dr John Bradley

Making Policy in Northern Ireland:
A critique ofStrategy 2010

JOHN BRADLEY AND DOUGLAS HAMILTON

John Bradley is a research professor in the Economic and Social Research Institute. Douglas Hamilton is a doctoral student in the Department of Geography, University of Newcastle, Newcastle-upon-Tyne, England. He is on leave of absence from the Northern Ireland Economic Council.

INTRODUCTION

Public debate in the political sphere arising out of a long history of violent conflict in Northern Ireland has had a tendency to crowd out discussion of more mundane policy areas of Northern governance, perhaps fostering the belief that when it comes to socio-economic development planning, there is wide agreement on diagnosis and prescription. For who could possibly quarrel with a vision statement for the Northern Ireland economy that sought to bring about:

..a fast growing, competitive, innovative, knowledge-based economy where there are plentiful opportunities and a population equipped to grasp them (Strategy 2010,p.9).

Strategy 2010: Report by the Economic Development Strategy Review Steering Groupwas published in March 1999 by the Northern Ireland Department of Economic Development (DED) and offered by Minister of State, Adam Ingram, MP, to the Assembly and the wider community for public discussion. The report was mandated in theBelfast Agreementin April 1998, where it is stated that the British Government would make rapid progress with:

..a new economic development strategy for Northern Ireland, for consideration in due course by the Assembly, which would provide for short and medium-term economic planning linked as appropriate to (a) regional development strategy.

Strategy 2010is an important document and comes at a crucial juncture in the development of political stability in Northern Ireland, with a real possibility of committed dialogue in the Northern Assembly on the socio-economic future of the region within the UK, Ireland and the EU. It is the desire of the British government that the report should act as the base from which debate and subsequent economic policy development in Northern Ireland will flow, so it is essential that it be critically evaluated and that its content be openly discussed.

As Northern Ireland begins to adjust to permanent peace, and if the new Assembly and Executive starts to function as a devolved regional government, debates on socio-economic issues will become the norm rather than the exception.Strategy 2010might be considered as an overture to this drama and is of interest both in terms of political context as well as economic content.

There are many ways in which one might examineStrategy 2010, and we propose to do so under two broad headings:

1) Analysis and diagnosisof the extent to which Northern Ireland's economy departs from the desired state painted inStrategy 2010'svision statement;

2) Prescriptionas to how public policy and private resources might be mobilised to move the Northern Ireland economy closer to the vision.

ANALYSIS OF THE NORTHERN IRELAND ECONOMY

When he launchedStrategy 2010,Minister of State Adam Ingram, MP, described the Strategy Steering Group (SSG), who oversaw its preparation, as being 'largely private sector'. However, only six of the thirteen person group currently work in the private sector and two of these were consultants from an area of the market services sector which, to a considerable extent, depends on the large Northern public sector. The Chair of the SSG was the Permanent Secretary of DED, two other members were Deputy Secretaries in DED, and two were respectively Chair and Chief Executive of the Industrial Development Board (IDB). The past performance and future remit of DED and the IDB were the main issues under scrutiny in the strategic review, which suggests that the balance of representation on the SSG may not have been conducive to rigorous self-critical re-appraisal. The nearest comparable review of economic policy in the Republic of Ireland --theCullitonreport of 1992 - had a nine member group consisting of six from the private sector (of which one, JimCulliton, was Chair), and three from the public sector, of which one (Dr Seán Barrett of Trinity College Dublin) was an academic with an established reputation for being (inter alia) a scourge of what he considered was public sector complacency and inefficiency. There was only one civil servant, who acted as secretary to the group.

The Strategy Steering Group functioned as a co-ordinating mechanism for a range of other groups, consisting of government departments, sectoral working groups (in the areas of agri-food, construction, electronics, engineering, food processing, health technologies, software, telecoms, textiles, tourism and tradeable services), cross sectoral working groups (in the areas of culture, energy, exports, infrastructure, innovation, finance, and education), the publicly funded Northern Ireland Growth Challenge, and a consultation panel consisting of some thirty-six organisations (including the CBI, IOD, NIEC, NIC of ICTU as well as the two Northern Ireland universities). Such a wide-ranging process of consultation might appear to have offered a guarantee that all important aspects of the Northern economy were covered and all relevant points of view at least considered, if not taken on board. In practice, such an unwieldy organisational arrangement almost certainly resulted in DED itself, through its internal Strategy Review Unit, setting the agenda, initiating the drafts and making crucial judgement calls.

The analysis offered inStrategy 2010is shallow and fails to refer in a coherent fashion to the extensive research that has been published over the years on the Northern economy and government policy. Indeed, a serious omission is any reference to earlier strategy documents by the DED and the development agencies in the 1990s. To formulate policy in the absence of open policy evaluation is unlikely to lead to informed analysis and conclusions.

No published research appears to have been commissioned forStrategy 2010from outside experts, with the exception of a review of the structures of the DED 'family' of agencies (IDB, LEDU, IRTU etc.) carried out by Professor Peter McKie, Chair of DED's Industrial Research and Technology Unit (IRTU). However, this does not appear to have been formally placed in the public domain. Although sporadic references to other research are made inStrategy 2010, there is no bibliography of sources appended to the report. Once again, one cannot but compare this situation with the execution of the Republic of Ireland'sCullitonreport, where sixteen substantial research and consultancy studies on issues relevant to industrial policy were commissioned from outside independent experts, all of which were published with the main report.

Strategy 2010correctly identifies the rapid globalisation of economic activity as the primary factor setting the future context for the Northern Ireland economy. The opportunities offered by globalisation are obvious - with international trade often growing at over twice the rate of local GDP - but these benefits can only be realised if the local economy can obtain access to external markets through having a high degree of competitiveness, measured in the very widest sense.

Given the central role played by globalisation and international competitiveness in the development of small regional economies, one might have expectedStrategy 2010to have been based on solid research in the area. However, in his reply to a recent parliamentary question relating to Northern competitiveness, Minister Ingram stated that:

The Industrial Development Board for Northern Ireland (IDB), the arm of DED responsible for inward investment, examines among other issues Northern Ireland's performance in the inward investment market relative to competitors. IDB has not directly purchased or commissioned any study into Northern Ireland's competitive advantage in attracting inward investment. (written reply, 16 December 1998).

An illustration of the limited and selective wayStrategy 2010drew on available evidence is its failure to reference a recent report on competitiveness prepared for the Northern Ireland Economic Council (NIEC) by Dunning et al (1998). Written by a leading world expert on foreign direct investment and multinational enterprises, this report was balanced and measured in tone, but hard-hitting. Dunning pointed out that to the extent that Northern firms have any international competitive edge, it is based primarily on low wage costs and is not delivering improved living standards. He also commented that the concept of regional policy that permeates Northern thinking is focused more on the inter-regional distribution of UK central government largesse rather than on the creative use of local policy autonomy as a means of promoting self-sustaining wealth enhancement based on interaction with the global economy.

WhenStrategy 2010turns to the international context for the Northern economy, it quickly becomes apparent that it contains little or no new strategic thinking about the future relationship of the local economy with the external world. For a small regional economy like Northern Ireland (or indeed, the Republic of Ireland), any local perspective on the external economy has two distinct but complementary aspects:

(a) to understand how markets in the external world are likely to sustain a buoyant demand for exports from Northern Ireland;

(b) to gauge the likely prospects of a range of external regions as potential sources of foreign direct investment (FDI) into Northern Ireland.

In a short to medium-term perspective the list of dominant export destinations and the sources of inward FDI are unlikely to switch dramatically from the position today. That being so, the British market must continue to be of central concern for Northern Ireland since it is the destination of over half of external sales and the source of the bulk of inward investment.1Given the likely continued medium-term dependence of the Northern economy on the British market, it is puzzling thatStrategy 2010treats the nature of, and relationship with, that market in so cursory a fashion.

The section of the report that deals with the UK economy (a mere four pages) contains a crucial assertion that colours and constrains the thrust of the entire analysis:

The main determinant of economic activity in Northern Ireland is the level of activity in the rest of the UK. An economic development strategy for Northern Ireland therefore needs to be set within, and be consistent with, the overall thrust of national economic policy (p.62).

This, in a nut-shell, is Northern Ireland's development dilemma. On the one hand it can stick closely to UK economic policy and institutional norms and jog along, sometimes above, other times below UK average growth performance, but with little prospect of rapid convergence to the UK average standard of living. On the other hand, it can seek out a politically acceptable degree of regional policy innovation that might offer some hope of growth in the Northern private sector faster than that of the UK as a whole.

The Republic of Ireland, making use of its limited but crucial policy autonomy, followed the latter course from the late 1950s. Far-seeing policy makers under Taoiseach Seán Lemass took a strategic decision that the dominance of the UK market (destination at the time of over 95 per cent of Irish exports) was unlikely to provide a suitable context for Irish development and modernisation. Tax varying (or, more precisely, tax re-balancing) powers were a crucial element of this policy, especially with regard to the attraction of inward investment. The centre-piece of the industrial incentive system was initially a zero rate of corporation tax and, in order to keep the public finances roughly in balance, this necessitated the maintenance of high rates of personal income tax and indirect taxes. Equally important were reforms in education, progressive improvement in infrastructure, evolution of social partnership arrangements, enthusiastic embracing of EU initiatives (EMS, the Single Market, the Social Chapter, EMU), and - after many false starts - the creation of fiscal stability.

The situation in Northern Ireland is very different. Any explanation of the recent aggregate performance of the Northern economy can be summarised as follows:-

Northern Ireland and Britain share common fiscal, monetary and exchange rate policies; Britain is Northern Ireland's main external market and the (British) Exchequer makes significant transfers to Northern Ireland to enable the region to maintain UK level of provision (Strategy 2010,p.69).

The huge size of the British Exchequer financing (the so-called subvention) serves to influence and colour every corner of the Northern economy, a fact that is acknowledged only partially inStrategy 2010. The subventiondirectlysupports jobs in the Northern public sector to the extent of about 33 per cent of total employment, compared with 22 per cent in the UK as a whole (about the same in the Republic of Ireland). The subvention also directly supports incomes of the unemployed, the retired and the sick, as well as providing a high level of public housing, health and education (over and above direct public employment aspects).

However,indirectimpacts of Northern Ireland's public sector activity on the structure and behaviour of the local private sector are of equal, if not greater, importance relative to the above direct impacts. The subvention finance sucks in imports, and explains much of the buoyancy of the retail sector. Northern manufacturing is predominantly made up of small firms, oriented mainly to supplying the domestic market, which is in turn sustained to a great extent by direct and indirect demand arising from public sector activity. Comparisons between Northern Ireland and the UK (p.73) are distorted by the size and weight of non-market activity. For example, the fact that the Northern economy emerged relatively unscathed from the British recession of the early 1990s is due in the main to the size and cushioning effects of automatic and discretionary public expenditure stabilisers. Indeed, the buoyancy of activity in Northern manufacturing relative to Britain is probably due in large part to the much higher level of subsidies and grants, and may have little to do with intrinsic local competitiveness.2There is much more going on here than simply the provision of regional finance on the basis of regional need (according to the Barnett formula). Unless and until the pervasive nature of public finance in Northern Ireland is better understood, analysis will be misleading, diagnosis will be flawed, and policy prescription will be ineffectual.

'Peace' is identified inStrategy 2010as the first and most important 'opportunity' for the Northern economy, although conditions of peace are likely to facilitate faster economic growth rather than guarantee it. Growth, if it comes, will need to be in the private sector and is likely to be accompanied by sectoral reallocation and a shrinking of elements of the public sector, leading to re-balancing and restructuring of the economy.

The report itemises six other economic 'opportunities': favourable demographics; educational attainments; an attractive business environment; flexible labour markets; telecommunications infrastructure; and a green image. Most of these have been in place for many years, implying that the absence of peace has prevented them from being fully effective. However, such 'opportunities' also have downsides. Favourable demographics involve high natural growth rates of population, making it harder to meet job creation and unemployment targets, even if labour supply problems are eased. Educational attainment success in Northern Ireland appears to be limited to a high level of participation in higher education, but is accompanied by failures at lower levels and in skill training. Attractive features of the business environment in terms of 'quality of life' co-exist with a high degree of community locational polarisation that is unlikely to be wound back in the short to medium term. Flexibility of the labour market tends to mean low wages, high long-term unemployment, low skills and part-time working.

Perhaps the most serious failure of the Northern economy is the high proportion of long-term unemployment in the (declining) total rate of unemployment (about 45 per cent in the North, compared to 27 per cent in the UK as a whole). The report is tactful, but less than frank, in not pointing out that the bulk of the long-term unemployed are Catholic and that this has been an enduring problem for decades (Murphy with Armstrong, 1994; Gudgin and Breen, 1996; Bradley, 1997). Other failures include the fact that Northern manufacturing is concentrated in low wage, low productivity sectors that do not have a bright future in the region; a high level of industrial grants which has not produced a commensurate degree of profitable activity; technical education and training which generally mirror British levels, and are often poor by EU standards; R&D expenditure which is low, as is the rate of uptake of new technologies; and the manner of electricity privatisation which has left the region with very high energy costs.

Some of the economic failures identified inStrategy 2010seem to reflect failures of nerve on the part of the SSG rather than any real failure in the economy. For example, the peripherality of the North is stressed, as is the low level of intra and extra-regional networking. Yet, nowhere does the report draw attention to or promote the pioneering work of the Joint Business Council of IBEC and the CBI(NI) - in particular, its Discussion Paper issued in October, 1998 - which has cultivated the building of North-South networks to mitigate the individual peripheral status of North and South by stressing the potential for mutual interchange and engagement across the border (IBEC/CBI, 1998).3

Over the past two decades the Northern development agencies, and the IDB in particular, have been the focus of detailed analysis by bodies such as the NIEC, the Northern Ireland Audit Office and other researchers, with regard to their investment and job creation performance.4Such studies show that the IDB has not realised its jobs and investment targets, whether it be through inward investment or indigenous industrial development. Moreover, they refer critically to the underdeveloped nature of performance measurement and assessment within the IDB and DED. The enduring poor performance of the IDB, even allowing for the difficult period through which it has had to operate, has been the key problem in economic development policy in Northern Ireland. In this regard, it is again instructive to note that theCullitonreport in the Republic of Ireland presented an analysis of the IDA, highlighting the unsuccessful nature of grant assistance to industry over many years (Culliton, 1992, pp. 59-66).

POLICY PRESCRIPTION FOR FASTER GROWTH

Strategy 2010sets out five key principles or broad targets that it seeks to achieve. We examine each of these in turn.

Equality and social cohesion

Equality and social cohesion are desirable aims in their own right and have an importance and urgency that are independent of economic matters. It has also come to be recognised that modern high technology economies simply cannot function at high levels of efficiency if workplace and wider social relations are not characterised by equality, respect and cohesion. What makes the situation in Northern Ireland unique is that some important socio-economic differential (eg unemployment rates) have opened up between members of two different communities rather than simply between two socio-economic groups. Addressing such differentials will call for focused and determined policy responses.

Strategy 2010 picks its way carefully through this minefield. Policy areas related to the achievement of equity and social cohesion include industrial location and social partnership. With respect to location policy, the report stresses the trade-off likely to exist between the benefits of clustering and issues related to access. Those familiar with the history of location policy in the 1950s and 1960s will know that serious mistakes were made in the past when development was concentrated in the greater Belfast region at the expense of the western and southern periphery (Bradley, 1996, pp. 95-109). In addition, the drift of UK social policy during the period 1979-97 was one in which social partnership was not encouraged, leaving Northern Ireland with a legacy of institutional arrangements far less advanced than, say, those operating in the Republic of Ireland or in Northern Europe, even before one contemplates the additional and unique complicating problems of inter-community relations.

On the issue of future locational policy, Strategy 2010 endorses the regional plan outlined in the earlier DOE report, Shaping our Future. However, in its discussion of the trade-offs that exist between inclusivity (or equity) and efficiency, one detects echoes of the locational debate of an earlier era that came down very much in favour of concentration-based efficiency criteria, the social consequences of which proved so divisive.

Concerning social partnership, two specific recommendations are made: first, the establishment of an Economic Development Forum (EDF) made up of the social partners; second, the establishment of a high quality research body. Surprisingly, the Northern Ireland Economic Council (NIEC) - a statutory body rather like the South's National Economic and Social Council (NESC) - does not find favour as an embryonic EDF, a judgement call that is probably not unconnected with the pioneering role played by the NIEC in recent years in producing a series of reports that subject all areas of Northern socio-economic activity (and in particular, DED and its family of agencies) to constructive, if sometimes severe criticism. The second proposal, that the NIEC might evolve into the recommended research body suggests that the crucial and constructive partnership and consultative role played by the NIEC, and the high regard in which its activities are held across Northern Ireland and elsewhere, do not appear to be appreciated.

Knowledge-based economy

Perhaps this is an area where the experience of the Republic of Ireland is instructive, extending over almost four decades of experimentation, evolution and change. Great understanding and sensitivity is needed in order to strike an appropriate balance between the vocational skill needs of the existing economic base, the likely (but often unpredictable) changes in skill requirements in the future, and the human and individual side of education. Since little in the way of research in this area is alluded to, the diagnosis in Strategy 2010 lacks depth and authority.

Enterprise

The desirable qualities of an enterprise culture are easy to state: vigorous, entrepreneurial, self-reliant, innovative, risk-taking, competitive. Not surprisingly, given the heavy public sector representation on the SSG, there is a reluctance to declare outright war on the grant culture that permeates the Northern business sector. Rather, a 'rebalancing' of industrial incentives is mooted, with greater targeting of companies with desirable characteristics and greater use of private equity capital. The recommendations in this area are closest to the type of policy proposals that fall within the remit of DED itself, perhaps in association with Department of Finance and Personnel and the UK Treasury.

Clearly it is not feasible simply to sweep away the present set of incentives in the absence of a better alternative, so the report proposes that:

The existing grant regime for inward investment should be maintained unless and until new measures become available. ...However, we should also seek to adjust the package, and if the right changes are achieved, there could be less dependency on grant (pp. 168-69).

The justification offered for retaining high rates of grant aid is simply that other competing regions are also using grants. However, there is persuasive applied research on Northern Ireland on the impact of the grants system on investment decisions and company profitability (Roper, 1993; Sheehan with Roper, 1994), and the conclusions would warn one off any continuation of the present system if the objective is to engineer a switch from low profit traditional manufacturing to high profit new technologies.

Perhaps the most surprising policy recommendation inStrategy 2010is the proposal to establish, for a limited period, a special rate of corporation tax for new inward investment. Leaving aside the question of clearing this with the UK Treasury (a difficult, but not impossible task once trade-offs in the subvention were negotiated with the Northern Ireland Executive and Assembly), the proposal is simply not feasible since it would violate EU and WTO competition law.5Even if the law could be waived, experience shows that temporary tax breaks are likely to be discounted by inward investors, who tend to plan location of plants over a product life-cycle of at least ten or more years.

The crucial recommendation made inStrategy 2010is in the area of priorities for financial support of industry, i.e. the main regional policy instrument actually available to, and being actively used by DED. Here, theex postNorthern rates can differ greatly from those of the other UK regions and regional preferential assistance to industry in Northern Ireland amounts to 5 per cent of manufacturing GDP, but is only 0.1 per cent in England.

Strategy 2010rejects the idea that grants should only be made available to selected 'growth' sectors or that differential rates of assistance should be decided on a sectoral basis (pp. 173-74).6However, a form of prioritisation is recommended based on a series of specific company characteristics, including commitment to R&D, export orientation, workforce skill levels, anticipated added value, equity and funding aspects, partnerships, and strategic 'fit' for cluster formation. However admirable these criteria may be, the recommendation begs some obvious questions, such as: were they the basis of grant allocations in the past, and if not, why not?

Outward-looking orientation

Recommendations under this heading are grouped under three sub-headings: fostering global perspectives, infrastructure, and EU matters. The plea made in Strategy 2010 for greater 'outward orientation' of people and companies is a sad reflection of just how inward-looking and parochial Northern Ireland has become in recent years. Northern Ireland is doubly unfortunate in that it is a region of the UK which is itself perhaps the most euro-phobic member of the EU, as well as being the UK region that is geographically closest to the Republic of Ireland, whose very different experience of building outward-oriented prosperity might be found to be valuable if it could be shared in the context of the island economy. Calls for greater Northern 'outward orientation' in such a politically constrained context are unlikely to be very effective.

Infrastructural recommendations are based on the DOE document Shaping our Future, and deal mainly with improvements to North-South as well as East-West road links. However, while the North-South links are seen as merely a means of facilitating trade, the East-West recommendations are placed in the context of a centralised plan on a UK-wide basis. Curiously, while there is a willingness to recommend elements of energy policy in the context of an island of Ireland energy market (p.185), there is no such willingness when it comes to transport policy. This is an interesting reversal of priorities of all-island policy when viewed in the context of the Trimble-Mallon December 1998 statement on areas for North-South co-operation where, of the twelve areas agreed, all-island transport planning is to be intensified through existing arrangements North and South while energy policy does not feature.

Self help

Strategy 2010 states that it is action within Northern Ireland that will determine economic success. While some sensible suggestions are presented with regard, for example, to the structure of the development agencies and the form of financial incentives, the discussion would have been better framed in the context of how a region such as Northern Ireland can best use its limited policy autonomy. This is the key lesson that should be taken from the experience of the Republic of Ireland and other successful regions in Europe (Dunford and Hudson, 1996).

A strong recommendation of Strategy 2010 is aimed at the rationalisation of 'a very crowded local economic development arena' (p. 195). However, the actual proposals appear to be very insensitive to the desire of local communities to have a democratic say in how their towns, cities and sub-regions are planned, and they reflect little or nothing of the active efforts of sub-regions to engage in strategic planning and to motivate and mobilise local resources.

A final set of recommendations under the heading of 'self help' concern the public expenditure dimension of economic development. In an opening paragraph, it is claimed that Strategy 2010 has:

. sought to emphasise proposals which reduce reliance on direct Government subsidy of the private sector and imply significant rolling back of the State (p. 207).

However, this is simply at variance with the whole tone and content of the recommendations actually made. Public expenditure per head in Northern Ireland is set to decline only very modestly over the period 1999 to 2002 and is likely to remain significantly greater than any other region of the UK (p. 207).

A policy issue addressed at the end of the chapter of recommendations spells out how resources for a specific Northern development fund might be found. It is perhaps a sign of the political vacuum within which this report has been prepared that the proposed main source of funds is the 'rolling back of the State' in the areas of health and education! One cannot avoid the conclusion that in its effort to pinpoint resources for the creation of a specific development fund,Strategy 2010targeted vulnerable groups (health and education), suggested raising local taxes that are likely to produce little by way of revenue and be politically unpopular into the bargain, and held out the possibility of unspecified savings from what could be perceived as an overstaffed and inefficient public administration.

CONCLUSIONS

Strategy 2010makes sixty-two separate recommendations which can be informally classified into five broad groups (Table 1):

Table 1.

Subject classificationNumber

Relating to institutional rearrangements

27

Exhortatory

15

Related to policy instruments

9

Relating to education and training matters

8

Environmental planning etc.

3

Total

62

To illustrate the classification, an example of a recommendation of an 'exhortatory' nature is the following:

Businesses should take every opportunity to minimise their environmental impact through measures which will also enhance their competitiveness (p. 148).

An example of a recommendation relating to variation in existing, or the creation of new policy instruments is the following:

Northern Ireland should have a special rate of corporation tax for new inward investments over a period of five years (p. 168).

After stripping away the rhetoric of partnership and consultation,Strategy 2010essentially comes down to proposals for reformed or new institutions without in any way providing analysis of whether or how the old institutions were inadequate or failed, together with a series of exhortations (usually to the private business sector or the general public) that are not associated with any policy instruments or mechanisms. The policy recommendations that are made lack focus and involve no radical rethink about the policy framework that would be appropriate for a region like Northern Ireland, in the context of devolving governance within the UK and the growth and evolution of the economy of the island of Ireland. The quantitative targets listed at the end of the report are modest, probably achievable without much effort if external conditions (including the subvention finance) are reasonably benign, but are unconnected with the analysis, diagnosis and policy recommendations contained in the report.

On balance, much of the material dealing with Northern economic performance is partial, confused and complacent. If Northern Ireland really has structural and economic developmental challenges, then a concise and frank statement of these problems would help clear the air and lay the ground work for policy prescriptions. A better understanding of the functioning of the Northern economy is badly needed, informed by high quality applied economic research. Such research needs to be placed in the context of the work on other European regions (as illustrated by the seminal NIEC report by Dunford and Hudson, 1996) and also has much to learn from research on the cohesion problems facing small peripheral nation states like Portugal, Ireland and Greece as well as the research on economic transition in central and eastern Europe. Policy makers and analysts in Northern Ireland need to realise that the problems of the region are not unique and that more active links must be forged with colleagues in other small UK and EU regions. If this were done, then one might expect to see an improvement in the quality of public policy reports likeStrategy 2010.

NOTES TO ARTICLE

1 See NIEC (1992) for background analysis of FDI in Northern Ireland, and IDB (1998) for the most up-to-date position. NIERC/DED/IDB (1998) gives a picture of recent exporting activity.

2 Regional preferential assistance to industry in 1996/97 made up 5.0 per cent of manufacturing GDP in Northern Ireland, compared to 0.1 in England, 1.1 in Scotland and 1.8 in Wales (p. 113). Given that labour and other costs in the North are relatively low (particularly in the low-skilled area), and that Northern firms are price takers in local and external markets, this amounts to a large profit subsidy.

3 Bradley and Hamilton (1999) provide further material on the JBC proposals for North-South business and economic co-operation in the context of the North-South implementation bodies announced on 18 December 1998.

4 See, for example, NIEC (1990, 1992, 1997); NIAO (1990, 1998); Sheehan (1993); Sheehan with Roper (1994); Roper (1993); and O'Hearn and Fisher (1999).

5 The Republic of Ireland had a zero rate of corporate profits tax on profits derived from manufactured exports prior to EU entry. When Ireland joined the then EEC, this had to be changed to a flat rate on all manufacturing of 10 per cent. Proposals are being considered to switch to a flat rate of 12.5 per cent for the entire corporate sector.

6 Although the Republic of Ireland's 10 per cent corporate tax rate is not targeted on specific sectorsex ante, in effect it favours high profit companiesex post, and these tend to be in electronics, pharmaceuticals etc.

REFERENCES

Bradley, J. (1996), An island economy: exploring long-term consequences of peace and reconciliation in the island of Ireland, Dublin: Forum for Peace and Reconciliation, August.

Bradley, J. (1997), 'Evaluation of the Ratio of Unemployment Rates as an Indicator of Fair Employment: A Critique',Economic and Social Review, 28(2), pp. 85-104.

Bradley, J. and Hamilton, D. (1999), Accelerating Growth and Development: Border Effects in Ireland, North and South, January. Dublin: Economic and Social Research Institute.

Culliton, J. (1992),A Time for Change: Industrial Policy for the 1990s,Report of the Industrial Policy Review Group, January, Dublin: The Stationery Office.

Dunford, M. and Hudson, R. (1996),Successful European Regions: Northern Ireland Learning From Others,Research Monograph 3, November, Belfast: Northern Ireland Economic Council.

Dunning, J., Bannerman, E. and Lundan, S. (1998),Competitiveness and Industrial Policy in Northern Ireland, Research Monograph 5, March, Belfast: Northern Ireland Economic Council.

Gudgin, G. and Breen, R. (1996).Evaluation of the Ratio of Unemployment Rates as an Indicator of Fair Employment,Research Report 4, Belfast: Central Community Relations Unit.

IBEC/CBI (1998),Position Paper on Strand Two of the Belfast Agreement (North -South Ministerial Council),IBEC-CBI Joint Business Council, October.

IDB (1998),Annual Report and Accounts 1997-1998,Belfast: Industrial Development Board.

Murphy, A. with Armstrong, D. (1994),A Picture of Catholic and Protestant Unemployed,Research Report 5, Belfast: Central Community Relations Unit.

NIAO(1990),Industrial Development Board for Northern Ireland: Review of Performance,Northern Ireland Audit Office, Report by the Comptroller and Auditor General for Northern Ireland, 418, London: HMSO.

NIAO(1998),Inward Investment, Northern Ireland Audit Office, Report by the Comptroller and Auditor General for Northern Ireland, 1096, London: The Stationery Office Limited.

NIEC(1990),The Industrial Development Board for Northern Ireland: Selective Financial Assistance and Economic Development Policy,Report 79, February, Belfast: Northern Ireland Economic Council.

NIEC(1992),Inward Investment in Northern Ireland,Belfast: Northern Ireland Economic Council.

NIEC(1997),Industrial Policy Assessment and Performance Measurement - The Case of the IDB,Report 123, April, Belfast: Northern Ireland Economic Council.

NIERC/DED/IDB (1998),Made in Northern Ireland Sold to the World: Northern Ireland Sales and Exports 1995/96 - 1996/97,Belfast: Northern Ireland Economic Research Centre.

O'Hearn, D. and Fisher, C. (1999),Jobs or Just Promises? The IDB and West Belfast,Belfast: West Belfast Economic Forum.

Roper, S. (1993),Government Grants and Manufacturing Profitability in Northern Ireland,April, Belfast: Northern Ireland Economic Research Centre.

Sheehan, M. (1993), 'Government Financial Assistance and Manufacturing Investment in Northern Ireland',Regional Studies,vol. 27, no. 6, pp. 527-540.

Sheehan, M. with Roper, S. (1994),Government Grants and the Investment Decisions of Northern Ireland Manufacturing Companies,Belfast: Northern Ireland Economic Research Centre.

DR JOHN BRADLEY

Policy Review Section

Edited by J. MAWSON

In this issue of thePolicy Review Section,John Bradley of the Economic and Social Research Institute, Dublin, and Douglas Hamilton of the Department of Geography, University of Newcastle Upon Tyne, present a critique of the new economic development strategy,Strategy 2010, prepared by the Northern Ireland Department of Economic Development (DED). In the second article, John McCarthy of the School of Town and Regional Planning, University of Dundee, and David Newlands of the Department of Economics, University of Aberdeen, explore some of the key economic and spatial policy issues facing the Scottish Parliament. These include the question of finance, the need to dampen short term expectations, the role of development agencies and relations with Europe. In the third article, Julie Keane of Kinhill Pty Ltd and Janelle Allison of the Faculty of Built Environment and Engineering, Queensland University of Technology, argue that traditional regional economic approaches do not sufficiently capture the role of higher education in the contemporary learning economy. Based on current research into the role of a university in Queensland, they discuss a conceptual framework for analysing this role.

STRATEGY 2010: PLANNING ECONOMIC DEVELOPMENT IN NORTHERN IRELAND

In March this year,Strategy 2010was published by the Northern Ireland Department of Economic development (DED, 1999) and offered by Minister of State AdamIngram to the Northern Ireland Assembly and the wider community for discussion. While a consultation process around the future of the Northern Ireland economy had been initiated in 1997, a specific commitment was made to the strategy in theBelfast Agreementin April 1998. In paragraph 2(ii) of the section dealing with Rights, Safeguards and Equality of Opportunity, it was stated that the British Government would make rapid progress with 'a new economic development strategy for Northern Ireland, for consideration in due course by the Assembly, which would provide for short and medium-term economic planning linked as appropriate to [the] regional development strategy' (The Agreement, 1998, p.19).1

Strategy 2010is an important report, coming as it does at a crucial juncture in the political stability of Northern Ireland and it is likely that it will influence debate and subsequent economic policy development. Hence, it is crucial that the report be critically evaluated and that its content be openly discussed by all those with a stake in the future economic and social development of Northern Ireland.

Strategy 2010arose out of a political process, one in which economic affairs played only a small part. However, this is not to deny the lively debate that has taken place around the Northern Ireland economy - and the pages ofRegional Studiesin recent years are testimony to this. It is important that the future economic development of Northern Ireland be placed clearly in its political context. For example, the strategic future of the Northern Ireland economy is perceived in rather different ways by the two main Northern Ireland communities. The Unionists are reluctant to depart in any way from continued full regional integration into British economic thinking and planning while Nationalists have an aspiration to build future economic progress on a pragmatic blend of North-South as well as East-West co-operation.Strategy 2010, by ignoring this issue, has failed to give leadership on a defining problem whose resolution will be a key determinant of the future success of the Northern Ireland economy.

We examineStrategy 2010under three broad headings: (1) analysis of the extent to which the economy departs from the desired state painted inStrategy 2010's vision statement; (2) diagnosis of how and why any departure from more desirable outcomes may have arisen; and (3) prescription as to how public policy and private resources might be mobilized to move the Northern Ireland economy closer to the vision.

Analysis of the Northern Ireland Economy

Strategy 2010has a vision statement for the economy that seeks: 'A fast growing, competitive, innovative, knowledge-based economy where there are plentiful opportunities and a population equipped to grasp them' (DED, 1999, p.9). On the basis of much research over the past few decades, and despite unparalleled levels of government funding and intervention, the economy is far from realising such a vision. Unfortunately, the analysis offered inStrategy 2010is shallow and fails to get to grips with key phenomena. Obvious starting points, such as an evaluation of Government policy or the impact of over 25 years of political and violent conflict, are either ignored or touched on only in passing. Indeed, an inexplicable omission is any reference to earlier strategy documents from the past two decades, such asPathfinder(DED, 1987).Competing in the 1990s(DED, 1990) andGrowing Competitively(DED, 1995), not to mention the various strategy documents of the development agencies, all of which have evolved over time and have been the focus of intense study and debate. Instead, the report attempts to shed light on current economic conditions by looking anew at influences on modern economies, the international outlook and the Northern Ireland economy in both aggregate and sectoral terms.

With regard to influences on modern economies,Strategy 2010correctly identifies the rapid globalization of economic activity as the primary factor that will set the future context for accelerated growth and restructuring in Northern Ireland. The opportunities offered by globalization are obvious, with international trade growing at over twice the rate of local GDP, but these benefits can only be realised if the local economy can obtain access to export markets by having a high degree of competitiveness, measured in the very widest sense.

Two means through which improved local competitiveness can be built are identified: adoption of the latest production technologies; and an increase in the skill and education levels of the local work force. Other influences examined (the rise in services, a shift towards more flexible work patterns and the growing concern with the quality of life) are not independent of the consequences of globalization, but rather follow as a logical consequence of it and of rising living standards. They lie downstream of competitiveness-led growth and do not necessarily need to be part of the upstream strategic planning. A deeper treatment of the nature of competitiveness, as well as a broader, more inclusive, exposition of how international competitive strengths can be built in Northern Ireland is urgently needed if the correct global context for the regional economy is to be understood.

With regard to the international outlook for the Northern Ireland economy, the report contains little new strategic thinking about the nature of the future relationship of the local economy with the external world. For a regional economy, a local concern for the health and dynamism of the external economy will have two distinct but complementary aspects:

(1) how external markets are going to sustain buoyant demand for exports from Northern Ireland; and

(2) where is foreign direct investment (FDI) into Northern Ireland likely to come from.

In a short to medium term perspective, the list of dominant export destinations and the sources of FDI are unlikely to switch dramatically from the position today. Consequently, the British market must continue to be of central concern for Northern Ireland since it is the destination of over half of external sales and is the source of the bulk of inward investment.2Given this, the report treats the nature of, and relationship with, the British market in a very casual fashion. For example, it provides two conflicting explanations for the slow growth of UK productivity: over-regulation, and a group of other issues that range across low investment, macro-economic instability, increasing inequality and low skills. Unfortunately, no attempt is made to form a judgement as to which explanation is more correct, or what the differential consequences might be for the Northern economy. In this vital area,Strategy 2010has a serious credibility problem that stems from its failure to draw critically on the best professional economic and industrial research expertise and advice in an open and transparent way.

The section of the report that deals with the UK economy (a mere four pages) contains a crucial assertion that certainly colours and probably constrains the thrust of the entire report:

'The main determinant of economic activity in Northern Ireland is the level of activity in the rest of the UK. An economic development strategy for Northern Ireland therefore needs to be set within, and be consistent with, the overall thrust of national economic policy' (DED, 1999, P. 62). This, in a nut-shell, is Northern Ireland's development dilemma. Either it sticks closely to UK economic policy and institutional norms and jogs along, sometimes above, other times below, UK average performance, or it strikes out and (so to speak) seeks boldly to go where no one has gone before. The Republic of Ireland, making use of its limited but crucial policy autonomy, followed the latter course in the late 1950s. Policy makers took a strategic decision that the dominance of the UK market (destination at that time of over 95% of Irish exports) was unlikely to provide a suitable context for Irish development, modernization and faster growth. Tax varying (or, more precisely, tax re-balancing) powers were a crucial element of policy making, especially with regard to the attraction of FDI, and the centre-piece of the industrial incentive system was initially a zero rate of corporation tax. However, equally important were reforms in education, progressive improvement in infrastructure, evolution of social partnership arrangements, enthusiastic embracing of European Union (EU) initiatives and - after many false starts - the creation of fiscal stability.

Almost the whole explanation of the recent aggregate performance of the Northern Ireland economy can be summarised as follows: 'Northern Ireland and Britain share common fiscal, monetary and exchange rate policies; Britain is Northern Ireland's main external market and the (British) Exchequer makes significant transfers to Northern Ireland to enable the region to maintain UK level of provision' (ibid.,p.69). The huge size of the British Exchequer financing (the so called subvention) serves to influence and colour every aspect of the Northern economy, a fact that is acknowledged only partially and subliminally inStrategy 2010. The subvention directly supports employment in the Northern public sector to the extent of about 33% of total employment, compared with 22% in the UK as a whole (about the same in the Republic of Ireland). The subvention also directly supports incomes of the unemployed, the retired and the sick, as well as providing a high level of public housing, health and education (over and above direct public employment aspects). These might be termed the primary impacts of the public sector.

However, secondary impacts of Northern Ireland's public sector activity on the structure and behaviour of the local private sector are of equal, if not greater, importance relative to the primary impacts. For example, subvention finance sucks in imports, and explains much of the buoyancy of the retail sector. Northern manufacturing has come to be made up predominantly of small firms, oriented mainly to supplying the domestic market, which is in turn sustained to a great extent by direct and indirect demand arising from public sector activity. For example, the fact that the Northern Ireland economy emerged relatively unscathed from the British recession of the early 1990s is due in the main to the large size and cushioning effects of automatic and discretionary public expenditure stabilizers. The buoyancy of activity in the Northern Ireland manufacturing sector relative to Britain is also largely due to the much higher level of subsidies and grants and, therefore, has little to do with local competitiveness in any underlying sense.3There is much more going on here than simply the technical operation of the Barnett formula and the provision of regional finance on the basis of regional need. Unless and until the dominant and pervasive nature of public finance in Northern Ireland is better understood, analysis will be misleading, diagnosis will be flawed and policy prescription will be ineffectual.

Strategy 2010devotes some consideration to sectoral aspects of the Northern Ireland economy, but this material is marred by a very uneven presentation of data. For the electronics sector a detailed table of employment, turnover and productivity is provided for the most recent five years (1993-97), but not for any of the other 10 sectors examined. Hence, it is difficult to develop any feel for the different structures of the key sectors and make any comparisons. For example, the textiles and apparel sector employs 23,000 people (about a quarter of Northern Ireland manufacturing employment) and is not only a low wage, low profit industry, but appears to be in long term decline. It would have been useful to be able to compare its fundamentals with those of electronics, a sector dominated by foreign firms and which is export-oriented, high profit and with a bright future.

Diagnosing the reasons for success and failure

Two chapters ofStrategy 2010are devoted to diagnostic aspects of the Northern Ireland economy, where the report indicates its views on the nature and extent of Northern Ireland success (opportunities) and failure (challenges), as well as setting indicative planning targets (vision).

Perhaps the greatest success of the Northern Ireland economy is that it gives the outward impression of functioning in a relatively normal fashion in spite of prolonged and severe disruption from violent conflict. In part, this can be explained by the availability of financial transfers to boost public sector activities so that the negative consequences of the inevitable decline of private sector activities were mitigated. In the 1950s and 1960s, Northern Ireland attracted a substantial level of FDI to replace the shrinking (but still important) staples of textiles and heavy engineering. This investment was predominantly in sectors where the North already had a comparative advantage, e.g. artificial fibres. Unfortunately, this advantage effectively vanished with the onset of the oil-price rises of the 1970s, and a wide range of labour intensive industries across northern Europe in general migrated to the low cost centres of southern Europe and Asia.

Peace is identified as the first and most important opportunity for the Northern Ireland economy. However, conditions of peace are likely to facilitate faster economic growth rather than guarantee it. Growth, if it comes, will need to be in the private sector and is likely to be accompanied by sectoral reallocation and a shrinking of elements of the public sector, leading to a restructuring of the Northern Ireland economy. This will be a challenging political task and is unlikely to be easy to achieve without pain.

The report proceeds to itemise other opportunities: favourable demographics; educational attainments; an attractive business environment; flexible labour markets; telecommunications infrastructure; and green image. Most of these have been in place for many years, so one is forced to conclude that the absence of peace has prevented them from being fully effective. In addition, some of these opportunities have downsides. Favourable demographics will make it harder to meet job creation targets, even if labour supply problems are eased. Educational attainment success in Northern Ireland appears to be limited to a high level of participation in higher education, but is accompanied by failures at lower levels and in skill training. The attractive features of the business environment in terms of quality of life co-exist with an ever increasing degree of community locational polarization. Flexibility of the labour market tends to mean low wages, high long term unemployment and low skills.

Northern Ireland challenges tend to outnumber opportunities. The first, and perhaps the most serious, is the high rate of long term unemployment (about 45% of the total in the North, compared to 27% in the UK as a whole). The report is tactful, but less than frank, in not pointing out that the bulk of the long term unemployment are Catholic and that this has been an enduring problem for decades and is, therefore, a key challenge for the future (STANDING ADVISORY COMMITTEE ON HUMAN RIGHTS (SACHR), 1997).

Many of the remaining challenges are simply measures of economic failure. Northern Ireland manufacturing is concentrated in low wage, low productivity sectors that do not have a bright future in the region; the high level of industrial grants has not produced a self-sustaining industrial base; technical education and training mirror British levels, which are generally poor by EU standards; R&D expenditure is low, as is the rate of uptake of new technologies; and the manner of electricity privatisation has left the region with high energy costs.

There is one area of failure that is neglected and which should have been the central focus of the strategic review: the role played by the development agencies, and the Industrial Development Board (IDB) in particular, over the past two decades. Reading the report one gets little feel for the way in which the IDB dominates economic development policy in Northern Ireland, nor the crucial fact that it has been the focus of detailed analysis.4In all cases, these studies have found the IDB to have a poor record in meeting jobs and investment targets, whether it be in terms of inward investment or indigenous industrial development, and IDB assistance to involve a substantial degree of dead-weight. The enduring poor performance of the IDB, even allowing for the difficult period through which it has had to operate, has been the key failure in economic development policy in Northern Ireland.

It would have been extremely useful to have presented analysis and evaluation of the size and type of public funding directed towards the IDB and the other DED development agencies and the results achieved. The Culliton report in the Republic of Ireland (a similar strategic review body) presented an analysis of the Industrial Development Authority, highlighting the unsuccessful nature of grant assistance to industry over many years (CULLITON, 1992, pp. 59-66) which led to a change of policy involving much reduced grant assistance.

Turning to the future,Strategy 2010sets out a vision statement (see above) and a series of five key principles or broad targets that it seeks to achieve. These are: equality and social cohesion; enterprise; knowledge based activity; outward looking orientation; and self help.

Equality and social cohesion are desirable aims in their own right and have an importance and urgency that are independent of economic matters. In addition, modern high technology economies simply cannot function at high levels of efficiency if workplace and wider social relations are not characterised by equality, respect and cohesion. What makes the situation in Northern Ireland unique is that some of the socio-economic differentials that really matter are those that exist between sections of two different communities rather than simply between two socio-economic groups. For example, policy areas related to the achievement of equity and social cohesion include industrial location and social partnership. With respect to location policy, the report stresses the trade-off likely to exist between the benefits of clustering and issues related to access. The history of location policy in the North in the 1950s and 1960s shows that serious mistakes were made when development was concentrated in the greater Belfast region at the expense of the western and southern periphery (BRADLEY, 1996, pp.95-109). Moreover, the drift of UK social policy during the period 1979-97 was one in which social partnership was not encouraged, leaving Northern Ireland with a legacy of institutional arrangements that are far less advanced than, say, those operating in the Republic of Ireland or in Northern Europe, even before one contemplates the additional and unique complicating problems of inter-community relations.

The report's analysis of the importance of moving towards knowledge-intensive activity is timely. However, great understanding and sensitivity is needed in order to strike an appropriate balance between the vocational skill needs of the existing economic base, the likely (and often unpredictable) changes in skill requirements in the future, and the human and individual side of education. Since little in the way of research in this area is alluded to, the diagnosis of the report lacks authority, conviction and depth.

The desirable qualities of an enterprise culture are easy to state: vigorous; entrepreneurial; self-reliant; innovative; risk-taking; competitive. However, there is some reluctance to declare outright war on the grant culture that permeates Northern Ireland. Rather, a re-balancing of industrial incentives is mooted, with greater targeting of companies with desirable characteristics, and greater use of private equity capital.

The call for greater outward orientation of people and companies is a sad reflection of just how inward-looking and parochial Northern Ireland has become. Northern Ireland is doubly unfortunate in that it is a region of the UK which is itself perhaps the most euro-phobic member of the EU, as well as being the UK region that is geographically closest to the Republic of Ireland, whose policy flexibility and experience of building outward-oriented prosperity makes it difficult for Northern Ireland to build a competitive advantage.

Finally, with regard to the future, the report states that it is self help or action within Northern Ireland that will determine economic success. While some sensible suggestions are presented with regard, for example, to the structure of the development agencies, the discussion would have been better framed in the context of how a region such as Northern Ireland can best use its limited policy autonomy. This is the key lesson to be taken from the experience of the Republic of Ireland and other successful regions in Europe (DUNFORD and HUDSON, 1996).

Policy prescription for faster growth and development

Having carried out its analysis, diagnosed success and failure, and isolated five target areas where progress is needed,Strategy 2010then makes 62 separate policy recommendations which we have informally classified into the following five broad groups: relating to institutional arrangements (27); exhortatory (15); relating to policy instruments (9); relating to education and training matters (8); and environmental planning, etc. (3).

An example of a recommendation relating to institutional arrangements is: 'A high powered, high quality research body should be established' (p.146). An example of a recommendation of an exhortatory nature is: 'Businesses should take every opportunity to minimise their environmental impact through measures which will also enhance their competitiveness' (p.148). An example of a recommendation relating to variation in existing, or the creation of new, policy instruments is: 'Northern Ireland should have a special rate of Corporation Tax for new inward investments over a period of 5 years' (p.168). Of the 62 policy recommendations, the core proposals related to policy instruments focus on the perceived need to rebalance the incentives package and reform priorities for financial support. Unfortunately, with regard to the provision of incentives for inward investment, the report's recommendations are either highly conservative or ill thought through. With regard to direct financial assistance, the report proposes that 'the existing grant regime for inward investment should be maintained unless and until new measures become available' (pp. 168-69). Moreover, the possibility of targeting grants at specific sectors or that differential rates of assistance be decided on a sectoral basis are ruled out. Rather, grant prioritization is recommended based on a series of specific company characteristics, such as commitment to R&D or export orientation. This would seem to be a continuation of what is understood to be the existing situation and, moreover, raises serious questions as to how the necessary re-balancing of industry from low to high value added activities would take place. With regard to the proposal for corporation tax, this would violate EU and World Trade Organization competition law, and to satisfy the Treasury (a far from straightforward task) it is highly likely that it would have to be offset by contentious cuts in public expenditure. In a separate recommendation, the report proposes that a Development Fund be established to finance economic regeneration projects, with a suggestion that resources be found from the health and education programmes!

Concluding remarks

After stripping away the rhetoric of partnership and consultation,Strategy 2010essentially comes down to proposals for reformed or new institutions without in any way providing analysis of whether or how the old institutions were inadequate, together with a series of exhortations (usually to the private business sector or the general public) that are not associated with any policy instruments or mechanisms. The analysis upon which the report is based is at best partial, and at worst seriously flawed. Consequently, the diagnosis is unreliable and is unlikely to form a sound basis for arriving at policy recommendations. The policy recommendations that are actually made lack focus and involve no radical rethink about the policy context that might be appropriate, in the context of devolving governance within the UK and the development of the economy of the island of Ireland. The growth targets listed at the end of the report are modest, probably achievable without much effort if the external economic situation is reasonably benign, but are unconnected with the analysis, diagnosis and policy recommendations contained in the report.

Northern Ireland has serious structural and economic developmental challenges, and a concise and frank statement of these problems would have helped clear the air and lay the ground work for policy prescriptions. A proper understanding of the functioning of the Northern economy is badly needed and could be better informed by high quality applied economic research, placed in the context of work on, and links with, other European regions. Policy analysts in Northern Ireland should realize that the region's problems are not unique. Then, and only then, might one expect to see an improvement in the quality of public policy reports likeStrategy 2010.

JOHN BRADLEY* and DOUGLAS HAMILTON
*Economic and Social Research Institute
Dublin
Department of Geography
University of Newcastle Upon Tyne

NOTES

1. Another socio-economic report DEPARTMENT OF THE ENVIRONMENT (NORTHERN IRELAND) 1998, mandated by theBelfast Agreement(in paragraph 2(i)) and dealing with regional development strategy, had already been published - together with a wide range of supporting documentation - in December 1998.

2. See NORTHERN IRELAND ECONOMIC COUNCIL (NIEC) 1992 for background analysis of FDI in Northern Ireland. NIERC/DED/IDB, 1998 gives a picture of recent exporting activity.

3. Regional preferential assistance to industry in 1996/97 made up 5.0% of manufacturing GDP in Northern Ireland, compared to 0.1% in England, 1.1% in Scotland and 1.8% in Wales (DED, 1999, p.113). Given that labour and other costs in the North are relatively low (particularly in the low skilled area), and that Northern firms are price takers in local and external markets, this amounts to a large profit subsidy.

4. See, for example, NIEC, 1990, 1992, 1997; NORTHERN IRELAND AUDIT OFFICE (NIAO), 1990, 1998; SHEEHAN, 1993; ROPER, 1993; and O'HEARN and FISHER, 1999.

REFERENCES

BRADLEY J. (1996)An Island Economy: Exploring Long-term Consequences of Peace and Reconciliation in the Island of Ireland. Forum for Peace and Reconciliation, Dublin.

CULLITON J. (1992)A Time for Change: Industrial Policy for the 1990s,Report of the Industrial Policy Review Group. Stationery Office, Dublin.

DEPARTMENT OF ECONOMIC DEVELOPMENT (DED) (1987)Building a Stronger Economy - The Pathfinder Process.HMSO, Belfast.

DEPARTMENT OF ECONOMIC DEVELOPMENT (DED) (1990)Competing in the 1990s - The Key to Growth.HMSO, Belfast.

DEPARTMENT OF ECONOMIC DEVELOPMENT (DED) (1995)Growing Competitively - A Review of Economic Development Policy in Northern Ireland.Department of Economic Development, Belfast.

DEPARTMENT OF ECONOMIC DEVELOPMENT (DED) (1999)Strategy 2010,Report by the Economic Development Strategy Review Steering Group on Northern Ireland. DED, Belfast.

DEPARTMENT OF THE ENVIRONMENT (NORTHERN IRELAND) (1998)Shaping our Future-Towards a Strategy for the Development of the Region, Draft Regional Strategic Framework for Northern Ireland. Stationery Office, London.

DUNFORD M. and HUDSON R. (1996)Successful European Regions: Northern Ireland Learning From Others,Research Monograph 3. Northern Ireland Economic Council, Belfast.

NORTHERN IRELAND AUDIT OFFICE (NIAO) (1990)Industrial Development Board for Northern Ireland: Review of Performance, Report by the Comptroller and Auditor General for Northern Ireland 418. HMSO, London.

NORTHERN IRELAND AUDIT OFFICE (NIAO) (1998)Inward Investment, Report by the Comptroller and Auditor General for Northern Ireland 1096. Stationery Office, London.

NORTHERN IRELAND ECONOMIC COUNCIL (NIEC) (1990)The Industrial Development Board for Northern Ireland: Selective Financial Assistance and Economic Development Policy. Report 79. NIEC, Belfast.

NORTHERN IRELAND ECONOMIC COUNCIL (NIEC) (1992)Inward Investment in Northern Ireland,Report 99. NIEC, Belfast.

NORTHERN IRELAND ECONOMIC COUNCIL (NIEC) (1997) Industrial Policy Assessment and Performance Measurement - The Case of the IDB, Report 123. NIEC, Belfast.

NORTHERN IRELAND ECONOMIC RESEARCH CENTRE/DEPARTMENT OF ECONOMIC DEVELOPMENT/INDUSTRIAL DEVELOPMENT BOARD (NIEC/DED/IDB) (1998)Made in Northern Ireland Sold to the World: Northern Ireland Sales and Exports 1995/96-1996/97. Northern Ireland Economic Research Centre, Belfast.

O'HEARN D. and FISHER C. (1999)Jobs or Just Promises? The IDB and West Belfast.West Belfast Economic Forum, Belfast.

ROPER S. (1993)Government Grants and Manufacturing Profitability in Northern Ireland. Northern Ireland Economic Research Centre, Belfast.

STANDING ADVISORY COMMISSION ON HUMAN RIGHTS (SACHR) (1997)Employment Equality: Building for the Future,Cm 3684. Stationery Office, London.

SHEEHAN M. (1993) Government financial assistance and manufacturing investment in Northern Ireland,Reg. Studies27, 527-40.

The Agreement(1998) Agreement Reached in the Multi-Party Negotiations.

TOP

ANNEX 3

DR JOHN BRADLEY

WRITTEN SUBMISSION TO THE NORTHERN IRELAND AFFAIRS COMMITTEE:
INQUIRY ON INWARD INVESTMENT

Prepared by John Bradley

(1) Introductory remarks

(2) Inward investment

(3) Indigenous industry

(4) The role of the former DED and the IDB

(5) Past industrial policy, North and South

(6) Future policy on inward investment

(7) The Northern Ireland strategic economic context

(8) The North-South dimension of inward investment

(9) Island public policy and theBelfast Agreement

(1) Introductory remarks

I am honoured to be invited to appear before the NIAC and to be asked to give evidence to its inquiry into inward investment in Northern Ireland. However, although I have been an ardent student of Northern Ireland economic affairs for the past decade, I must stress that I put myself before you as a generalist on this subject rather than as an expert on all of its details.

My involvement with research on the Northern Ireland economy started in 1991 with a joint North-South collaboration between the Northern Ireland Economic Research Centre (NIERC) and the Economic and Social Research Institute (ESRI). In 1995 I was asked by the Irish government to carry out a study of the likely long-term consequences of peace and reconciliation on the future evolution of the two economies on the island of Ireland. In 1997 I was commissioned by the Northern Ireland Economic Council (NIEC) to carry out an examination of the likely consequences for Northern Ireland of the UK decision to remain outside Economic and Monetary Union (EMU). During all these years I have engaged in the cut and thrust of commentary and analysis of the Northern economy and have made many friends and hopefully few enemies!

Coming as I do from the Republic of Ireland, my research has focused primarily on theinterfacebetween the Northern and Southern economies rather than on the specific details of Northern Ireland. Business, economic and social links across this interface are important to us in the South, even if they are not quite at the centre of the present dynamic forces driving our economy. However, the need to examine existing and potential North-South linkages forces us to consider the present and likely future performance of the Northern economy in some depth. I hope that the Committee members will make allowances for me if my views on Northern Ireland are coloured by an external perspective that is very different from their internal perspective.

(2) Inward investment

Inward investment - the subject of your Committee's present inquiry - lies at the very centre of efforts being made to transform, modernise and develop the Northern Ireland economy. It is well established that regions such as Northern Ireland (as well as small states such as the Republic of Ireland) find it very difficult to design successful economic growth strategies based mainly on their own local resources. To an increasing extent they have come to rely on inward investment in order to acquire physical and financial capital, access to new technologies, upgrading of skills in the local labour force and entry to global export markets. To survive and prosper, such regions need to specialise in carefully selected areas of manufacturing and traded services and to make sure that the local policy making environment functions efficiently and effectively to focus domestic resources so that they produce self-sustaining growth. In the words of the First Minister, Mr David Trimble, speaking about Northern Ireland:

The key task is to develop a stronger core of highly productive firms which can support a high standard of living for all of our people. In the long term we would wish this to become self-sustaining, requiring only modest levels of subsidy.

(3) Indigenous industry

A focus on inward investment is considered by most analysts of small regional economies as a necessary condition for rapid growth in an increasingly globalised economy. However, this is not to imply that the nurturing of local or indigenous industry should be neglected, as it tended to be in the Republic of Ireland from 1960 until the mid-1980s. Northern Ireland's early and extensive industrialisation in the latter part of the 19thcentury has left it with a legacy of traditional industries in food processing, clothing, textiles and engineering. The economic challenges posed by this legacy concern the management of decline and the identification of the subset of the traditional industries that can survive, compete and grow within the EU Single Market and the wider global economy. These challenges require very specific policies and the very different policies needed to stimulate inward investment have tended to become enmeshed in the policies required to manage decline and transformation of the traditional sectors.

(4) The role of the former DED and the IDB

At the risk of over simplification, I would characterise the present policy thrust of the IDB as being based on a marketing strategy to win inward investment, where the crucial assumption is made that the Northern Ireland economy is already quite an attractive and competitive place within which to produce for export. It is as if all that is required is continued "peace" and the ability to catch the attention of potential investors in the crowded market place.

Although the IDB view is never expressed in quite so blunt a fashion, nevertheless, at almost every turn I find the IDB and its parent government department (the former Department of Economic Development, DED) to be complacent and defensive about the underlying competitiveness situation in Northern Ireland. To illustrate this, may I direct you to paragraph 10 of the memorandum submitted by the IDB to the Committee hearings of Wednesday, June 16th1999. Each one of the points advanced by the IDB as illustrating a strong competitive situation could be contested.

A policy based largely on "marketing" has a natural tendency to gloss over weaknesses and failings. This is very understandable. After all, if the IDB is not seen to believe wholeheartedly in its "product", why should any potential inward investor be persuaded to locate in Northern Ireland? But a serious consequence of the IDB strategy is that its marketing optimism has flourished in a policy making environment where countervailing critical business and economic analysis has either been stifled or ignored. May I illustrate this point by some examples?

  • To a parliamentary Question to the Secretary of State for Northern Ireland asking for a list of the studies carried out by DED of Northern Ireland's competitive advantage in attracting inward investment, the reply statedinter aliathat: "IDB has not directly purchased or commissioned any study" (Parliamentary Question No 63963, December 16th, 1998). The answers to a series of related questions asked on the same day tended to confirm the fact that either the DED/IDB knew the answers and were not telling, or that these serious questions about the role of inward investment had never been asked internally.
  • Policy on inward investment in Northern Ireland is now developed within the encompassing context of the strategic planning report, Strategy 2010, that was launched in final form early in 1999 without much by way of open public debate on its contents. This contrasts with the very open and extensive process of public debate and consultation carried out on the former DOE spatial planning strategy document, Shaping our Future. May I draw the Committee's attention to the recently published report of the panel conducting the public examination of Shaping our Future, and to the formal response by the Department for Regional Development published on April12th. Why was the approach taken in economic planning less open to outside public scrutiny?
  • One of the more interesting elements of the Strategy 2010 process was the preparation of a series of very detailed background papers on the key sectors of the Northern Ireland economy, as well as on key linking themes such as inward investment, skills and education, exports and marketing, etc. Although these sectoral and thematic reports were finalised in early Autumn of 1998, they were not formally published and were only placed on the Strategy 2010 web site late in 1999.
  • Since it is of particular relevance to this Committee's inquiry, may I draw your attention to the fact that the background Strategy 2010 reports on "Inward Investment" (11 pages) and "Investment and Finance" (2 pages) are very inadequate treatments of the important issues involved, and are in stark contrast to the wealth of detail and analysis contained in the many other background papers.
  • In the preparation of Strategy 2010, the extensive advice on, and criticism of DED and IDB industrial policy design and implementation published over the preceding decade by the government's own policy advisory body - the NIEC - were largely ignored.
  • More specifically, in August 1999 the NIEC published a major report on the manner in which Northern Ireland economic development strategy had been implemented during the decade of the 1990s. Among other criticisms, the NIEC presented compelling evidence that the former DED and the IDB had ignored its own policy strategy and had continued to rely heavily on a grant-based incentive system that the NIEC believed was ineffective and wasteful. Rather than promoting a public debate on this critique, the then Secretary of State Dr Mowlam issued a press release that effectively rejected the Council's evidence in a very peremptory fashion.
  • The former Department of Economic Development, having studiously avoided engaging in any public debate with the NIEC and with other criticisms of Strategy2010 (including my own), finally proposed late last year to hold a forum for economist "critics" of the strategy. However, they insisted that all discussions of Strategy 2010 at the meeting be held under the so-called Chatham House rules.

One is almost forced to the conclusion that economic policy matters may not be debated openlywithinthe former DED and that the advice of their own experts and specialists seems to be either absent, suppressed or ignored. Furthermore, it would appear that major policy matters are not organised and debated in a fully satisfactory fashionbetweenthe different departments of the Northern Ireland government that share responsibility for financial, economic and social policy. The fact that Northern Ireland's spatial strategy (Shaping our Future)is being designed and debated separately from the economic strategy (Strategy 2010),and that neither appears to be integrated into future public expenditure and finance planning, is a receipt for future policy mismanagement.

One of the consequences of this unsatisfactory state of affairs is that politicians, policy makers, business leaders, trade unions and ordinary citizens are seldom exposed to the type of healthy constructive criticism and debate on socio-economic policy making that ideally should flourish in an open society. This may well be inhibiting the emergence and evolution of a consensual process of social partnership that would ensure that there were as few losers as possible in the necessary economic restructuring that will accompany modernisation.

(5) Past industrial policy, North and South

As a result of the learning experience of earlier periods and changing external circ*mstances in the global economy, the overall level of industrial support in the Republic of Ireland has been cut considerably and those resources which are used are being targeted on a smaller number of pre-selected firms which are seen as having the real potential for significant and rapid development.

At the beginning of 1992, the Industrial Policy Review Group, set up by the Government and composed mainly of industrialists, published theCullitonReport (1992). The key aspects of this important report were that:

  • Industrial policy had to be viewed in a much broader manner than previously and had to include the effect on industrial development of policies on taxation, infrastructure and education and training.
  • The economy needed much more market-led and production-oriented enterprise in contrast to the encouragement of a 'hand-out mentality' or the promotion of unproductive activities.
  • Industrial performance had to be based on national sources of competitive advantage with Irish owned- companies requiring special attention. The thinking in this respect, as well as the need to create industrial clusters, was strongly influenced by Professor Michael Porter of Harvard University.
  • The delivery of industrial policy had to be improved with greater cost-effectiveness and better monitoring.

A further important development in the Republic of Ireland since the late 1980s is that policy towards industry is now seen as an important part of the wider social partnership approach to economic policy. This approach aims to achieve agreement amongst the social partners, in particular the trade unions and the employers, on the main parameters of economic policy, in particular the annual rate of pay increases.

Reflecting a high degree of commonality, the debate around industrial policy in Northern Ireland has paralleled the experience of the Republic of Ireland. After an attempt in 1987 under the so-calledPathfinderinitiative to change policy away from its simple grant giving focus, a more serious review of policy began at the end of the 1980s and culminated with the publication in 1990 ofCompeting in the 1990s.While this document included much of the rhetoric of the earlier and now largely forgottenPathfinderdocument - such as the need for more enterprise and an escape from a so-called "dependency culture" - the new strategy was centred around the two concepts of "market failure" and "competitiveness". The first concept, in line with the way in which industrial policy had developed in Great Britain during the 1980s, saw government as having only a minimal role to play in the development of industry. The second concept of improved competitiveness was seen not just as the key objective of policy, but also the criterion against which assistance for a project would be assessed and, ultimately, the means by which other benefits such as job creation would arise. The strategies which were subsequently produced by the IDB and LEDU to follow this new approach clearly showed the confusion and difficulty of trying to implement a policy based on more free-market type thinking into a regional economy which had experienced, for such a long period, substantial levels of industrial support.

Competing in the 1990sappeared to be suggesting a withdrawal by government from industrial policy. Its overriding emphasis on improved competitiveness as the key driving force behind industrial policy was reaffirmed with the publication in 1995 ofGrowing Competitively.This document continued the earlier commitment to a reduction in the level of financial subsidisation of industrial development. However, analysis carried out by the NIEC showed that the fundamental change in policy proposed in bothCompeting in the 1990sandGrowing Competitivelywas only implemented to a very limited extent. There seems to have been a clear lack of success on the part of the agencies in the North, whether due to implementation difficulties or reluctance to wean industry off high levels of subsidisation. The average rate of financial support by the IDB for industrial investment in 1997-98 remained above 20 per cent, which is very high in comparison with other UK regions and the rest of the EU.

(6) Future policy on inward investment

Policy making for promoting and sustaining inward investment in Northern Ireland needs to be based on a comprehensive, critical and realistic evaluation of the present endemic lack of underlying competitiveness of the region, as documented - for example - in the regular DTI publications onRegional Competitiveness Indicators.For too long, the IDB and the former DED have tended to shrug off their critics by pointing to some Northern Ireland success stories and by making the fallacious inference that these undoubtedly successful cases are representative of the performance of the economy and the effectiveness of their own policies at large. The faster growth of manufacturing output and employment in Northern Ireland relative to Great Britain is presented as a sign of underlying competitiveness rather than as an indication that very high grant rates serve to attract a certain type of labour intensive low profit manufacturing and service activities to Northern Ireland before it leaves the UK and the EU for lower wage locations in Eastern Europe and elsewhere.This type of defensive behaviour deceives nobody, least of all analysts of global economic issues upon whom multinational companies rely for advice on their future investment strategies.

Having spent considerable time and public resources in drawing upStrategy 2010, it is simply not acceptable that the IDB and the former DED should challenge others (who lack these resources) to come up with an alternative policy framework. For example, the NIEC consists of a tiny core secretariat of dedicated public servants and has only a minuscule budget for funding external research, yet has produced an amount of high quality strategic, detailed and searching analysis of which any Northern Ireland or British government should be proud. Alternative and better strategies have been developed by the NIEC, but it is difficult to have any confidence that they will be received and debated with any spirit of openness. When I compare the way in which the National Economic and Social Council (the analogue of the NIEC in the Republic of Ireland) operates at the very centre of Irish consensual strategic policy making, I am appalled at the casual (almost arrogant) way that the advice and analysis of the NIEC have been ignored or rejected.

(7) The Northern Ireland strategic economic context

The strategic economic policy context for Northern Ireland is difficult to characterise with any degree of precision since the region has only recently experienced a sustained period of peace and is in the process of designing and implementing major changes to its system of political and economic governance. Nevertheless, from a strategic point of view the region faces major policy challenges and will have to address some potentially serious issues:

  • The continuation into the medium term of a situation where the region has limited policy-making autonomy combined with a lack of political consensus as to the wisdom of seeking out and using greater policy autonomy in the context of theBelfast Agreement.The very limited degree of policy autonomy within Northern Ireland hinders the emergence of region-specific policy variations from national policies designed to address region-specific structural problems.
  • The additional constraints faced by Northern Ireland policy makers due to the North-South policy mismatch and market completion problems with its nearest neighbour and largest export market, leading to the continued use of a range of policy instruments (particularly in the area of industrial policy and inward investment) that have not proved particularly effective in the past.
  • Difficulties in modernising its manufacturing base away from its traditional specialities such as textiles and clothing towards higher value-added products, combined with the possibility that there may be a human capital deficit in the transition from traditional to modern manufacturing.
  • A continuing dependence on great Britain as the main external sales destination, with potentially undesirable consequences in terms of uncertain growth in the longer term if the UK remains outside EMU.
  • Economic peripherality within the UK, one of the lowest standards of living among the UK regions, combined with the possible perpetuation of dependence on external financial aid in the form of the "subvention", with consequential lack of dynamism in the private sector of the economy.
  • The disruption caused by violent conflict - together with related problems of increased labour market segmentation and discrimination - which is likely to make it difficult to mobilise resources of both private capital and labour to bring about fundamental changes. After three decades of violent conflict, labour markets have become segmented both geographically and along religious lines. The result has been the perpetuation of differential unemployment rates regionally and between the two main communities.
  • The possibility of political and economic disruption during the process of public-to-private sector restructuring, if the institutions of the Belfast Agreement are not restored quickly.

As policy makers North and South face these challenges, the progressive centralisation of macroeconomic and monetary policy-making in Brussels and Frankfurt will result in a greater focus on the differential performance of regional rather than national economies within the EU. In future, the difference between national success and failure will come to depend increasingly on the ability of regional economies to mobilise their resources and policy making powers to improve their competitive performance. Regions that do not already have such devolved powers within their own nation states, or who do not seek them, are likely to be at a severe handicap relative to regions that have extensive devolved or federal policy- making structures and are prepared to use them wisely and creatively.

(8) The North-South dimension of inward investment

I wish to draw my remarks to a conclusion with some observations on the island-wide context to Northern Ireland policy on inward investment. I am aware that this is a sensitive area, both in the political and policy-making contexts. I am also aware that it was raised by one of the Committee members during Dr Gorecki's evidence presented on January 22nd.

I hope that it will not be regarded as too contentious to suggest that the simple facts of geography imply that there is a North-South dimension to policy making within Northern Ireland that is additional to the East-West dimension of its relationship with the other regions of the economy of Great Britain. Attention paid to the North-South dimension is perfectly consistent with the fact that the major external markets and sources of inward investment for both regions presently lie, and will continue to lie, outside the island of Ireland. It is also consistent with the fact that both regions are among the most open economies in the world. But openness in terms of trade, in a situation where island production has come to be dominated by externally-owned multinational branch plants, is a position that is not without its problems.

Another reason why I suggest to the Committee that it might consider examining the North-South dimension of policy and performance for inward investment is that policy makers in Northern Ireland simply cannot ignore the fact that the policy freedom enjoyed by the Republic of Ireland places limits on what can be attained by policy in Northern Ireland. Indeed, the high rates of grant used by the IDB might be considered to be necessary and essential in order to overcome the attractiveness of low corporate tax rates in the Republic of Ireland. The challenge to political decision makers must surely be to put in place a better way of bringing inward investment to both regions at lower cost.

(9) Island public policy and theBelfast Agreement

The "climate" for better North-South business and economic co-operation is rapidly improving and a number of key "drivers" for longer-term North-South co-operation are now in place:

  • There has been a psychological boost from the evolving peace process as well as from theBelfast Agreement,in particular from the proposal to establish ten Northern government departments, a North-South Ministerial Council and North-South implementation bodies as well as designated areas for economic co-operation.
  • There is growing pressure, especially from business, for the need for greater North-South co-operation and co-ordination based on the widespread acceptance of its good economic and business logic, especially in the light of increasing European integration.
  • The demonstration effect of the so-called "Celtic Tiger" economy of the Republic of Ireland has generated increased interest in the processes of regional growth in these islands, as the UK constitutional changes devolve greater administrative and policy autonomy on the UK regions.
  • There is now a growing realisation in Northern Ireland that structural changes to the economy are urgently needed and that industry, as the likely "engine" of growth, may benefit from a more synergistic island industrial development and policy. Unfortunately, organisations such as the Northern Ireland Growth Challenge (a body in receipt of considerable public funding) have been slow to take up and develop this theme.

Against the strength of the factors listed above, it has been argued, by policy analysts and economists that the evolution of North-South economic co-operation should be left to market forces, thus eliminating any requirement for formal inter-governmental bodies with a remit and executive or implementation powers to work towards that end. This low key approach asserts that the private sectors in Northern Ireland and the Republic of Ireland should be allowed to decide for themselves what kind of co-operative efforts and joint ventures are advantageous and necessary.

Of course, these types of low key interactions are already in train in many areas (for example, all-island tourism promotion, joint trade missions to foreign markets, joint IBEC/CBI initiatives, etc). Nevertheless, the experience within the EU has been that a strong commitment by governments is required to harmonise policy (where necessary), remove non-tariff barriers to trade, plan EU-wide physical infrastructure investment, and thus ensure the smooth and rapid development of an integrated EU market. Formal inter-governmental bodies deal with these issues at the level of the EU. The dilemma for the island of Ireland is that the very specific co-operation and policy harmonisation needs of Northern Ireland and the Republic of Ireland may be inadequately represented at present at the Brussels tables by the UK and Irish governments. Direct UK-Republic of Ireland co-operation would be more focused, but ultimately what is required is a Northern-based administration with at least a limited range of policy-making powers that is willing to develop co-operative mechanisms and institutions for the island economy. Only within this context is Northern Ireland likely to become a dynamic host for high technology inward investment.

TOP

ANNEX 4

NORTHERN IRELAND COMMITTEE,
IRISH CONGRESS OF TRADE UNIONS (ICTU)

28 January 2000

1. Introduction

There has been a long-term concern about the performance of the Northern Ireland economy, concentrated particularly on the region's disproportionately high unemployment. Isles and Cuthbert, provided evidence that male unemployment in Northern Ireland in 1939 was nearly two and a half times higher than in Britain while female unemployment was nearly twice as high. Since then a plethora of reports have pointed to an economy with severe structural weakness:

  • A worrying share of manufacturing concentrated in low-technology, low valued-added industries
  • Since the Troubles, and compounded by the oil shocks, there have been difficulties in attracting and maintaining foreign direct investment
  • Reflecting the industrial structure, there are significant concentrations of low pay
  • The region is characterised by a low rate of firm formation
  • Total factor productivity rates remain relatively low
  • GDP per head remains stubbornly around 80 per cent of the UK level.

These features of the local economy have been relatively constant over the past three decades despite substantial public investment in economic development totalling about £150 million per year at current prices. This ignores substantial investment in physical infrastructure and in training funded largely from the European Union. Thus, not only has the economy suffered from long-term structural weakness, but also the level of intervention designed to tackle these problems has been relatively higher than in other UK regions.

At the same time during the 1990s, unemployment and manufacturing growth both converged with the UK. While such developments are grounds for optimism, they cannot conceal underlying problems - a region that competes primarily on price, where average wages are about 85 per cent of those in the UK and where productivity rates and GDP per head are amongst the lowest of the UK regions.

As the 21stCentury approaches it is imperative that the Northern Ireland economy moves to a different trajectory. Such factors as increasing globalisation and the possible entry of the UK to EMU will increase competitive pressures. Those regions and areas that cannot 'raise their game' to meet these challenges will be economically marginalised. This imperative is reinforced by the impressive growth rates of Northern Ireland's immediate neighbour, the Irish Republic whose performance in attracting foreign direct investment and in economic growth has been dramatically better than Northern Ireland's.

It is thus appropriate than an Economic Development Strategy Review has been undertaken to offer a new approach to regional development over the next decade. The Northern Ireland Committee of the ICTU welcomes the decision to take this comprehensive approach. The terms of reference are extremely ambitious referring to: 'the entire economic context'; 'ambitious but attainable long term goals for the Northern Ireland economy in terms of wealth creation, employment and living standards; other major factors such as education and infrastructure; sustainable development; and, equality of opportunity'. There are thus grounds for believing that this will be the overarching strategy for the region to which all other forms of strategy development will have to relate.

The Northern Ireland Committee also recognises the extensive preparatory work undertaken by the eleven sector, and seven cross-sector, review groups and by the Consultation Panel that commented on the reports generated. The Northern Ireland Committee of Congress is deeply concerned that trade unions were marginalised in the process of drawing up Strategy2010. The Committee is also concerned that the process was not inclusive to the extent that a number of other social partners were also marginalised. This creates an obstacle to winning support and achieving a positive attitude to 2010 within the Trade Union Movement and beyond. Strategy 2010 has been a major exercise, largely among the business community, that connects with key concerns for trade unions and other interests in society. Indeed, no other economic strategy document has attempted the breadth and depth of Strategy2010, nor matches its length.

At the same time however the scale of the development challenge facing Northern Ireland, demands that the findings and recommendations of the Review Group be critically assessed. Since the document itself argues that everyone in Northern Ireland should have a stake in the economy, advocates that growth be fairly shared and prioritises partnership and social cohesion, it is crucial that extensive consultation occurs withallsectors to ensure that such goals are embedded in both the targets and recommendations.

This statement by the Northern Ireland Committee of the ICTU responds to the document by asking the following questions:

  • Is the review based on sound assumptions about the general economic development agenda?
  • What have we learned from the current ten-year strategy, launched in the late 1980s by the 'Pathfinder' document and confirmed in 'Competing in the 1990s' and 'Growing Competitively'?
  • Are the visions and key principles articulated in the review appropriate to the local economy? - Are they capable of translation beyond the general and rhetorical?
  • Do the proposed institutional reforms constitute a new, dynamic system of economic governance?
  • Are the key ten targets realistic and achievable? - How much of a difference would they make?
  • What is the relationship between the ten targets and the 62 recommendations? - Do the latter represent a coherent, implementable set?
  • Are the twin goals of competitiveness and cohesion appropriately reflected in the recommendations?
  • How does 2010 relate to other areas of policy development, eg New TSN, PAFT and Social Inclusion?
  • Does the whole package represent a robust overall approach to overcoming the structural weaknesses of the local economy?

2. Sound Assumptions?

A key challenge facing the European Union as it moves into the 21stCentury is to find a development model that will enable it to compete economically on a global scale while retaining its commitment to social cohesion and social inclusion. This will be no easy task. Even large economic units, like the EU, are not immune to rapid changes occurring within the world economy. A recent trend in this respect has been termed globalisation -the worldwide wave of liberalisation of trade, investment and capital flows and the consequent growing importance of these flows and of international competition in the world economy:

  • As world trade has become progressively liberalised, it has dramatically increased in volume. During the 1990s, the growth of exports exceeded the growth of world GDP hence increasing the export-to-GDP ratios of most OECD countries. In order to be successful in this environment, enterprises have to produce at global prices - there is thus a permanent pressure to be price competitive.
  • Large corporations have internationalised their production centres and plan investment where long-term return is greatest. Foreign Direct Investment's annual average volume increased from $50 billion in 1981-84 to $212.5 billion in 1994This has meant the relocation of production from traditional sites and, indeed, the volatility of investment in new sites. Global production is changing faster than ever before driven by a more deregulated world order, new systems of production and the pace of technological advance. International investment flows have grown in volume while the competition to attract foreign direct investment has become intense.
  • Moreover, the world financial system has become substantially integrated so that large shocks in one part of the world affect all others.

The world has become more open, more complex and more interdependent. The end result is that international developments have had an increasing significant impact on national economies and regions have become more open to competition from elsewhere. Accordingly, governments have come to regard competitiveness as the corner stone of economic development policy.

At the same time however there is no international consensus about how competitiveness can be achieved. The Asian model of export-led development sustained by a close alliance between enterprises, government and the banks has been tarnished by recent problems. The United States approach of fiscal prudence coupled with deregulation has produced impressive growth and millions of jobs, but the bottom 40 per cent of US society has paid the price in terms of slow growth in real incomes and greater risk of job loss. Moreover, at the end of the 1990s, there are increasing fears that the over-valued US stock market will dramatically fall catalysing a new crisis in the global economy.

There does seem to be an emerging European consensus on achieving competitiveness, signalled in the White Paper onGrowth, Competitiveness and Employmentand to which the new majority of social democratic governments within the Union are signing up. This has five elements:

  • First, there is no future in long-term subsidy.Small, open regions have to be competitive - that means exploiting competitive advantage and finding the right competitive niche. Underdeveloped regions cannot rely on central subsidy to solve their problems. Long-term subsidy creates a 'soft budget' culture. This does not deny the necessity for redistribution towards the most needy but suggests that social rights have to be balanced with social responsibility, obligation and entrepreneurship.
  • Second, a central issue is thequality of human resources. Although the situation is complicated by population movement, a key goal for most regions is to ensure that the quality of their human resources is better than the national average - ie looking critically at the form and content of existing education/ training provision and finding the means to make it better and linked to the development process. If economies are driven by a combination of resources and knowledge, the latter has become dominant. The key to competitiveness lies in knowledge-intensive workers capable of constant innovation.
  • Third, thatkey gains can be made through co-ordinating existing effortand enabling the development ofintegrated strategies. In that respect, no sector has exclusive responsibility. It is not the role of government to 'solve' regional problems - statutory agencies, the private sector, local politicians and the entire community have all to take on the responsibility for an area's development. Evidence from Europe suggests that regeneration is dependent on getting three things right - hardware (the appropriate physical infrastructure), software (education/training, business formation/attraction and social inclusion) and 'heartware' (a culture characterised by energy, enterprise, co-operation and the desire to get things done). All three have to come together at the right time to combine development with sustainability. In turn, this suggests that the role of the public sector should be redefined from provider to enabler, broker and entrepreneur.
  • Fourth, thatpartnership is the most important mechanism for making things happen. The development agenda needs to pay attention to systems for economic governance. Where different sectors are capable of collaborative economic decision making without subordinating the interests of any one sector, development is facilitated. Partnership involves the relevant sectors, operates on the 'meso' scale so as to have greater impact and yet retains a human face in terms of accountability and participation.
  • Fifth, that social cohesion is an crucially important goal. Evidence from the most successful European regions suggests that inequality and unemployment are obstacles to development. Equality and social inclusion should therefore be the goals of economic as well as social policy. Moreover, active solidarity between the affluent and the deprived, between prosperous and underdeveloped regions and between mainstream society and those on the margins can spur the development process.

It is clear that Strategy 2010 reflects some of that agenda. Section 3 looks at key influences on modern economies emphasising the impact of globalisation and competition. It makes explicit reference to the 'Successful European Regions' research commissioned by the Northern Ireland Economic Council pointing to the need for new mechanisms for economic governance, collaborative systems of industrial relations and social inclusion as key pre-conditions for economic success. Section 4 sets out the general economic context briefly describing forecasts for the major sectors of the global economy. A key assertion is that 'inflationary pressure appears to be subsiding' (p.49). Companies will thus have to 'add quality to their goods and services, cut production costs or gain economies of scale' (p.50).

The general message from both sections is that the economic environment is likely to get tougher placing an increased premium on competitiveness. In turn, competitiveness depends on a wide range of factors, many of which would not be regarded as 'economic' in the traditional sense.

There is thus a sense that the document embraces three key elements of the emerging European development agenda:

  • Achieving international standards of competitiveness is the key to success in the global economy.
  • This requires new forms of economic governance that are both more effective and more participative.
  • Social cohesion, equality and social inclusion are central components of economic progress. In this respect however it is unfortunate that the equality and cohesion goals of Strategy 2010 tend to be relegated to the status of 'downstream effects' of economic development. The significance of the Economic Council report on Successful European Regions was the finding that equality and cohesion are conditions that enable successful development rather than just its consequences.

The Northern Ireland Committee endorses an approach of this kind. However it is not clear that a commitment to all three runs throughout the Strategy 2010 is manifest in all of its recommendations.

3. Lessons from Previous Strategies

It should be recognised that Northern Ireland has had an economic development strategy in place since 1990. It is thus important to assess how that has been implemented and with what effect. This constitutes the immediate context for the consideration of 2010. The shape of the current strategy was signalled in 'Building a Stronger Economy (1987)', 'Competing in the 1990s (1990)' and 'Growing Competitively (1995)'. The 1987 document identified key weaknesses in the local economy including an over-dependence by industry on public subsidy, the alleged lack of an enterprise tradition and deficiencies in training, work and managerial competencies. The 1990 document emphasised the need for industrial competitiveness suggesting that public assistance should be targeted at potentially successful firms and concentrated on training, R&D, quality and design rather than capital investment. This new approach was reaffirmed in the mid-1990s pointing to the necessity to target assistance to remove obstacles to growth, to reduce the share of public funding (particularly for capital projects) and to generate an enterprise culture.

Accordingly, a central component of 2010, improved competitiveness has been at the heart of industrial development policy for almost a decade. If so, what progress has been made? A recent study by the Northern Ireland Economic Council suggests that the policy was implemented with considerable variation amongst the DED agencies and with mixed results. For example:

    • .there has been little reduction in overall public expenditure on economic development, either in absoluteterms or relative to GB.;
    • .there is scant evidence that the Government's economic development strategy is being implemented withvigour.
  • IDB, the lead development agency, has not made substantial progress in implementing Competing in the 1990s;
  • The DED has not set timetables and benchmarks for the implementation of the economic development strategy.

To be fair, the report comments favourably on LEDU, IRTU and the T&EA, but neither the department nor its lead agency are judged to be fully 'on-message' with regard to the current strategy.

It is disappointing that 2010 makes no reference to this experience. If the evidence presented by the Economic Council is accurate, it raises the question not just about the strategic direction of economic development policy, but also about its implementation. Even if the strategy is appropriate, lack of implementation could inhibit success. Indeed, despite improvements in economic growth, employment and unemployment over the 1990s (attributed by many to the more favourable political climate), GDP per head as a percentage of the UK average scarcely improved while labour productivity fell from 87 per cent of the UK average in 1991 to 82 per cent in 1997.

If 2010 does develop a consensus about the direction of economic strategy in Northern Ireland, care should be taken to ensure that the mechanisms for its implementation should be adequate.

4. Visions and Principles

Strategy 2010's vision statement reads:

A fast growing, competitive, innovative, knowledge-based economy where there are plentiful opportunitiesand a population equipped to grasp them (p.129)

The emphasis is on the competitiveness of the local economy that will, in turn, create opportunities for those able to grasp them. There is an assumption of the 'trickle-down' benefits of economic growth provided people have the skills and knowledge to grasp new opportunities. It would thus appear that the social cohesion/social inclusion dimensions of the strategy are to be achieved within the labour market. Indeed, this accords with the general policy direction in the UK as manifested by Welfare to Work and New Deal for Communities:We want to make the mainstream economy - with its opportunities and risks - the main path out of exclusion for all people of working age.

Many commentators fear that translating the equality/social inclusion agenda into an exclusively labour- market approach, particularly since this is seen as a substitute for redistribution, will leave certain sections of society untouched even if economic growth is accelerated: We agree.that redistribution is not the only route to a 'more equal society'. However ministers seem to have erased it from the map altogether.

Nevertheless, in describing the characteristics of such an economy, 2010 does refer to: high employment levels; high value-added, high wage, lasting jobs; a more even spread of economic welfare; an educated, creative and flexible workforce; and, a good quality of life (pp 129-130). At the same time, the document highlights five principles of which the first is to promote equality and social cohesion:

The Strategy Steering Group regards it as essential that any new strategy should be based upon the principles of equality of opportunity and social inclusion. It is important that all the people in Northern Ireland not only have an equal chance of sharing in its increasing prosperity but also instinctively know that they do (p.143).Thus the group endorses the new Human Rights and Equality Commissions together with NEW TSN and Promoting Social Inclusion policies.

The Northern Ireland Committee welcomes this statement of intent. However, it believes that economic development cannot embrace social cohesion by simply 'genuflecting' towards such policies already in place. The form and substance of economic development policy must show their own capacity to enhance cohesion and inclusion. Unless these visions and principles are translated into recommendations, they will remain banner headlines rather than substance.

The Northern Ireland Committee has been discussing such issues within the Concordia forum. This is a partnership embracing trade unions, business, the community sector and the farmers' organisation. Two key ideas have emerged from these discussions:

  • the first is the primacy of social partnership in the development process as has been evident in theIrish Republic. As Rory O'Donnell argues: The Social Partnership approach developed inIreland over the past decade has reaped considerable economic benefits and a high level of social solidarity. The Irish model engages a wide range of diverse economic and social factors, in consultation with government, in devising long-run agreed strategies for economic and social progress and development;
  • the second idea has been 'collaborative advantage' a productive alternative to the narrow ideas of the efficacy of market competition that were dominant in the 1980s. This suggests that different sectors can combine differential expertise, information and best practice to assist the development process. It assumes active, rather than passive, citizenship in the development process. It urges enterprises to collaborate to make training, marketing and R&D more effective.

ICTU firmly believes that the Concordia experience can make a substantial contribution to the development debate in Northern Ireland.

5. The Reform of Economic Governance

2010 proposes a new structure for economic governance in Northern Ireland. It has three components:

  • The overall control of economic development will be devolved to the Assembly and Executive;
  • As a new form of social partnership, an Economic Development Forum will be created, supported by a new high-powered, high-quality research body (possibly a development of the Northern Ireland Economic Council);
  • Fostering increased networking and collaboration amongst Northern Ireland businesses.

Thus, economic development will be under the control of a locally elected, locally accountable political structure. A new form of partnership will offer the social partnersa strong, effective voice and a meaningful role in influencing the formulation and implementation of economic development policy in the region.Equally, a new culture of networking and, potentially, clustering will be fostered within the business community.

The Northern Ireland Committee endorses the concept of local control and local accountability with respect to economic development. It also welcomes, and has consistently advocated, a partnership approach to policy design and implementation. The Northern Ireland Committee welcomes the inclusion of the farmers' organisations and the extension of representation from the community and voluntary sector. This has been an issue to which the NIC has attached importance and we acknowledge the fact that all the social partners involved in Concordia model are now members of the Economic Development Forum. It remains our view that there should be equality of representation and, given that the trade unions and business community have four seats, we would strongly recommend that the community and voluntary sector, through NICVA, and the farming and rural community, through UFU and NIAPA, should have their representation increased to mirror that of business and trade unions. We hope this issue can be dealt with rapidly.

As we already indicated, there is a model of social partnership available in the Irish Republic. During a seminar with a Review Steering Group, Garret Fitzgerald suggested that one of the reasons for the remarkable economic performance of the Irish Republic was the existence of a stable social contract between the state, employers and trade unions over the previous decade. New relationships developed amongst government, employers and trade unions in the Irish Republic as a response to the crisis of public finances in the mid-1980s. This resulted in the Programme for National Recovery (1988-90) and three subsequent programmes - the Programme for Economic and Social Progress (1991-93), the Programme for Competitiveness and Work (1994-96) and Partnership 2000 for Inclusion, Employment and Competitiveness (1997-99).

The production of such programmes has involved a set of key elements:

1. each programme was based on a strategy produced previously by the National Economic and Social Council;

2. each reflected a 'shared view of the range of economic and social policies which are necessary to achieve international competitiveness, employment growth, a reduction of inequality and high levels of health, education and welfare provision';

3. the range of organisations associated with their development expanded steadily over the period so that, for example, there are now eight community partners including representatives of the unemployed and women's organisations and six different employers and business organisations. Indeed the ICTU remains the only organisation with total representation for a particular sector;

4. as the programmes developed, social concerns gained prominence so that the current programme has inclusion as its primary goal.

In addition to these national programmes, a series of task forces was set up to focus on key issues - long-term unemployment and the Travelling Community - and Area-based Partnerships were also established. All had a partnership structure. Social partnership in the Irish Republic thus represents a strategic approach to development, seeking the engagement of multiple partners and prioritises social issues in addition to macroeconomic stability.

Clearly some would not share the view that the Irish Republic's experiments in economic governance have significantly contributed to its economic performance. However, there is clarity about role, functions and who participates, and these are the minimum conditions for successful partnership. Without such level of detail, it is impossible to assess the potential impact of the proposed Economic Development Forum and we remain concerned about the level of contribution this Forum can make to the economic and social well-being of the Northern Ireland community.

Moreover, whilst it would be important to support such a body with high quality research, there are very severe reservations that if the Economic Council were simple conscripted to fulfil this role, some of its key advantages would be lost. It is already a form of social partnership that works through consensus to generate significant research on the local economy. It has pioneered a new discourse on economic development by translating international research to the local context. Most of all, it has 'public voice' to criticise, comment on and evaluate existing policy. It thus offers an independent benchmark by which the entire population of the region can judge policy development and implementation. It is crucial that such functions are not lost in any institutional reform.

6. The Ten Targets

Strategy 2010 sets ten targets for the Northern Ireland economy to be achieved within the next decade. With the exception of T4 (the reduction of long-term unemployment as a percentage of the workforce from four to two per cent) these are conventional economic indicators. The Northern Ireland Committee endorses the idea of establishing timetables and targets but has questions about the set identified in the strategy document:

  • If social cohesion is to be an integral goal of economic development policy, why is the target list confined to conventional indicators - why not, for example, the United Nations' Index of Human Development?
  • Why are only two indicators concerned with social exclusion, ie long-term unemployment and average earnings? In any case, the latter could rise as a percentage of UK average earnings without any corresponding increase for the low paid if earnings increases were concentrated in the upper deciles. Why not an improvement in the lower quartile of the earnings distribution?
  • How was this particular set of indicators chosen - why for example was GDP per employee (a measure of productivity) ignored?
  • On what basis were the target figures chosen? It would appear that some are perfectly feasible given the anticipated impact of current programmes like New Deal for the long-term unemployed. No evidence is provided for others, particularly since existing projections (for example, with respect to GDP per head - T1) suggest the current Northern Ireland figure will decline rather than improve.
  • If all of these targets were achieved, would that place the local economy on a different trajectory?
  • Does Northern Ireland need to increase its investment in roads by 50 per cent (T10) given that it is reactively well endowed with physical infrastructure and much evidence points to increased road capacity simply filling with new traffic? If nothing else, concern for the local environment raises questions about such a target, particularly since 2010 places a priority on sustainable development.

In short, there is little rationale for this particular set of indicators, the targets established seem to have been done so arbitrarily and the entire calculation makes no allowance for anticipated changes in the indicators over the ten year period in the absence of a strategy like 2010. It is disappointing that the social cohesion and equality goals appear to be marginal to the overall development effort. Moreover, it is surprising that no targets appear for cross-border development which the Northern Ireland Committee believes has considerable potential in the development of both parts of Ireland.

7. Sixty-two Recommendations

2010 comes with 62 recommendations designed to achieve its ten targets. Some have been commented on above (the Economic Development Forum and its associated research body). Others endorse existing strategy statements, eg the cities and towns identified in 'Shaping our Future' should be the main location for the future location of industry. It is inappropriate to comment on each recommendation. Accordingly, these comments focus on areas of concern to the Northern Ireland Committee.

  • The recommendations come as a list. It is not indicated whether these alone would be a sufficient condition to transform the regional economy or are part of a broader framework covering the work of other departments. If the former, then there are practically no recommendations covering social cohesion, equality or social inclusion - a substantial gap. If they are to be integrated with initiatives happening elsewhere, it is not clear what particular niche they occupy. For example, at least seven recommendations concern changes in education. Many of them are useful, but how do they relate with what else is happening in the field of education? If the recommendations relating to education are to be implemented by the new department, will it have say in determining which recommendations will be implemented? How will that effect the overall economic strategy?
  • Since the recommendations come as a list, it is not clear how they are prioritised. This is important if only because some imply changes (in places substantial) in public expenditure. The Assembly will have responsibility for the Northern Ireland Block but no substantial authority with respect to raising finance. Change will therefore have to be accommodated by revisions within the Block. What would such changes look like? 2010 pays no attention to issues of this kind.
  • With respect to particular recommendations -

1. The document calls for the implementation of the Dearing Report - does this suggest that government had no intention of implementing this report previous to 2010?

2. The document suggests that the universities could play a major role in assisting with R&D. Does this mean that the £4 million cut in university funding for R&D related research will be restored?

3. How would the special rate of Corporation Tax be financed? Is this likely to be paid for by other programmes in the Northern Ireland Block or by increasing the rates of domestic rates' payers? Would it raise concerns in other UK regions, particularly those with devolved government? Why should the measure only last five years? Is the evidence overwhelming that this would attract new FDI? As a blanket measure for new inward investment would it simply encourage the grant dependency identified as a problem in Northern Ireland?

4. Is it feasible to suggest that Selective Financial Assistance should be less readily available to existing firms when research by the Economic Council points to major problems in implementing similar reforms in the 1990s?

5. Is the case fully established for a single economic development body - after all, IRTU was created because of the low attention being paid to R&D within a large organisation like the IDB? Is there a danger that the co-ordination gains of a single body would be matched by the loss of focus on key themes and sectors?

6. Is Growth Challenge the appropriate organisation to develop sector networking?

7. Why restrict out-of-town shopping developments for only five years?

8. Why are the recommendations relating to cross-border development restricted to roads and energy? Why not economic development or public-sector co-operation?

9. Is there really evidence that deregulating the bed and breakfast sector would produce significant benefits from tourism?

10. Under what rationale should public administration arrangements be reviewed - more effective service? - a greater contribution to economic development? - savings?

These issues do not suggest that the Northern Ireland Committee opposes each and every recommendation in the report. There is concern however that they do not constitute a coherent set, that the public expenditure implications have not been identified, that the role of other departments in implementing these recommendations has not been fully explored and that, in some instances, the recommendations would not bring about desirable results.

8. Competitiveness and Cohesion

The simultaneous achievement of economic competitiveness and social cohesion is the Holy Grail of development strategies. Previous DED economic strategies wanted to concentrate on economic growth and leave the social agenda to others. For example, reviews of the implementation of TSN (Magill, McLaughlin and Quirk) suggested that the economic agencies had most difficulty in operationalising the concept. 2010 boldly sets both as its central goals and this is to be applauded. There remains a problem, however, in that there is a failure to translate this bold approach into a practical and meaningful programme. It would not have been impossible to do so, for example, why not set targets for the reduction of inequality or low pay? Why not go for comprehensive partnership arrangements as has been tried in the Irish Republic?

It is hard to resist the conclusion that lip service has been paid to social cohesion, equality and inclusion while the targets and recommendations are mainly focused elsewhere on the more traditional economic agenda. This is exacerbated by the inference that the public sector in Northern Ireland is too large and needs to be rationalised and reduced. Certainly public expenditure is a high proportion of GDP and requires subsidy from the British Exchequer. However, public services in Northern Ireland (with the obvious exception of industrial support) are offered on exactly the same terms as elsewhere in the UK. A higher level of need (for example, disproportionately high long-term unemployment) largely accounts for relatively high expenditure. Attempts to reduce and rationalise services could intensify inequality and social exclusion, contrary to the spirit of 2010. The Northern Ireland Committee is opposed to the privatisation ethos that underpins much of Strategy 2010. There has to be a rational analysis of the need and role of public services in the overall development process. Otherwise there will be a collapse into the cul-de-sac slogan that the market place is good and the public sector bad.

Similar comments can be made about its relationship to New TSN. It is not sufficient to acknowledge its importance. It is crucial to specify how they it is to be achieved within economic development and by those agencies responsible for this area. There are simply too many assumptions that gains in this respect will be achieved via general economic growth or by reference to new agencies or legislation. Yet the evidence of TSN suggests that it was not taken sufficiently seriously by the economic development agencies. Unless goals of this kind are fully integral to economic development strategies, there remains the danger that they will be sidelined. This whole issue becomes much more important, given the Northern Ireland Act 1998 and the ongoing consultative process in relation to statutory duty. The Economic Development Forum will need to be to be to the fore in ensuring that these issues are pursued and that the inequalities which have existed in our community, and the difference in employment prospects and opportunities for all those categories referred to in Section 75 are reflected in public policy.

The Northern Ireland Committee puts particular emphasis on the need to address the differences in employment opportunities, training etc between men and women. This is emphasised in the ongoing discussions regarding the next round of Structural Funds post-1999. In this context we have considered a number of the proposals in 2010 and wish to make the following series of recommendations for improvement. These include:

    • The impact of Strategy 2010 on women and men must be assessed to ensure that, even if it appears genderneutral, it does not impact adversely on one gender;
  • The Government should continue to monitor male and female labour market participation and set realistic goals and timetables for change to the current patterns of occupational and industrial segregation;
    • The Government, industry and individual employers should initiate positive action encouragement measuresin areas where women are under-represented such as construction, engineering, electronics, health technologyand the software industry;
  • Public funds should be used to encourage the expansion of good quality training in new growth areas where women are under-represented such as information technology and in the service sector such as childcare which has expanding employment opportunities.

9. Can 2010 make the difference?

In terms of the degree of preparatory work, the breadth of its approach and its attempt to define the new European Development agenda for Northern Ireland, 2010 is a significant step up from previous economic development strategies issued by the DED. It could, however, be improved:

  • There needs to be a better understanding of how previous economic development strategies have worked, - what has been their impact? - in what ways have they be deficient? - and any new strategy should be based on that assessment;
  • The strategy needs to be coherent from the vision and principles right through to the recommendations. If social cohesion is an important principle, that should be detectable in the targets and recommendations;
  • The new strategy has to indicate how it will fit with the new departmental structure and what division of labour is to be effected amongst these departments. In turn, this requires a clear statement of the role and responsibility of any new partnership structures;
  • The recommendations should form a coherent whole with clearly specified priorities including some account of the public expenditure implications;
  • Recommendations should be put forward only where there is clear evidence that they will actually work.

10. Conclusion

The Northern Ireland Committee wishes to play its full part in the Economic Development Forum. We believe that our participation, along with the other social partners, will allow a significant contribution to be made and would take this opportunity of stressing the success of the model adopted in the Republic of Ireland where there has been equal representation of the social partners and would strongly recommend that this model be applied to the Forum.

We remain concerned that there is not adequate recognition of the contribution the public sector has, and continues to make to peace and prosperity in our community. Comments about 'rolling back the state' would appear to send all of the wrong signals not only to the Trade Union Movement but to the business community and the people of Northern Ireland in general. We believe that the Forum will provide an opportunity to strengthen relationships with all the partners to ensure a peaceful and prosperous society in Northern Ireland. The creation of an Executive and a working Assembly is a key factor in achieving these goals.

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ANNEX 5

INSTITUTE OF DIRECTORS

January 2000

Northern Ireland Division Policy Committee - A Response to 2010

Executive Summary

The IoD assembled a widely representative group of members to examine and prioritise the main recommendations flowing from Strategy 2010, based upon those actions that will give the greatest return. This is not an attempt to rewrite Strategy 2010, rather to give it priorities in a time of financial stringency. The IoD believes that a prioritised implementation strategy for Strategy 2010 must be urgently developed. Certain sectors, activities and initiatives will deliver faster, cheaper and more certain results than others. These must be identified and appropriate action taken.

Based on their high growth, high job-creation and sales potential, and their low/medium cost to implement, the published strategies of the following Sectoral Working Groups should be given priority:

  • Electronics
  • Health Technologies
  • Software
  • Telecommunications
  • Tourism

There is a need for the urgent production of an accurate detailed budget for all 2010 recommendations to enable informed judgements to be made on priorities and to link the Strategy with annual NI Block budget decisions.

It is necessary to put into placenowthe procedural steps within the control of the public sector as recommended in the Strategy.

A merger of the industrial development bodies should be implemented to take forward most effectively the drive for new investment and the stimulation of local enterprise.

The public/private approach to infrastructure investment has never been effectively mobilised in Northern Ireland. The IoD believes that a key element to regeneration and investment in a desirable timescale lies in the wider application of public/private partnerships. The outcome will be to enhance the local infrastructure with particular relevance to the competitiveness of the tourism and communication sectors. As a matter of urgency, a revised approach to the identification and fast-tracking of key public/private partnership programmes should be developed.

Central to economic regeneration is a refocusing of government incentives and targeting towards higher added-value, knowledge-based, Foreign Direct Investment (FDI). High levels of FDI are crucial to medium- term economic development and to stimulate the indigenous sector. This will require strategies and skills not currently available.

In attempting this exercise, the IoD concluded that a rationalisation of education and training lies at the heart of creating a successful, knowledge-based economy. Without exception, the recommendations and targets of the Sector Working Groups depended upon the availability of new or increased numbers of skilled workers. It is vital, therefore, that economic development and education strategies are well integrated and mutually supportive, the education system being purposefully targeted at potential growth areas. The IoD recommends the development of the education and training system to support the strategy, and the implementation of the various recommendations of the review group to that end, including:

  • the implementation of the Dearing Report on Higher Education
  • the creation of clusters of schools, colleges and businesses to meet the needs of the economy
  • the focusing of further education colleges primarily on vocational activity and their development as advanced centres of technology
  • the creation of a business-based careers service
  • the raising of standards of education to the best international standards all round, and
  • the understanding of the implications for business, education and training of any change to the selection procedure for post-primary education.

The three key areas to drive the economy forward are:

  • Targeted FDI with multiplying factors
  • Incentives to indigenous companies to expand and become global
  • Stimulate the spirit of enterprise to create and multiply small businesses.

The Economic Development Forum must be effective in ensuring the delivery of the 2010 recommendations is the desired timescale.

Introduction

The Institute of Directors has contributed to all stages of the production of the Strategy 2010 economic development plan and was supportive of the concept of involving the private sector in the initiative.

Our members have followed the progress of the plan with interest and welcome the establishment of the Economic Development Forum to ensure that the plan becomes reality.

In late October 1999, the Institute invited members to contribute to a 'think tank' on priorities for action, recognising that the number of recommendations produced in the plan could not all be acted upon simultaneously due to budgetary and other constraints.

The 'think tank' met in mid November 1999 and contributions were received both in person and in writing from members representing a wide range of business and sectoral interests.

This document reflects the views of the 'think tank' and of the Institute.

Setting Goals and Milestones

As the Minister for Enterprise, Trade and Investment contemplates how to take Strategy 2010 forward, the IoD has serious concerns that this process could become an enquiry into the principles underlying the plan, rather than a process of consultation into implementation.

There is anxiety that Strategy 2010, published in March 1999, has moved forward little. It could be a year after publication before a debate is initiated, by which time the impact of delay and the growth of e-commerce could, at least in some quarters, justify an overall review of Strategy 2010.

The current financial pressures on the Executive will not become any easier. Increased public expenditure for Northern Ireland, in real terms, will be less than 1 per cent in the forthcoming year. This public expenditure allocation was made in 1998, when GDP growth ran at 3.9 per cent. In 2000, however, GDP growth might not exceed 2 per cent.

The IoD is also concerned that the complexity and linkages of Strategy 2010 could have a constraining effect on debate insofar as every recommendation would be afforded equal weight. A careful reading of the reports of all the Cross Sector Working Groups and Sector Working Groups indicates that certain sectors, activities and initiatives will deliver faster, cheaper and more certain results. In the case of some of these sectors, like software and health technologies, strategies, costings, goals and milestones already exist. Delay in implementing some of the most promising of these could actually cost jobs and projects.

Central to the implementation of Strategy 2010 was the recognition that the recommendations fell into three main categories:

  • Those where the initiative fell to the business sector. To achieve these objectives, the Steering group recommended that the Sector Working Groups remain in place and have their membership expanded.
  • Those where the initiative fell to government departments. In each case the relevant department was to bring forward proposals to implement, or rebalance, the recommendations.
  • Those where initiatives fell to public/private partnerships. In such cases the relevant department was charged with initiating contact with potential partners.

The Steering Group recommended that each of the above groups should develop action plans with their partners. An Economic Development Forum would oversee implementation. Other than the establishment of the Economic Development Forum, there is no evidence that, except within a few selection areas, the recommendations have been taken forward.

An examination of the detailed reports from the Sector Working Groups reinforces the holistic nature of Strategy 2010. In each of the five sectors where the fastest growth is forecast, the single greatest need - or constraint to success - will be available skilled labour. Consequently, the implementation of these sectoral strategies, without a parallel implementation of educational, training and labour-market initiatives, may result in failure.

We have, therefore, attempted to set priorities and value ratings against some initiatives. This is not to say that those not highlighted should not be pursued, simply that those with the highest return and lowest cost should be given priority. The IoD believes that by picking and backing winners, the lead-time between implementation and outcome will be reduced with everyone in Northern Ireland society being a beneficiary.

The Economic Status Quo

Strategy 2010 was developed in an economic environment where Northern Ireland was, by certain levels of measurement, the best-performing region in the UK. Unemployment was falling, employment was rising, while manufacturing output and GDP both continued to grow. During the year of its authorship - 1998 - Northern Ireland's GDP growth exceeded 3.9 per cent while manufacturing output and exports improved significantly.

However, these headline performance figures disguised worrying structural weaknesses in the economy. These included relatively static GDP growth per capita, higher than UK average capital expenditure per employee, an imbalance in the skills base and a tightening labour market.

In addition, long-term unemployment remains worryingly high and Government actuaries predict that the working age population will rise by 42,000 between 1998 and 2006. These problems are compounded by the imbalance between the public and private sectors in the economy and the decline of manufacturing.

Whilst unemployment continues to decline and has now fallen to record lows, the economy, nevertheless, remains highly vulnerable. Agri-business, both producers and processors, are in crisis. The clothing sector shed 2,000 jobs in 1999. Reduced public sector and EU funding threatens up to 30,000 jobs in the voluntary sector.

Despite these challenges, the Institute of Directors takes the view that the long-term prognosis is good. Northern Ireland remains competitive in terms of labour availability and labour costs. Excellent communications and relatively good infrastructure are supported by strong industry/university links and the overall cost of doing business remains amongst the lowest regions in the EU.

The immediate issues hinge around exploiting the long-term opportunities whilst minimising the short-term losses. To this end, the IoD believes that Strategy 2010 must now become the single most important focus for the Assembly and the wider community, as originally defined by the Steering Group and Mr Ingram.

Strategy 2010 - Key Issues

Strategy 2010 has been afforded little of the debate or dialogue urged by the Minister and the Steering Group at the launch of the document. A number of recommendations were implemented, but these were of the less contentious variety and were described by one MLA as, ". easily reversed if the Assembly decided to do so."

There remains, therefore, considerable confusion surrounding Strategy 2010. There is nothing in the overall vision which the IoD, and the wider community, cannot easily support. The notion of targeting increased Foreign Direct Investment from the knowledge sectors, moving indigenous companies up the value-added chain, and the creation of a dynamic small business environment is appropriate and logical.

What appears to be missing from the main document is the threefold puzzle of What do we do first? How do we do it? And how much will it cost?

Benchmarking Growth: Goals and Milestones

The IOD examined a number of the specific implementation plans developed by the Sector Groups, particularly in the context of labour market issues. The common feature linking the fast growth sectors is a refocusing of government incentives and targeting towards higher added-value FDI.

The Software Sector Group concluded that inward investment could create 10,000 new software jobs by 2004. The Health Technologies Sector determined that attracting 5 key FDI companies could pump-prime sector growth by 10,000 jobs by 2010. Similarly Telecommunications and Electronics perceived focused FDI as crucial to sector growth.

In setting FDI objectives, some Sectoral Groups were, on occasions, critical of IDB strategies and expertise, recognising that while tradable services' growth outpaced manufacturing, incentive still reflected a manufacturing environment. It was acknowledged that a merger of the industrial development bodies would be critical to success in attracting FDI. Given the task facing any new industrial development organisation, there is a compelling argument for relocating any new body outside the civil service and with a strong commercial, private-sector bias.

At the other end of the scale, Tourism was not dependent on FDI, arguing that security and political stability were more important. However, the greatest constraint facing the Tourism sector is a lack of infrastructure investment. The public/private approach to infrastructure investment has never been effectively mobilised in Northern Ireland. A key element to the regeneration of tourism and improving communications lies in the wider application of public/private partnerships. A revised approach to the identification and fast-tracking of key public/private partnerships should be identified.

A matrix of the key sectors and their priority is undernoted:-

SectorGrowthNewJobs / 2010Cost to GovtPriority

Agri-food

Low

Low

High

Low

Construction

Med

N/K

Med

Low

Electronics

High

N/K

Low

High

Engineering

Med

N/K

High

Med

Food Processing

Low

N/K

High

Low

Health Technologies

High

13,350

Med

High

Software

High

21,000

Med

High

Telecommunications

High

N/K

Med

High

Textiles/Apparel

Low

Nil

High

Low

Tourism

Med

12,000

Low

High

Tradable Services

High

15,000

Med

High

Skills, Education & Training And Growth

Of the 11 sectors represented in Strategy 2010, five are identified as having the greatest potential development and contribution to economic growth and employment. However, the growth targets of these high-growth sectors are inextricably linked with increased skills provision.

The sectors are:

  • Electronics: Existing levels of output could treble, but will depend on the availability of a skilled labour force.
  • Health Technologies: Existing levels of employment could increase by 500 per cent. As with electronics, this growth will depend on increasing the available labour pool.
  • Software: This sector offers a tenfold growth, but the greatest obstacle will be the lack of suitable skills.
  • Telecommunications: Here existing output could double, but only if suitably qualified workers are available.
  • Tourism: This sector could double its existing workforce, perhaps quicker than other sectors given the faster tourism response to the peace process. Growth in the higher added-value sector could be inhibited by the perception of the industry as a low-pay employer.

The implications of education and training on the next generation of industry are profound. To create the knowledge-based economy, which will underpin future economic performance, demands a radical approach to building linkages between business and education. The IoD, therefore, believes that the clear priorities within Strategy 2010 lie in the field of education and training.

These are:

  • Implement the Dearing Report into Higher Education. Priority should be given to those aspects of Dearing related to increasing the number of places in higher education, progress towards an over-arching certificate, credit accumulation, and the creation of strong and relevant GNVQs.
  • Create collaborative clusters of schools, colleges and businesses to deliver education and training tailored to the needs of the economy. These should be facilitated by a single organisation which should be single minded in its objective of building relationships between education and work.
  • Create a sub-degree level vocational education programme based on HNDs. All the fast-growth Sector teams recognised the need for sub-degree technical qualifications and the creation of a quality technical vocation educational standard as a priority. This will need Technology Centres of Excellence. Failure to implement this will have a direct impact on economic growth.
  • Develop a clearer focus within the FE sector. The FE sector should have vocational training as its primary activity, with funding linked to the needs of industry and the economy. Of all GNVQ candidates in Northern Ireland, currently 5 per cent are pursuing IT qualifications, 2 per cent engineering, while 40 per cent are 'general' business studies.
  • Create a business-based careers service and make an industry placement module an integral element in teacher training.
  • Raise the standards of education to the best international standards throughout the system.
  • Any change in the selection process may have a profound impact on the entire educational and training agenda. The Assembly must ensure it is adequately and comprehensively briefed on the implications for the economy related to any change in the selection process or the total abolition of selection at 11-Plus.

Administrative Steps

Although some of the 2010 Sector groups did attempt to produce budget information the overall document should have included a budget with sums allocated to each recommendation. This would have given us a mechanism to identify which implementation measures were affordable each year within the projected term and would have greatly facilitated the economic planning process. We believe that this exercise should be done retrospectively as a matter of urgency even if an outside agency is involved to assist, with a target deadline in advance of the 31st March year end date. Such an exercise will greatly assist the Assembly in its deliberations over the allocation of the Northern Ireland Block Expenditure. It will also assist the judgement on prioritising measures noted elsewhere.

Strategy 2010 includes many measurers which are within the control of the public sector or where the public sector is a facilitating agent. We believe that there is no reason why such procedural measures should not be put into place now within an appropriate timescale. We believe that the business sector will take whatsoever organisational steps are necessary to deliver 2010.

The EDF is the main accepted mechanism for implementing 2010 and we must ensure that it is effective in ensuring the delivery of the recommendations in the desired timescale.

January 2000

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ANNEX 6

INSTITUTE OF DIRECTORS (NORTHERN IRELAND DIVISION)

7 June 2000

Thank you for your letter of 30 May indicating that the Enterprise, Trade & Investment Committee is renewing its inquiry into Strategy 2010 and advising of the extended deadline for submissions to 21 June. The Institute welcomes the re-establishment of the inquiry as we feel that no time should be lost in implementing a strategy for economic development for Northern Ireland.

We do not wish to add to our submission of January 2000, but would emphasise the urgency of the situation. Strategy 2010 has now been around for a very considerable time and few of the recommendations - identified through extensive consultation with the wealth creators of the private sector - have been turned into action.

The Institute would suggest that the recommendations relating to the restructuring of the economic development agencies under government control should proceed swiftly. This action will create the integrated support system that will underpin many of the recommendations of the Strategy.

With the Executive restored, we look forward to speedy action instigated by our own, accountable, local politicians to make up for the missed opportunities of the past.

LINDA R BROWN
Divisional Director

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ANNEX 7

GENERAL CONSUMER COUNCIL FOR NORTHERN IRELAND

Introduction

The General Consumer Council's task is to promote and safeguard the interests of consumers in Northern Ireland. Set up by Statute, the Council is funded by the Department of Enterprise, Trade and Investment.

Since 1985 the Council has given consumers a voice. We carry out research, promote awareness of consumer rights, seek to influence both public and private sectors and campaign for a fair deal. In addition to some specific duties in relation to energy, transport and food, we investigate and speak out on the important considerations of the day. We also take up individual complaints about passenger transport, coal and natural gas.

The Council supports much of Strategy 2010 but believes there are important omissions such as public transport and areas where a change of emphasis is required.

1.

ECONOMIC FORUM

1.1

Membership

The Council has been dismayed at the exclusion of consumer interests from the Economic Forum. Serving the needs of customers is the essential purpose of the economic system. In the past there may have been a tendency to see the economic equation as balancing the interests of business on the one hand and employees on the other. However, forward-looking businesses now recognise the importance of the customer and there is growing recognition of the validity of the consumer interest.

The Council strongly recommends that the membership of the Economic Forum be extended to include consumer interests.

2.

ENERGY

2.1

Electricity Market

Northern Ireland has the highest electricity prices of any UK region. This impacts right across the economy. In addition to the effect on industry, it is a burden on domestic consumers, particularly on those on low-incomes who need to spend more of their income on fuel.

The Council understands that industry must be profitable and has no objection to a reasonable return on investment. However, what has taken place is an inequitable distribution of the benefits of privatisation and a failure to achieve a proper balance between the interests of consumers and shareholders.

In an attempt to remedy these problems, the Director General of Electricity Supply produced price control proposals (December 1998) and has begun to tackle the problem of the generator contracts with a view to reducing the gap between tariffs in Northern Ireland and Great Britain significantly - from 24% to 12-13%.

The Council is strongly supportive of the actions of the Director General to reduce electricity prices.

2.2

Natural Gas - Extending the Network

Having long argued that natural gas should be made available to Northern Ireland, we are concerned that the current development plan covers mainly the Greater Belfast area placing the rest of Northern Ireland at a competitive disadvantage.

Gas should be made available to as many consumers as possible and we have recommended that the case for extending the network should be examined in detail. Government has already commissioned a study into the feasibility of taking natural gas to the North West. The report says that such a pipeline is technically feasible but the high costs involved could make commercial viability difficult.

We would urge Government to consider the wider social case for extension of the network including, to the Craigavon/Newry Canal Corridor, especially since this would be consistent with the New Targeting Social Need initiative.

2.3

Interconnection

The isolation of Northern Ireland's energy systems from other grids in the past has prevented it from benefiting from economies of scale and competitive influences.

The Council wants to see further co-ordination with other grid systems (including the Republic of Ireland, Great Britain and the European mainland) if this is capable of delivering savings to Northern Ireland consumers.

2.4

Utility Regulation

The Government's Green Paper (March 1998) -A Fair Deal for Consumers: Modernising the Framework for Utility Regulation- and current Utilities Bill proposed placing a new primary duty on regulators requiring them to protect the interests of consumers. It also proposed that the Northern Ireland Consumer Committee for Electricity should be merged with the General Consumer Council for Northern Ireland and a single energy committee established within the Consumer Council.

The Council strongly supports both proposals and looks forward to taking on the wider role of representingallenergy consumers.

3.

TRANSPORT

3.1

The Role of Public Transport

The Strategy looks at how transport can contribute to regional economic development, greater opportunities and a better quality of life for the people of Northern Ireland. However it fails to recognise the role that public transport should play in achieving these objectives.

Quality bus and rail services produce important social dividends:

  • They help people get to the jobs in the centres identified inShaping the Future.
  • They contribute to economic development allowing many who do not own a car, especially women and young people, to find work.
  • They combat social and economic exclusion.
  • High quality services minimise the noise and air pollution caused by car travel and reduce other adverse effects imposed by commuters on city residents.

However, to achieve these dividends, our public transport system requires urgent attention. There is a significant fall in the numbers using both bus and rail and passengers perceive a serious deterioration in standards of service, (see the results of independent monitoring surveys).

The Council recommends that the Strategy recognises the essential role of public transport in sustaining economic development and makes proposals for the necessary investment.

3.2

Paying for Public Transport

Recent research showed subsidy levels for both bus and rail operators in Northern Ireland were less than half the averages for operators in Great Britain even though the GB system is run by private profit making companies.

The document mentions road pricing, vehicle parking charges and public private partnership possibilities (on pages 208-9) but offers no plan for how public transport will be turned into the frequent, affordable and attractive service needed to sustain regional economic development.

We recommend that the Strategy includes detailed proposals for both investment and continuing support for bus and rail.

3.3

Roads

The document places a high priority on increased investment on Northern Ireland's roads. We support the proposal to improve of the Belfast-Dublin route; this was a recommendation in the Council's report,Cross Border Shopping on the Island of Ireland,(1996).

The proposal to increase spending on roads from 1% to 1.5% of GDP is not, however, well substantiated. As the public purse is limited and road projects compete with the public transport projects, a more detailed case for such spending decisions should be articulated.

While we welcome the priority given to improving the Belfast - Dublin road, we recommend that the implementations of the proposed increase in spending on roads be re-assessed in the light of the need for investment in public transport.

3.4

Rural Transport

Measures such as road pricing can adversely affect the rural population without reducing congestion or pollution. Partnerships between community groups, employers and transport providers, through initiatives such as the Rural Transport Fund, appear to be a promising way forward.

The Strategy should ensure that the rural population who do not have access to a private car can participate in economic growth.

4.

RETAILING, TOWN CENTRES AND PLANNING POLICY

4.1

What Customers Want

In general consumers are best served by a competitive environment in which, through their own decisions, they can affect the way goods and services are provided.

Some time ago we developed 5 criteria against which new retail development should be judged to determine whether it is in the consumer interest. Planning policy should:-

  • Ensure a wide range of shops, services and facilities,
  • Maintain an efficient and innovation retail environment,
  • Provide conditions in which competition can flourish,
  • Facilitate consumer choice and convenience by permitting a balance of appropriate different locations,
  • Provide easy access with, wherever possible, access by public transport.

4.2

Protecting Town Centres

Viable town centres are important for consumers. Town centres serve a number of functions including leisure, entertainment and other activities as well as shopping trips. However the success of out of town shopping has come about because it is providing the access and facilities that consumers want. This is supported by evidence from representative sample surveys, which we have carried out. (Available from GCC)

Finally there is no evidence that banning out of town shopping would necessarily result in the success of town centres. Shoppers who have the means to do so may drive further to enjoy the alternative. This would make it an empty policy and contribute to pollution and greater rather than lesser use of the car. In the meantime consumer choice and convenience would undoubtedly suffer.

The Council recommends that the proposal to ban any out-of-town shopping development for five years should be re-considered.

5.

EDUCATION

5.1

Collaboration Between Schools and Business

We acknowledge that high quality, business-sponsored materials and joint activities can provide schools with information and supplement other classroom resources. They can also strengthen the links between business and the community. At the same time it is essential that all materials or activities achieve the standards of quality, balance and integrity expected of educational resources. We have distributed Guidelines on Business Sponsorship to provide a checklist for schools to assess the quality and educational value of business.

We recommend that businesses and schools collaborating in cluster arrangements use GCC's Business Sponsorship Guidelines.

5.2

Increased Number of University Places

Inadequate provision of university places in the province results in NI students studying elsewhere. We agree that there should be maximum participation in higher education and that the number of places should be increased as recommended by Dearing. This gives rise to implications for housing and our research shows that there is insufficient good quality, private rented accommodation to meet student needs.

We recommend that plans should be developed to cope with an increased level of demand for student housing.

5.3

Information About the Education Service

Information protects consumers. In the case of education, detailed, reliable and timely information about standards, the range of courses and likely financial commitments are vital. There is scope for improving the nature and quality of the information presently available. This would help young people to make better and more informed decisions on matters which will ultimately affect their future career opportunities.

We recommend that the education authorities address the information needs of young people and introduce any necessary improvements.

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ANNEX 8

NATIONAL ENERGY ACTION (NEA) NI

VISION 2010 - ENERGY ACTION PLAN NEA Northern Ireland's Response

October 1999

Summary

Higher prices coupled with lower incomes and higher dependency on social security benefit cause a higher proportion of Northern Ireland's population, as opposed to Britain, to be at risk of fuel poverty. Fuel poverty and the proportion of the population at risk can be impacted upon, positively or negatively, by wider energy policy including access to cheaper, more efficient fuels and energy efficiency measures.

NEA NI agrees with the establishment of an Island of Ireland energy market but would draw to the attention of DED the disadvantage Northern Ireland may face in the light of the proposed Climate Change Levy. NEA NI believes this must be an all-island market, that is, the North-West (and the West coast in general) should also be afforded access to reliable, cheap and efficient fuels in order to increase industrial competitiveness which will improve socio-economic circ*mstances.

NEA NI believes the natural gas pipeline should be extended to the North-West and that the opportunity cost for the North-West of remaining without a supply should be taken into account when the economic feasibility of this project is examined. Access to affordable warmth has benefits within individual households, within the local community and the wider economy. Some consideration must be given to net savings on health and social security and increased taxation. The same principals must be applied to other communities in Northern Ireland when assessing economic feasibility of energy infrastructure projects.

In the interests of true energy competition, the fledgling natural gas industry must be considered for EU funding for similar reasons afforded to funding electricity projects - security of supply, the burden on consumers, diversification of energy sources etc.

Public-private partnerships should be considered for energy efficiency as well as energy infrastructure projects. The benefits of energy efficiency are well documented.

NEA NI welcomes the recommendations of the Government's Utility Regulation Review with particular reference to a new primary duty on the Regulator to have regard for low-income consumers. The duty to promote energy efficiency is also beneficial. In light of proposed future developments in the energy market in Northern Ireland, NEA NI agrees with the creation of a single energy committee. However, NEA NI believes this must be a dedicated energy committee with adequate resources. NEA NI also welcomes the proposal to require consumer councils to take account of the interests of low-income consumers and to consult on their work.

NEA NI believes an extension to the Regulator's powers to introduce competition to generation at this time would not result in lower prices, however we do see the benefits for consumers in the longer term and would accept this extension.

The document makes numerous references to the Assembly and NEA NI asks, what are DED's plans for the introduction of legislation where an Executive cannot be formed and power is not devolved to the Northern Ireland Assembly?

NEA NI firmly believes the £40 million support fund would be best invested in energy efficiency for low-income consumers. At £500 per household, 80,000 households could be helped to achieve savings greater than the £3 per year reduction forecast by the Regulator if the money were used to buy off generation capacity.

Renewable energy is an excellent opportunity for rural communities, however, funding is essential to encourage innovation and development of existing technologies. The same principal applies to CHP, which can deliver heating and hot water for as little as £3 per week, however, the Department must proactively promote the benefits and actively encourage demonstration projects.

The introduction of a climate change levy to Northern Ireland would reduce Northern Ireland's competitiveness in an all-island energy market and quite possibly, bearing in mind higher current energy prices, in Europe.

Conclusions

NEA NI is disappointed that there is no recognition of fuel poverty in the document. Whilst NEA NI accepts that DED is no longer responsible for domestic energy efficiency, the department must seek to understand the impact of energy policy on all sectors of Northern Ireland's economy, including the domestic sector and in particular, on low-income consumers.

Furthermore, in attempting to achieve the joined up and co-ordinated approach to policy-making advocated by the current Government, NEA NI is disappointed that there is inadequate consideration of domestic consumers in this consultation document.

NEA NI feels there should be more of a focus on energy efficiency, which would bring three immediate benefits:

  • lower capital investment
  • lower prices
  • lower overall energy costs.

NEA NI believes very strongly that energy policy decisions must take account of the costs and benefits of those decisions on communities in Northern Ireland likely to be affected by the outcome.

NEA Northern Ireland's Response to
DED Vision 2010 Energy Action Plan

Introduction

NEA is the national energy action charity working in Northern Ireland, which develops policies and practices to tackle fuel poverty. Fuel poverty is the inability to afford adequate warmth and in Northern Ireland, is caused by the combination of a number of factors such as:

  • Lower average incomes
  • Higher unemployment
  • Higher dependency on social security benefits

That are outwith the remit of DED, along with a number of factors, which are within DED's scope of responsibility:

  • Higher fuel prices
  • Less fuel choice
  • Inability to afford energy efficiency measures.

These last three contributory factors can be impacted upon positively by energy policy.

Higher Fuel Prices

It is well documented that consumers in Northern Ireland pay more for fuel than their counterparts in Britain. Energy policy in Britain in recent years has led to a reduction in prices of electricity and gas and movement is still in a downward direction causing a growing differential between prices in Britain and those in Northern Ireland.

Higher prices coupled with lower incomes and higher dependency on social security benefit cause a higher proportion of Northern Ireland's population, as opposed to Britain, to be at risk of fuel poverty.

Fuel Choice and Energy Efficiency

Lack of fuel choice arises in two ways:

  • Availability of fuel supply

A household can only choose energy efficient fuel as far as availability dictates. The primary example is natural gas, which is cleaner, cheaper and more efficient than for example, coal, however, since natural gas is only currently available in the Greater Belfast area, the ability of consumers elsewhere to change to a cheaper, more efficient fuel is limited. The natural gas issue will be further examined at a later state in this document, suffice to say, energy policy at regional level can impact immensely on the socio-economic status of communities. Areas without access to a supply of efficient, economic fuels tend to be characterised by low inward investment causing higher unemployment, lower incomes and more generally, a higher degree of economic deprivation. It was with this is mind that the EU focused on trans-national energy networks.

  • Ability to afford fuel switching

The inability to afford fuel switching is an issue for the vast majority of low-income households. Many have no access to, or cannot afford capital or credit. It should be noted that this may also apply to those in full-time work or self-employment, earning a low wage (that may or may not entitle them to in-work benefits) and thus living on a highly inflexible budget. The problem also applies to the installation of energy efficiency measures.

Strategy 2010 Energy Action Plan - NEA NI's Response

i. Creation of an Island of Ireland Energy Market

Whilst recognising the difficulties in creating such a market, NEA NI feels this is a valid objective bearing in mind the structural problems, isolation, peripherality and diseconomies of scale associated with small markets and small energy markets in particular. The efficiencies, which could be obtained by the expansion of the market, would also have a positive impact on emissions and therefore go some way to meeting targets agreed at Kyoto. NEA NI would however, make the following points:

  • Although the electricity and gas industries are privately owned in Northern Ireland, it is NEA NI's understanding that the future structure of the industry in the Republic of Ireland will not be so different. The implementation of EU directives on electricity and gas should ensure, regardless of ownership, a similar structure in both Northern Ireland and the Republic, and indeed in other EU member states. The Department of Public Enterprise has already recognised the need for changes in order to conform to the directives such as the appointment of an independent regulator and separation of supply and distribution businesses.
  • The Republic of Ireland, which currently has lower fuel costs, experiences fuel poverty to a similar degree as Northern Ireland. Accordingly, the fall in prices expected as a consequence of an all-island energy market, should have a greater impact on fuel poor households in Northern Ireland. However, comparison of state help afforded to citizens of Northern Ireland and to those of the Republic during winter months leads NEA NI to the conclusion that low-income consumers in Northern Ireland may still be disadvantaged in comparison with those in the Republic. NEA NI believes the system of social security cold weather payments needs to be reviewed with regard to the conditions under which payments are made, timing of payments, the breadth of the client base the scheme is available to and with a view to increasing the amount of support available.
  • The amalgamation of two energy markets into one larger market will have a positive impact on inward investment, however, the introduction of a Climate Change Levy into Northern Ireland could cause the bulk of this additional investment to flow into the Republic. Such a levy would have a negative impact in a number of areas; not least, the extension of the natural gas network that could facilitate lower fuel pries (and emissions) for all consumers. It would also place the Republic of Ireland at a competitive advantage industrially and the loss of this type of investment would have adverse effects on the wider economy of Northern Ireland, particularly the socio-economic circ*mstances of many communities.
  • NEA NI feels that any process to establish an all-island market should strongly consider the rural dimension. Current plans favour the development of infrastructure on the eastern coast that obviously affects availability and security of supply in the west and these issues must be considered as part of the overall plan for the development of the energy infrastructure.
  • NEA NI accepts the establishment of a joint DED/DFE Steering group and would endorse joint ministerial control and, in particular, the inclusion of consumer representatives.
  • NEA NI would, in the light of the current political status quo, ask what plans DED has in the event of failure of devolution and the absence of an Assembly.

ii. Any New Gas Pipeline between Britain and the Republic of Ireland to be routed through Northern Ireland

iii. Provision of a Gas Pipeline to the North-West

NEA NI is convinced that the gas network must be extended beyond the Greater Belfast Area for a number of reasons.

  • The inward investment issue in terms of job creation in those areas with higher than average unemployment, in particular, the North-West has been well documented; the direct benefits of gas to low-income households in terms of lower fuel costs, perhaps less well documented. Making cheaper, more efficient fuels available to low-income households has a range of positive effects within the household and within the wider economy; households can afford adequate warmth that may have positive health benefits (saving money on the health bill of NI), as well as contributing to the local economy.
  • The recent DFE report on the gas network in the Republic (The Gas 2025 Project Close-out Report and Review) seems to suggest that a direct pipeline between Britain and the Republic of Ireland is, in the absence of public funding, the most economically feasible option. In light of this conclusion, NEA NI would urge DED to investigate the impact of each of the options on the Northern Ireland economy:
  • Direct GB-RoI pipeline,
  • GB to RoI pipeline with S-N interconnection,
  • GB-NI with N-S interconnection,
  • This should include the socio-economic impact on those communities in Northern Ireland that would not have access to natural gas. Further, NEA NI understands that there may be interest among companies in Northern Ireland to bring a natural gas pipeline south towards Banbridge/Portadown. The impact of this development must be fed into the overall scenario for gas network development.
  • The Corrib discovery off the west coast of Ireland could also have implications for the supply of gas to the South-West of Northern Ireland, an area that is unlikely to have a gas supply under the current proposals for extension of the network within Northern Ireland. NEA NI suggests that when more information about this find and its usefulness is available, an assessment of the feasibility of bringing a supply of natural gas to the South-West be carried out.
  • NEA NI feels that the long-term costs and benefits to the economies of those communities currently lacking access to natural gas, including the impact on the fuel poor and implications for economic competitiveness and hence employment and incomes, must be considered when assessing the economic feasibility of such projects.
  • In the interests of true energy competition, the fledgling natural gas industry must be considered for EU funding for similar reasons afforded to funding electricity projects - security of supply, the burden on consumers, diversification of energy sources etc. Such funding should be made available from Objective 2 Transitional Funds and not from Peace and Reconciliation monies.
  • The opportunity cost of money currently invested in strengthening electricity inter-connection from Coolkeeragh to Buncrana must be considered when making decisions as to the feasibility of a natural gas supply to the North-West for which Coolkeeragh would be the baseload. If natural gas is not extended to the North-West, Coolkeeragh may be decommissioned and these funds will have been wasted.

iv. Re-enforcement of North-South Electricity Interconnection

The logic and outcomes for these projects, currently funded from EU Structural Funds, is accepted by NEA NI, particularly in light of the relevant points in the previous section and the benefit to those in the west of Northern Ireland and Donegal of increased security of supply.

v. Public/Private Partnership, with Public Support, provided Energy Projects are Economically Sound

Whilst NEA NI agrees wholeheartedly with the principal of public-private partnerships, we would be cautious in a generic endorsem*nt of public financial support:

  • NEA NI would expect public funds to be spent on economically sound proposals however, the subsidisation of privately owned industries which abdicate their responsibility to invest in their businesses is unacceptable.
  • Decisions as to the economic feasibility of projects should consider the costs and benefits to local communities and the wider economy of the proposed option(s).
  • Influencing factors and final decisions regarding public support for projects should be transparent and open to debate in the public domain and such open debate should be actively encouraged by DED.
  • Public support should be considered only where there is a limited impact upon other public services and associated budgets.
  • Public-private partnerships should be considered for energy efficiency as well as energy infrastructure projects. The benefits of energy efficiency are outlined earlier in this report and well documented elsewhere. In assessing the economics of such projects there should again be some consideration given to the socio-economic costs and benefits within communities and within the wider economy including the impact on health and social security spending and increased revenues to the Treasury.

vi. Recommendations of the Government's Utility Regulation Review to be implemented in Northern Ireland as soon as possible

NEA NI welcomes the recommendations with particular reference to a new primary duty on the Regulator to have regard for low-income consumers. We also welcome the requirement for transparency and the duty placed on the Regulator to have regard to wider social and environmental objectives of Government Policy. The duty to promote energy efficiency is also beneficial.

The proposal to improve openness including consultation, publication for reasons for key decisions and a code of practice governing consultation is welcomed. NEA NI is particularly pleased at the express requirement to ensure all consumers, including disadvantaged consumers, can participate in the consultation process and feels that these principals of New Primary Duty, Statutory Guidance and Improving Openness would be of benefit across the decision-making process and not only in the case of the Regulator.

Regarding appointments to regulatory and consumer bodies, NEA NI, whilst agreeing with the principal of selection on merit, would suggest that relevant knowledge and experience may be gained in numerous settings including the community and voluntary sectors. NEA NI also believes that, in making appointments to such bodies, account should be taken of the Northern Ireland Office's determination that more women and under-represented groups, such as minority ethnic communities, should be appointed to public bodies.

NEA NI's response to the two Northern Ireland-specific proposals - merging the Northern Ireland Consumer Committee for Electricity and General Consumer Council for Northern Ireland and extending the Regulator's powers to introduce competition in generation - is:

Creation of a Single Energy Committee

NEA NI believes the creation of a single energy committee for Northern Ireland is a logical step in light of future competition, a 'dual fuel' regulator, the importance of the 'bigger picture' regarding energy infrastructure, and consumer protection afforded to those in Britain.

NEA NI feels current arrangements are somewhat confusing to consumers; the Regulator regulates the gas and electricity industries but consumer issues are dealt with by two separate bodies; and therefore agrees a separate energy consumer committee should be created. However, NEA NI feels the following should apply:

  • The committee should be dedicated to energy issues in order to
  • Build up expertise
  • Bring a range of perspectives
  • Reflect the breadth and complexity of the issues involved
  • Provide enough time to consider the complexity of energy issues.
  • The committee should be adequately and separately resourced with
  • A dedicated budget
  • Dedicated staff
  • NEA NI does not support the proposal that this remit should be merged within the General Consumer Council, advocating a separate dedicated committee instead. Should DED proceed with a model which may fall under the auspices of the General Consumer Council, NEA NI would recommend such a committee
  • Has a separate chair
  • Has a separate identity
  • Takes a holistic approach to energy issues purely from the consumer's perspective.

NEA NI also welcomes the proposal to require consumer councils to take account of the interests of low-income consumers and to consult on their work.

Extension of the Regulator's Powers to introduce Competition in Generation

NEA NI feels that this could be of benefit to low income consumers if prices fall substantially as a result however, the fact remains that Northern Ireland Electricity is currently locked into contracts drawn up favourable to generators at the time of privatisation. The Regulator has in recent months attempted to secure voluntary re-negotiation of these contracts but the process has, so far, failed to secure lower prices for consumers. NEA NI feels that extending the Regulator's powers at this time will be of no benefit to consumers unless the current contracts can be re-negotiated successfully. NEA NI can however see the benefits for consumers in the longer term and would accept this extension of the Regulator's powers.

Once again, if devolution of power to a Northern Ireland Assembly, NEA NI asks what are DED's plans for the introduction of legislation?

vii. Facilitation of the largest possible electricity market at the earliest date via

a. Implementation of the EU Directive

Whilst NEA NI accepts the logic of the EU Directive and the creation of the largest possible market, we feel opening up the market to the largest users disadvantages domestic customers, especially low income consumers, as regards the burden of current generation contracts. NEA NI feels that, in order to limit this potential burden, competition in the domestic market needs to be expedited in the absence of substantial changes to the generation contracts and the financial burden these contracts put on consumers.

b. Ofreg speedily concluding the generation contract negotiations

For the reasons outlined in the previous section, NEA NI would support this objective. The outcome of such negotiations could be positive, in favour of consumers or status quo; NEA NI would obviously hope for a positive outcome resulting in lower prices whether through re-negotiation or referral to the Competition Commission. NEA NI would, however, endorse the need for an alternative.

c. Using £40 million support fund to buy out generation capacity currently contracted to NIE

Whilst this option may be an interim alternative re: point c, NEA NI believes a longer term alternative for all consumers, most especially low-income consumers, would be a concerted effort to encourage energy efficiency. NEA NI firmly believes this £40million would be best invested in energy efficiency for low-income consumers. According to Ofreg, using this money as proposed would deliver a £3 per annum reduction in annual electricity bills for all consumers. Investing this money in energy efficiency would deliver greater returns on the investment, especially for low-income consumers who tend to use a disproportionately large amount of energy. The Domestic Energy Efficiency Scheme is currently under review following review of similar arrangements in Scotland, England and Wales. Warm Deal, currently operating in Scotland, provides a grant of £500 for a range of energy efficiency improvements including cavity wall insulation. The New Home Energy Efficiency Scheme provides grants of up to £2,000 to cover the installation of heating. In Northern Ireland, over 70,000 homes lack central heating including 58,000 with an annual household income of less than £15,000. Over 50% of dwellings lack wall insulation and over 10% lack any loft insulation. 240,250 households live in properties with a SAP value of less than 40 including almost 70,000 living in properties with a SAP of less than 20. Of those living in properties with a SAP value of less than 20, over 50,000 have an average household income of less than £10,000 per annum. Another 12,000 households have an annual household income of between £10,000 and £20,000. (All figures from the 1996 House Condition Survey published by NIHE, 1998.) At £500 per household 80,000 households could be helped. This may not install heating in the 58,000 or so households below average income that require a system, but it would install cavity wall insulation, loft insulation, draught-proofing, hot water cylinder jackets and pipe insulation which would not only increase comfort levels for the fuel poor but decrease energy use in each of these homes by substantially more than £3 per year.

Another benefit of investing in energy efficiency for the most vulnerable households is the potential saving on the health budget. Approximately £30 million is spent annually on cold-related illness in Northern Ireland. With an initial injection of £40million, savings in health coupled with extra cash flow to the Treasury resulting from job creation in the industry (extra taxation - direct and indirect, fewer social security payments) could then be re-invested to help more vulnerable households.

NEA NI strongly advocates that had this money, originally £60 million, been used when it was made available in 1995/96 it would have bought more measures and helped more people in need than is possible today. Whatever the use of this money, and unfortunately NEA NI believes it will be used to correct the extreme short-sightedness at the time of privatisation, we feel it must be spent at the soonest possible juncture in order that the maximum value be obtained from public funds.

d. Modernisation of existing plant with benefits passed transparently on to consumers.

Whilst NEA NI understands the importance and future implications of modernising existing plant, we would question as to whether this is the responsibility of Government or a 'private matter'. NEA NI feels that private companies making massive profits at the expense of the consumer should be responsible for their own plant. Those who acquired generators on privatisation would have had information regarding long-term investment requirements. NEA NI would, perhaps simplistically, assume business decisions at the time of privatisation and since then would be made with consideration to investment requirements of the organisation. EU funding made available for the conversion of Ballylumford to natural gas was a catalyst for the introduction of natural gas to Northern Ireland and thus, public funding was in the interests of consumers. It is imperative that the consumers' best interests are served in these matters rather than the privately owned generators' interests.

Again, energy efficiency has a role to play; demand-side management would reduce the need for extensive investment in the longer term.

viii. Targets for:

a. Use of non-fossil fuels

The use of renewable energy has numerous advantages, not least the reduction in emissions. Renewable energy is currently more expensive than that generated by traditional means and, in the current climate, NEA NI is concerned that low-income consumers could bear a proportionately heavier burden. Technological advancements could close the gap in generation costs, however, innovation is a function of a number of factors: security of supply concerns; environmental concerns; economic competitiveness; availability of finance and social values.

Unfortunately, for the poorest of households, warmth and its cost must be an over-riding concern. More generally, in a climate of high prices, social values will not reflect environmental concern. However, renewable energy may be more of an incentive for rural communities who may be concerned about security of supply, the local environment and economic competitiveness. The utilisation of renewable energy technologies will impact more on rural communities both positively (job creation, increased farm incomes, less polluted environment) and negatively (aesthetically). Renewables could provide a cheaper, more secure supply of energy for these communities when all factors are considered which would increase economic competitiveness, however, the sticking point remains - the inability to afford the initial investment. If renewable energy is to be a serious alternative to fossil fuel generation, finance must be provided.

b. The achievement of energy efficiency

Energy efficiency within the domestic sector has already been discussed earlier in this document. As regards energy efficiency in the industrial/commercial sector, surely, with current high energy prices, the drive to minimise overheads and maximise profits is incentive enough for businesses to implement energy efficiently. Those businesses that are not currently investing in energy efficiency are likely to be those with the smallest margins and therefore a lack of up-front capital to invest. The principals applied to the domestic sector would also apply here - encouragement and information for those who can afford it, financial help for those who cannot.

c. Use of CHP

Whilst NEA NI recognises the potential benefits of CHP in the industrial sector, which should be more actively promoted, we feel that benefits for the domestic sector must also be more actively promoted. Weekly costs of £2 to £3 for space and water heating are certainly appealing for the fuel poor but the domestic sector in general needs more information on CHP, the technology and process involved and the potential benefits, including cost. CHP could, for example, be promoted with the major housing developers including Housing Associations and in some instances become part of the conditions laid down to obtain planning permission just as arrangements for access, water supply and sewerage systems are.

  • NEA NI would also point out that partnerships between the domestic and other sectors would have potential to cut energy costs for all involved including households in the vicinity of, for example, an industrial estate, hospital, school.
  • NEA NI feels that proactive promotion of CHP to a much wider audience is required and that the EDS should be extended or replaced to help in this task. Funding demonstration projects would show the benefits of CHP in a practical, quantifiable way. We also felt that the ten-year target set in the document is extremely modest.

Climate Change Levy

NEA NI believes that a climate change levy would not be the most effective or efficient way to achieve reductions in emissions in Northern Ireland.

In the current climate of high energy prices in Northern Ireland, NEA NI feels that those who can afford to invest in energy efficiency have a substantial incentive to do so already; it is those who cannot afford to invest in energy efficiency who would bear a disproportionate burden of such a levy.

NEA NI accepts the argument that a climate change levy may restrict the expansion of the fledgling natural gas network and would make two points: firstly, natural gas is a less polluting fuel and it seems absurd to restrict the supply of a less polluting fuel which would replace other fuels currently emitting more noxious gasses. Secondly, if DED understands the importance of the expansion of the natural gas network to such an extent that it is willing to lobby Government on this issue, then surely the department can understand the need for Structural Funds and give a firm commitment on this.

The introduction of a climate change levy to Northern Ireland would reduce Northern Ireland's competitiveness in an all-island energy market and quite possibly, bearing in mind higher current energy prices, in Europe.

Conclusions

  • NEA Northern Ireland is disappointed that there has been no attention to fuel poverty within this document although around one third of households in Northern Ireland are estimated to be at risk. There is little focus on energy efficiency in the domestic sector and, in fact, little focus on the domestic sector generally. The domestic sector uses 65,300terajoules (1996) of energy annually costing more than £400 million and is therefore a substantial user.
  • Whilst NEA NI accepts that DED is no longer responsible for domestic energy efficiency, the department must seek to understand the impact of energy policy on all sectors of Northern Ireland's economy, including the domestic sector and, in particular, on low-income consumers.
  • Against a background of:
  • Increasing demand for energy and the ability of the current energy infrastructure to meet this demand;
  • High energy prices and the socio-economic impact directly and indirectly;
  • Global pressures to reduce greenhouse gas emissions and the apparent relative ease with which Northern Ireland could attain a substantial reduction;
  • NEA NI feels there should be more of a focus on energy efficiency, which would bring three immediate benefits:
  • Management of increasing demand within the current infrastructure or within envisaged limits leading to lower capital investment.
  • Lower prices.
  • Reduction in emissions.
  • Lower overall energy costs.
  • Each of these benefits would apply in varying degrees to all sectors of the economy, however, the fuel poor who currently use a disproportionately large amount of energy within the domestic sector could be helped to reduce energy use substantially and thus reduce the overall domestic energy bill.
  • Lower prices, as well as being beneficial to those on limited incomes, would benefit the industrial/ commercial sector increasing competitiveness, impacting positively on the wider economy of Northern Ireland. Increased competitiveness would create employment, creating extra Government revenue from direct and indirect taxation and reducing Government spending on social security and cold-related ill-health. Another positive offshoot would be increased saving within the economy, which may be substantial enough to impact on internal investment and enterprise.
  • The draft response appears not to consider current policy developments in Britain and the implications of this on the wider economy. In short, there appears to be little 'joined-up' thinking, no appreciation of economic cause and effect. UK policy statements on climate change, sustainable development (both of which are mentioned in the draft response) and social exclusion all incorporate references to fuel poverty and the last DTI Energy Report included a chapter exclusively devoted to this issue.
  • NEA NI feels strongly that the natural gas network must be extended beyond the Greater Belfast area in order that industrial competitiveness is enhanced and more communities can enjoy the direct and indirect benefits of a natural gas supply.
  • Accordingly, NEA believes very strongly that energy policy decisions must take account of the costs and benefits of those decisions on communities in Northern Ireland likely to be affected by the outcome. The positive and negative effects of all options must be considered.
  • It is imperative that all decisions are made in a transparent fashion and these decisions should be open to debate in the public domain, including the influencing factors.

NEA NI would also expect the regulator to be obliged to publish an annual assessment of progress on a Social Action Plan that would oblige utilities to take greater account of low income consumers.

TOP

ANNEX 9

DOUGLAS McILDOON, DIRECTOR GENERAL OF
ELECTRICITY SUPPLY (NI) AND DIRECTOR GENERAL FOR GAS (OFREG)

3 July 2000

Energy Policy, Section 9.22

1. The government should adopt as soon as possible an updated energy policy statement setting out a coherent policy for energy with clear objectives for where the industry should be in 10 years time.

1.1 Ofreg concur with the aim of the recommendation. Modern generating plant, development of the natural gas industry and strengthening electricity interconnection will be vital to the future development of the energy sector in Northern Ireland. Therefore government need to formulate a clear strategy for the next ten years, and introduce the necessary legislation to enable the energy sector to develop.

2. Strategic investments may require a public/private partnership, with public support, provided the project is economically sound.

2.1 Government input and joint financing for strategic projects such as gas expansion and electricity interconnection, which have wider societal benefits, is essential if the market is to develop on a secure basis. Not all energy infrastructure projects would be self financing, and government should therefore be prepared to participate in the public interest. In the case of fuel diversity, it may be necessary to pay a premium for the strategic benefit, as a market solution in this case would tend to favour the single cheapest fuel source.I have proposed a licence modification which would protect NIE from the excess costs of out of market non-gas plant necessary to allow fuel diversity. This will however require approval.Northern Ireland's disadvantages arising from the way both electricity and natural gas were developed will require new approaches to financing infrastructure investment.

3. Targets should be set for the use of Non-Fossil Fuel for electricity generation, for the achievement of energy efficiency and the use of Combined Heat and Power (CHP).

3.1 There is a great deal of confusion about policy objectives here. Government must decide if its objective is to promote renewable energy technologies or to reduce CO2 emissions. At a UK level both are objectives. It is not clear that the former should be an objective at NI regional level. If the objective is to reduce CO2 emissions regionally as a contribution to combating climate change then the most cost effective options should be chosen. These are fuel switching to natural gas, energy efficiency, and the use of CCGT technology for electricity generation. A target for renewable generation by itself serves no useful purpose. It is a single minded response to a complex problem which puts up prices for customers and damages Northern Ireland's competitiveness. The imposition of a further fixed charge on Northern Ireland customers cannot be justified, given the already high cost of energy and disproportionate effect on the fuel poor, and the fact that NFFO capacity per capita is already highest in NI, and that NFFO costs per capita are the most expensive in the UK. Furthermore, certain non-fossil technologies such as wind power are now commercially viable, and as such a subsidy from electricity users is unnecessary. Ofreg and DETI have been taking other steps to promote the development of these technologies, and modifications to trading rules allow renewables generators the right to sell to any customer in Northern Ireland, as well as the right to sell to customers which are eligible under the EU IME Directive. Renewables will increasingly come forward by integrating CO2 targets with market mechanisms to offer the most cost effective CO2 solutions. The role of government in NI would therefore best be directed towards encouraging new renewable technologies where there is a NI competitive advantage with information and other incentives. The cost of promoting such technologies should be borne by the taxpayer and not the electricity consumer.

3.2 Combined Heat & Power is a technology which should be adopted where it is suitable for economic reasons. It has the advantage of bringing additional environmental benefits. To gauge progress in ensuring that there is an optimum uptake of this technology the setting of targets is appropriate since this keeps the subject under review and enables progress to be measured. The target must however be appropriate to the potential useful demand for the technology and not an arbitrary or pro rata of a GB figure.

3.3 Government should also make a leading contribution to the drive for energy efficiency, and a suitable target will focus the actions of the industry towards an achievable objective. Ofreg has been in close co-operation with NIE and licence holders in Northern Ireland in recent years in order to promote energy efficiency. NIE are not strongly incentivised in their price control to sell additional units of electricity, so if as expected we see a reduction in overall electricity cost, this should not be reflected in higher sales. As part of the last price control NIE was entitled to collect - 1 per customer to use for energy efficiency projects. The projects which were developed in co-operation with energy groups were very successful, and Ofreg have recently consulted publicly on the possibility of increasing this to - 2 per customer. Responses were largely favourable, and the energy efficiency levy became- 1.50 in 1999/2000 and will be - 2.00 from 2000 onwards.I have now agreed the next NIE Supply price control with the company. The control is now firmly based on the promotion of energy efficiency, and in this respect I believe we are head of the rest of the UK.

4. The recommendations of the Government's Utilities Regulation Review should be fully implemented in Northern Ireland as soon as possible.

4.1 I concur that many of the Utility Regulation Review's recommendations, which are currently being implemented in Great Britain, should be implemented in Northern Ireland at the earliest opportunity,particularly given the greater need for reform in Northern Ireland. It was therefore disappointing that under Direct Rule no steps were taken to formulate legislation.Implementation will more clearly define the roles of regulator and government, particularly with reference to implementation of social policy, and will specifically add a duty of protecting the interests of consumers to my primary duties. However, it is important to adapt the recommendations to the needs to Northern Ireland customers and not uncritically copy GB legislation.The utilities Bill in Great Britain will gain Royal Assent by the end of the summer, which will lead to a divergence between the duties of regulators in the UK and Northern Ireland. Ministers should announce their intentions at the earliest opportunity and provide guidelines for regulators to provide protection for customers to the same extent as in GB, and to follow the spirit of that legislation.

5. The Government should facilitate the creation of the largest possible electricity market at the earliest possible date in accordance with the EU Directive on an Internal Market in Electricity as a means of creating competition and lowering costs. To this end (i) the current review of electricity generation contracts should be brought to a speedy conclusion; and (ii) the ,40 million fund (to compensate Northern Ireland customers following abolition of the nuclear levy in GB), held by DED, should be used to buy out generating capacity currently under contract to NIE.

5.1 The eligible customer market under the IME Directive is currently 30.29% by demand of unit sales in Northern Ireland. This level has increased from 26.4% in 1999, and by 2003 must expand to 35%, at which point the EC will review the IME Directive. Ofreg, in co-operation with DETI and the electricity supply industry has implemented a trading system to implement the IME Directive, commencing in July 1999.

5.2 The system is based on bilateral contracts between suppliers/customers and generators, which are not subject to regulatory control. The Directive also specifically requires that the Transmission System Operator (TSO) be made independent in management terms from other business areas involving generation or supply. NIE has restructured its business accordinglyand the TSO has been set up as a separate Viridian owned company called System Operator Northern Ireland.The bilateral trading system is intended to be interim in nature, and licencees are required to modify and improve it over time as necessary. Associated with the trading system is a settlements system, administered by the NIE, which settles financial differences occurring as a result of mismatches in demand and generation in each half hour period.

5.3 Access to the NI network is on a regulated third party basis, and NIE are required to publish Transmission Use of System and Use of System statements.

5.4 In the period August 1999 to April 2000, because of the lack of generating capacity not under contract to NIE, Ofreg and NIE agreed that a Virtual Independent Power Producer (VIPP) would be established. The VIPP was in effect spare contracted capacity which NIE auctioned to suppliers in two 100 MW tranches. This capacity was then available for suppliers to sell on to eligible customers. Currently there arethree (previouslyfour: Premier Power on longer is an active supplier to final customers) active suppliers retailing to the eligible sector, with one prospective licencee being assessed for award of licence.

5.5 Further to the current market opening, NIE, other licencees and Ofreg have agreed to accelerate final compliance with the Directive, by implementing the 35% requirement in stages (with an interim step to 32% in October 2000) by April 2001, two years ahead of schedule and thus bringing forward the benefits of competition to eligible customers. Eligible customers have already benefited in the period from August 1999 with competitive bids from suppliers. The market opening has been facilitated by the expected conclusion of the ongoing contract renegotiations involving Premier Power, which should reduce the cost of the existing long term contracts and thereby reduce the exposure of customers to stranded costs (costs which are not recovered due to the imposition of the IME Directive). Furthermore the renegotiation process has also released 234 MW of independent generating capacity for sale into the eligible market, reducing the need for further VIPP auctions. One of the sets at the Power Station West has also been released into the market place. The use of the ,40 million fund will further increase the benefits to customers of the contract renegotiations, and will aid the accelerated implementation of market opening.By April 2001 between 600 and 900 of Northern Ireland's largest energy users will be able to choose their supplier and this will provide competitive market access for smaller businesses than would be the case in many other countries, including the Republic of Ireland. There will be increased pressure for further market opening beyond the 35% envisaged. There may be a case for allowing further slight market opening for companies exposed to internationally competitive markets. The Implementation Group of the IME Directive has asked me to write on its behalf to DETI to request that a cost-benefit analysis be undertaken to examine further market expansion, so that informed policy decisions may be taken. Next year, in the absence of any more IPP capacity, and before the interconnector with Scotland is available, it may be necessary to hold further VIPP or if possible take another contracted generating set temporarily out of contract.

5.6 The electricity market also opened on 19 February 2000 in the Republic of Ireland, and therefore both systems were required to implement rules and agreements for cross border interconnector trades, as the IME Directive specifically requires that eligible customers may trade with suppliers in interconnected countries.100 MW of interconnector capacity has been available for trade to the Republic since 1 April, allocated by auction. In the period 19 February to 31 March 2000 a day-ahead means of access had been agreed to comply with market opening from 19 February.Both regulators will carry out a review of interconnector trading in the autumn with a view to developing a more sophisticated system. Leaving aside tax differences, electricity prices for industry should tend to converge across the island. It has recently been agreed in principle that green electricity coming from renewable sources in NI may be traded across the interconnector to suppliers in the Republic.

Energy (North/South and East/West), Section 9.17.3

6. The Steering Group recommends that future energy investment decisions should be taken in the context of an island of Ireland energy market and that any new gas pipeline between Great Britain and Ireland should be routed through Northern Ireland.

6.1 Ofreg concurs that open markets allow competition to develop and place pressure on end user prices. Electricity interconnection to link Northern Ireland with Scotland, as well as the existing link with the Republic of Ireland, will play a vital part in increasing the exposure of incumbents in NI to outside competitive pressures. Equally, gas markets would be affected in the same way. In the electricity sector, as noted above, the IME Directive has required the interconnector with the Republic to be made available to third party access for cross border trades.There are plans to increase the capacity of the existing North-South electricity interconnector. This will be augmented when the Moyle interconnector becomes available at the end of 2001. NIE and Scottish Power recently announced that the size of the link has been increased from 250 to 500 MW, at little extra cost. The interconnector supply agreement between the two parties allows for 125 MW to be reserved for NIE's imports for 70 months, the remainder of which will be available for third party access. The settlements process currently in place for the bilateral trading system could be adapted to handle such increased trading behaviour.

6.2 Ofreg concurs that gas interconnection with the Republic, and the expansion to the North West would be of strategic benefit to Northern Ireland by providing competitive pressures for fuel supplies outside the Greater Belfast area, and provide further security of supply for the electricity industry. The possibility of a CCGT at Coolkeeragh would also be important in the ongoing drive to modernise the generation plant in NI and improve environmental performance of NI generation plant.

6.3 Ofreg welcome any cross border co-operation in relation to energy investment given the potential benefits to each jurisdiction.Developments in the opening of European gas and electricity markets set the context within which further North-South integration will take place. Falling energy prices across the EU point to the need for action from both administrations on the island to ensure that prices are competitive against the rest of the EU. In particular, charges in both the RoI and NI for Transmission and Distribution are high when compared to GB, and in NI especially have shown resistance to downward flexibility, despite the efficiency gains and technological advances in the industry. These gains have not been captured for the benefits of customers. The issue of charging for networks needs to be addressed in both jurisdictions.

7. It is recommended that the machinery for the creation of an all island market should be established as a matter of priority and that a study to identify the actions needed to accelerate the development of such a market should be commissioned.

7.1 Due to the limited size of both markets on the island, a joint approach to market development with the eventual creation of a single market would make available increased opportunities to both customers and suppliers. However , the success of such a process would require the harmonisation of numerous procedures, including system operations, financial settlements, licensing and so on. The practical difficulties suggest that the process would take a number of years and close governmental co-operation.

8. Conclusion

8.1 Ofreg welcomes and supports the aspirations contained in Strategy 2010. Ofreg however believes that it is vital for the Northern Ireland economy, and to protect the quality of life of its citizens that these aspirations are converted into deliverable commitments. This cannot be achieved within the present legal framework for the industry supplemented by announcements of individual targets. Rather, a comprehensive and integrated approach to policy formulation is required, backed by new legislation which combines and replaces the Electricity and Gas Orders, as well as providing the additional powers required to deliver a low cost, competitive and environmentally friendly energy industry operating within the context of the European Energy Market.

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ANNEX 10

NORTHERN IRELAND SCIENCE PARK FOUNDATION LIMITED

16 June 2000

Strategy 2010 - Evidence to the Enterprise Trade and Investment Committee.

1. Introduction

Representatives of the Northern Ireland Science Park Foundation appeared before the Committee on the 19thJanuary 2000 to give evidence of progress with the establishment of the Science Park. Since then the Foundation has agreed terms for a 23 acre site at Queen's Island and for developments at Coleraine and Magee College.

The Foundation was formed shortly after publication of the Strategy 2010 document and hence was not in a position to offer any views for consideration. However, several of the Foundations members were involved in an individual capacity in the process of consultation that led to the preparation of the document.

In making this submission to the Committee the Foundation confines itself to making comments on those sections of the document which have a bearing on the current and future development of the Science Park.

2. Comments

2.1. The Foundation's Mission Statement is as follows:

"To create a self sustaining, internationally recognised Science Park which is both a commercially and research driven centre for knowledge based industries."

The strategy document makes several references to the Science Park, to the commercialisation of University research, and to the importance of R&D in general (see annex).

2.2. The Foundation strongly supports the Strategy and agrees with its recommendations on the need to equip ourselves for the knowledge based economy of the future. It welcomes the Strategy's wholehearted support for the Science Park and the recommendations on innovation and is ready to play its part in helping secure the target for employment in high tech industry. Having said that, the Foundation believes that some important developments which are essential to the success of the Science Park and to economic regeneration in Northern Ireland were not fully addressed. In particular, how the two Universities are to be assisted in exploiting the intellectual property they create and how international companies capable of working with University research groups in producing new products and services to be exploited and developed in Northern Ireland can be attracted to Northern Ireland.

2.3. The Foundation notes the Strategy's comments on R&D funding but considers that implementation in the following areas is crucial:

(1) Increased funding of University research in key areas in order to provide a sound basis for future commercial exploitation.

(2) The need to address the shortfall in higher education capacity in Northern Ireland (see paragraph 7.32) where in 1997/98 the shortfall was 12,000 places. Many of our best young people have no alternative but to pursue higher education elsewhere and many never return as a direct result. This has the effect of weakening Northern Ireland's capacity to develop new knowledge-based industry.

2.4 As the implementation of the recommendations in Strategy 2010 are progressed the Foundation will seek to ensure that the Science Park plays its full part in overall strategy aimed at the creation and embedding of future knowledge-based businesses in Northern Ireland. It is essential to address the continuum of activity that leads to building a knowledge-based economy, if there are any gaps then the process will fail. This continuum includes:

  • An education and training system which will provide the calibre and number of people needed in future knowledge-based businesses.
  • The promotion and funding of high tech research in the Universities and by local industry.
  • The promotion of links between business and the Universities which can facilitate the commercialisation of research.
  • The development of Science Park sites which create an environment where new knowledge-based businesses can be nurtured and to which research orientated inward investors can also be attracted.
  • The marketing of Northern Ireland as a location for knowledge-based business.
  • The provision of specific financial assistance and the encouragement of venture capital funds to assist the development of businesses committed to high tech R&D, innovation and product development.

3. Conclusions

The Northern Ireland Science Park Foundation strongly supports the recommendation in the Report that the promotion of knowledge-based businesses in Northern Ireland is an essential part of its future economic prosperity. However, in order to bring this to fruition a co-ordinated strategy involving higher education, the promotion of R&D in the Universities and Business, the availability of specifically targeted venture capital, and continued support for the Science Park concept are essential.

Annex.

References to Northern Ireland Science Park in Strategy 2010

Page Paragraph

11 3rdindent.

12 4thindent.

13 4thindent.

16 5thindent

39 3.16

40 3.18

105 7.9

115 7.32

116 7.35

129 8.1

130 8.3

133 8.11

135 3rd, and 4thindent.

158 Recommendations 3,5,6,9

159/160 9.8

161 9.8.3, 9.8.6

162 9.8.9

163 Middle Paragraph.

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ANNEX 11

ULSTER FARMERS' UNION

February 2000

THE ULSTER FARMERS' UNION

1. The Ulster Farmers' Union (UFU) was formed in 1918 and now has 13,000 members.

2. Members are organised in 23 geographical Groups of which there are approximately four per County. Each group has 400-600 members and is staffed locally by Group Secretaries of whom there are 56.

3. Members are also organised by commodity or sector of production. There are committees covering:-

Cattle and Sheep Hill Farming

Dairy Production Seeds and Cereals

Fruit Production Mushrooms

Potatoes Fish Farming

Vegetables Pigs

Poultry Family Farm

Animal Health Legislation and Commercial Matters

4. These all report via County Committees to an Executive Committee which meets on a monthly basis.

5. Committees are serviced by Headquarters staff who number 20 and the Union is led by a President and his team.

6. With this spread of staff, committees and membership, the Union is the principal spokesman for farmers and their families.

1. The Ulster Farmers' Union is gratified that the Committee is to examine the Strategy 2010 Report and to analyse how it may contribute to the economy of Northern Ireland.

2. The Union is concerned that the Report and the Strategy 2010 are seen as an economic analysis and prognosis of the Economy of Northern Ireland. In our view it is in fact nothing of the sort. An economic analysis is by definition a static device which attempts to obtain a factual snapshot of the Economy. It may well be translated into a dynamic view by the inclusion of possible time frames as well as assumptions about the future.

3. It is regrettable that a number of economic commentators have seen the 2010 in this somewhat oversimplified context. Criticisms have therefore tended to be of a nature as to case doubt on the strict accuracy of the Strategy 2010 document.

4. In fact, the Union sees Strategy 2010 as a set of intentions and potentials to be achieved. These have included specific targets which ought to be aimed at rather than expressions of what "will" be achieved. To put it rather more crudely 2010 provides a corporate plan for Northern Ireland plc; and as in any corporate plan this will be organic in nature, being modified, developed and changed as achievement and conditions arise.

5. To continue the analogy, a good corporate plan having been developed and broadly agreed in principle, is then taken forward by strong and effective leadership. Direct Rule Ministers were slow to take this task on but in the end they have created the Economic Forum.

6. While this body undoubtedly has a role to play in monitoring progress and generally commenting on progress, there needs to be a vehicle to drive the strategy forward. Such a vehicle has not yet emerged and would seem not likely to do so in the context of a suspended Executive and under direct rule.

7. To seek to examine alternative proposals to those contained in Strategy 2010 Report is not productive. It seems to the Union that a more appropriate approach would be to see how Strategy 2010 can be modified and developed to meet new conditions.

8. One example of new conditions is the continued catastrophic slide in incomes in the Agricultural sector (see attached Paper for details). These changes need to be taken account of in the continuing development of a co-ordinated approach.

The Agri Food Sector

9. The Committee will be aware that the Union participated very fully in the Agri Food Sector Working Group. This Group was set up and invited to deliberate later in the progress than other sector groups. Nevertheless a useful Report was prepared.

10. The Union continues to be supportive of the contents of that report and also of the targets and timetables identified. However, the Union regrets that the momentum was lost and that it will now be rather more difficult to re-establish.

11. As already stated (see paragraph 7/8 above) conditions have changed and the Agri Food Sector Report must be modified and developed to take these into account. In particular the continuing weakness of the Euro against sterling is the most serious single impact on successful trading for Northern Ireland producers and processors.

The Way Ahead

12. The Union was much encouraged by the initiative of the Minister (now in suspension) Mrs Brid Rodgers MLA when she set up a Strategy Group to take the Industry forward. While the Union has some reservations about how best to achieve high momentum and an imaginative approach, we will fully support the work of the Group. This needs to be taken forward with the maximum commitment and energy; it is a matter of regret that some further momentum has now been lost in the suspension of the local devolutionary process.

PRESENT STATE OF NORTHERN IRELAND'S AGRICULTURE INDUSTRY

  • the agrifood industry is still Northern Ireland's largest, single industry accounting for 10% of civil employment and 7% of Gross Domestic Product;
  • the agrifood industry here is almost three times as important as at UK level;
  • the agrifood industry is still the major driving force in the rural economy in Northern Ireland
  • £756 million has been removed from the Province's economy over the last five years;
  • annual total farm income has plummeted by 79% in real terms to £71 million in that period;
  • a recently produced EUROSTAT report (summary attached) shows that agricultural producer prices in the United Kingdom have fallen by much more than any other EU Member State in the period 1995-1998;
  • provisional figures for 1999/00 indicate average net farm income to be - £700;
  • hill farming incomes in Northern Ireland plummeted by 95% in 1998/99 to average £200/farm/annum. Negative incomes are forecast for 1999/2000.
  • farm incomes in Northern Ireland fell 23% in real terms in 1999 compared to a 1% real terms reduction in the United Kingdom as a whole.
  • farmers now owe over £520 million to banks and this continues to grow.
  • in 1998, the UFU produced a 'Guide To Benefits And Schemes For Low Income Farmers' in recognition of the severe financial pressure endured by Northern Ireland's farmers even at that time.

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ANNEX 12

ULSTER FARMERS' UNION

July 2000

INTRODUCTION

1. Ulster Farmers' Union is a voluntary membership organisation representing farmers in Northern Ireland. Formed in 1918, the Union currently has 13,000 members. These are organised on an area basis via 23 groups, reporting in to an Executive Committee, which meets monthly. The ultimate authority is the membership, but this is represented by Council, which meets annually and has 900 members.

2. In addition, the Ulster Farmers' Union is organised on a commodity basis, with a dozen central and specialist Committees. There are Committees focussing on:

  • Cattle & Sheep
  • Milk
  • Pigs
  • Hill Farming
  • Poultry
  • Fish Farming
  • Potatoes
  • Seeds & Cereals
  • Fruit
  • Vegetables
  • Animal Health
  • Mushrooms

Written Evidence February 2000

3. In February 2000, the Union, in response to a request from the Committee submitted a short paper on Strategy 2010. The main points in this were that the Union, having contributed to the Agri-Food Sector Working Group of Strategy 2010:

  • Reaffirmed its support of the Strategy
  • Stated its concern that too much emphasis was being placed on further analysis of the Strategy
  • Wanted to see Strategy 2010 as a working document providing a framework for action
  • Commenting on a (temporary) gap with the suspension of the Assembly and the new structures

The Union also welcomed the Initiative of Mrs. Brid Rodgers MLA to set up a Strategy Group to take the Agriculture Industry forward within DARD.

Current State of the Agriculture Industry

4. The Sectoral Working Group Final Reports in Strategy 2010 were published in November 1998. Since then much has changed, for the worse, in the Sector. The Committee may find it helpful for the Union to summarise the current position.

5. The Agrifood Industry is still Northern Ireland's largest single industry accounting for almost 10% of employment (60,000 jobs) and 7½% of GDP. The Induistry in proportionate terms is almostthree timesas important as at UK level. It is, therefore, a major driving force in the Northern Ireland Economy.

6. The Agrifood Industry generates around 20% of the Northern Ireland manufacturing sector's external sales, while 55% of total agrifood processing sector sales are external.

7. Farm incomes have been in crisis, which has increasingly deepened over the past five years. £604 million has been removed from the economy of the Province in that period.

8. Annual total farm income has plummeted by 79% in real terms to £71 million in that five-year period. Official provisional figures for 1999/2000 indicate that average net farm income is nowminus£700.

9. On a sectoral basis, everyone has been to some degree affected.Hill Farming incomeshave plummeted in Northern Ireland by 95% in 1998/1999, to an average of £200 per farm, per annum. Negative incomes are forecast for 1999/2000.Pig Farminghas been devastated with the breeding sow population almost halved in two years from 65,000 to under 35,000. The number of pig farmers has dropped from 2,300 to 900 in that same period.

10. There is a serious disparity between Northern Ireland and the rest of the UK, probably explained in part, by a dependence on external sales by Northern Ireland producers. Farm income in Northern Ireland fell in real terms in 1999 by 23%. The comparable figure in real terms for UK is 1%. In addition, EU figures show that UF farm producer prices have fallen to a much lower level than in any other EU Member State.

11. The level of debt by farmers to the banks alone (not including finance and rental arrangements) is now £540 million. However, this is covered by very adequate collateral, with the exception of a small number of pig producers.

Main Causes for the Crisis

12. The situation is highly complex. However, there are a number of key points of particular consequence:

  • The Industry in Northern Ireland, so very dependent on external sales has been rendered un-competitive by market conditions.
  • The Industry in UK has been rendered un-competitive by the strength of sterling, effects of BSE crisis on all livestock production, and the insistence by UK Government to legislate additional costs on the sector on a quicker timetable than that applied by other EU Member States.
  • Farmers' incomes have been depressed over their colleagues in other Member states by the refusal by the UK Government to operate the EU Compensation Schemes in full.

13. In addition, Northern Ireland has seen in the past five years, an insurgence in local retailing of the major multiples. Their buying power has a strong depressing effect on Agriculture producers as presently organised and this is a matter of some concern.

Considering the Future

14. The Sectoral Report for Strategy 2010 highlighted a number of key areas for action:

  • Producing a market led approach
  • Developing structures and systems to sustain viable business units
  • Developing the role of part-time farmers

15. Much work has been done to develop the market led approach. However, the action is inevitably limited by the income crisis outlined above. Nevertheless, quality assurance schemes continue to develop, Food Standards Agencies are being put in place and the elimination of BSE is far progressed. Northern Ireland is well advanced in obtainingLow BSE Incidence statuswith the EU. This, when attained, will be invaluable to the entire livestock sector.

16. The current Government, until the Agricultural Summit in Downing Street on 30March 2000, was pursuing a policy of abandonment. This would have been bad enough outside of EU, but where every other Member State had a more or less supportive regime for farming and agriculture, it was disastrous. The Summit changed the mood and for the first time, the Government pledged a supportive policy. There has been a subsequent Summit on 7 July 2000, but progress is inevitably slow. Much, therefore, is still needed to develop systems and structures to sustain viable business farm units.

17. The problem of part-time farmers and non-viable farmers particularly in less favoured areas (LFAs) remain. It should be noted that 70% of Northern Ireland land is designated LFA. The approach of the Government is now still largely aspirational. There is much to play for within the EU Rural Development context and also in the context of the Northern Ireland Peace III and the Community Initiatives even though resources are limited and marginal. These processes are currently under negotiation with the EU. Until these are finalised there is a lack of clarity with funding arrangements.

Next Steps

18. The Agriculture Industry and the Union, is now engaged with the Agri-Vision Strategy Group within DARD. This should, of course, be a mechanism for connecting with Strategy 2010. In addition, the Union along with other representatives of the Sector are fully involved with the Economic Forum, under the Chairmanship of the Minister for Enterprise, Trade and Investment Sir Reg Empey MLA.

In Conclusion

19. The Ulster Farmers' Union welcomes the opportunity to meet the Committee and to consider their questions.

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ANNEX 13

NORTHERN IRELAND FOOD AND DRINK ASSOCIATION LIMITED

18 February 2000

  • The Northern Ireland Food and Drink Association Ltd currently represents 166 Food and Drink Manufacturers based in Northern Ireland.
  • NIFDA represents 85% of the employment in the sector.
  • NIFDA was developed from clustering theory via Northern Ireland Growth Challenge.
  • NIFDA Ltd was registered on 15 January 1996.
  • NIFDA agree with the recommendations detailed in the Strategy 2010 Report.

We would highlight the recommendations in Annex B (page 257). We have attached to this document the Executive Summary of our submission from which Annex B was drawn. We would also draw attention to our work in section 7.49 (page 123) outlining some of the hurdles to be overcome. In Appendix One (Section 2.8, Page 10 of Economic Strategy Review November 1998, NIFDA) we cite the main observations. In addition these were updated and recently forwarded to the Minister for Agriculture and Rural Development. (Appendix Two)

NIFDA is committed to not only identifying the problems, but also being part of the solutions. Our Economic Strategy Review Group has been meeting under the chairmanship of Dr R T Campbell, (Moy Park Ltd) to developactionplans. The Balanced Score Card (Appendix Three) gives a good overview of our latest thinking. We have written to the Minister for Enterprise, Trade and Investment requesting resources to develop these plans. We estimate that £0.3 million will be required over three years. These monies would in essence, be match funded by industry, through NIFDA.

Fragmentation is one of the key issues to be overcome and we are continuing to work closely with the following organisations to develop the competitiveness of our members:-

IDB

Trade Unions

LEDU

NI Dairy Association

T & EA

NI Seafood

IRTU

NI Meat Exporters' Association

DARD

NI Bakery Employers' Council

Tesco Plc

Ulster Curers'Association

Marks and Spencer Plc

NI Grain Trade Association

Sainsbury's Plc

SuperValu

Iceland Plc

Lidl Gmb H

Safeway Plc

C W S Ltd

We hope that the attached documents and the above information assist you in understanding a complex andvitalindustry to Northern Ireland. We are strongly of the opinion that this industry warrants ongoing strategic development and therefore can maintain its role as the economic backbone of Northern Ireland. We would welcome the opportunity to give verbal evidence at your convenience.

Michael Bell
Director

Encs

Appendix One (Section 2.8, Page 10 of Economic Strategy Review November 1998, NIFDA).

Appendix Two main observations that were updated and recently forwarded to the Minister for Agriculture and Rural Development.

Appendix Three The Balanced Score Card.

APPENDIX ONE

2.8 FOOD AND DRINK INDUSTRY

A number of recommendations apply to the industry as a whole

In relation to agriculture and the processing sector, N Ireland has much in common with the South of Ireland, e.g. a strong dependence on the dairy and meat sectors.It is therefore recommended that a cross border body for food and agriculture should provide European representation on an all-Ireland basis.

Currently industry can become frustrated in its dealings with numerous Government bodies and the associated overlap of activities.The shape of the Government/industry interface should have more integration, ideally with a 'one stop shop' link. In particular the marketing of NI food, including speciality food, needs to come under the control of one body in order to provide focus and clarity.

Innovation is essential to success in consumer markets, food ingredients, and basic foodstuff technology. N Ireland currently has good facilities in the universities and at Loughry, however, betterco-ordination of these R&D resources is required possibly through a 'Virtual Centre of Excellence' to provide greater synergy in the scientific and technical support to the food industry and the better use of IT. Innovation is also the subject of a cross-sectoral review, and the group supports their recommendations to develop innovation skills in N. Ireland.

If the industry is to succeed, consolidation in the basic foodstuffs sector, and development in the consumer products and food ingredient sectors will be required. The group as assessed investment needs by a number of methods, and concludes that investment in the range £100- £120mill per annum is required. The current levels of profitability do not support such levels of investment funding and in such circ*mstances tax relief does not provide support to the industry.The group therefore recommends that funding opportunities need to be further explored by industry and government, particularly venture capital, whilst ensuring Government support at a level similar to other competing European locations.

The particular requirements of family firms need to be addressed.The particular needs of the family firms include the areas of succession planning, introducing external management expertise, and the facilitation of entry to export markets.

It is recognised that industry may not always be achieving the maximum utilisation on current investment and needs to look at capacity utilisation, shift working, maintenance and changeover procedures etc. Return on capital in the industry has declined from 20% in 1989 to 9% in 1996 - typically food companies in GB and Ireland would be achieving 12-20% return on capital.Companies must increase their margins, and an overall increase of 50% over 5 years, from 9 to 13.5% return on capital, needs to be targeted by the industry in order to fund its capex needs.

Fluctuations in exchange rates and interest cause serious difficulties in such a low margin business.The Group supports any initiative that provides a more stable macro-economic environment.

APPENDIX TWO

1. Strength of Sterling/Weakness of Euro

Narrow use of currency compensation schemes, particularly re grain and intensive livestock sectors. Weak lobbying in London re disproportional impact on NIEconomy. Uncertainty re government long term policy re pound/Euro. NIproducers heavily dependant on export income for viability, due to smallness of local market.

2. Legislation

'Can't do' attitude fostered by disparate approaches by EC and UK to funding and support re hardship, scale, peripherality, etc. resulting in uncompetitiveness in Europe.

3. Clarity re Marketing Strategy

Insufficient emphasis on consumer foods, ingredients and other value added products. Uncertainty and overlap re departmental responsibilities. Insufficient clarity and marketing of image at home and abroad. Insufficient development of professionalism & entrepreneurial culture of many family businesses.

4. Competitiveness

Insufficient sharing and stimulation of ideas and reduction of costs through clustering, mentoring, benchmarking, partnerships etc. Competition from Eastern Europe. Additional costs through legislative burdens eg CCL, employment law, food standards, waste, etc and through uniquely high costs of energy and shipping. Insufficient attention to driving down supply chain costs.

5. Labour

Shortage of people, skills and basic education. Pressure on pay rates from new industries. Cost of legislative compliance.

6. Capacity

Inefficiency through over capacity in some sectors. Legislative barriers to consolidation.

7. Investment

Insufficient profits and reduced accessibility to capital grants to support investment in new technologies. Uncertainty, overlap and bureaucracy in UK/European funding which diminishes its effectiveness.

8. Retailer Power

Impact of National Retailers' marketing & sourcing policies on NI producers and processors. Barriers to increased business in GB & RoI. Uncoordinated promotion of local produce and products. Insufficient recognition of industry's needs when major retailers' planning applications are assessed.

9. Structure

Inefficiency, duplication and delay through overlap and competitiveness of public agencies/initiatives and sectoral associations.

10. Vision & Passion

The 'troubles', food safety scares, major changes in global and European trading arrangements, sudden changes in local retailing, massive reductions in income and profitability, etc have diluted confidence regarding recovery and re-investment.

APPENDIX THREE

Strategy 2010 Balanced Scorecard

Sector Group ObjectiveMeasuresTargetsActions/Initiatives

Competitiveness:

  • To ensure that consolidation and ESP in dairy sector is supported by government.
  • To facilitate increase in ROCE for us from 9% to 13.5% over 5 years. (NB, Erosion in ROCE in 1998.)
  • To provide grant support at European Levels.
  • Total Quality Management schemes to be fully promoted and supported.
  • Meet needs of small/family companies.
  • Achievement of consolidation
  • ROCE
    Level of profit
  • Capital investment of £100m per annum
  • No of schemes in operation.
  • No. of supply chain initiatives.

Investment barriers to consolidation.

  • Lobbying with regard to retailer/processor interface.
  • Initiatives to help cost reduction
  • Improved marketing
  • Promote understanding of role of internationally competitive new materials.
  • Mechanism to measure capital investment.
  • Cast to be presented to UK & EU funding Bodies to increase grant levels to 25/30%

Actions to promote supply chain initiatives:

  • N.I. sector to be encouraged to adopt.
  • Education programme.
  • Large retailer involvement
  • NIQC to develop Supply Chain Board.
  • Facilitate expansion plans/company transfers.

Market Development

  • To help attract inward investment.
  • Sales and added value growth from existing companies.
  • No. of companies attracted to N.I.
  • Sales and added value
  • Case to be Presented to Committee and UTC food body for continued support.

Support IDB Programme

  • Develop joint Initiatives/ventures between N.I. & for companies.
  • Encourage members to support IDB visits (to N.I. and from N.I.)
  • Actions to improve operating environment (cost of haulage, energy, waste disposal and labour availability).
  • Ensure grant position is not eroded.
  • Re-present case to new political institutions

Market Development

  • Market N.I. clean, green, high quality image more effectively.
  • Develop new markets.
  • Level of exports
  • Single marketing face to customers
    (agreed agenda)
  • Established AGRI-Food cross border body.
  • Established Consumer Food Groups to advise on market opportunities, R&D requirements and investment needs.

Encourage N/S co-operation.

  • Develop relationship with GB
  • Multiples E.G. Supplier Liaison
  • Group to be developed (phase II)

Cross-Initiative Issues

  • To develop an entrepreneurial culture.
  • To help promote a more stable macro-economic Environment.
  • New business start-up/success stories
  • Negotiate appropriate NIFDA PROJECT RESUME
  • <35 yr. Old Management Board.
  • Entrepreneurial clinics
  • Engage LEDU in championing entrepreneurship within food industry.
  • Reduction in strength of £.
  • Special fiscal regime for NI
  • To represent Industry in debate on climate change levy.

Integration

  • Promote linkages between customers, processors & farms.
  • Improve co-ordination of government interfaces & industry associations.
  • LCM agreed to by industry.
  • No. Of government submissions.
  • Extent of co-location of offices.
  • Number of joint events.
  • Livestock Chain Management

already established.

- Need further promotion/development.

- Common set of standards to be set.

  • Develop liaisons with all major customer groups, farming groups (to be developed by NIFDA)
  • Encourage to locate in same building (7 groups)
  • Link NIFDA and NI Food and Drink Training Council.

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ANNEX 14

JOHN SIMPSON

Short statement to the Committee from John Simpson

1. This inquiry into Strategy 2010 is not only welcome but is an essential part of the process of reducing the misunderstandings and confusions created by the publication by the former Department of Economic Development of this document. The search for appropriate economic policies for the local economy has not been helped by misstatements of the role and content Strategy 2010, nor by the dogmatic rejection by its authors of various attempts to secure a better informed public debate.

2. As a personal note, may I add that I did not have any opportunity to take part in the processes which produced this document, nor, after its publication, was a request for a full briefing from the authors accepted. This experience, which was surprising, has not helped to better inform the wider debate.

3. A document which formulates aspects of economic strategy for Northern Ireland in the context of an overall setting is critically important. Strategy 2010 is a useful document and contains a number of ideas which form essential parts of such a strategy. The document has much to offer but the context, the content, the timescale and the economic ambitions need to be expressed as a coherent whole. In that setting, the role of incentives, Government policies and Government spending priorities are also critical components.

4. Strategy 2010, whilst a useful document, does not fulfil these objectives: without an undue quibble about words, Strategy 2010 is not a strategy. It is a series of ideas and proposals which might be part of a strategy when the objectives are clearly set, the policies determined and the actions refined.

5. The document contains 62 proposals. Each is of interest but the conclusion shortly after its launch that those proposals which could be implemented easily would be advanced and the others would follow later (if they became possible) was logically flawed. Some of the highest priorities will be difficult to (identify and) implement. Some of the 'easy' proposals may need to be refined or developed.

6. An example of the confusion created by the apparently pragmatic approach is that there have been conflicting statements about the status of the document. Is it now approved as official government policy? If yes, does the new Minister and the Assembly have any input into the content? If no, which of the 62 recommendations has Government accepted and which are not yet accepted? How can Ministers make speeches saying that 'something' is commended as part of Strategy 2010 if the status of the document is insecure.

7. Of course there are uncontroversial recommendations. There are others which are aspirational and need to be made operational. There are some which depend on public sector spending priorities. This makes the document unsatisfactory. To put Strategy 2010 back on the rails it needs to be given clear status. At present it is a report from an advisory group to the then Minister which has not been formally adopted. The Assembly will wish to have proposals which come with commitment from Ministers.

8. The document sets a number of objectives. Perhaps the most critical is the goal set for 2010 that Northern Ireland will make progress to the point where GDP per head rises from 80% of the UK average to 90%. In many ways this is modest enough, certainly compared to what has been happening in the Republic of Ireland. Yet it would be such a change of trend that it would mean that the next decade would see more of a catch-up for Northern Ireland than at any other time in the last 35 years.

9. One difficulty is that a global macro-economic objective must be essentially aspirational. Northern Ireland agencies and businesses cannot guarantee such an outcome. It is possible and desirable but no guaranteed. The document should not be criticised for these uncertainties. However, it should acknowledge where the economic changes might or should come from if the result is to be obtained. Such macro-economic "modelling" even in a simple form is not part of the document. Some conceptualisation of the contribution of different sectors, the manpower implications, the productivity changes implicit and the public sector contributions would help to give the process coherence.

10. The strengths of the document are:

    • A useful review of the position of key sectors in the economy
    • An agenda of 62 proposals to consider
    • An involvement of key private sector participants in its preparation
    • The attempt to gain a co-operative framework for the private sector to contribute to the evolution of actions affecting their sectors

11. The weakness are:

    • The goals are essentially aspirational, not operational
    • The unfinished nature of some proposals
    • The impractical nature of suggestions about timetables
    • The absence of a public sector expenditure framework to fit the context
    • The need for policy commitments from other Government departments

12. Each of the 62 proposals might merit review by the Committee. Many are not in a final form and some depend on unlikely support from the Treasury (London) or the European Commission.

13. Three examples will illustrate the work still to be completed. Many others could also be quoted.

14. First, the document, referring to the role of the Further Education sector and the needs for expanded vocational training programmes concludes that:

  • Economic development strategy must inform education and training policy, funding and delivery mechanisms
  • Welcomes the establishment of the Skills Task Force with its membership drawn from the business community

15. Neither of these recommendations takes an account of the input needed from the vocational training providers, mainly the further education sector and they are naively worded.

16. In addition, 'a valued sub-degree level of vocational education programme .. should be established.' Again the views and contributions of the main providers are overlooked.

17. Then it adds, 'a clearer focus is needed for the Further Education sector'. This is given a timescale of 12-18 months. Again, the providers were not consulted.

18. All these elements are important but they are not coherent, do not carry commitment from providers and are in need of careful (and speedy) refinement.

19. Second, on the provisions of economic advice, the document, apparently deliberately, ignores the role of the Economic Council and suggests the setting up of an Economic Development Forum. This has been done. However, the Forum has not released any of its papers for a wider audience to participate. This looks like an internal advisory body to DETI and needs to be more open and accountable. It also needs to be reconciled with the role and functions of the Economic Council and the Civic Forum.

20. Third, the document is weak when it discusses the work of attracting inward investment and the expansion of existing businesses. Nowhere does the document outline the responses to the weaknesses in the IDB which have been exposed by the PAC and the Economic Council. The references to the incentives package are aspirational, lacking clear detail and need the approval of the Treasury and the EU. Since the position is so uncertain, the document needs to be refined to create a clearer and agreed set of measures before this can be described as a strategy. The references to lower levels of selective assistance and greater emphasis on softer forms of assistance are in the right direction but need clarity and quantification.

21. Strategy 2010 is a valuable starting point. It is not comprehensive strategy. It lacks clear priorities for policy and spending. It is assertive to the point of excluding further debate.

22. Unnecessarily, Strategy 2010 has been made too confrontational. It could easily have been persuasive rather than didactic. The Forum for its further development and eventual approval by the Assembly and Members needs to be widened and made more participative.

23. If the Committee would find any further elaboration helpful, then this document might be amplified or the range of issues broadened.

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ANNEX 15

THE FEDERATION OF SMALL BUSINESSES

1. Introduction

The Federation of Small Businesses was founded in 1974 and is the major organisation in the UK and Europe representing the interests of the self-employed and those who direct small businesses in the UK. Its membership in excess of 1500 in Northern Ireland benefits from a nation-wide lobbying force committed to furthering the interests of the small business sector. The FSB is run by business people for business people and funded by member subscriptions.

2. Summary

Overall the Federation of Small Businesses welcomes the Strategy 2010 document. It provides a comprehensive review of the Northern Ireland economy and outlines the many challenges facing the region over the next 10 years. There are, however, a few points the Federation wishes to raise in relation to the content of the document and the consultation process employed.

3. Content and Process

(a) The Federation of Small Businesses agrees that Northern Ireland has a strong record of educational attainment (page 10) providing significant benefits for business growth and inward investment. The report, however, does not address the current high levels of graduates leaving the region, often for higher paid and more attractive employment. The Federation proposes that any strategy for the next 10 years needs to examine the retention of this important element of the workforce.

(b) Although the diagram on the "Review Process" (page 26) outlines a comprehensive consultation process, this could have been enhanced through greater transparency on the appointment of individuals /organisations to the various groups and panels. The Federation of Small Businesses would welcome the opportunity to become involved in any further discussions.

(c) The Federation welcomes the reference to "Equality and Social Cohesion" outlined on page 143. It is important, however, that disadvantage, as outlined in "New TSN" extends beyond geographical areas and recognises that affluent areas can still have pockets of deprivation. Therefore, the strategy needs to recognise disadvantaged sectors, such as the long-term unemployed, women and other marginalised groups in its recommendations.

(d) The Federation of Small Businesses would welcome the opportunity to become involved in any Economic Development Forum that is established as a result of the Strategy moving forward.

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ANNEX 16

THE NORTHERN IRELAND TEXTILES and
APPAREL ASSOCIATION LIMITED (NITA)

Introduction to NITA

NITA is the representative body of the textiles and clothing industry in Northern Ireland. It serves all sub-sectors of the industry and represents its interests to government, public sector bodies and other organisations, encourages the adoption of best practice in the industry and adaptation to the changing business environment to increase competitiveness and co-ordinates sectoral programmes to meet the needs of its members.

Comments on Strategy 2010

General

Feedback from NITA members indicates a generally favourable response to Strategy 2010. The terms of reference and recommendations of the review were wide-ranging and still largely valid, and it has been a major influence in changing the attitudes of the economic community in Northern Ireland. It is felt, however, that the recommendations should be given more structure by being prioritised and costed by the original Strategy 2010 Co-ordinating Committee. The sector would also welcome the early implementation of many of the general recommendations of the review such as the creation of a single industrial development body, a review of energy provision, improvement of transport links and a closer relationship with Europe.

Sector-Specific

The sector-specific recommendations in 2010 highlighted a number of priorities for action, in particular;

  • enhanced collaboration within the sector to learn from, and adopt, best practice identified within Northern Ireland and further afield. A number of initiatives are already underway within NITA and NIGC, and the Working Group recommends that Government should encourage further such collaboration through the establishment of a Northern Ireland Innovation, Design and Marketing Group, building on the work of the Design and Marketing Forum. The Group also believes that collaboration should not be restricted to arrangements within Northern Ireland and strongly recommends that the potential of networking and clustering within the island of Ireland be explored and exploited to a greater degree than heretofore;
  • establishment of a joint industry/Government task-force to develop and promote a vision for the future of the industry;
  • in line with the belief that more young people should be involved in the economic development process, the Group recommends that the proposed task-force should contain a significant number of young high-flyers; and
  • the development, in co-operation with Government, of a strategic plan to identify and address key skill shortages and competencies at every level in the industry. It was also recommended that the two sectoral training councils should merge, and this has now happened.

NITA is addressing some of the specific sector recommendations in Strategy 2010 through partnerships with other bodies including NIGC, IDB, IRTU, LEDU, T&EA, Industry Matters, The Irish Linen Guild and the newly formed NI Textiles & Clothing Training Council. There are currently sectoral programmes which foster innovation, encourage better design and marketing, address human resource issues, improve industry/education links and build a positive image of the industry through the media.

The pace of change in the textiles and apparel industry has necessitated an early revision of the sector review carried out in the Strategy 2010 process. The increasing strength of Sterling and price deflation in the high street have accelerated the need to outsource production, particularly for apparel manufacturers. As a result, job losses in the sector have been greater than the 2% predicted in 2010, with 2000 jobs being lost in the past 18 months. Current employment in the sector is estimated at 20,000. Further losses are now projected to be in the region of 5%-6% per annum over the next 4-5 years.

In light of the rapid changes in the sector at present, NITA and the NIGC Textiles & Clothing Cluster began a further review process last autumn to revise the future vision for the sector and examine ways to facilitate the necessary changes in the sector. This review process has also been supported by IDB, LEDU and the NI Quality Centre. The Review Group has already submitted fully-costed and prioritised proposals in its document entitled "A Transformation of the Northern Ireland Textiles & Apparel Sector" which has been submitted for consideration for Peace and Reconciliation Funding. Meanwhile, Phase 2 of the review process will begin in May 2000 with the appointment of outside independent expertise to facilitate the change process.

A summary of the views and recommendations of this Review is attached (Appendix 1). This highlights the way forward for the industry and is a revision of the conclusions of the Strategy 2010 Working Group, taking into account the rapid changes which the industry has experienced in the interim period.

Linda MacHugh
Director, NITA
March 2000

Appendix 1

Northern Ireland Textiles and Apparel Sector Strategy Review
Autumn/Winter 1999/2000

Introduction

In 1998 the Department of Economic Development initiated sectoral and cross sectoral reviews, with the aim of developing strategies that would meet the needs of the Northern Ireland economy until 2010. After six months consultation, the textiles and apparel sector Working Group, including representatives from NITA, IDB, LEDU and NIGC made a series of recommendations that were published in Strategy 2010.

Since the publication of Strategy 2010, global economic pressures have accelerated the pace of change in the industry and forced many companies to re-evaluate their mode of operating. Consequently over 2000 jobs have been shed in Northern Ireland over the past 18 months. In light of the declining employment, difficult trading conditions and more recently the recognition of the Danish model (outlined in the Jutland Experience Report) the Working Group deemed it necessary and timely to update and further develop Strategy 2010 recommendations.

In October 1999 the NITA/NIGC Textiles and Apparel Sectoral Working Group undertook to:

  • review key issues facing the industry sectors:
  • identify a change and development strategy to achieve long term profitable growth.
  • redefine a vision for the sector.

An Industry Vision

Over the next 5-10 years, the Northern Ireland textiles and apparel industry will continue to grow and compete by adopting a global strategy and differentiating through innovation, quality, value, performance, service and embracing technology. As a result, it will position itself as a thriving, self-sustaining, profitable contributor to the economy of Northern Ireland.

Current Drivers Necessitating Change

1. Strong Sterling and price deflation in the high street is forcing the sector to maintain competitiveness by sourcing lower-value product offshore.

2. The consumer is becoming increasingly fashion-conscious, knowledgeable and demanding leading to a demand for shorter product lifecycles and more innovative and better designed products.

3. Buying habits are changing and retailing experiencing a revolution with e-commerce, customisation and mail order all increasing in importance.

4. Lifestyle trends are becoming increasingly global.

5. The emphasis on brands is likely to move from 'branding hype' to branding as a quality identifier.

6. Technological developments present opportunities to develop 'smart' fabrics and products, technical textiles and improve the performance of traditional product.

Managing the Change

The Northern Ireland textiles and apparel industry must act on a number of issues if it is to remain competitive and consolidate its position as a serious player in the global market. The diversity in the sector makes it impossible to develop a common strategy which will be a perfect fit for all. However, there are a number of generic themes which will apply to a large number of companies in the sector. These are:

1. Consolidation - it is anticipated that companies will in general be larger and fewer with up to 50% less companies operating in the sector in 10 years' time.

2. Adopting a balanced sourcing policy. This will lead to a significant reduction in lower-skilled manufacturing jobs, but an increase in skilled employment in areas such as logistics, ITC and customer service.

3. Addressing the human resource issues arising from these changes. This will involve recruiting highly motivated and trained personnel, reskilling existing workforce and addressing the social impact of the anticipated job losses.

4. Placing greater emphasis on design, design management, marketing and branding to differentiate.

5. Focusing on improved customer service and quick response to meet the demands of shorter product lifecycles.

6. Acting to improve the image of the industry.

7. Maximising the use of technology for ICT, production and management processes and product innovation.

It is believed that by addressing these issues sooner rather than later, the industry can manage the transition from a production-based industry to one which focuses on design, innovation, marketing and supply-chain management. Whilst initial job losses will result, it is expected that employment will eventually begin to increase again, and at a higher skills level, with turnover per employee increasing by as much as 50%.

The Way Forward

The Strategy Review Group has identified a number of steps required to achieve these objectives:

1. Appoint an external consultant with wide experience in the global textiles and apparel sector to:

  • validate the conclusions of the Strategic Review Group
  • recommend an action plan to industry, government and other support bodies to achieve optimal growth.

2. Communicate the need for change to a wider audience within the sector and secure commitment from both industry representatives, support bodies and the unions.

3. Act on the recommendations in conjunction with all appropriate partners. Textiles and Apparel Strategy 2000.

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ANNEX 17

NORTHERN IRELAND TOURIST BOARD

20 June 2000

The NITB Board discussed Strategy 2010 at its meeting in April 1999. In response to the invitation to submit views to the ETI Committee, the opportunity was taken to revisit Strategy 2010 at the June2000 Board meeting.

The Board reiterated that it is supportive of the general principles outlined in the strategy.

However, NITB consider that an opportunity was missed in not presenting findings from the Tourism Strategy Review, completed in 1997, more extensively within the Strategy 2010 Report.

DAVID McAULEY
Acting Chief Executive

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ANNEX 18

BELFAST CITY COUNCIL

Introduction

(i) This Memorandum presents the views of Belfast City Council (hereafter referred to as the Council) on the proposals outlined in the Strategy 2010 Report by the Northern Ireland Economic Development Strategy Review Steering Group, March 1999.

(ii) The Council welcomes the opportunity to contribute to the Enterprise, Trade and Investment Committee's Inquiry into Strategy 2010 and it would urge the Committee to look afresh at the issues identified by Members some time ago, but which, from a local authority perspective, remain of some concern. The submission, as advised, is comprised of the following sections:

Section One: Summary of Response.

Section Two: The role, function and policies of Belfast City Council.

Section Three: Belfast City Council Response to Strategy 2010.

Section Four: Recommendations for action.

Section One: Summary of Belfast City Council Response

1.1. This report identifies a number of salient issues in the form of 'general observations' in relation to the Review as well as other issues relating particularly to Belfast City Council. A summary of those concerns, both general and specific, is presented below.

1.1.1 General Observations

Economic Analysis

  • General absence of substantive research evidence in support of the critical assumptions presented within the report;
  • A failure to evaluate past economic performance, nor does it analyse the effectiveness of current and past economic policies for Northern Ireland;
  • General failure to refer to wider contextual developments, and in particular, the influence of policies and models of best practice emanating from Central Government and the European Union;
  • The role of cities as an economic powerhouse within a regional context is overlooked;
  • The absence within the report of a model for growth leaves it difficult to differentiate the effects of Strategy 2010 from those of existing policies, such as New Deal.

1.1.2 Principles, Recommendations and Targets

  • The primary criticism levelled against the recommendations referred to an absence of any attempt to prioritise, identify cost implications or the contribution of respective 'social partners', including the private sector.
  • The report made explicit ten targets; however, in the absence of quantitative baseline information, it would be difficult to attribute directly any progress towards those targets to the relevant recommendations. In other works, some of the 'targets' may be achieved through existing policies, irrespective of Strategy 2010.

1.1.3 The Views of Belfast City Council

The main concerns of the City Council were identified as:-

  • Failure to consult adequately, particularly with elected representatives;
  • Absence of acknowledgement of the contribution of local authorities to economic development;
  • Failure to make explicit any role for local authorities in the implementation of any future strategy, despite independent evidence (LRPD, 1998; University of Ulster 1999) suggesting that local authorities had acquired a proven track record in that regard;
  • Where a pilot project for District Council is proposed as a means of rationalising local economic development, a failure to consult with elected representatives undermines the proposal;
  • Rhetorical commitment to addressing deprivation and disadvantage was highlighted, in the absence of a clear articulation as to the means by which the causes of such disadvantage should be addressed; a view reinforced by a failure to consult adequately with the community and voluntary sectors;
  • While the proposal to establish several new organisations was seen to contain some merit, the report failed to make explicit the justification for the proposed new structures. Insufficient evidence was presented as to convince the reader of the alleged 'shortfalls' of existing, specialist organisations, such as the Northern Ireland Economic Council, as to warrant their replacement by a proposed Economic Development Forum and Research Body.
  • City Council challenged the validity of the recommendation that consideration should be given to the use of tax incentives as a means of effecting economic benefits over the longer-term;
  • City Council opposed the brief reference that privatisation of public utilities including harbours and water/sewerage should be considered;
  • Disappointment was expressed with regard to the absence of substantive tourism recommendations, given the potential for future development.

1.1.4 Concluding Summary

Belfast City Council welcomed the publication of Strategy 2010 and commended the Department for leading a wide-ranging, but limited, participative process.

Nevertheless, concern was expressed that insufficient consideration had been accorded to the role and function of local government in general, as well as the contribution - both existing and potential - of the principle local authority of the region, in promoting economic development.

It was recommended that the Department of Economic Development should consider the following actions:

(1) that the report be re-drafted, incorporating additional empirical analysis and contextual evidence; and

(2) that further consultation should take place, particularly with relevant organisations not formally included within the scope of the initial consultation process.

Section Two: Belfast City Council- its role, functions and policies

2.1 The Council performs five principal roles within its local area and district:

  • the direct provision of a number of services and facilities,
  • the promotion of the arts, tourism, community and economic development,
  • the regulation and licensing of certain activities relating to environmental health, consumer protection, building regulations, and public safety,
  • a representative role on a number of bodies and Boards including Education and Health,
  • a consultative role in relation to functions conducted by other Government bodies and agencies on issues such as planning; water, roads and housing.

2.2 In the performance of the above roles the Council carries out functions in the following areas:

  • the provision of facilities for recreational, social and cultural activities including leisure centres, community centres, parks, open spaces, sports grounds and places of entertainment,
  • street cleansing,
  • waste collection and disposal,
  • the provision of burial grounds,
  • the provision of grant aid to support the Arts, community development and the promotion of tourism and economic development,
  • the administration and regulation of certain matters relating to the environment, public health and public safety including building control, food safety, statutory nuisance, dangerous buildings, air pollution, noise pollution, dog control, consumer protection and health and safety,
  • the licensing and regulation of street trading, places of entertainment, amusem*nt centres, sex establishments, societies' lotteries, cinemas and the storage of petroleum spirit and mixtures,
  • the making of Bye-laws and regulation of same.

2.3 To enable the Council to provide the above services and perform its other functions, the Council must levy an annual rate and has the power to:

  • acquire and dispose of land
  • borrow money
  • employ staff
  • procure goods and services.

2.4 To support and implement the above statutory functions and provision of services and facilities, the Council has adopted a number of policies. For example, the function of provision of leisure centres is supported by a range of policies including a policy on charging for hire and usage of each centre. There are also a range of policies relating to the procurement of goods and services and employment which support all the Council's functions.

Organisational Structure

2.5 The Council consists of 51 Elected Members, elected for a four year period, who meet monthly in full session (except in August) and on a regular basis as Committees and Sub-Committees.

2.6 Officers who provide support to the Council and implement its policies are organised into Departments and Services.

2.7 The Chief Executive oversees the work of the Departments through the Chief Officer's Management Team which is also responsible for the corporate management of the Council. The Chief Executive is responsible for providing strategic direction and advice to the Council, for the day to day management of services and the longer term planning and allocation of resources.

Committees and Sub-Committees

2.8 The Council has six principal Committees, three of which also operate through Sub-Committees.

Policy & Resources Committee

2.9 This is the principal Committee of the Council and is responsible for the determination, implementation and monitoring of corporate policy and strategy. Five Sub-Committees report to the Committee, dealing with issues relating to:

  • Cultural Diversity,
  • Finance, Administration and Information Systems,
  • Members,
  • Personnel, and
  • Policy and Performance Review.

The Finance, Administration and Information Systems Sub-Committee also sits as the Audit Panel.

Client Services Committee

2.10 This Committee is responsible for the provision of the Belfast Waterfront Hall, community services, leisure services and parks and amenities. Two Sub-Committees report to the Committee, dealing with issues relating to:

  • Community and Leisure Services, and
  • Parks and Amenities.

The Committee is also responsible for the Belfast Waterfront Hall Board.

Contract Services Committees

2.11 This Committee was created in response to the Compulsory Competitive Tendering (CCT) legislation which required the Council to win the right to provide a range of defined activities in open competition. Now that the implementation of CCT has been suspended, the Committee is responsible for overseeing the delivery of a range of services in accordance with specified standards. These services include:

  • street cleansing,
  • refuse collection,
  • grounds maintenance,
  • indoor and outdoor leisure,
  • building services,
  • vehicle maintenance, and
  • catering.

Development Committee

2.12 This Committee was established in June 1997 to provide a focus for the Council's role, remit, relationships and profile in the development and regeneration of the City. The Committee's remit is to consider issues and initiatives which impact upon the quality of life and prosperity of the City and the contribution which the Council can make to these through the use of its influence and assets. Three Sub-Committees report to the Committee, dealing with issues relating to:

  • Arts (including heritage),
  • Economic Development, and
  • Tourism and the Promotion of Belfast.

Health & Environmental Services Committees

2.13 This Committee is responsible for all of the Council's many and diverse health and environmental control functions including:

  • regulation of the safety of food and consumer products,
  • collection and disposal of solid waste,
  • improvement of the quality and safety of the domestic, public and working environments, and
  • helping to secure the safety, health, welfare and convenience of persons in the built environment.

Town Planning Committee

2.14 This Committee fulfils the Council's consultative role in relation to all planning matters affecting the City.

Decision making process

2.15 The Council has a defined range of duties and powers (see Section 2 above). Proposals to amend existing policies or adopt new policies are generally considered by the Committee (or Sub-Committee) which has responsibility for the function to which the policy relates on the basis of a written report prepared by appropriate officers. In the case of proposals in respect of key policies or policies which affect more than one function, there will have been consideration of the issue by the Chief Officers' Management Team in advance of the meeting of the Committee or Sub-Committee.

2.16 Following discussion at the Committee or Sub-Committee meeting, agreement will be reached on the action to be taken and this will be minuted. Apart from those items of business which have been delegated by the Council, decisions of Committees and Sub-Committees will not be final until they have been approved by the full Council.

2.17 To speed the decision making process the Council has delegated a very limited number of decisions to Committees (sometimes for onward transmission to a Sub-Committee). Such decisions may be acted upon without the approval of the full Council. This main areas of delegation relate to certain operational decisions of the Waterfront Hall Board and unanimous decisions of the Town Planning Committee in respect of planning applications.

Section Three: Strategy 2010 - Belfast City Council Response

Background to the written submission

3.1 Committee Members may be aware that, on 12th May, 1999, Mr. G. Loughran, Permanent Secretary, Department of Economic Development, together with Mr. S. Kingon and Mrs. J. Pyper, attended a meeting of the Council's Development (Economic Development) Sub-Committee and made a presentation regarding the Northern Ireland Economic Strategy Review 2010.

3.2 Mr. Loughran and Mr. Kingon answered a number of questions which were put to them by the Members concerning the Review and the Sub-Committee agreed that it was imperative that a detailed Council response to the document be formulated to take into account the concerns and views expressed by Members at the meeting.

3.3 Accordingly, a special meeting of the Sub-Committee was held on 11th June, when further consideration was given to the Review document. The Sub-Committee considered also a report which had been prepared by the Council's Acting Economic Development Manager on the Strategy Review and agreed that it be forwarded to the Department as representing the Council's views on the Strategy Review document. The view was expressed that, while the document represented a starting point for economic regeneration in the Province, it was by no means a finished article and would require a great deal of work before it could be acted upon.

3.4 The Sub-Committee's decision was adopted by the Development Committee at its meeting on 16th June and subsequently ratified by the Council at its meeting on 1st July 1999. The Sub-Committee agreed also to seek a meeting with the then Minister so that Council's concerns could be conveyed to him. That meeting took place, subsequently, on 26th October 1999.

STRATEGY 2010: REPORT BY THE ECONOMIC DEVELOPMENT
STRATEGY REVIEW STEERING GROUP ON NORTHERN IRELAND

BELFAST CITY COUNCIL

Introduction

3.5 In the light of the recent launch of the Strategy 2010 Report by the Economic Development Strategy Review Steering Group on Northern Ireland, members of Belfast City Council wish to make a formal response to communicate the Council's observations and views on the document. Members of Belfast City Council have studied the report, examined its structure, recommendations and targets, and have raised a number of concerns.

3.6 Section one of this report will concentrate on general observations in relation to the Review and the following section will focus specifically on issues relating to Belfast City Council.

3.7 In preparation for compiling a Belfast City Council response to Strategy 2010, the Council consulted with a number of individuals including economists, the Council's Policy Services Section and key Economic Development players in Belfast.

General Observations

Economic Analysis

3.8 Having studied Strategy 2010 in detail, Belfast City Council's immediate response in terms of the content and structure of the report is that it lacks evidence of a basis in solid research and economic analysis. The opening chapters simply provide a brief economic profile of the region and a SWOT analysis. It provides a short examination of a number of key trends operating in modern economics and a brief section on the Northern Ireland economy in the context of the UK. None of these are referenced to existing research or databases.

3.9 The report does not evaluate past economic performance in Northern Ireland or refer to any analysis of the effectiveness of current and past economic policies for Northern Ireland, which would have been an obvious starting point for the review.

3.10 Recommendations contained within Strategy 2010 are not placed within the context of previous work. This is in contrast to previous documents such as "Competing in the 1990s" and "Growing Competitively", which used solid evidence and research data.

3.11 Current and past Economic Policy in Northern Ireland has led to the region performing well in the early 1990's. Surely therefore a starting point for the report should be an analysis of this performance, particularly to maintain and improve those existing policies and measures which have proven to be effective and in this context to suggest a way forward. The lack of reference to earlier economic strategies or annual performance reports of other Economic Development agencies is surprising. Statements are not supported by quoting any reliable data sources and no references or comparisons are made to past significant reports such as the Dunning report on competitiveness. It is not obvious that any formal research or analysis has taken place during the process of the review nor any consideration of other Government agency strategies or a goal to achieve joined up Government. In particular we would emphasize the almost complete absence of discussion and analysis of the implications of the Department of the Environment for Northern Ireland's proposed Regional Strategic Framework as a whole.

3.12 In addition, Strategy 2010 fails to refer to wider contextual issues beyond Northern Ireland such as those outlined in the important EC publication Framework for Action for "Sustainable Urban Development in the European Union". As a Member State of the European Union, Northern Ireland has a responsibility to consider current European thinking. While the situation with regard to Structural Funds is changing over the next period, these will still have a significant impact on the Northern Ireland economy. A Section on local economic development and the role of cities as key drivers for regional prosperity is missing from the document.

3.13 Strategy 2010 does not provide a Regional Framework nor does it use any growth model to underpin the recommendations. How for example can the effects of 2010 be differentiated from the effects of New Deal or Best Value? The report outlines a number of macro economic indicators but how can these be isolated and how can the impact of other policies in Northern Ireland be measured.

Principles, Recommendations and Targets

3.14 In theory, Belfast City Council agrees with the underlying principles or key themes of Strategy 2010. There is nothing new here or visionary. They cover old ground and reflect the principles outlined within many local Economic Development Strategies across Northern Ireland. In terms of the sixty-two recommendations, these are listed as an over-ambitious wish list rather than a coherent strategic plan.

There does not appear to have been any thought in relation to prioritising the recommendations or, the costing implications for public and private sector finances. Many recommendations are statements with no supporting evidence or justification. At least one third of the recommendations re-iterate existing Government Policy and things which will happen anyway. The Strategy Steering Group of 2010 should take into consideration that the Northern Ireland Assembly Members may require more substantiated evidence of effect before committing the future of Northern Ireland to this direction.

3.15 The targets detailed in 2010 are unrealistic and again are not supported with hard evidence or measurement indicators. They lack reasoning and a research basis and Belfast City Council members wonder if they are truly additional targets to what would happen regardless of 2010.

3.16 The question must therefore be asked if the targets truly reflect additional impacts to that which would have been achieved regardless of 2010. More work should be undertaken to provide evidence costs, priorities and resource implications for each recommendation and target within the report.

Conclusion

3.17 In conclusion Belfast City Council would argue that while the concept is laudable and much needed, such an exercise requires serious and robust analysis, and this is clearly lacking from much of the text. The Steering Group might wish to examine the process by which the Department of the Environment has embarked on its Regional Strategic Framework exercise, a process which began in January 1996 and is only nearing completion now. While this timeframe may be overly long, the less than 12 months devoted to the task of creating a framework for economic development is perhaps too short and does not allow for a full examination of these complex issues.

Belfast City Council's Views and Concerns

3.18 Belfast City Council has a number of main concerns in relation to Strategy 2010 which may be summarised as follows:-

3.19 Local authorities and politicians were not consulted in relation to the report. The report does not acknowledge the contribution of local authorities to the development of the Northern Ireland economy and it fails to include a role for local authorities for implementation of any future strategy. Belfast City Council finds this difficult to accept given that it is the largest local authority in Northern Ireland with an annual budget of £63 million which includes approximately £3 million per annum for local economic development purposes. Belfast City Council levers a considerable amount of external European funding and has stable partnership arrangements on a local, national and international level.

3.20 Strategy 2010 refers to local economic development as now being a mainstream activity. The recent positive evaluation of the local economic development performance of councils in Northern Ireland which was undertaken by the University of Ulster, Jordanstown and the Northern Ireland Economic Council has legitimised this role for local authorities. The evaluation produced hard evidence on the added value and outputs achieved by councils. It highlighted that the average cost per job created by local authorities through the Local Economic Development Initiative is approximately £15,500 compared to up to £25,000 for LEDU and £20,000 for IDB.

3.21 While Belfast City Council agrees with the recommendation in Strategy 2010 that there needs to be a rationalisation of economic development agencies in Northern Ireland there has to be a strong argument for a future increased role for local authorities for the implementation of a Regional Economic Development Strategy. This is further underlined by the European document "A Framework for Sustainable Urban Development".

3.22 The Strategy 2010 recommends that a District Council pilot project is established, led by a private sector individual to explore methods of rationalising local economic development. While this may be worth exploring, it should be noted that district councils have not been consulted and would certainly want an input into this.

3.23 While Belfast City Council acknowledges that it was important to undertake a Northern Ireland Economic Review, the review should not have been taken in isolation of the other developments and plans evolving in Northern Ireland, such as Council Strategies and the Future Structural Funds Plan 2000-2006.

3.24 With respect to the Strategy Steering Group's inclusion of Equity and Social Cohesion as a key theme within Strategy 2010, Belfast City Council feels that the document does not adequately address deprivation and disadvantage nor suggest practical solutions at a grass roots level. The report concentrates more on motivation in relation to industry and education. Local communities and the development of people is not emphasised strongly enough.

3.25 This may be partly due to the fact the voluntary community sector was not properly consulted on the process. This weakness should be addressed given the contribution of the sector to the development of the local economy and given the strong focus applied to this sector within the future SPD for Northern Ireland.

3.26 While Belfast City Council endorses the key principles outlined in the Strategy it has serious reservations in relation to a number of the recommendations, and wishes to express these before the recommendations become an agreed action plan for implementation in Northern Ireland.

Strategy 2010 recommends the establishment of several new organisations, namely;

  • An Economic Development Forum and Research Body
  • An Information Age Commission
  • A new Single Economic Development Body

3.27 While there may be justification for new structures, the report does not elaborate on the reasoning for these nor does it mention what role existing bodies should have such as the Northern Ireland Centre in Europe and the Northern Ireland Economic Council. Such organisations have a high level of expertise, valuable networks and experience which cannot be ignored. No evidence is given of the 'shortfalls' of these existing organisations. Like other points of the document these recommendations lack any substantive evidence to make the case.

3.28 Belfast City Council opposes the recommendation that there is scope for spreading develop throughout Northern Ireland through the establishment of other major centres in seven other Northern Ireland towns. Although GDP figures show a high GDP per head in Belfast, the travel to work population has to be taken into consideration and the fact that this percentage of the population spend is outside Belfast. Further, such a proposition runs counter to the European analysis of cities and their importance as centres of economic drive and prosperity.

3.29 Belfast City Council would challenge the reality of the recommendation that the Northern Ireland Assembly should lobby the Chancellor with a view to creating a special rate of Corporation tax in Northern Ireland. Although this would be welcome to allow Northern Ireland to compete with the Republic of Ireland, it might make better economic sense to work with the ROI and sell the island of Ireland as a whole to potential investors, marketing varying assets of varying sub-regions.

3.30 It is important to point out in relation to the consideration of tax rates and incentives that research evidence suggests that temporary tax rates do not produce long-term effects.

3.31 Belfast City Council strongly opposes the recommendation for the privatisation of harbours and water/sewage. This highly controversial recommendation is made in two short lines within the Strategy 2010 with no justification or substance.

3.32 Belfast City Council has recently submitted a detailed research paper to oppose the privatisation of Belfast port and highlighted through the research that port privatisation has proven unsuccessful elsewhere in the UK and that a more reasonable option would be to establish a Trust Port with extended powers. In the Department of the Environment's "Shaping into our Future" document, Belfast is recognised as a regional hub at the heart of Northern Ireland. It is therefore Belfast City Council's responsibility as civic leader to question the major economic implications of privatisation and ensure that the best possible economic decisions are taken for Belfast and so for the region as a whole.

3.33 Strategy 2010 emphasises the urgent need to reduce grant dependency and public expenditure in Northern Ireland and increase private sector investment. Although Belfast City Council agrees with this, it was felt that the report is not hard hitting enough and should make detailed recommendations on how to reduce grants where the starting point is for this and how to attract different sources. The Strategy Steering Group should reflect on the Department of Economic Development's document "Addicted to Aid", which recommends how to remove and reallocate public money. How has this been implemented and what have the outcomes been?

3.34 Within Strategy 2010, the tourism sector is mentioned briefly in the context of rural diversification. Given that this Industry is a major employer in Northern Ireland and given the potential for the development of the industry if peace is sustained, Belfast City Council finds the absence of tourism recommendations as very disappointing.

Conclusion

3.35 Belfast City Council welcomes the publication of Strategy 2010, and views the document a starting point for further, more inclusive and intensive consultation to add weight to the document. While there are obvious weaknesses, it is recognised that 2010 has no statutory status and is merely a consultation report, which with a lot more work, should evolve into a coherent Regional Development Plan for Northern Ireland PLC. However we also note that Minister Ingram has already begun to implement parts of the document already without full public consultation.

3.36 Belfast City Council agrees with the over-arching themes such as industry and education links, technical skills development, development of growth sectors and a knowledge-based economy, development of ICT capacities and external relations. Such themes will help to develop Northern Ireland as a global competitive region. These are common sense objectives which will undoubtedly be universally accepted. However the practical recommendations to achieve these objectives also need to be universally endorsed if Northern Ireland is going to develop through true and meaningful partnership.

3.37 Belfast City Council commends the initiative taken by the Department of Economic Development in leading the development of 2010. It also acknowledges the commitments of such a wide range of contributors, recognises the importance of Strategy 2010 but questions the added value of the document and the many weaknesses therein as outlined in this report.

3.38 Belfast City Council requests that the Strategy Steering Group considers the Members' concerns and observations and that these are discussed at the June DED conference. The Council further requests that more work is undertaken to improve 2010 before it is presented to the Northern Ireland Assembly as a proposed blueprint.

3.39 Finally, Belfast City Council realises that regardless of the current political stalemate in Northern Ireland, there is an obligation on Northern Ireland stakeholders to move forward with economic policy and actions. Belfast City Council is keen to assume a civic leadership role and commit itself to driving forward some of the recommendations within Strategy 2010 following further consultation, amendment and endorsem*nt of the Strategy.

3.40 Council Members recommend that the Strategy Steering Group, guided by the DED, should re-draft the Strategy to make it more evidence-based, realistic and coherent with other existing policies and strategies. Belfast City Council recommends that further consultation should take place engaging those who were not consulted before, including local authorities, the Northern Ireland Centre in Europe, the Northern Ireland Economic Council and the voluntary/community sector.

Section Four: Recommendations for Action

4.1 It is recommended that the Department of Enterprise, Trade and Investment Committee should consider the following actions:

Role of Local Government

4.2 The Northern Ireland Assembly should move quickly to affirm the value of local government within the economic development arena and further, to widen its remit to embrace comprehensive local strategic planning as a means through which a strategically oriented, rather than programme driven, package of policies can be created, so as to enhance effectiveness.

Policy framework

4.3 Early critical evaluations pointed out the shortcomings of the Report in regard to the absence of an explicit model for economic growth. To that criticism might be added the absence of a policy framework within which economic growth now has to be considered.

4.4 Increasing recognition is given to the inter-relationship between, indeed the inter-dependence of, economic growth, social cohesion and environmental protection within the concept of 'sustainable development'. Similarly, the importance of an urban component as a key economic driver within regional development programmes has gained widespread acceptance within European and Central Governments' thinking.

4.5 It would appear to be imperative, consequently, that Strategy 2010 should take cognisance of, and be aligned to, existing policy trends and models of best practice emanating from European and National Government levels. Of particular relevance in this regard is the European Commission communication entitled 'Sustainable urban development in the European Union: a framework for action' which places emphasis on the introduction of an explicit urban component into regional development programmes as a means through which balanced regional development can be achieved. Similarly, the Urban Task Force Report (1999) articulates Central Government's endorsem*nt of the principle of sustainable development applied to the urban context. The report further acknowledges the importance of urban centres to their region's economic growth.

Structures of governance

4.6 The coincidence of devolution, the new round of European Structural Funds and the consideration by the Assembly Committee of Strategy 2010, presents a unique opportunity, in determining the means through which agreed policy objectives are to be achieved, to consider not only the current structures of governance pertaining to the arena of economic development but to examine other models that may offer the potential for enhanced efficiency and effectiveness with regard to both policy formulation and delivery in the professional field.

4.7 In particular, Belfast City Council would contend that the complementarity of regional and local government should be recognised, and that the capacity of local government to assume a pre-eminent role in the formulation of local policies and, subsequently, the co-ordination of delivery at the local level in regard to economic development, should be enhanced as an appropriate delivery framework.

Consultation

4.8 That further consultation should take place, beyond the business sector, particularly with relevant organisations not formally included within the scope of the initial consultation process.

Concluding remarks

4.9 Belfast City Council would welcome any opportunity to give oral evidence to the Committee on any matters arising from this submission.

Reference Section

European Commission (1998) Sustainable urban development in the European Union: a framework for action. (COM(1998) 605 final)

Hart, M., Murray, M., Smyth, M. and Keane, M. (1999) Local Development in Northern Ireland. Belfast.

LRDP (1998) Study on local development in Northern Ireland - final report. Belfast.

Urban Task Force (1999) Towards an Urban Renaissance. Final Report of the Urban Task Force Chaired by Lord Rogers of Riverside. DETR London

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ANNEX 19

DERRY CITY COUNCIL

20 June 2000

1. Purpose of this paper

1.1 Derry City Council through its Economic Development Section is facilitating the preparation of "One Integrated Economic Development Strategy for the Derry City Council Area, 2000-2006". Its purpose will be to create a shared analysis of the economic development priorities for the City and the region it serves and to present an integrated, interagency action plan to meet those priorities. It will also provide the means by which citizens can evaluate the likely impact of future plans for the local economy. AnEconomic, Strategy Advisory Grouphas been established to assist Council in this task. The Group includes business leaders, representation from the social economy sector, senior executives of the central government agencies present in the city, senior representatives concerned with the city's education resource as well as senior political and executive representation from Derry City Council. An initial economic strategy document was published in January 1999.

1.2 In February 2000 theCity Partnership Boardpublished 'City Vision 2020 - First Plan for Progress 2000-2005'. This is the first comprehensive development strategy produced for Derry/Londonderry and follows what has been described as the most inclusive civil initiative ever undertaken in Northern Ireland. The Plan has been endorsed by Derry City Council and by the Minister for Regional Development. It is now being actively promoted as a blueprint to transform the city physically and improve the quality of life for its citizens through a series of proposals that cross the economic, cultural, social and environmental spectrum. The report "City vision 2020 First Plan for Progress 2000-2005" translates the City Vision into reality by outlining specific actions to be taken within five themes for the period 1999-2004. "Economy - earning our living" is one of these five themes; the others focus on inclusion, culture, environment and community. The City Partnership Board has a broad cross-sector membership reflecting the comprehensive nature of these themes.

1.3 Derry City Council established theFoyle Development Organisationin the mid-1970s to promote commercial and industrial development in the city. Derry City Council, like other local authorities after the local government reforms of 1973, had no powers in the field of economic development. Foyle Development Organisation receives a small annual grant from the City Council, which nominates City Councillors to its board and membership was additionally drawn from industry, from educational institutions and from bodies such as the Honourable the Irish Society, traditionally concerned with the city's economic progress.

1.4 The Economic Strategy Advisory Group, the City Partnership Board and the Foyle Development Organisation are working closely together to ensure that the economic priorities of the city and the region that it serves are clearly communicated within the developing local economic strategy and city vision. The three comes at an opportune time for achieving change when policies concerning the economic future of Northern Ireland are undergoing radical change.

1.5 The three organisations recognise that the policy review processes initiated by the Regional Planning Division, DoE NI and by the Strategy Review Unit, DETI will have a major impact on the implementation of the local economic strategy. This paper has been produced as a result of discussion between the three organisations and has been enhanced by a recent focus group meeting with a wider group of locally based development organisations. The paper is intended to stimulate a structured dialogue with the Regional Planning Division, DoE NI, and the Strategy Review Unit of DETI.

2. Synergy between "Strategy 2010", "Shaping Our Future" and locally focused strategy review processes

2.1 In broad terms the vision set out for the Northern Ireland economy in "Strategy 2010" is consistent with the Derry/Londonderry City Vision Economy Statement.

"A fast growing, competitive, innovative, knowledge-based economy where there are plentiful opportunities and a population equipped to grasp them".

Principles underlying the strategy;

Promoting equality and social cohesion,

Helping to create a knowledge-based economy,

Foster enterprise,

Be outward-looking, and

Emphasise self-help.

Strategy 2010 Vision

"Our greatest natural resource is the potential of our young people and it follows that the wisest investment we can make of our time, effort and money is in their education and training. Our children should have access to the flexible skills needed for the future and important links between education, training and the world of business and industry in a global economy will be strengthened."

City Vision Economy Statement

2.2 The Derry Economic Strategy recognises the need to restructure the local economy in line with these vision statements if the city is to fulfil its regional hub status as set out in Shaping Our Future.

"To give a strategic focus to future development and achieve balanced growth within the (NI) Region by developing:

. A strong North-West regional centre based on Derry/Londonderry, the transport pivot and regional gateway for the North-Western corner of the island."

Shaping Our Future

"To realise the City's role as the regional economic centre for the North West by achieving a significant restructuring in the local economy and a major step change in the area's economic prospects."

"To reduce unemployment to a rate no greater than the NI average."

One integrated Economic Development Strategy 2000-2006 - Aim and Objective

2.3 This initial review of "Strategy 2010" and "Shaping Our Future" indicates that the high level principles outlined in both documents are consistent with the local strategies and should therefore be endorsed.

3. Issues arising from "Strategy 2010" and "Shaping Our Future"

3.1 The following issues in "Strategy 2010" and "Shaping Our Future" present some cause for concern and should be the subject of further discussion.

Relationship between "Strategy 2010" and "Shaping Our Future"

3.2 "Strategy 2010" uses the DoE's "Shaping Our Future" Regional Plan as a basis for recommending that nine urban centres (including Derry) should be the main focus for the future location of industry. Our own Economic Development Strategy points out the challenges that must be addressed if the City is to fulfil its role as a regional centre. These challenges include access toenergy, transportation, capital, education and research. Yet "Strategy 2010" does not suggest any clear targeting of resources at the sub-regional level to ensure that urban centres such as Derry are able to play their part in creating a balanced NI economy.

3.3 "Shaping Our Future" does not recognise Derry's role as a manufacturing centre at a significant distance from Belfast. Nor does it take account of the differential effect on the North West of expansion and decline in different manufacturing sectors (viz. textiles and apparel) as anticipated by "Strategy 2010". Both documents ignore existing economic imbalances within the NI region and offer no analysis of how they might be addressed.

New Targeting Social Need (New TSN)

3.4 "Strategy 2010" welcomes the introduction of New TSN, but does not demonstrate how New TSN will have a greater impact than existing TSN policies. For example, IDB seeks to locate 75% of new inward investment projects and new jobs in or close to TSN areas. This policy has hardly impacted on the North West in the way the area might expect (there has actually been a reduction of 284 IDB jobs in the North West between 97/98 and 98/99. Does Strategy 2010 conceive of TSN entirely in terms of local issues to the exclusion of broad sub regional differences requiring other forms of intervention? Is migration and commuting seen as the chief solution to sub-regional unemployment problems? It therefore seems appropriate to seek clear policy statements by economic development bodies on how they propose to address New TSN and to require a tighter interpretation of TSN areas in future.

3.5 Clarification of Strategy 2010's intentions in regard to TSN location is urgently required. "Strategy 2010" states that regional GDP figures show a high GDP per head for the Belfast area suggesting scope for spreading development throughout Northern Ireland. However this statement is left hanging in the air. This inconclusive statement about Belfast's relatively high GDP per head might have been put another way i.e."there remain areas of low GDP per head and relatively high unemployment in Northern Ireland e.g. in the North West, some of which may also be adversely affected by necessary sectoral shifts. Special attention will need to be given to these areas to develop more effective and rewarding deployment of under-utilised resources".One needs to ask why a formulation of this kind was not adopted. After all, if a section about TSN refers to any geographical areas specifically, it ought first to mention those that are disadvantaged rather than those that are ahead of the game.

Principles and Inclusion and Partnership

3.6 These principles are repeated throughout "Strategy 2010". Has any account been taken in its production of existing economic development strategy initiatives produced by regional/local partnerships?

3.7 The strategy generation process that Derry City Council has initiated mirrors the process being adopted at a NI level. It is important that the two processes feed into each other and that effective, two-way channels of communication are opened.

3.8 The Economic Strategy Advisory Group (responsible for developing the integrated, interagency economic development strategy for Derry) should be invited to participate in the proposed NI Economic Development Forum.

3.9 City Vision has enabled local people to genuinely influence the decisions that will be taken about their city. This is in keeping with Strategy 2010's own view that 'any new strategy should be based on the principles of opportunity and social inclusion. It is important that all people in Northern Ireland not only have an equal chance of sharing in its increasing prosperity but also instinctively know that they do. They should become stakeholders.' (9.1). It is expected therefore that appropriate weight will be given to the recommendations in the 'First Plan for Progress' in the implementation of Strategy 2010. Equally as City Vision now acts as a reference against which other local strategies are measured, those areas of Strategy 2010, which are clearly at odds with the First Plan for Progress, should be reconsidered.

Infrastructure Linkages

3.10 This is a key area for concern. Whilst accepting the broad proposals in the DoE's "Shaping Our Future" document, "Strategy 2010" appears to treat the Belfast-Dublin road route as a priority. The north-west community has already articulated its wish through the City Vision and the Integrated Economic Development Strategy to see equal priority attached to the development of the Derry-Dublin and the Derry-Belfast corridors.

3.11 Strategy 2010 concludes "access to the main gateway out of the region is sufficiently developed to meet the foreseeable needs of the economy to 2010. Port and airport facilities are also considered to be of sufficient standard." This statement ignores local expectations to develop City of Derry Airport to provide links to key hubs. It ignores the inability to move freight from Derry to any seaport by rail. It ignores the inefficient existing rail service from Derry to Belfast. Derry's economy needs radical restructuring if the current jobs gap is to be addressed and the statement fails to substantiate how existing port and airport facilities are sufficient to meet shifts towards tourism and knowledge based sectors. As such, this statement should be strongly challenged.

Energy

3.12 The recognition given by Strategy 2010 to the importance of the extension of natural gas to the North and West of Ireland is welcomed. This recognition needs to be reinforced by a firm recommendation to Government to secure the necessary investment.

Cross-Border Dimension

3.13 "Shaping Our Future" identifies as a strategic planning guideline the priority to develop.

"Derry as the key strategic employment location of the North West and central focus of the North-West Development Corridor extending into Donegal."

3.14 The analysis provided by "Strategy 2010" regards the Republic as a competitor region and does not pay sufficient attention to the cross-border economic dimension within which urban centres such as Derry operate.

One Single Economic Development Body

3.15 The proposed amalgamation of IDB, LEDU, IRTU and the company development side of T&EA has merit and should be supported. That support should, however, be qualified with the requirement for a commitment to expand rather than decrease the local presence of economic development agencies.

3.16 Given the important development requirements of the North West, such an amalgamated body should have a strong presence in the North West. It would make sense for it to be headquartered in the North West since that is where the real gap in income and employment levels with the UK and Europe that justify differential selective funding for Northern Ireland is chiefly to be found.

Local Economic Development

3.17 "Strategy 2010" points out that "Local Economic Development (LED) efforts in Northern Ireland have increasingly become fragmented and needs co-ordination and rationalisation". Have any studies been made of the comparative performance and value for money yields of LED and central development agencies? It is important that the benefits of LED are highlighted as well as the problems. It is also important existing local models of good practice are adapted and built on. Examples of local models are:

Policy formulation Economic Strategy Advisory Group,
City Partnership Board

Cross-sectoral programme delivery Rural Area Based Strategy Groups,
District Partnerships

Sectoral focus initiatives Derry Investment Initiative,
Visitor and Convention Bureau,
City Centre Initiative

3.18 It is important that any NI economic development strategy recognises the lead role, which Councils can play in facilitating greater co-ordination and rationalisation at the local level while retaining the best features of existing local development structures.

4. Conclusions

4.1 The initiative shown by the Departments in setting out initial priorities for developing the NI economy and guidelines for developing NI as a region is to be welcomed. This initial review of "Strategy 2010" and "Shaping Our Future" indicates that the high level principles outlined in both documents are consistent with the local strategies and should therefore be endorsed. However, the issues set out above indicate that further analysis is required to assess the potential impact of the NI regional priorities on sub-regions such as the North West. It is essential that effective, two-way channels of communication be opened between the strategy generation processes operating at the NI regional level and the processes operating within NI's second city.

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ANNEX 20

UNISON, NORTHERN IRELAND

The following brief comments on the Strategy 2010 document are made in the context of work undertaken by UNISON and others over many years to ensure that there is recognition in specific practice and outcome of the integral link between economic growth and social inclusion. Regional and local inclusive partnership mechanisms must be integrated as a core dimension of regional strategies in addressing economic development and associated problems of long term unemployment and social exclusion.

These comments are further influenced by work undertaken by John Bradley and Douglas Hamilton in a report on Strategy 2010 commissioned by NIC/ICTU; the response of the NIEC to Strategy 2010; and groundbreaking work undertaken by the Concordia social partnership.

BRIEF comments on the strategy 2010 document

General

The recommendations are particularly weak as:

  • Their implementation would fail to achieve the targets set.
  • They are vague and general.
  • They do not contain a discussion of the evidence on which they are based.
  • There are practically no recommendations covering social cohesion, equality or social inclusion.
  • It is unclear how the recommendations are prioritised.
  • They avoid costing proposals

The current review also appears to avoid reference to earlier strategy documents produced over past 10 years. For example, 'Pathfinder'.

The document ignores the North/South economic and social co-operation agenda which has been developed by CBI/IBEC and ICTU.

The document ignores the requirement for local communities to have a democratic say in how their own towns, cities and sub-regions are planned.

The report raises the crucial issue of finding resources by rolling back state in health and education, and rationalisation of public service structures. However, no evidence is presented to quantify this. The document ignores the uncomfortable that major public subsidy has been given to industry and business without quantifiable outcomes.

There is insufficient discussion to back up the indicators and targets set for NI to be achieved within the next decade. For example: Why are only two indicators concerned with social inclusion and how were these particular sets of indicators chosen? UNISON would agree with the analysis of the NIEC that the, "lack of clear qualitative links, lines of causation and channels of impact" mean that, ".the targets of the desired scenario are unlikely to be reached by 2010".Clear links must thus be made between the targets and the recommendations.

The failure of the consultation process

The consultation process around the strategy has been far from satisfactory, particularly in light of the importance of the document. For example:

  • There has been no formal consultation period.
  • The DED has consistently set the agenda, initiated drafts and made crucial judgement calls with little outside input.
  • There is a notable absence of the involvement of voluntary/community sector in the consultation process.
  • There is a distinct lack of formal research commissioned from outside experts unlike the southern Culliton report.

It is thus essential that extensive consultation occurs with all sectors to ensure that the priorities of economic growth and social cohesion are embedded in both targets and recommendations. Currently this has not occurred. The requirements of the new statutory duty and European mainstreaming in the context of participation and impact by affected groups is completely missing.

Inadequate contextualisation and analysis of the NI Economy

There is inadequate material on the whole issue of competitiveness in the global context. In particular:

  • There is little or no new strategic thinking on future relationships of the NI economy with the outside world.
  • The document fails to draw critically on the best professional economic and industrial research expertise and advice in an open and transparent way.

There is also a limited and selective application of evidence on the NI economy. For example:

  • The document fails to mention NI's current economic development strategy or whether the lessons learnt from current strategy will inform future developments.
  • Material on sectoral aspects of economy is marred by an uneven presentation of data - particularly over the fact that the bulk of the long term unemployed are catholic.
  • Some of the challenges in the report are simply measures of economic failure due to political and violent conflict.
  • Nowhere does report draw on the work of IBEC and the CBI, which has tried to build north/south networks - stressing the potential for mutual interchange and engagement across the border.
  • The Strategy makes no reference to the poor performance of IDB (unlike Culliton analysis of IDA).

Equality and social cohesion

The reports analysis of equality and social cohesion issues is inadequate particularly in light of the new equality of opportunity duty under the NI Act 1998 and the general consensus that the mainstreaming of equality, social partnership and social cohesion issues will underpin the new round of European Structural Funds.

Although 2010 sets both economic growth and social cohesion as central objectives, this bold approach lacks the detail to ensure effective implementation. The document is equally as vague in its reference to New TSN and PAFT.

  • Only a model of the economy based on local partnership actions, capacity development and the collaborative approach between social partners will command widespread agreement across society and assist in realising the vision set out in Strategy 2010. Such a model is identified below.

THE CONCORDIA PROJECT - A MODEL OF BEST PRACTICE IN
Sustainable Economic Development

Local Partnership Actions

The work of the Concordia project and associated evidence would increasingly suggest that local people need to be given the opportunity to own and control programmes and to engage with the process if there is to be greater return on the investment of effort involve.

Evidence from many regions makes clear there is an integral link between inclusive growth and economic growth. The local has been identified as a fertile terrain for innovation both in creating new sources of jobs and in generating new more supportive and integrative systems of social relations.

It is essential to put in place working structures and mechanisms to link direct experience from the practical through to policy development and implementation.

Regions need to explore how far Third System organisation can play a full role, moving beyond fostering social cohesion, but also in generating new sources of jobs and a sustainable economy.

Capacity Development

Capacity building is essential in order to ensure long term sustainable progress. However, by itself it is not enough. Capacity building actions must lead on to a point where local people come together to themselves address the creation of job slots in the normal economy, to ensure better access to existing mainstream jobs, to improve the environment, and quality of life.

Capacities need to be put in place not just for marginalised people and places but also for other players and stakeholders, who need to develop their ability to engage in open and equal partnership. The detailed analysis undertaken by the Concordia project has produced clear evidence that structured support and capability development is required for the regional administration, local government, the social partners and the private sector. Their collective capacity to support local enterprise and their confidence in its capability varies widely from place to place.

Information is the key resource which a modern social partner brings to the table - they have the links, the capacity and the contracts to add further understanding to what is really going on in society.

To this end the Concordia project has evolved a specific working method. This clearly defines and delivers the necessary elements to successfully achieve an open, permanent and informed dialogue and thus secure collaborative advantage for Northern Ireland.

The Collaborative Approach

The work of the Concordia project has led to significantly enhanced co-operation between the organisations participating across a range of issues. This has underlined how trust can be created as inter-organisational and inter-personal relationships develop and as a result of successful joint actions become evident. Mechanisms and processes are now required to build on this and to put in place similar open and trusting relationships with administrators.

Common language only arrives after common purpose but is an essential precondition to collaborative progress. Joint analysis and collaborative problem solving is an absolutely vital element in the task of seeking active and productive ways to increase the coherence between the multiplicity of initiatives and securing the most effective solutions possible.

Essentially social dialogue centres on promoting social inclusion and strengthening society, but to be successful a central issue is to redesign interfaces with public administration itself, so that it is consistent with these emerging roles.

We must install, in every sector, the capacity for open, permanent and informed dialogue to secure collaborative advantage. This is essential to raise to the required level an understanding of the needs for the actors who have different holds on power to bring new language and inclusive and informed perceptions to the table. The Concordia project is a clear illustration of the authority in agreed opinion - the acknowledgement that no single actor can dominate if successful solutions are to be attained. The question is how to move from the tendency towards confrontational situations to those based more on consensus and the search to develop new collective ways to solve the problems of society

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ANNEX 21

NORTHERN IRELAND HOTELS FEDERATION

Written Evidence prepared by the Northern Ireland Hotels Federation to support their presentation to the Enterprise, Trade and Investment Committee on 6 September 2000.

1. We welcome the opportunity to meet the Enterprise, Trade and Investment Committee, and look forward to building the relationships and understanding that assist the development of the local hospitality sector.

2. While tourism was one of the eleven sector working groups set up by Growth Challenge to prepare Strategy 2010, the conclusions did not adequately bring out the opportunities or challenges facing the Industry and what needs to be put in place to achieve success.

3. In summary, the Federation has been disappointed with the impact and follow up to the publication of the 2010 document.

4. Largely for this reason, the NIHF has invited PricewaterhouseCoopers to undertake a major piece of research and review to assist Government and the industry to jointly take advantage of the tourism opportunities created by the new political climate. The Minister will launch the report at Hospitality Exchange on 18 October 2000.

5. We are confident that the PWC report will help to remedy the position. The Federation looks forward to working in partnership with Government and their Agencies to learn from and implement the report's recommendations.

6. To assist the Committee Members we enclose an updated version of the paper prepared for our previously scheduled meeting. This will provide you with:

a. an introduction to the Federation

b. the opportunities and challenges facing the industry

c. areas in which Government and its Agencies could support a sector, which can contribute so much to permanent economic growth within the province.

7. Finally, to add to our earlier observations on Strategy 2010 and to re-emphasise the opportunities ahead, we enclose a copy of the speech our President gave in May to the North Eastern Branch of the Federation. The speech also links into the PWC study and explains why it was commissioned.

REALISING THE OPPORTUNITY

1. Introduction

The Northern Ireland Hotels Federation (NIHF) was formed in January 1999 after extensive consultation within the hospitality and tourism industry. It is based on the foundations and principles of an organisation going back to 1922, its primary aim being to represent the business interests of its members. Funded through subscriptions from accommodation providers and trade suppliers, it does not receive any direct Government funding, although specific projects have been funded through the Training & Employment Agency.

Membership currently consists of 104 hotels and guesthouses and 50 trade suppliers. The Federation represents approximately 80% of the hotel business in Northern Ireland. An Associate Member of the British Hospitality Association, it works very closely with the Irish Hotels Federation in Dublin. The Irish Hotels Federation, in partnership with NIHF, produces Ireland's most used marketing guide, Be Our Guest.

The Federation is a limited company managed by an elected Board of Directors. The Board for 2000 is as follows:

  • Howard Hastings, President (Managing Director, Hastings Hotels Group)
  • Margaret Nagle, Hon Secretary (General Manager, Jurys Belfast Inn)
  • Sean Small, Past-President (Managing Director, Burrendale Hotel)
  • Rodney Watson (Managing Director, Killyhevlin Hotel)
  • John Mooney (Group Business Development Director, Mooney Hotel Group)
  • Matthew Mullan (General Manager, Hilton Templepatrick)
  • Charles Kelly (Owner, Keef Halla Country House)

The Federation recently appointed Colin Shillington as Director General to formulate new policies and drive membership benefits. It organises marketing and training events for the industry and works closely with the Northern Ireland Tourist Board and many of the other representative bodies in the sector.

The challenges facing the industry and the economic opportunities are detailed in this document.

2. The Opportunity

    • Current contribution to GDP: c2%
      Republic of Ireland 7%
      Scotland 5%
      Wales 7.5%
    • Significant Growth Potential Exists
    • Present Employment
      Northern Ireland (narrow definition) 12,500
      Republic of Ireland 119,300
    • Potential to create 20,000 additional jobs across Northern Ireland by a tourism led economy with increased contribution to GDP.
  • Provide support to local agriculture and the food sector in Northern Ireland resulting in additional employment and contribution to GDP.
  • A vibrant tourism industry can also make a significant contribution to the image of a region and improve morale and self pride for its population.

"Tourism is one of Britain's fastest growing industries. It is creating new jobs, generating money to conserve our historic sites and gardens, and breathing new life into the high streets. It is important to economic success."

Janet Anderson MP
Dept for Culture, Media & Sport

3. Realising the Opportunity

If we are to realise the opportunity there are certain steps that government can take to facilitate the industry.

3.1 Government Support

  • Need to attract visitors from overseas markets. We must improve access to be competitive.
  • support existing air, sea routes
  • attract new carriers on scheduled routes
  • financial incentives/marketing support
  • address key road networks
  • Historic low profitability has impacted on the ability of business to expand.
  • Incentives needed to attract new entrants and encourage existing businesses to expand. Some fiscal measures can help:

"There are no factories churning out the wares of the world's largest industry nor piles of stock by which to identify it. Yet travel and tourism has not only developed rapidly over the past decades to stake a claim to being the world's biggest industry, it is along with telecommunications and information , one of the world's fastest growing too."

Schehezarade Daneshku
Financial Times

Rates relief

Tourism businesses do not receive relief from rates the way that manufacturing businesses do. This relief has been a major incentive to manufacturing in Northern Ireland and should be extended to registered Accommodation providers. This will also discourage "pirate" operators.

After cost of food, drink and payroll, rates can be the largest single cost for a hotel. By introducing similar rates relief a balanced and non-discriminatory method of assistance can be spread across the Accommodation sector.

VAT - Hotels

UK VAT Rate 17.5%
ROI Rate 12.5%
Isle of Man Rate 5.0%

There is an obvious competitive disadvantage. Need for a reduction in rates to be competitive and stimulate business.

Capital Allowances

Targeted tax incentives can be used to stimulate growth.

Northern Ireland is already at a disadvantage to competitors in ROI due to accelerated capital allowances. The concessions in the Chancellors package focus on plant and machinery allowances. The majority of costs in a hotel/guesthouse development are buildings that do not receive this benefit.

"Every business knows the true value of regular customers and recommendation by word of mouth. That means providing them with the quality and standards of service that will make them want to return."

Janet Anderson MP
Dept for Culture, Media & Sport

Human Resources

One of the major impediments to growth in the industry is the availability of trained staff.

Incentives are needed to ensure adequate entry level training and continuing employee development through to senior management level.

Need for dedicated tourism trainer to address fragmented nature of provision.

Review of college based training to get balance between industry needs and employment opportunities.

Increased funding for tourism training required.

Development of an industry code of practice is essential.

Support Structure

It is vital that the importance of tourism to the economy must be recognised and appropriate support structure put in place.

  • Need for total ministerial commitment
  • NITB still have key role to ensure NI Tourism is not disadvantaged in an all-Ireland context.
  • Regional Tourism Organisations need to be supported.

3.2 Marketing

  • It is vital that the Northern Ireland tourism industry takes a market led approach.

"Tourism is an industry for the future. It is an opportunity for work, it is an opportunity for all of us to lift the quality of what we receive and what we enjoy."

David Blunkett MP
Secretary for Education & Employment

  • The industry supports the establishment of the cross-border marketing company. However this needs to be adequately funded and must have substantial input from the private sector.
  • This must also be supported by a cross-border business development company involving the private sector representative bodies. This should be actively encouraged.
  • The fastest growing medium for marketing is the internet. Northern Ireland is lagging behind the rest of the UK and Ireland and the hospitality sector lagging behind the Northern Ireland average. Urgent Government assistance is required.

3.3 Accommodation Infrastructure

  • There is an urgent need to give a short-term support to many of the smaller accommodation providers. In many cases low profitability has seen a deterioration of building standards due to low investment. We would recommend a short-term stimulus to "repairs and renewals" in the form of a package of assistance.

3.4 Communication

    • There is concern that effective communication does not always exist between Government and the Hotels Federation. There is a need for a forum to discuss issues of critical strategic concern including:
      • Profile of Tourism
      • Economic Benefits of Tourism
      • EU Structural Funds
      • Pro-active Planning
  • To assist tourism, the NITB need to communicate the difficulties faced by the industry. We await the strategy to be produced by the Tourist Board, in consultation with the industry, addressing the competition problems with more developed markets.
  • Northern Ireland Assembly members need to presented with a co-ordinated message in order to raise the profile of tourism. A joint forum could achieve this.
  • Representation is the surest form of communication. Government should accept the Hotels Federation as a strategic partner and demonstrate this partnership by including Federation representation at NITB Board level.

"One of the great things that the tourist industry has done over the last year is to employ many of the young people who have taken on New Deal. This tourism strategy points the way to the future and this indeed is an industry of the future."

Gordon Brown MP
Chancellor of the Exchequer

4. Summary

Tourism not only will benefit from the new environment in Northern Ireland but has a significant part to play in it by:

    • Creating jobs quickly and in areas of most need across the community.
    • Improving morale and image.
    • Increasing wealth.
    • Generating receipts for government through direct and indirect taxation.

However tourism needs to be nurtured and supported over the next crucial few years and Government can play a key role in this.

Prepared by

Northern Ireland Hotels Federation
With the assistance of BDO Stoy Hayward; and contribution from the Irish Hotels Federation.

NORTH EAST SPEECH

Speech given by Howard Hastings to the North East Branch of the Northern Ireland Hotels Federation on Wednesday 11 May 2000.

Ladies and gentlemen

Tourism is an industry that relies for its success on a positive image. And the images conjured up by the term "Northern Ireland" are not, at present, at all positive.

Up until 1968, the year before the hostilities broke out in earnest, visitor growth in Northern Ireland was roughly parallel to other regions in the British Isles, including the Republic. In 1968 there were a million tourist trips to Northern Ireland. By 1972, that had fallen to 430,000 - a decrease of 60 per cent at a time when the world market was growing dramatically.

It took us until 1991 to claw our way back to where we had been in 1968 - a million visitors. The troubles had, in effect cost Northern Ireland almost 25 years of investment and growth.

If tourism in Northern Ireland had grown at the same rate as the Republic, there would have been nearly three million visitors a year by the early 1990's. If tourism in Northern Ireland had grown at the same rate as the rest of the UK, we would now be enjoying over 5 million visitors a year.

The impact of Northern Ireland's image on tourism has been catastrophic. The response to the 1994 ceasefire bears that out. In 1995, the immediate aftermath of the cease-fire, the number of tourists jumped 20 per cent. That was five times the European and world average growth for that year and twice the rate of growth experienced in the Republic.

Just by the way of comparison, over the same post-ceasefire period, the number of first-time inward investment visits recorded by the Industrial Development Board leapt by 84 per cent.

Despite the return to violence at Canary Wharf in February 1996, that brief period demonstrated that if Northern Ireland was back on a level playing field, it was one of the EUs most attractive destinations for visitors and investors. So, Northern Ireland's image need not be permanently scarred with the negative connotations of the long years of the troubles.

Despite the collapse of the cease fires, that brief period of confidence stimulated investment and has opened the way for a new brand of visitor. In the month of April, Belfast generated about £7 million worth of conference and convention income.

Last month's World Irish Dancing Championships at the Waterfront Hall attracted 13,000 people. The week before the May Bank Holiday an additional 6,000 people attended conferences and events in the city and a significant proportion of them travelled here to visit the attractions of the Antrim coast.

In this room members of the North East Branch of the Hotel Federation know all too well of the increasing popularity of the Black Bush Golf Tournament, the Milk Cup and the North West 200 motorcycle extravaganza.

But why the history lesson? Why revisit the past and count up the visitors we never had and the investment we never won? The answer is, because it tells us why peace is so important to this industry. It also tells us why this industry is so important to the economy and how we can make a greater impact on short-term growth than any other sector.

Now, more than ever before, we need to repeat that message. And it is time for all branches of Government to hear that message. The current political situation suggests that, come May 22, the Assembly and the Executive, may be back at work.

The most recent statements emanating from the British and Irish governments and from the local politicians, suggest that there is a deal to be done and that the deal may deliver an end to violence and the beginning of a constitutional peace process.

If that is the case, the experience of 1995, in terms of tourism growth and inward investment enquiries, tells us that we can and will be back on the world stage on a level playing field. But the experience of 1995 also tells us that we may be ill prepared for what that level playing field can bring. Visitor numbers over the last year increased by some 10 per cent to 1,641,000 encouraged by the apparently lessening political and security tension.

A real, transparent and permanent cessation of violence, combined with a lessening of tension during the traditional marching season could mean these visitor numbers exceeding the 20 per cent growth experienced in 1995. That would be even more likely if the recent levels of conference business continue to grow, supplemented by additional space at the Odyssey Stadium in Belfast.

You will recall that when Bord Failte was preparing its Tourism Brand Ireland campaign in the early 1990s, the organisation commissioned market research throughout its world target markets. That research identified the Giant's Causeway as the single most recognised attraction on the island of Ireland.

If we take the Giant's Causeway, together with Dunluce Castle, with Whitepark Bay and with Carrick-a-Rede, this part of Ireland holds out the promise as potentially the most exciting destination in Ireland. If we add the Sperrins and Mid Ulster, the Mournes, the Ards Peninsula, Fermanagh and the Lakelands, North Down, the Ulster Way, almost 100 golf clubs and access through modern, efficient airports and ports in Belfast, Londonderry and Larne and a land frontier from Donegal, Leitrim and Sligo, we have a formidable visitor offering. But if the politicians can deliver a new political accommodation, and a lasting peace, this industry may be wholly unprepared to cope with the growth in visitor numbers.

Based on the actual experience of 1995 and the growth over the last 12 months, visitor numbers could reach 3.4 million in five years. In addition, there will be an associated shift in demand away from the visiting friends and relations sector and towards genuine - and more lucrative, holiday and business visitors.

Not only are we in the industry unprepared, so is the NITB. As far back as 1997, the Northern Ireland Economic Council, in its report: 'Rising to the Challenge: the Future of Tourism in Northern Ireland,' identified the new role NITB would have to develop in the event of a cessation of violence.

The Economic Council concluded that, in a post-settlement Northern Ireland, marketing would become the key function of the Board. It recognised the potential conflict between the marketing role and that of a provider of finance and an enforcer of standards.

It also emphasised the importance of developing an all-Ireland approach to marketing, with NITB and Bord Failte each having members on each other's Board.

But if we are to experience some of this resurgence of visitor numbers as in 1995, - and I firmly believe that we will - where, you might ask, is the blueprint for the future of Northern Ireland's tourism? Where is the plan for 3 million visitors? The answer is - nowhere.

Currently, Strategy 2010 represents the overall strategic plan for the economic regeneration of Northern Ireland over the next decade. Any analysis of that document will identify the role of the new knowledge-based industries in delivering long-term prosperity and job creation through sectors such as software, telecommunications, health sciences and business services.

Strategy 2010 is a viable, long-term, strategic vision for the manufacturing and services sector - but its contribution to tourism is marginal. It takes no account of the problems of overcrowding which have afflicted the Republic; of the seasonality of accommodation in traditional tourism; of the opportunities afforded by business tourism, of conference provision and of marketing Ireland as a single destination.

Strategy 2010 offers five recommendations for the hospitality sector and concludes that - and Iquote - "a greater number of Departmental Ministers will enable the Minister responsible for economic development to give greater profile to tourism promotion." In my book, as I have said before, that does not count as strategy.

When we first met as a Federation, last November, I said that our vision must begin with politics. It must assume an Assembly, an Executive and fully operational Strands One, Two and Three, as outlined in the Belfast Agreement. And above all, it must assume an end to violence and a permanent peace. If that is our starting point then Strategy 2010 offers us nothing, for it does not share our vision. Now we are about to create that vision.

The Federation, in partnership with PricewaterhouseCoopers, is about to embark on a major examination of the industry and its place in a new society and a new millennium. We will take ownership of making the private sector case concerning the way forward for this industry.

In the near future, you will all receive a detailed questionnaire to help us benchmark the sector. Iurge you to complete it and return it without delay. The more members that participate in the survey, the more accurate it will be. This will be no benign review of the status quo. It will be a radical evaluation of the needs of an industry in a post-settlement Northern Ireland. It will identify our shortcomings, highlight our strengths and define the opportunities for growth and dramatic expansion.

This initiative will rise to the challenge of creating an agenda for new tourism. It will give the analysis that supports our offering to the Assembly as a blueprint for growth and expansion in the twenty-first century. If we are to plan for this new post-settlement Ireland, we, the private sector and Government alike, must have the confidence to invest. The tragic loss of the Causeway Visitor Centre is a real blow.

But if we are to be serious in our planning for growth, we must not rebuild for the current number of visitors. We must take a political settlement view and a 10-year growth view and rebuild for an eightfold expansion in visitor numbers.

We should commission the most imaginative architects and deliver a visitor experience that truly compliments the stature of a unique world heritage attraction. We must deliver on the expectations of new visitors, new opportunities and new growth. Extrapolating on the status quo is not acceptable as a vision.

The Economic Council suggested that the holiday tourists as a percentage of all visitors could increase up to a fourfold in the short-term and that tourism could create jobs one-and-a-half times faster than the economy as a whole.

But if we are to look at strategic issues facing the industry in a scenario of rapid economic growth, we must also examine the potential burden facing local authorities.

Why should Moyle, the smallest district council in Northern Ireland, be expected to manage the most popular tourism centre on the island?

In a regime of reducing public expenditure, should strategic investment in tourism be linked to the ability of local authorities to fund attractions from the rates? I submit that it should not. If we take our model the Irish National Development Plan. It was conceived by government, in partnership with the private and voluntary sectors. Over the next seven years it will commit £51 billion on infrastructure, business competitiveness, training and social inclusion.

Of that total, £8 billion will be invested in roads, primarily intended to link the major jumping-off points for tourism, including Dublin, Galway and Cork and Limerick, while £650 million will copper-fasten the future of a high-speed intercity rail link. The Irish proposals for infrastructure are integrated with the proposals for rural development. These reflect the needs of regional tourism, which, in turn, reflect issues of training, skills development and marketing.

It is joined-up planning such as this that delivers joined-up economic development. Where the State recognises the value and contribution of the major tourism centres to economic growth, then it is the State - not the county, which must take the lead in planning, investment and marketing.

One of the rationales of having a 10-department Executive in Northern Ireland was - and we were constantly told this by members of the Executive, that it would encourage joined-up government. If our politicians can deliver a settlement based on the discussions of the last few days, we will see joined-up government again in less than a fortnight.

We in this industry must have the confidence to create the vision and the faith to trust the locally elected and locally accountable politicians to deliver the policies that will enable us - you and I - to create the reality.

This is not the time for faint hearts or for introspection. As William Butler Yeats said, "In dreams begin responsibility." If our vision is to be realised, it is our responsibility to define it in a way that makes sense to us, to our bankers, our partners and to the Assembly.

So, have faith in your industry - go back to your hotels, your guesthouses and your visitor attractions and prepare to be a part of the new tourism.

Thank you.

STRATEGY 2010

EXTRACTS CONCERNING TOURISM

2.9 The Northern Ireland Growth Challenge (NIGC) has been working through sectoral teams on improving Northern Ireland's industrial performance over a number of years. The Steering Group asked NIGC to build on this work and 11 industry Sector Working Groups were set up to look at the following sectors: Agri-Food, Construction, Electronics, Engineering, Food Processing, Health Technologies, Software, Telecommunications, Textiles and Apparel, tourism and Tradable Services. The Groups examined the prospects for these sectors seeking to identify their strengths and weaknesses and the barriers to their accelerated development. The members of the groups, which met at least six times, were chosen for their knowledge and experience of their sector and were drawn from industry, academia, employee organisations and Government Departments. They drew on the experience and views of many others in developing their reports and in some cases commissioned new research.

The Northern Ireland economy is made up of a number of service and manufacturing sectors which, while all are important for different reasons, are of varying significance to the future economic development of the region. A number of these sectors have a marked potential for growth: these are electronics, telecommunications, software, health technologies, tourism and tradable services. Others have less favourable prospects in the global marketplace. This latter category includes textiles and apparel, agri-food, food processing, engineering and construction. These sectors face a different and more difficult challenge in securing their future prosperity. In an increasingly competitive market, that will include identifying and exploiting specialist market opportunities and developing higher value-added products.

6.15 tourism research indicates an overall picture of slow but steady growth in the industry during the late 1980s and early 1990s, culminating in a peak of activity in 1995 following the 1994 ceasefires. Average annual growth in the sector between 1968 and 1995 was 1%. The Working Group report indicates that tourism contributes around 1.8% of GDP in Northern Ireland. This compares to 7% in the RoI, 5% in Scotland and 7.5% in Wales and highlights the significant growth potential in the tourism sector here (Figure 6.3). The sector currently employs around 12,500 people.

Figure 6.3

CONTRIBUTION OF TOURISM TO GDP

6.16 It is generally accepted that, given a peaceful environment, tourism has the potential to make an immediate and significant impact on the local economy. However tourism depends very much on good image for its success. It has the capacity to generate wealth and employment quickly and to a substantial degree in areas of most need. For example, the Northern Ireland Tourist Board estimates that if the contribution of tourism to GDP were to increase to 5% from its current level, an estimated 20,000 new jobs could be sustained.

6.17 A stable political environment is vital to the success of the tourism industry in Northern Ireland. However even with a stable environment there are issues to be addressed if the industry in Northern Ireland is to compete effectively over the long term within an intensely competitive market. These include a perception of high travel costs and difficulties of access in Northern Ireland; the challenge of developing a sustainable tourism product in balance with environmental concerns; the perception of the industry as a low pay sector with poor conditions of employment; effective marketing of Northern Ireland and its sub-regions; and overcoming problems of "seasonality" of demand.

7.17 Northern Ireland's low population density combined with its outstanding scenic features help to create a strong "green" image. As already mentioned this can be a significant advantage in attracting inward investors and their management teams. It can also be a useful factor in marketing food products. However by far the greatest opportunity lies in the tourism and hospitality business.

7.18 Tourism is the world's largest industry. It is estimated by the World Trade Organisation that the value of tourism world-wide will double by the year 2005. The industry represents a tremendous opportunity for Northern Ireland. At present, tourism represents less than 2% of GDP. Tourism could have the potential to contribute to GDP on a similar scale to the industry in the Republic where it represents about 7%.

7.2 A lasting political settlement will represent a significant opportunity in both the social and economic context. It will strengthen our ability to attract international investment and provide the right environment for our indigenous firms to realise their full growth potential. The potential for the tourism sector is particularly significant in terms of increased employment in the sector itself and significant spin-off employment in the retail, leisure and entertainment fields. We will need every sector to maximise the economic benefits of peace.

9.6.5 A clearer focus is needed for the Further Education (FE) sector. The FE sector should have vocational training designated as its primary activity with funding tailored to encourage this shift, perhaps by means of a premium. It should also have funding linked to challenging targets on raising the key skills which employers seek, such as effective communication, IT skills, working within a team, self discipline, responsibility and leadership. In addition FE needs to develop training programmes which prepare the unemployed for work and to respond to specific needs such as training for call centre work or tourism or hospitality. We regard the linkage of FE and training in the new Department of Higher and Further Education. Training and Employment (DHFETE) as very positive and an important step towards the objectives just outlined.

THE RURAL ECONOMY

Recommendations

1. Deregulation of the bed and breakfast sector of the tourism industry should be considered.

2. New, technology-driven businesses should be promoted in rural areas.

3. A technology training programme targeted at those working in the rural community should be devised.

9.21 The rural economy has both an economic and a social importance in Northern Ireland. It has, however, been in decline over recent years, and continues to face a number of challenges to its future prosperity. Action is needed to maintain farm incomes and help ensure the rural economy's longer term sustainability. This points to the need for diversification and for realising the potential in existing assets. Bed and breakfast accommodation provides one such opportunity, given the demand for rural/farm based holidays.

9.21.1 Some may, however, be deterred from exploring this opportunity by the need to comply with the regulations which the Northern Ireland Tourist Board currently applies. It is however recognised that regulation also brings significant benefits, not least in terms of quality of provision.

Nonetheless the Steering Group recommends that deregulation of the bed and breakfast sector of the tourism industry should be considered, with standards of accommodation being maintained through a market-based approach. This could facilitate the rapid development of new accommodationnot only in rural areas but also in potential new markets like west Belfast.

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ANNEX 22

THE QUEEN'S UNIVERSITY OF BELFAST

The Queen's University of Belfast welcomes this opportunity to present evidence to the inquiry into the Strategy 2010 Report by the Enterprise, Trade and Investment Committee of the Northern Ireland Assembly.

1. Executive Summary

The University supports the Strategy 2010 Report and the vision for economic development contained in the recommendations. Queen's was, of course, able to make an early contribution to the formulation of Strategy 2010 through the eleven members of staff who served on the Sectoral and Cross-Sectoral Working Groups, two as Group Chairmen.

It is pleasing that progress has been made in the implementation of so many of the recommendations. However, much remains to be done and the University pledges its continued support and commitment in taking forwarding implementation. It is hoped that processes will be put in place at an early stage for monitoring and review, as the Strategy will need to evolve and adjust in a dynamic manner to external global change.

Strategy 2010 is correct in stressing the importance of the information age. All our businesses will need to embrace and use the tools of the knowledge based economy. We are fortunate also in having industry strength in the electronics, telecommunications and information technology sectors. Hopefully these sectors will grow and prosper through the successful development of the new ICT tools that will be required in a global knowledge based economy.

It is regrettable however that, in considering areas for future economic development, Strategy 2010 appears to have a somewhat narrow focus on ICT, and the immediate future. The University believes also that it is important for a watching brief to be kept on emerging technologies that have economic potential, and for appropriate R&D skill bases to be developed in their use and application. In particular, examination should be made of the opportunities for development of bio-technology and life science based industries, in new materials technology, and in developing a cluster around the creative industries including multi-media.

It is important that R&D is benchmarked against National Foresight strategies and EU Framework policy. Also, the Strategy 2010 recommendations need to be re-examined against more recent plans for the EU Structural Funds (2000-2006) for Northern Ireland.

The University has been disappointed by the lack of success of submissions to the UK Joint Infrastructure Fund (JIF) for new strategic 'centres of research excellence' in the sciences and engineering. However, it welcomes and is encouraged by the recent announcement by DHFETE of a £40m Support Programme for University Research (SPUR). This will of considerable help in maintaining the research base in the universities.

2. The Queen's University of Belfast

The Queen's Colleges were established in Belfast, Cork and Galway in 1845. The college in Belfast received full university status in 1908 when it became The Queen's University of Belfast. It has been a major contributor to the educational, economic, social and cultural life of Northern Ireland for the past 150 years. Today, its teaching, research and outreach activities are undertaken in five Faculties covering Engineering, the Humanities, Legal, Social & Educational Sciences, Medicine & Health Sciences, and Science & Agriculture.

The University is a large organisation employing over 3,300 people of which 1,100 are academic staff. If the 16,400 students are included, the population of Queen's exceeds that of most towns in Northern Ireland. In 1998-99, undergraduate student enrolment was 12,726 and there were a further 3,686 students undertaking research and other post-graduate studies. In that year a total of 4,183 degrees was awarded, 25% of which were higher degrees.

In 1998-99, the turnover of £135 million was made-up of 45% from Government grants, 19% from academic fees & support grants and 36% from research grants & contracts and investment income.

3. Its Mission

The University's purpose, as set out in its Mission statement, is:

"To provide the widest possible access to learning through international excellence in teaching and research in an environment of equality, tolerance and mutual respect, thereby enhancing educational, economic, social and cultural development in Northern Ireland and elsewhere."

This has been interpreted as providing "Access to Quality", where students are able to experience and benefit from the very best in educational, social, sporting and cultural provision, while business and the wider community benefit from the highest quality research and development and from the availability of highly skilled graduates. Building on this vision of "Access to Quality", the main strategic thrust in the period covered by this plan is to enhance academic quality, the wider Queen's experience and the University's contribution to the community.

4. End Goals

In developing its institutional strategy for the millennium, the University has identified four "end goals" which cover the four main areas of University activity: learning and teaching, research and development, the student experience and contribution to the community. These are:

Learning and Teaching: provide the widest possible access to national and international excellence in learning and teaching

Research and Development: provide national and international excellence in research and development

Student Experience: enhance the "Queen's Experience" for students

Contribution to the Community enhance the University's contribution to the educational, economic, social, and cultural life of Northern Ireland.

5. Learning and Teaching

The University seeks to achieve its 'end goal' for teaching and learning by:

  • appointing and retaining staff of the highest quality;
  • providing the most up-to-date facilities and supporting infrastructure;
  • having an academic management structure and reward system which supports the delivery of the highest quality teaching and research; and
  • having a strong regulatory framework and robust quality assurance and enhancement procedures.

The learning and teaching strategy is intended to ensure that all subject areas achieve at least 22 (out of a maximum of 24) points under the current Teaching Quality Assessment (TQA) or subject review arrangements. The results of completed teaching assessments have been encouraging and the University is in the top quartile in the national league table for TQA results. The results for the subjects assessed so far are set in the Table below.

SUBJECT ASSESSMENT OF TEACHING QUALITY

24/24 points23/24 points22/24 points21/24 points20/24 & 19/24

Dentistry

Physics

Anatomy

Aero. Eng.

French (20)

Electrical Eng.

Civil Eng.

Chem. Eng.

German (19)

Psychology

Mathematics

Agriculture

Sociology (19)

Medicine

Bio. Sciences

Nursing

Food Science

Planning

Podiatry

Hispanic Studies

A new Institute of Lifelong Learning is being established to give renewed focus to Continuing Professional Development and Adult Learning and to facilitate their development and expansion.

The academic restructuring programme, begun n 1998 and involving the investment of some £25 million over five years, has led to the appointment of a 81 new research-active academic staff, with a further 45 appointments pending. While this programme is geared to enhancing the University's research profile and bringing it into line with the standards achieved in teaching, it reinforces the policy that good teaching should be research-led. The inter-relationship between teaching and research quality has been vividly underlined by the TQA subject review result of the maximum 24 points in Electrical and Electronic Engineering, which is a Grade 5 research area and targeted for 5* in the next RAE.

6. Research and Development

Every four or five years the quality of research is assessed across the UK university sector by panels of specialists for each subject or Unit of Assessment (UOA). The process is called the Research Assessment Exercise (RAE) and, for the last assessment in 1996 Queen's submitted 47 subjects. In this respect it made one of the largest submissions in the UK. There are seven grades of assessment from 1 to 5* with 5* being the highest rating given for research of the highest international standard. The 'average' level 3 is divided into two categories 3a and 3b. Grade 4 is considered to be research of national standard, and Grade 5 is research of international excellence.

The Government allocates its core funding of research in universities on the outcomes of the RAE. The amount of grant is based on two elements - the number of research staff submitted for assessment and the grading of their subject. One unit of grant is paid for each academic researcher in a UOA of Grade 3b and the amount increases by 50% per grade up to 4.05 units being paid for a researcher in a Grade 5* subject. No research funding is awarded for subjects in units rated Grade 1 or 2.

1996 RAE RATINGS COVERTED INTO FUNDING WEIGHTS

Research RatingFunding Weighting

1

2

3b

1

3a

1.5

4

2.25

5

3.375

5*

4.05

Every university aspires to achieve high grades, and at Queen's the grades have improved significantly since the RAE system was introduced in 1989. In 1989 and 1992 only eight units were assessed at Grade 4 or 5. In 1996 the number at national and international standard increased to 20 and the target for RAE2001 is 32 units at Grade 4,5 or 5*.

NATIONAL & INTERNATIONAL RESEARCH GRADES IN RAE 1996

GRADE 5GRADE 4

Mech & Aero Eng. (5*)

Computer Science

Electrical & Electronic Eng.

Civil Engineering

Physics

Food Science

Agriculture

Inst. of European Studies

Inst. of Irish Studies

Education

Archaeology

Sociology

Music

Politics

Economic History

Modern History

Anthropology

Celtic

French

Spanish

The University Research Committee of leading researchers across the five Faculties is chaired by the Pro-Vice-Chancellor for Research and Development. The Committee has responsibility for developing the overall research strategy in consultation with Deans and Heads of Schools, and for monitoring progress towards meeting targets.

Immediate targets for the University research relate to the 2001 Research Assessment Exercise where three key objectives are paramount.

(a) To pursue research of the highest quality across a wide range of disciplines.

(b) To increase the number of research active staff returned from 74% IN 1996 to over 90% in 2001.

(c) To effect a substantial improvement in research quality with 75% of all units graded at 4, 5 or 5* in the 2001 RAE compared with 37% in 1996.

Substantial additional investment is, however, required to accelerate the improvement in research performance so that the benefits associated with a research-led university are maximised. These include:

(a) Enhancement of the University's reputation as a university of national and international standing.

(b) Enhancement of the University's role as a university with significant regional dimension relating to, and contributing to, the local community in all its activities.

(c) Provision of access to international excellence in both teaching and research which will act as the engine for institutional and regional regeneration.

(d) Achievement of a substantial improvement in the University's position in the UK research league while providing a much enlarged and enhanced NI research base.

(e) Significant new investment in human capital and the recruitment and retention of "new blood" essential to developing and supporting the new knowledge-based industries of a successful modern economy.

(f) Enhancement of opportunities for both creativity and innovation including technology transfer and company start-ups.

7. Contribution to the Community

One element of the University's strategy is to enhance substantially its contribution to the educational, economic, cultural and social life of Northern Ireland and elsewhere. This will build on the University's current activities that have been developed over a number of years and contribute in a most diverse way to society. This goes beyond the narrow economic development agenda to mobilising people and resources in strengthening and supporting the social fabric and fostering a sense of community within Northern Ireland.

Dr Barry Martin, in his 1996 report on University/Industry Interactions in the UK, wrote "It is salutary to note that the university where this culture is most deeply embedded is the Queen's University of Belfast where for many years the local economy has suffered the most severe problems". Outreach activities have been part of the Queen's culture for more than 30 years.

There are overlapping areas within the end goals of "Research and Development" and "Contribution to the Community". The developmental aspect of the research and development goal plays a pivotal role in the University's contribution to the community, as it underpins its involvement in the area of technology transfer and the development of a knowledge-based economy. Key contributions to the community are set out below.

7.1 Graduates

The University educates the majority of those trained for the professions in Northern Ireland. It makes an immense contribution to the skills resource and economic capability of Northern Ireland through the training of graduates and postgraduates in both vocational and non-vocational subjects. Many of the skills fostered and developed in its students not only underpin and encourage self-development and personal fulfilment but are transferable and relevant to serving the needs of an adaptable, sustainable, knowledge-based economy at local, regional and national levels.

7.2 Staff

Staff are frequently involved in providing technical expertise to both the public and private sectors. This includes assisting the inward investment activities of the Industrial Development Board, contributing to policy formulation and providing members for a wide range of public, voluntary and charitable bodies.

7.3 Impact in the Economy

As a major employer, with over 3,000 staff, the University is of major importance to the local economy. Based on research on the regional impact of higher education by Professor Ian McNicholl of Strathclyde University, it is clear that funding used to support higher education activities within a region has a wide-ranging and positive effect on the regional economy irrespective of any higher education activity in itself. A very large fraction of higher education income is re-spent within the region on goods and services provided by other local industries and suppliers to the overall benefit of "Northern Ireland plc".

7.4 Regional Networking

The University makes a substantial contribution to regional networking through the Northern Ireland Growth Challenge, the Regional Foresight Initiative, the Teaching Company Scheme and its technology transfer company, QUBIS Ltd. Staff also play leading roles in the Northern Ireland Science Park Foundation and have been much involved in the formulation of Strategy 2010.

7.5 Technology Transfer

The developmental aspect of R&D plays a pivotal role in the University's contribution to the community, and underpins its involvement in technology transfer and the development of a knowledge-based economy. Such outreach activity has been embedded in the University culture for more than 50 years. A Materials Testing Station was opened in 1945, an Automation Centre in 1968, an Electronics Centre in 1977, a Technology Centre in 1987.

During the 1990s an infrastructure of research 'centres of excellence' have been established with support from the EU and IRTU to provide an effective interface with small and medium-sized enterprises (SMEs) and easy access to communal resources and services - QUESTOR and the Polymer Processing Research Centre are good exemplars. The Northern Ireland Technology Centre provides a valuable resource to the SME community for technical information, materials testing, instrument calibration and rapid prototyping of new products.

TCS, the Teaching Company Scheme has been proven to be an ideal vehicle for knowledge transfer to the SME community. Queen's is currently operating 33 TCS programmes with SMEs. More than 70 members of staff are employed in these self-financing centres that provide full-time services to industry - their turnover is in excess of £3m per annum.

Queen's, along with the University of Ulster, provides more than 34% of the research base in Northern Ireland (ref: NIEC Report 133 December 1999).

At Queen's collaborative pre-competitive research, sponsored by IRTU's START programme, is ongoing between Short Bros. and Aeronautical Engineering, Franklin Textiles and Mechanical Engineering, DuPont and Electrical Engineering, Clarehill Plastics and the Polymer Centre, McKehnie and the Polymer Centre, Courtaulds Lingerie and Mechanical Engineering and Moy Park and Chemical Engineering. There have been 30 collaborative START projects with a total value in excess of £15 million between local firms and Queen's during the past six years.

BCO Technology of West Belfast developed its bonded Silicon Wafer Technology in Electrical Engineering where for a number of years it ran the 'night shift' with access to the University's silicon fabrication laboratories from 7.00 pm to 7.00 am.

Activities are not solely technology driven and, through the Enterprise Project, there are many effective partnerships with employers who provide work based experience, placements and personal skills development aimed at preparing students for the world of work.

Queen's and the University of Ulster operate successful R&D research training consortia with Seagate Technology and Nortel Networks Ltd. The Science Shop project, also jointly developed and run with the University of Ulster, links students to the needs of voluntary and community groups. The Manufacturing Technology Partnership Ltd is another joint venture which seeks to encourage and facilitate small firms in using technology to develop and grow their business in an effective manner.

7.8 QUBIS Ltd

The University has a long established strategy of fostering an entrepreneurial culture and of promoting the successful transformation of good research into good business through innovation and commercial development. The University's technology transfer and business incubation company, QUBIS Ltd, was established in 1984. To date it has assisted the establishment of 25 spin-out companies. It has retained holdings in 20 of these. The QUBIS companies employ over 460 people, mostly graduates, and have a combined turnover in excess of £20m per annum. Over 95% of the work is exported.

8. New Initiatives

A number of exciting new initiatives will enhance entrepreneurial activities over the next few years.

8.1 Regional Office (for Economic Development)

The new Regional Office, being supported by the Reach-Out Fund HEROBC, emerged from employer feedback from both the Northern Ireland Growth Challenge and the Dearing Report which recommended improving interaction between higher education, business and the wider community. The Regional Office will promote and develop further University's role in the business, commercial, industrial and social life of the Province and will establish a readily identifiable contact point within the University for business, community and voluntary groups and the wider community. It will ensure that the University is complementing its programmes of national and international research with appropriate and relevant developmental, training and support services to meet local needs.

8.2 University Challenge Fund

Queen's and the University of Ulster have secured £2.75m from the University Challenge Fund. The Northern Ireland University Challenge Fund has been established to enable both universities to build on their current success of turning research into wealth-creating businesses and make them into a major driving force in the Northern Ireland economy.

8.3 The Northern Ireland Science Park

The package of economic incentives announced by the Chancellor of the Exchequer in 1998 contained a sum of £10m to support the creation of a Northern Ireland Science Park. The Park is to be based around a central location (in Belfast) with a number of linked developments in the North-West. The Park will contribute significantly to the local economy through the commercialisation of the research base in Northern Ireland. Key stakeholders are the two universities, and the public and private sectors. The University will bring to the Science Park its intellectual capital and research of truly international quality, based on the establishment of a Research Institute on the Belfast site. The Institute must be in an area where the University has an international reputation, a strong record of links with industry and technology transfer. An Institute for Electronics, Communications and Information Technology (ECIT) could be an appropriate initial development.

8.4 Riddel Hall

Riddel Hall, formerly a privately-owned Hall of Residence, is being considered for possible development as an incubation and business centre that would provide short-term leased accommodation to high-tech knowledge-based small companies. These would include QUBIS and non-University owned companies.

8.5 Technology Entrepreneurship and Innovation Programme

In continuing their desire to assist economic development, the two universities have been successful in securing support form the Peace & Reconciliation Fund for the Technology Entrepreneurship and Innovation Programme (TEI). TEI, sometimes called 'The Spin-in Project' aims to promote innovation and the formation of technology based companies by offering access to the expertise and resources of the both universities to scientific entrepreneurs from outside the academic sector.

8.6 NICENT - The Northern Ireland Centre for Entrepreneurship

The Northern Ireland Centre for Entrepreneurship (NICENT) is a further initiative by the universities to promote and develop an entrepreneurial culture not only in the research community but also amongst the student body. In responding to the DTI Science Enterprise Challenge, and with help from IRTU, the two Northern Ireland universities are now at an advanced stage in establishing a regional centre for entrepreneurship.

The key objectives for NICENT are to:

(a) embed an entrepreneurial culture in undergraduate and postgraduate students and the wider community;

(b) mentor best practice entrepreneurship and innovation in the creation of new businesses;

(c) maximise opportunities for interaction between entrepreneurs, students and business angels;

(d) manage all stages of the knowledge transfer process to support organic growth within the high technology sectors for spin-out and spin-in enterprises; and

(e) be a world-class exemplar for high technology enterprise development.

8.7 Chair of Innovation

To augment the work of the Entrepreneurship Centre, Queen's plans to establish a Chair of Innovation to focus on the international benchmarking of innovation of products and processes in business. The Chair of Innovation will be responsible for the dissemination of best practice to the business and industrial community in Northern Ireland. It will assist in the development an dissemination of a new culture within our young people, including graduates, which encourages innovation and promotes a spirit of entrepreneurship. The creation of a Centre of Excellence in the Management of Knowledge and Innovation will be central to taking this initiative forward with support from IRTU and industry.

8.8 The Bio-science and Technology Institute

The Bio-science and Technology Institute, a partnership between Queen's University, Belfast City Hospital, the Royal Hospitals, the National Cancer Institute and the University of Ulster, offers exciting opportunities to develop and further commercialise the bio-science and medical research being undertaken in the universities and the hospitals. The Institute will be located on the Queen's University - City Hospital site.

9. Response to Recommendations

The numbering in this section corresponds to that used in Chapter 9 of Strategy 2010.

Equality And Social Cohesion

The University welcomes and supports the comments in 9.1 and 9.2 of the Strategy 2010 Report concerning equality and social cohesion.

Locational Policy

9.3 The cities and towns identified in the DOE's "Shaping our Future" regional plan should be the main focus for the future location of industry.

The University supports this recommendation to focus development around the two cities and seven major towns of the region. Staff from the School of Environmental Planning at Queen's were actively involved in the research and writing of the 'Shaping our Future' report.

Social Partnership

9.4.1 An Economic Development Forum should be established.

The University welcomes the establishment of the Economic Development Forum. It is disappointed however that the Higher Education Sector has not been invited to participate in this social partnership. This would appear to be an oversight, in view of the significant contribution that the universities make to the R&D infrastructure of the Region. It is worthy of note that in England, Scotland and Wales the universities are an integral part of the Regional Development Agencies (RDAs). In a number a 'local' Vice-Chancellor is the RDA Chairman.

9.4.2 A high powered, high quality research body should be established.

The University generally welcomes the recommendation that a high quality research body should be established, and believes that it should evolve from the NI Economic Council which has carried out excellent work with very limited resources in the past.

Sustainable Development

9.5.1 Businesses should take every opportunity to minimise their environmental impact through measures which will also enhance their competitiveness.

The University endorses this recommendation and hopes that more businesses will take advantage of the assistance that its Environmental Research Centre, QUESTOR can provide in waste minimisation and environmental impact. The Polymer Processing and Product Design and Development Centres (NITC) can assist in the selection of materials and design features for disassembly and reprocessing.

Knowledge-Based Economy

The Steering Committee believes that the economic objective for skills and education should be:

"An education and training system that is fully contributing to the development of a strong, dynamic, participative economy."

The Report also states that 'While education is as much about personal development as it is about earning a living, nevertheless people, governments and employers have a right to expect education and training to be fit-for-purpose'.

The University is doing much to implement the key skills and employability skill implicit in the 'fit for purpose' expectation. However, care is being taken to ensure that there is appropriate balance and education provision that goes beyond a narrow economic agenda and attempts to cater for all the knowledge needs of society.

Skills and Education

9.6.1 The Dearing report should be speedily and comprehensively implemented.

The University endorses the recommendation about the speedily implementation of Dearing.

Student Places in HE

The University has responded to the request from the Minister for Higher Education and has submitted a detailed proposal on expanding student numbers. This proposal takes into consideration the sectors identified in Strategy 2010 as having the greatest potential for growth with expansion in Software, Electronics, Telecommunications, Tradable Services (including the Creative Industries) and Health Technologies the dominant areas. The bid for places increases each year and seeks support for 1,880 additional undergraduate students by 2004-2005.

NICATS - Credit Accumulation

Much progress has been made and the NICATS credit accumulation system in Northern Ireland is much more developed and operational than similar system in Great Britain.

9.6.2 Economic development strategy must inform education and training policy and its funding and delivery mechanisms.

The University endorses the recommendation that the skills needs for a future economy need to be closely aligned with education and training policy if the economic development strategy is to succeed.

9.6.3 Collaborative clusters of schools, businesses, and colleges should be established.

The University endorses this recommendation and is much involved in such initiatives through NIBEP, the Growth Challenge and other bodies. The widening access programme with seven secondary schools in TSN areas of Belfast is also involved in offering opportunities for widening participation.

9.6.4 A valued sub-degree level vocational educational programme should be established.

The University welcomes this recommendation and believes that much of the criticism about skills shortage stems from mission drift with respect to the provision of sub-degree vocational programmes at technician level. Appropriate developments at the Springvale Campus of the University of Ulster and Belfast Institute for Further & Higher Education could address the problem.

9.6.5 A clearer focus is needed for the Further Education sector

The University agrees with the recommendation, and believes that the strategy of DHFETE to link FE and Training Centre activities will assist in shifting the focus away from alternative 6th Form Colleges to truly Vocational Colleges. It should be noted that 14 members of University staff are Governors of FE Institutes.

The University is pleased to be given responsibility for managing the Regional Support Centre for the extension of the JANET computer network to all the FE Institutes. This will provide an important regional resource to all involved in Further and Higher Education.

9.6.6 The current system of careers guidance should be enhanced

Although this recommendation is targeted at schools, the University has a significant responsibility for the provision of careers advice to its students. The development of an enhanced work placements programme and the provision of a successful 'skills to Work' programme on employability skills by the University Careers Service is an enlightened move away from the more traditional approach.

9.6.7 Teacher training should include an industry placement module

Experience of current business and manufacturing practice is important of all teachers. A record of the increase in the number of university staff secondments or placements in industry is to be one of the national statistics recorded as a measure of the success of the Reach-Out to Business Fund (HEROBC). The University is currently developing a work shadowing/placements programme for staff in engineering.

Information Age

9.7.1 An Information Age Commission should be established

The University welcomes the formation of the Information Age Initiative as an interim measure prior to the formation of the Commission. The recently published 'leapfog' strategy paper is useful. Professor John McCanny is a member of the Information Age team.

Innovation

The University is encouraged by the recognition given in Strategy 2010 to the importance of the universities as the major centres of R&D infrastructure and technical resource to support innovation to the region.

9.8.1 There should be a campaign to promote innovation and good design

The University endorses this recommendation and is keen to assist the promotion of innovation in industry. The offer of support from IRTU to 50% fund the cost of establishing a Chair of Innovation at Queen's for the next five years is greatly welcomed. The Chair of Innovation will be a focus for research and benchmarking of best practice in innovation world-wide and then for the dissemination of that knowledge to local industry.

At the schools level, a programme is being developed to link schools with the Computer Integrated Manufacturing facilities at the Northern Ireland Technology Centre (NITC) through the Internet. This will permit the pupils to use virtual reality to programme robots and machine tools on computers in school and then to down-load the information over the Internet so that they can programme and operate the real machines at the NITC.

The University is encouraged to know that the Design Directorate of IRTU is initiating a 'Design Futures Task Force' to bring forward a strategy for Design Innovation in Northern Ireland. This will link closely with the advanced product design and development facilities available to SMEs at the NITC. Professor Eric Beatty has been Chairman of the Design Directorate since its formation in 1995.

9.8.2 Efforts to increase R&D in indigenous firms should be intensified

The University welcomes this recommendation and wishes to offer the facilities of its industrial research centres to assist the work and the development of new partnerships with the SMEs. The University has been involved in over 30 IRTU assisted collaborative START research projects with local firms during the past five years. The proposals to rebalance the DETI initiatives package to give further support to the encouragement of R&D and innovation is welcomed.

9.8.3 University/business links should be enhanced

There are considerable links already between the universities and business at individual company level, at sector level through the various industrial steering groups of the Industrial Research Centres, and at strategic levels through the Growth Challenge Board and Clusters and the Foresight Panels. Further enhancement of links and the organisation of an annual conference to report on university/business activities and discuss how collaboration can be improved are an integral part of the HEROBC activities in Northern Ireland. This conference will be a joint activity by QUB and UU.

The proposal that Government would consider the possibility of providing public funds to support (generic) research needed by SMEs is to be welcomed.

9.8.4 Businesses should look for opportunities to collaborate on R&D with local and overseas partners

The University welcomes this recommendation and is anxious to be involved further in collaborative UK LINK programmes or in CRAFT or full EU Framework projects with local firms. During 1999, QUESTOR, the Polymer Processing Research Centre and NITC have all been involved with local firms in EU and National R&D projects. The University is a good facilitator for such work and is keen to see further partnerships develop.

9.8.5 A separate stream of funding to encourage R&D in universities is needed

This recommendation under 9.8.5 covers the same issue as 9.8.8 regarding the DTI White Paper of 1998 and the extension of its recommendations to Northern Ireland. It is pleasing that this has happened and, working in partnership, the two universities have been successful in securing national funding from the University Challenge Fund and the Science Enterprise Challenge. Funding of £2m has been secured to set-up the £2.75m fund of UCF (NI) which will assist spin-out campus companies to be formed. An offer has been made to provide £900k from the Science Enterprise Challenge to assist the universities establish a Northern Ireland Centre for Entrepreneurship (NICENT). IRTU has generously offered a further £300k of support to this project. Through NIHEC/DHFETE both Queen's University and UU have been successful in separate bids for Reach-Out Funds (HEROBC) to improve the opportunities for collaboration with business and the community.

These initiatives and the recent announcement of the Special Programme for University Research (SPUR) go some way to redress the 30% reduction in public funding of research in the two universities since 1992.

9.8.6 Further funding should be allocated to the Teaching Company Scheme

The University operates the largest and most successful TCS programme in the UK and is pleased to see plans for further expansion in this recommendation. It follows from a similar recommendation in the 1998 DTI White Paper on Competitiveness, and is particularly relevant in Northern Ireland where there is a predominance of SMEs.

There are 33 TCS project ongoing between Queen's and local industry at this time. Projects with Wilsanco Plastics and Jordan Plastics were judged respectively as Best Overall TCS Project in the UK in 1999 and Best SME Project in the UK in 1998.

9.8.7 Consultation is needed about the coverage of future centres of Excellence

The University welcomes the recommendation to consider with industry and government on the sectoral and technological coverage required of any future centres. It is pleasing to see provision to support such activities in the recently published Structural Funds Plan for 2000-2006. The Strategy 2010 Report is narrow in its focus on ICT. The University believes that the Hi-tech economy will develop in other areas and considers that future attention will need to be given to strengthening research in the biological and life sciences as in the ROI and Europe, and in other areas such as the Creative Industries including Multimedia and Internet.

The recent announcement by DHFETE of a £40m Support Programme for Research (SPUR) in the two universities is most welcome.

9.8.8 There should be a Northern Ireland equivalent of the "Reach Out" fund

This recommendation has been implemented, and Queen's is to receive £1.1m over the next 3.5 years to improve its infrastructure for reach out to business. While this funding is small relative to the problem and opportunity to be addressed, a number of new developments have been initiated. A Regional Office to support economic development has been established. A Centre for Work Experience is being set-up to co-ordinate and monitor the placement of students and staff in industry. It involves pilot projects in engineering and law. There is also additional support to enhance the provision for Continuing Professional Development courses (CPD) and for the commercialisation of research. To ensure that progress is sustained this funding requires not only to be provided on a recurrent basis but to be significantly increased.

9.8.9 The support structures for spin-out companies should be enhanced

There has been considerable activity in this area since the Report was published and some co-ordination of activities could be useful. In addition to the University Challenge Fund which is exclusive to the universities, the IRTU is developing its Northern Ireland R&D Challenge Fund and LEDU has just announced its Enterprise Excellence Programme and Fast Forward Finance initiatives. There is also the new Equity Fund that IDB is promoting.

9.8.10 A programme to promote Northern Ireland as a region associated with quality design is needed

This last recommendation in this section has linkages to the first recommendation about design. The University endorses the recommendation and is pleased that the Design Futures Task Force will be reviewing the requirement and developing an implementation strategy.

It is pleasing that 35 Northern Ireland products were selected as UK Millennium Products in the recent competition.

Networking

9.9.1 The Northern Ireland Growth Challenge should further develop its sectoral approach to networking

The University supports this recommendation and will continue to encourage staff involvement in as many sectoral groups as appropriate. ProfessorEricBeattie represents the University on the Management Board and Supervisory Committee.

9.9.2 The business bodies should co-operate to increase networking.

The University supports this recommendation and would encourage the development of mechanisms to widen the business participation in such activities. There are many businesses where the CEO and staff are dedicated to the concept of Northern Ireland plc. It is regrettable that there are many others that are not so actively involved.

ENTERPRISE

Celebrating Success

9.10.1 The Government should set up a joint working group with the business bodies to consider ways and means of celebrating business success.

The University welcomes this recommendation that more should be done to celebrate the success of business and talented business people. The 'one-line' recommendation loses much of the sentiment contained in the text, particularly the public recognition of personal success and wealth creation.

Rebalancing the Incentives Package

9.11.1 The existing grant regime for inward investment should be maintained unless and until new measures become available.

9.11.2 Northern Ireland should have a special rate of Corporation Tax for new inward investments over a period of five years.

9.11.3 Selective Financial Assistance should be less readily available to existing firms.

9.11.4 The Assembly should discuss further options for tax incentives with the Chancellor.

Priorities for Financial Support

9.12.1 Financial assistance should be prioritised according to characteristics displayed by applicant companies.

9.12.2 A large share of resources should be devoted to "softer" forms of assistance.

The University supports the recommendations of these sections and would highlight, in particular, the favourable tax treatment for business in the ROI and the contribution this has made to the 'Celtic Tiger'.

In particular it welcomes the suggestion that future Government support should focus on the 'softer' forms of assistance and less on Selective Financial Assistance. That is, that greater priority be given to 'capability building' of our industry through support for investment in R&D, innovation, technology transfer, marketing and skills development, and less towards 'capacity building' through investment in plant and machinery.

Private Equity Finance

The University has been successful in establishing more than 25 hi-tech campus 'spin-out' businesses in recent years through QUBIS Ltd, its wholly owned technology transfer and incubator company. These firms employ more than 450 people and have a combined turnover in excess of £20m p.a. Former members of university staff have established other companies, such as Randox Laboratories, CEM Computers and BIC Systems. In 1999, the two local universities were successful in the national University Challenge Fund competition and secured £2m support from DTI to establish UCF (NI) Ltd., and a £2.75m fund to assist further commercialisation of their research output.

9.13.1 The establishment of a venture capital fund to provide up to £250k to small companies and high risk projects.

The University notes the recommendation that a further venture capital company be established, but is of the view that adequate VC funding is available. Examination should be made however of establishing a support mechanism to fund hi-tech projects and the individual entrepreneurs during the developmental phase of the work (i.e. progressing the research idea to a stage where it can be shown to be a feasible commercial proposition). This might involve releasing individuals from their substantive other duties to develop prototypes etc.

The Committee's attention is drawn to the research that the North-South Body for Trade & Development has commissioned into the need for more Venture Capital funding on the island.

9.13.2 The development of a Business Angels initiative as part of a broad policy of encouraging the wider use of external equity in Northern Ireland companies.

Business Angels have been helpful to the establishment of a number of the QUBIS companies and the University is pleased to endorse this recommendation.

The Planning System

9.15.1 No further out-of-town shopping developments for five years.

9.15.2 The Assembly should introduce a rates regime which helps to nurture small indigenous retail businesses.

The University has no comment to make on these recommendations.

OUTWARD LOOKING

Infrastructure Linkages with Other Regions

9.17.1 The Belfast-Dublin road route should be developed as a matter of priority.

9.17.2 A centralised plan should be established to develop and budget for Strategic Transport Routes on a UK-wide basis.

9.17.3 Future energy investment decisions should be made in the context of an island of Ireland energy market.

9.17.4 The machinery for the creation of an island energy market should be established as a matter of priority.

The University endorses these recommendations, and as a major energy consumer, looks forward to implementation of a strategy which will see energy prices come into line with those in the rest of the UK.

European Union

9.18.1 There should be a well-resourced, high profile Northern Ireland Office in Brussels.

9.18.2 There should be a Minister with special responsibility for Northern Ireland's interests in Europe.

The University is pleased to see this emphasis being put on the importance of Northern Ireland's profile within the European Union and the European Commission. The University supports strongly these recommendations.

A number of University staff are technical experts to the Commission, and there must be many more such persons throughout Northern Ireland. The University believes that more could be done to harness the knowledge that these people have of the 'thinking' in Brussels. It is recommended that the Minister with special responsibility for EU consider establishing a local forum or 'think-tank' where this EU knowledge can be shred and used for the greater good.

9.18.3 A further round of special EU funding, with a particular focus on economic regeneration is necessary to maximise the benefits of peace.

The University is pleased to see the plans for the Peace II Programme for Northern Ireland 2000-2004 are now published in the Structural Funds publication. It is encouraged to note that many of the proposals endorse the Strategy 2010 recommendations in areas such as centres of excellence, innovation, technology transfer, entrepreneurship, incubators and science parks and for skill training appropriate to the needs of a knowledge based economy.

Fostering Global Perspectives

9.19.1 Programmes such as the Business Education Initiative and Explorers which provide opportunities for studentsand business people to gain experience and knowledge overseas should be expanded, and new ones developed.

The University is pleased to support this recommendation for an expansion of these programmes that permit our young people to gain experience abroad. We are encouraged by the very positive feedback that we continue to receive from business on the performance of our graduates on the Explorers Programme. Indeed, we are disappointed that the University does not qualify to participate, as Explorers could greatly enhance our marketing programme for the recruitment of overseas students.

9.19.2 Tailored training courses in self-presentation should be developed and introduced in all schools and colleges.

The University fully supports this recommendation and is actively engaged in implementing it.

The recommendation links with the reference to implementation of the Dearing report in the skills section of the Knowledge Based Economy chapter. The Careers Advisory Service has been running a popular and successful course 'Skills to Succeed' to prepare students for work and give them the required employability skills. The Centre for Enterprise, Learning and Teaching (CELT) is actively pursuing a key skills development programme throughout the University. A Skills Co-ordinating Group has been established and a new Policy on Student Skills has recently been approved for implementation. The Skills Policy covers Key Skills, Subject Specific Skills and Employability Skills. The Training & Employment Agency has been very supportive of this work in the past and we are greatly encouraged by the recent support from DHFETE of nearly £700k from the Teaching Quality Enhancement Fund to assist the skills and related programmes.

9.19.3 Foreign language teaching should be extended throughout the education system and the choice of languages available should be widened.

The University welcomes this recommendation and the influence it is likely to have on our Languages Centre and Europe inter alia.

9.19.4 Twining arrangements with other regions should be developed.

Queen's has many international links with individual universities and university confederations. We are pleased to support this recommendation, and would wish to contribute to its implementation.

9.19.5 Northern Ireland should engage more actively in European, UK and, where appropriate, Republic of Ireland initiatives, in areas such as technology, competitiveness, IT and education and training.

Although aimed at businesses and agencies, the University would be pleased to support this recommendation and to offer assistance from our experience and involvement in UK, EU and international programmes of research and student exchange.

SELF HELP

Local Economic Development

9.20.1 The Assembly should address the future funding and evolution of local economic development as soon as possible.

9.20.2 A pilot project to explore methods of rationalising local economic development arrangements should be set up.

The University agrees with the sentiment of these recommendations and welcomes the suggestion that, in such a small region, there is a need to rationalise economic development activities for maximum advantage. This is particularly so for inward investment.

The Rural Economy

9.21.1 Deregulation of the bed and breakfast sector of the tourism industry should be considered.

No comment.

9.12.2 New, technology-driven business should be promoted in rural areas.

9.21.3 A technology training programme targeted at those working in the rural community should be devised.

The University welcomes these recommendations and will be an active partner in their implementation through the Regional Office and the Gibson Institute for development of Land, Food and Environment.

Energy Policy

9.22.1 An updated energy policy statement should be adopted.

9.22.2 Strategic investments may require a public/private partnership justifying public investment.

9.22.3 Targets should be set for use of Non-Fossil Fuels for electricity generation, for the achievement of energy efficiency and the use of Combined Heat and Power.

9.22.4 The recommendations of the Government's Utilities Regulation Review should be fully implemented.

9.22.5 The revision of the electricity generation contracts should be brought to a speedy conclusion.

9.22.6 The £40 million fund, held by DED, should be used to buy out generating capacity currently under contract to NIE.

The University has considered research interest in the energy sector for both fossil and alternative sources and looks forward to playing an integral part in taking forward the energy debate.

The Structure of the Public Sector

9.23.1 The public administration arrangements in Northern Ireland should be reviewed urgently.

DED Structures

9.24.1 The recommendations of the McKie report relating to a sectoral approach and to information sharing should be implemented as soon as practicable.

9.24.2 A new single economic development body should be created.

The University supports the views expressed in the Report. The model recently introduced in the Republic has merit for consideration, whereby Enterprise Ireland draws together all internal functions of economic development and the IDA has responsibility for Inward Investment.

The recent Economic Council Report No 133 on Publicly Funded R&D and Economic Development in Northern Ireland makes some interesting recommendations about structures and in particular a Council for Science and Technology. There would be merit in having such a forum involving business, the universities and the scientific branches of the Enterprise, Health and Agriculture Departments to discuss a regional S&T strategy. The University recommends that the Committee consider the recommendations of the Economic Council's Report alongside those of Strategy 2010.

The Public Expenditure (PE) Dimension of Economic Development

9.25.1 A Northern Ireland Development Fund should be established.

The University supports the concept of a Northern Ireland Development Fund to finance economic regeneration projects.

QUEEN'S UNIVERSITY STAFF INVOLVED IN STRATEGY 2010

CROSS SECTOR WORKING GROUPS

Culture

Professor George Bain (Chairman)

Innovation & Design

Professor John McCanny

Investment & Finance

Professor Michael Moore (Chairman)

SECTOR WORKING GROUPS

Professor Fred Gordon

Agri-Food

Professor John McCanny

Electronics

Professor Eric Beatty

Engineering

Professor Jack Pearce

Food Processing

Professor Patrick Johnston

Health Technologies

Professor Arthur Kingston

Software

Dr Jeremy Carmichael - CIB

CONSULTATION PANEL

Professor Danny Crookes

Queen's University

Professor Eric Beatty

Professor David Hitchens

For Further Information Contact:

Professor Eric Beatty
Regional Development Office
The Queen's University of Belfast
BELFAST
BT7 1NN
Telephone Number: (028) 9033 5432
Fax Number: (028) 9066 3715
E-Mail Address: e.beatty@qub.ac.uk

TOP

ANNEX 23

THE ASSOCIATION OF NORTHERN IRELAND COLLEGES

21 June 2000

The Association welcomes the Enquiry into Strategy 2010 and the opportunity to comment that it has given. We have chosen to restrict our responses to Section 9 - The Knowledge Based Economy, as this is the area on which FE can have the most impact. We believe that more in-depth consultation with the sector prior to publication would have been beneficial, but we would make the following observations:

1. We fully support the recommendation to implement the Dearing Report, particularly in 'lifting the cap' on full-time HND places in Further Education. This is long overdue and is a major issue for the sector.

2. We whole-heartedly support the recommendation that an Economic Development Strategy must inform education and training policy and its funding and delivery mechanisms. For too long colleges have been left to make provision in terms of courses and qualifications with inadequate market intelligence.

3. In this era of collaboration, partnership with schools, colleges and relevant businesses can only improve the richness of our curriculum, its provision and delivery. Partnerships can provide colleges with an essential steer in relation to their courses and qualifications and other services which they make available to local businesses and industry.

4. The recommendation that a sub degree vocational/educational programme be established needs to be carefully thought out. There should be a clear understanding of the effect of this on existing Higher and National provision and how the government's current proposals for Foundation Degrees would impact upon it.

5. For too long now, the Further Education Sector has worked without a clear focus and a strategic direction from government. The Sector's success in every aspect of its provision from basic education through vocational, academic and professional programmes to HE Courses and provision for businesses and industry, is a result of clear articulation by colleges of local needs.

6. Despite several attempts at review, over the years, statutory careers guidance still lacks cohesion and is largely ineffective. If this is to improve, Further Education Colleges will need to be seen as integral to any new arrangements brought about.

7. The proposal to include an Industry Placement Module in teacher training is welcomed. Colleges are currently heavily involved in their own "Lecturers into Industry" scheme and this is proving most beneficial for staff, colleges and employers. Starting this process at the teacher training stage can only enhance it.

Report on Strategy 2010 Inquiry Volume 4 (2024)

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