Select Committee on Northern Ireland Affairs Minutes of Evidence


Examination of Witnesses (Questions 140 - 143)

WEDNESDAY 16 FEBRUARY 2000

MR BRYAN JOHNSTON AND MR NIGEL SMYTH

  140. I am just wondering what dialogue, if any, you have with the providers of the flights on these issues?
  (Mr Smyth) Just on that, KLM have been running that flight for at least ten years, and very successfully, but it did not fit into KLM's strategy. Belfast International Airport has been very active in trying to get an alternative carrier for that, but unfortunately they have failed to do that. We indicated we would give as much support as possible to do that. We have at the moment just a daily service, which is a poorly timed service in the middle of the day, to Brussels which is not considered satisfactory.
  (Mr Johnston) In that particular area, one reason why KLM introduced the flight was they wanted Amsterdam to be seen as an alternative hub to Heathrow for international traffic. As it would appear they were not getting sufficient on the KLM international flights, it was no longer of interest to them.
  (Mr Smyth) They had over 100,000 a year using it and I understand it was a profitable route but not as profitable as an alternative route.

  141. The second point, by this stage we have exhausted the issue of tax incentives as a key to attracting inward investment but the points you made on this interest me very much because during the last Parliament I went to some length, to thrash through with the then government the advantage or otherwise of this tax, we did not get very far. I am wondering if you have extended your thoughts to dialogue with the present Government. Is this an issue that has been significantly discussed with Ministers?
  (Mr Smyth) This is on potential tax incentives for Northern Ireland? Earlier I referred to the major Economic Strategy Review that was undertaken over about twelve months, which was completed a year ago. There were two recommendations applicable to this, one was that there should be a lower rate of Corporation Tax for inward investors for five years. Secondly, as soon as the Assembly was set up they should set up a working party to look at this in more detail. We have had Treasury officials over and whatever chance we have we try to get across to them the impact that national tax issues have on Northern Ireland, particularly with this land border issue and the impact on the fuel duty. We would have hoped that we would have made more progress with the local assembly to address that and take something forward. We suggested it could be offset, let us reduce the public expenditure and cut back on the capital grants, etc. We are very much waiting for the Assembly to get up and running. Until that was up and running we did not really think we would have significant opportunities. We are working on Climate Change Levy fuel duties, we have made that known at a national level.

  142. The reaction we found four or five years ago was that Treasury was very hostile to differential tax rates throughout the United Kingdom and argued that if there was an argument for a reduction in Corporation Tax being beneficial, the same would apply to the rest of the United Kingdom. I wish you luck in pursuing that line and I shall be interested to hear what emerges over the course of time. The third point I wanted to raise, the last one, when during its five or six years this Committee has looked at job creation in Northern Ireland we have sometimes encountered the argument that jobs created by inward investment are or can, to a certain extent in some circumstances, displace existing jobs from indigenous companies or companies that have already come to the Province. Sometimes we have encountered the argument that the output from inward investment from the companies that have come is again displacing the output of indigenous companies. I have never really been convinced by these arguments but I am wondering if the CBI or yourselves individually have a view on this?
  (Mr Smyth) I think it is meant to be called displacement. Certainly there is evidence, I think we have quoted in paragraph 7, some work that the T&EA has done to create jobs in the TSN areas in Belfast, 25 per cent of staff are recruited from existing companies. As you go into the higher knowledge based, higher skilled based that percentage is likely to rise. We did say very early on that particularly some smaller companies have had problems where key staff have been poached—this is the nature of a competitive market place—that is where we would like to see capital grants trimmed down so there is an open and level playing field. Other companies have said it is quite good to have a turnover in companies—if they can bring on and train people it sets them up. There is a case, yes it does displace some but I think there is a lot of effort, again in the last three to four years, with the Training and Employment Agency and some of these new plants coming in of trying to target very specifically the long-term unemployed, etcetera and very specific training schemes, the Bridge to Work programme, etc. There is probably as much effort as possible going in to trying to recruit the long-term unemployed but whenever jobs come in some of those will come from existing employers. Provided you get a reasonable balance and you do not distort a local market place too significantly one has to accept that.

  Mr Hunter: Thank you very much.

Chairman

  143. With serendipity Mr Hunter has asked a question in the area Mr Pound was contemplating asking about, so we have the benefit of having finished five minutes within our time frame. Thank you very much, indeed, on behalf of the Committee. Your evidence was marvellously complementary to each other and each of you reinforced the other, for which we were grateful. Is there any question you were surprised we did not ask you?
  (Mr Johnston) I think we should reserve our position on that, lest you do.

  Chairman: That is a very skilful answer. Thank you most warmly.





 
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