Select Committee on Northern Ireland Affairs Fifth Report



FIFTH REPORT

The Northern Ireland Affairs Committee has agreed to the following Report:—

PUBLIC EXPENDITURE IN NORTHERN IRELAND: INWARD INVESTMENT

I. INTRODUCTION

1. Inward investment has an important part to play throughout the United Kingdom in terms of both overall economic development and in providing employment. It has recently been announced that 1999-2000 was a record year for attracting inward investment projects to the United Kingdom; 757 direct investment projects by foreign owned companies were reported in the year and it has been estimated that these projects could create nearly 53,000 new jobs.[2]

2. The importance of inward investment to the development of the Northern Ireland economy has long been recognised.[3] The table below shows the number of new inward investment projects in Northern Ireland in each of the last five years and the number of jobs promoted by those projects. It also shows the corresponding figures for subsequent developments by existing inward investors.[4] 10.5 per cent of Northern Ireland's GDP arises from inward investment, and externally owned businesses are responsible for three quarters of Northern Ireland's exports.[5]

New inward investment

1995/96

1996/97

1997/98

1998/99

1999/2000

Number of projects

10

11

12

21

13

Jobs promoted

1,379

1,579

1,422

2,657

2,548

Total investment (£m)

64

122

27

33

78

Expansions and competitiveness projects by existing inward investors

 



1995/96

1996/97

1997/98

1998/99

1999/2000

Number of projects

27

27

33

17

20

Jobs promoted

3,550

3,108

3,784

1,505

4,036

Total investment (£m)

373

373

503

116

288

3. The Industrial Development Board for Northern Ireland (IDB), which has been in existence for nearly two decades, is an executive arm of the Department of Enterprise, Trade and Investment,[6] with responsibility for assisting the profitable growth of Northern Ireland's manufacturing and tradeable services sectors through the development of existing companies and by securing new inward investment.[7] 60 per cent of the 86,000 employees in IDB's client companies are employed in externally owned companies.[8]

4. IDB provides financial support for new inward investment projects, and expansion and competitiveness[9] projects, by providing a proportion of the finance needed. The figures for the last five years' total assistance, the average percentage IDB contribution and the average cost per job are set out in the table below:

New inward investment


1995/96

1996/97

1997/98

1998/99

1999/2000

Total IDB assistance (£m)

24

41

11

16

26

IDB contribution (%)

38

33

41

48

33

IDB cost per job (£)

17,180

25,277

6,997

5,774

9,860

Expansions and competitiveness projects


1995/96

1996/97

1997/98

1998/99

1999/2000

Total IDB assistance (£m)

109

87

104

25

51

IDB contribution (%)

29

23

21

22

18

IDB cost per job (£)

23,619

13,118

15,830

7,139

9,687

5. In view of the importance of inward investment to the Northern Ireland economy and the significant sums of public money involved in attracting it, we decided in April 1999 to conduct an inquiry into the public expenditure aspects of inward investment in Northern Ireland. This is our third inquiry of the present Parliament into a specific aspect of public expenditure in Northern Ireland.[10]

6. Our inquiry has been a relatively lengthy one and we have taken oral evidence on ten occasions. In addition, a substantial amount of written evidence has been received. We are most grateful to all those who have assisted with the inquiry.[11]

7. In the course of our inquiry, the Committee of Public Accounts (PAC) also reported on IDB.[12] However, the focus of our two inquiries has been different: the PAC report followed a report[13] by the Comptroller and Auditor General for Northern Ireland which sought to assess the performance of IDB in relation to inward investment over the nine year period to March 1997. Our own inquiry has concentrated on the more general impact of inward investment, but we have also drawn, where appropriate, on evidence published by PAC.

8. Like the subjects of a number of our recent reports, inward investment is a transferred matter. Consequently, Ministerial responsibility transferred from Northern Ireland Office Ministers on the establishment of devolved government in the Province. It transferred back with the suspension of the devolved Administration and transferred once more on the ending of that suspension. We have therefore taken oral evidence from both the Rt Hon Adam Ingram JP, MP, the Northern Ireland Office Minister responsible for oversight of inward investment policy for the periods of Direct Rule during our inquiry, and from Sir Reg Empey MLA, the Northern Ireland Minister of Enterprise, Trade and Investment. We are particularly grateful to him for giving evidence very shortly after the resumption of devolved government in the Province; he has the distinction of being the first Northern Ireland Minister to give evidence to a Select Committee of this House.

9. Besides taking evidence, we have visited two successful overseas inward investors, both based in the Londonderry area. They are du Pont, and Seagate Technology. We are grateful to both of them for their hospitality. Although not specifically in the context of this inquiry, we have also visited Gallahers, who have increasingly concentrated their United Kingdom cigarette manufacturing operations at Lisnafillan, Ballymena. We were grateful for the opportunity to see this operation also.

10. On 6 July 2000, Sir Reg Empey announced[14] that he had decided to have work commenced on developing possible new models for his department's economic development agencies, including the IDB. A considerable number of suggestions have been made in the course of our evidence sessions and we therefore hope that this evidence, and our Report, will be useful to him in this context.


2  Official Report, 5 July 2000, Vol. 353, col. 208W. Back

3  For a short history of the contribution of inward investment to the Northern Ireland economy, see Appendix 21, p. 191. Back

4  Industrial Development Board End of Year Statement, 1999-2000, p. 9. A number of existing jobs were also safeguarded by this investment. Back

5  Q 1. Back

6  Prior to devolution, it was an executive arm of the then Department of Economic Development. Back

7  Ev. p. 1. Back

8  Ev. p. 2. Back

9  'Competitiveness' projects are non-mobile projects which can only take place on a company's existing site. Back

10  The two previous reports were the First Report, Session 1997-98 (HC 295) (Current Plans and Priorities) and the First Report, Session 1998-99 (HC 33) (Special Needs Education). Back

11  For a list of the witnesses who gave oral evidence, see p. xxix. Details of written evidence published as Appendices to the Minutes of Evidence are given on p. xxxi. Back

12  The Industrial Development Board for Northern Ireland: Inward Investment. Eighteenth Report of the Committee of Public Accounts, Session 1999-2000, (HC 66) (The "PAC Report"). Back

13  Industrial Development Board for Northern Ireland: Inward Investment. Published as HC 1096 (Session 1997-98) (The "NIAO Report"). Back

14  Department of Enterprise, Trade and Investment Press Notice, 6 July 2000. Back


 
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