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Competitiveness (Northern Ireland)
11 am
David Simpson (Upper Bann) (DUP): I am grateful for the opportunity to debate an issue that is crucial to the future of Northern Ireland. I thank the Under-Secretary of State for Northern Ireland, the hon. Member for Basildon (Angela E. Smith), for attending today. She is a very busy lady and I appreciate her giving her time to be here. She is one of the direct rule Ministers who pays a lot of attention to Northern Ireland and is dedicated to it—so she tells me.
The economic competitiveness of any region is of immense importance to its people, their standards of living, their ability to care for the weakest members of society, the upbringing of their children and their ability to provide for their own retirement. Northern Ireland is a small regional economy within the UK economy, similar to but smaller than Wales, north-east and north-west England. It accounts for 2.9 per cent. of the people of the United Kingdom and just 2.6 per cent. of its expenditure. Northern Ireland's economy has experienced severe strains over recent decades, not through any lack of inventiveness on the part of its citizens or any lack of ambition on the part of its business community, but because it was directly and systematically targeted by terrorists, who calculated that, by planting bombs, setting fires, threatening business men and extorting money from them, they could not only terrorise the community, but destabilise the economy, make Northern Ireland less attractive to potential investors and thereby cripple the entire society.
Undoubtedly, inward investment and business growth were hindered during the years of intense terrorist campaigns. The provincial towns, as I am sure the Minister would agree, were more badly hit than other areas. They were attacked by the bombs, fires or whatever. It has been difficult. None was more affected than my own constituency. Lurgan town was badly affected by bombs, little money was put into the infrastructure and it needs a lot of investment. I would appreciate it if the Minister used her influence with the other Ministers involved, so that some money was poured in to help the regeneration company, Lurgan Forward, which has done tremendous work over the past 10 years but needs Government help and funding to push it forward.
The Government's response has been to prioritise inward investment, and help to keep society stable and the economy moving by enlarging the public sector. Consequently, and for understandable reasons, our public sector has significantly outgrown the private sector. In recent months, the competitiveness of our economy has come under more subtle pressure, thanks in no small part to the comments of the Secretary of State for Northern Ireland, who, while in America, said that the Northern Ireland economy was unsustainable, despite the fact that the single biggest factor in deciding whether a potential investor comes to Northern Ireland, or locates in the Irish Republic, is not in the control of anyone in Northern Ireland, but is the Secretary of State's responsibility. I refer to the level of corporation tax, which is entirely in the remit of Government and which, in comparison with that of our nearest competitor to the south, has a detrimental impact on our
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economy. I have raised that matter in the House and we shall return to it later in this debate. However, for the moment, I make it clear that, if any chief executive of any commercial enterprise said the things about its products or the company that the Secretary of State said about the Northern Ireland economy—especially if it related to a matter pertaining exclusively to his own responsibilities in his post—he would very quickly find himself on gardening leave. Business people, politicians and civic leaders were busy trying to promote Northern Ireland, but our Government were busy chipping away with a pick axe at our economic bedrock.
For the Secretary of State to say what he did in America, of all places—the biggest source of foreign direct investment in Northern Ireland—was particularly ill judged and damaging. It was carelessness of a kind that no community should have to experience and it also ignored certain key facts. Northern Ireland gross domestic product growth has equalled or outperformed the UK average since the mid to late 1990s and manufacturing output has outperformed the UK average since the late 1990s. Output grew by 2.3 per cent. between quarter four of 2003 and quarter four of 2004, compared with 0.6 per cent. on the mainland, with proportionately fewer job losses than in the UK. Employment is at a record high, with 10,830 jobs created in the last 12 months. Unemployment is at a 26-year low and has been below 5 per cent. for 43 consecutive months. Northern Ireland is currently the fourth best performing of the 12 UK regions.
Despite all the turmoil, violence and death visited upon the Province by terrorist organisations, Northern Ireland's people continued year on year to prove the lie of a former Prime Minister, who described them as "spongers". The resilience, inventiveness, and dogged iron will of its people not to let adversity overcome them convinces me that, given the proper opportunity, business in Northern Ireland can prove to be as good, if not better, than anywhere in the British Isles. But it must be given a fair opportunity.
Despite the Secretary of State's comments on these matters, he has identified certain things that are relevant to today's debate. Northern Ireland's apparent strong performance conceals underlying structural weaknesses, which are well documented. Although we do not have the time to go into those in full detail today, they can be summarised as follows: an underdeveloped private sector; an over-dependence on the public sector; low levels of business formation and research and development spend; low participation in the labour market; high long-term unemployment; uneven sub-regional growth; and the £5 billion annual subvention from GB, which I agree is not sustainable. To that could be added the demographic time bomb of 40,400 people going into the work force in the next decade. On that measure alone, Northern Ireland needs 4,400 new jobs annually just to stand still. If we add to that the Government targets on civil service reductions and the indications in relation to the economically inactive, we shall need 141,000 new jobs by 2015 just to stand still.
As can be seen from all that, we are still facing major economic challenges. The Secretary of State has drawn attention to the need to transform Northern Ireland from a public sector-reliant economy to a highly efficient and competitive private sector-led economy. We in my party agree and are keen to discover what steps he has
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taken to date, what he proposes to do to facilitate that transformation, over what time scale and what the annual targets are for that transformation. Perhaps the Minister will outline some of those things for us today.
Government cannot do the job of business, but must create the conditions in which business can compete and win. It should be clear, from the challenges Northern Ireland faces that I have outlined, that only a managed transition from the current public sector domination to a private sector-led economy will work. I place on record my request that that managed approach be the Government's approach to that crucial task. Perhaps the Minister will confirm that.
Steep tax increases with sharp reductions in public expenditure will stall the economy, already overwhelmingly dependent on historic levels of Government support, and may impact on political and security stability. Managed transition requires steady private sector expansion, continued growth in foreign direct investment, growth in indigenous businesses and increased entrepreneurship.
It should be clear to all that the Government must commit to a privatisation programme, including significant transfers of both service and estate from the public sector. However, they must also pledge that any revenues accrued through such a programme will remain in Northern Ireland by way of investment in our infrastructure, help for new private sector initiatives and assistance for research and development. Again, will the Minister deal with that?
Increasing Northern Ireland's competitiveness will demand the following: a world-class infrastructure, which could be partly funded by a radical programme of privatisation; ring-fencing and reinvesting the proceeds of privatisation to fund new investment and to alleviate excessive long-term debt; and transparent funding of the £14.7 billion investment strategy for Northern Ireland to prevent the Government from mortgaging future generations in Northern Ireland. Will the Minister commit to those essentials today?
I turn to corporation tax. Northern Ireland is the only part of the United Kingdom with a land border with another European state. That brings significant challenges. Not only are we neighbours to another European country, but that country continues to invest massively in infrastructure and, even more importantly, it has a corporation tax rate of 12.5 per cent. According to the former chief executive of the Irish Development Agency:
"In the battle to attract overseas investment to Ireland, no financial weapon has been more important than tax in convincing new industry to locate here. It remains the IDA's unique selling point, giving Ireland a critical advantage in winning new investment."
The most basic economic analysis indicates what a massive advantage such a low corporation tax rate brings. The number of international businesses with European headquarters in the Republic of Ireland is a testament to that. Almost no matter what else we do in Northern Ireland, while the corporation tax rate differential remains at the present rate, it will be virtually impossible to compete with the Republic of Ireland.
Through parliamentary questions, I have sought repeatedly to get the Government even to acknowledge that corporation tax is a factor, but all to no avail. It is
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clear from my earlier quote that the Irish Treasury, which has been the biggest beneficiary of the different rates of corporation tax, is aware of the significance of that difference, even if the Treasury in the UK, which has been the loser, claims not to recognise it.
The stark reality remains, and it is known by the Government, even if thus far there has been a steadfast refusal to say so openly. Corporation tax has been, if I might coin a phrase, the tax that dare not speak its name. Over the years, pleas for a lower corporation tax rate for Northern Ireland have been made by all parties and dismissed by the Treasury. Those of us who are familiar with the issue are aware of the arguments routinely employed as to why a different corporation tax rate is not possible for Northern Ireland, and we may hear some of them repeated by the Minister today. However, such a change is possible. It is a only matter of will.
It cannot be that the Government are concerned by the loss of a portion of the very modest corporation tax generated in Northern Ireland. The loss of revenue from the reduction in corporation tax that we propose would amount to approximately £350 million, which would be more than offset by increased revenues from new jobs. Indeed, as part of any reduction, the Chancellor of the Exchequer could put in place new job targets for the first and second year. That would wipe out any loss of revenue.
If the Government are serious about improving Northern Ireland's economic competitiveness, the single most significant step that they could take would be to lower corporation tax for Northern Ireland to below the prevailing rate in the Republic of Ireland. In doing so, let the Treasury set annual targets for business growth and new investment, to test my belief and that of the business community in Northern Ireland that, far from reducing tax revenues, such a step would, over time, significantly increase them. I repeat that call again today and ask the Minister to address the issue.
What I ask for could be done in a manner that directly altered the rate for companies already in operation in Northern Ireland, or new foreign investors in the UK. Such a move would prevent companies already in place in mainland Great Britain from upping sticks and setting up a shadow company in Northern Ireland solely to milk the benefits of the lower corporation tax. Perhaps the Minister could give a commitment to give the matter serious consideration. The simple, easily monitored alteration I have suggested would allay the Chancellor's fears that such a system could be massively abused, and would at a stroke ensure that Northern Ireland was able to compete with its neighbour, the Republic.
What objections could central Government, or for that matter the Treasury, have if the result were increased revenue from new, skilled jobs and reduced benefit claims? The only remaining objection would be the old chestnut that we cannot treat Northern Ireland differently for fear of having to do the same for other regions of the UK. The answer to that is simple—when during the past 30 years has Northern Ireland not been treated differently when it suited the Government?
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Indeed, there have been examples of time-limited fiscal variations—for example, in relation to the climate change levy and its non-implementation, to assist the development of the natural gas industry. Corporation tax variation is a further measure that could have a dramatic influence for good in the Province, not just for one industry, but for all. Instead of casting around for reasons not to vary the tax, surely the Government should think of the contribution that they could make to the future of the most disadvantaged part of the UK.
As I have stated, corporation tax could be changed directly with very little trouble, and that is our goal. If the Government remain timid about such things, perhaps the Minister, whom I know is certainly not timid, could consult with the Chancellor about alternative ways of getting to the same place. For example, the Government are aware of the proposal that approved and allowable expenditure for research and development and for training and marketing included in the corporation tax computation could be multiplied by a factor of three and allowed as a deduction in arriving at the taxable profits for businesses based in Northern Ireland. Might the Minister and the Chancellor get together on that?
Corporation tax may be the most significant issue for economic competitiveness in Northern Ireland, but it is not the only one. A number of significant problems face various sectors of our economy and they must be addressed. I should like to move on to aggregates tax. The disparity between aggregates tax levels in Northern Ireland and those across the border is both a drain on the Northern Ireland economy and an incentive for illegal smuggling. Given the evasion and avoidance, special arrangements for Northern Ireland could increase the economic competitiveness of the Province without having a significant impact on the taxes raised. Can we have an assurance today that that issue will be taken up? Without that, business will continue to drain away across the border, and no benefit will accrue to the Treasury or to businesses in the Province.
Another matter that I would like to spend some time on is industrial derating. The decision to remove that has the potential to cause the most damage to the manufacturing industry in Northern Ireland in a generation. The decision has had a serious impact on manufacturing across the Province. It is clear that the measure will particularly affect the profitability and viability of a number of businesses, so it is vital that the phasing in of the policy is frozen and that a detailed analysis of its impact is carried out. Unless the proposals are halted, or other assistance is given, many crucial jobs will be lost to the economy. Surely that is not something that the Minister is prepared to contemplate. Perhaps we might hear the Government's view today.
The ending of industrial derating could devastate the economy of Northern Ireland. The competitive advantage in business has tilted dramatically in favour of the south. That decision has no saving graces: our economy will lose jobs, tax revenues and entrepreneurial talent. At a time when Invest Northern Ireland is working to promote the economy, industrial derating will completely undermine any modest advances. Any good work in other areas could be entirely wiped out by that measure, and economic progress could be set back years. I ask the Minister why the Government would act against their own jobs promotion agency.
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All that comes when many traditional manufacturing jobs are being lost because of lower costs abroad. There is concern that industrial derating will be very damaging to existing businesses and those that may be considering coming to the Province. Industrial derating was once a selling point and advantage that Northern Ireland offered, but now even that has gone.
Large companies in Northern Ireland operate in extremely competitive international markets on extremely tight margins and cannot increase prices to absorb such cost increases. Industrial derating will hit hardest the bigger companies, particularly those with large premises. By implication, they employ the most people, or deal in commodities with tight margins. This state of affairs was brought about not by international competition or by internal terrorism in this instance, but by a stroke of a Government pen. Like Nicodemus of old, I ask, "How can these things be?"
I would like to take a few moments to consider the landfill tax. In the 2003 Budget, which I have raised with the Minister before, the Chancellor promised that any increase in landfill tax would be implemented in a revenue-neutral manner. He promised that additional revenue would be ploughed back by way of grants. However, I have had it confirmed by Stephen Peover of the Department of the Environment, in a letter dated 17 February, that the Secretary of State for Northern Ireland has used his ministerial discretion to ensure that the Chancellor's promise will not be honoured in Northern Ireland, thus placing Northern Ireland businesses at a direct and severe disadvantage compared with the rest of the UK. I ask the Minister to find out how the Secretary of State is using his discretion to ensure that the negative effect of his reneging on the Chancellor's promise will be offset.
There are several other issues that I would like briefly to highlight. Northern Ireland is already at a disadvantage because of higher electricity, insurance and transport costs and waste disposal charges. Even our education system, which traditionally has been one of our strongest selling points, is under threat because of the Government's dogmatic approach. All those disadvantages, which have been made far worse by the Government's policies, must be addressed properly—not to ensure the maintenance of political dogma, but for the good of the Province. What comfort can the Minister give us today?
Far too many of Northern Ireland's potential work force are not economically active. More than 530,000 people—41 per cent. of the working-age population—fall into that category, and there are worrying underlying trends. Since 1978, unemployment has fallen by 45 per cent. and employment has risen by 33 per cent., yet the number of incapacity benefit claimants has risen by 156 per cent. The rise in incapacity claimants is three times the total fall in unemployment. Northern Ireland has the highest long-term and youth unemployment among the 12 UK regions. It is obvious that it needs a vigorous programme to encourage people into the workplace. How does the Minister propose to address the problem? What action will she take? What targets will she set each year to reduce the number of people who are economically inactive?
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I would like to mention public sector reform in Northern Ireland again briefly. It is undoubtedly needed. We need less government and better and faster planning procedures. There is no political, social or economic argument for the vast array of Departments and quangos that have been inflicted on Northern Ireland. They have had a stifling effect on the Province and would be neither missed nor mourned. Is the Minister prepared to be as brave as the problem requires, and can we have clear assurances to that effect today?
Northern Ireland does not have a good reputation for being able to deliver quick planning decisions. It is not my purpose to apportion blame for that, but it is important to get it right. No doubt it will take a combination of additional resources, more streamlined procedures and a willingness to take decisions rather than sit on them. Quick decisions are vital to attracting investment and securing jobs. Planning delay discourages private sector involvement and sends out a signal that Northern Ireland is not geared up to do business at the highest level. When opportunities arise, we must be in a position to take advantage of them. We cannot do anything about our geographical location at the edge of Europe, but there is no reason why we cannot have a planning process to rival any in Europe.
What commitments can the Minister give us on that matter? For example, having consulted on the investment strategy, is further time-consuming planning consultation necessary for each project or each part of its implementation? Perhaps the Minister might care to tackle that as well in her response.
In conclusion—I am sure that my colleagues and the Minister are glad to hear those words—we have focused thus far on what the Government can do, but it is important to put it on the record that, if the Government do what they should, it will be up to the people of Northern Ireland to respond and to take advantage of the opportunities. I believe that the whole of the UK will benefit in the long run by helping Northern Ireland now. Northern Ireland has the potential to transform its economy into one that is more balanced between the public and private sector, but that will not happen unless it has the opportunity to prosper. Simply wishing it to happen will not deliver it. The Government must put in place the proper environment.
Today, I have touched on just a few of the many areas that need to be addressed, and I am sure that my hon. Friends will pick up any slack that I have missed. Although many of these matters will ultimately fall to a devolved Administration, others will need the assistance of the Treasury. Either way, Northern Ireland cannot afford to wait for devolution before it makes the changes that are needed to equip our economy for the years and decades to come. The Government have the opportunity to make a difference and to create a Northern Ireland that has not only put violence behind it, but has a secure economic future. I call upon the Government to rise to those challenges.
11.30 am
Sammy Wilson (East Antrim) (DUP): I congratulate my hon. Friend the Member for Upper Bann (David Simpson) on securing the debate. The competitiveness of the Northern Ireland economy has been well
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highlighted by recent pronouncements not only by the Secretary of State but by others in Northern Ireland who increasingly realise that we are dependent on the public sector. That is not what people in Northern Ireland want, and it is not sustainable in the long run anyhow. However, when it comes to public pronouncements, it is important that public representatives, including the Secretary of State, should talk up our economy rather than talk it down. We all want to work towards the goal of reducing the public sector, but we can only do that if we engender confidence in the private sector to attract outside investment.
I want to make a couple of general points and then move on to specific points relating to my constituency of East Antrim. My hon. Friend made many references to the tax regime in Northern Ireland, especially the differences between corporation tax in the Republic and in Northern Ireland, which create disadvantages when trying to attract outside investment. There is no doubt about that. The complaints from other European countries indicate that one of the Irish Republic's biggest advantages in attracting outside investment has been the low corporation tax it has imposed on manufacturing companies that export a large percentage of their output.
I know that there has been resistance but, in the long run, reducing corporation tax would not be a cost to the Exchequer. One has only to examine the figures in the Republic. Although its corporation tax is lower than corporation tax in the United Kingdom, it comprises a substantially higher percentage of total tax revenue than corporation tax in the UK. To use the economists' term, the elasticity of demand is such that the lower the tax rate, the higher the total revenue obtained.
If the Minister is concerned that that would lead to unequal treatment for Northern Ireland, it can be offset through the other support given to industry. We should examine the record of Invest Northern Ireland and the number of times that it has been brought before the Public Accounts Committee in this House, where it has been found wanting regarding how public money has been administered and, indeed, the amount of public money that has been spent on companies simply to bolster failure rather than reward success.
Attacking the problem by rewarding successful companies by taking less off them in tax is more sustainable than simply propping up companies through the various incentives and grants given by Invest Northern Ireland. Such a policy would also help to reduce some of the bureaucracy that exists in the grant regime. The approach should be given serious consideration. It does not have to have negative revenue consequences for the Exchequer. It needs more serious exploration. It has been dealt with in a dismissive way in the past. We do not have a unified grant regime, so why do we need a unified tax regime for the promotion of industry?
My hon. Friend pointed out that, if we are to have a competitive economy, we must reduce the high levels of low economic activity—if that is not a contradiction. In Northern Ireland, three times more people claim sickness and disability benefit than in the Irish Republic and twice as many claim as in the rest of the United
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Kingdom. I do not believe that that reflects the state of the working population. There are structural problems. I know that the Government intend to introduce proposals to deal with those on long-term benefits and it is important that that aspect is tackled.
At the moment, competitiveness in Northern Ireland is bolstered by the fact that large numbers of people have come from eastern Europe to provide labour for many industries. They have made a valuable contribution to the economy of Northern Ireland and it is sad that in recent times there have been attacks on some of those people in the areas where they live. There have been those who see them as outsiders and, for racist reasons or whatever, they have attacked them. In Galen, in my constituency of East Antrim, a large number of immigrants are employed and they make up a valuable part of the work force. That is true in many manufacturing plants and agricultural establishments in Northern Ireland.
I shall use a couple of examples from my constituency of East Antrim to show how public bodies could help to increase competitiveness. One of the issues has been raised in the past by my hon. Friend the Member for Belfast, East (Mr. Robinson) and mentioned by my colleague the Member for—[Hon. Members: "Upper Bann."]—my hon. Friend the Member for Upper Bann.
Dr. William McCrea (South Antrim) (DUP): So many colleagues.
Sammy Wilson : I have eight of them; I cannot remember where they all come from .
The Parliamentary Under-Secretary of State for Northern Ireland (Angela E. Smith) : It's an age thing.
Sammy Wilson : We will never forget.
My hon. Friends raised the issue of the planning regime. Planning has had a detrimental impact on the development of the economy in Northern Ireland. I have mentioned the slowness of the planning regime to the Minister before. In my constituency, the quarry at Glenarm is looking for an extension. It provides not just stone for building roads, but limestone for many industrial products in Northern Ireland that are essential to local industry. However, the issue of whether there can be an extension has been going on for nearly two years. The product will still be needed and, ironically, if the planning permission is not given, limestone will have to be imported from areas of natural beauty and special scientific interest in other parts of the UK, adding to the costs, but not improving the environment in any way. The planning regime has gone tortuously through investigating whether there should be an extension, leaving uncertainty even though there has been huge public as well as private investment.
The port of Larne in East Antrim is now the major roll-on, roll-off port for the whole island of Ireland. It is a valuable gateway for exporting goods and importing raw materials to Northern Ireland. Its infrastructure has been improved recently, thanks to the efforts of my hon.
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Friend the Member for Belfast, East when he was Regional Development Minister in the Northern Ireland Assembly. However, he fell short of improving the whole. We have a major port, and half the road to it either way is served by single rather than dual lanes. It is detrimental to the movement of goods in and out of the port. Larne will need expansion, and I trust that it will get the help that has been afforded to ports such as Dublin in the Irish Republic and Warrenpoint in Northern Ireland. The port is an important element in retaining competitiveness in Northern Ireland.
Furthermore, we must have an energy source that keeps us competitive. There is diversity, and East Antrim is one of the main suppliers of power. We use gas, oil and coal. B9 Energy, a firm based in East Antrim, is a leading provider of renewable energy through wave power and, more recently, through capturing the power of underwater currents. A test has been undertaken at Strangford to see how effective it will be.
It is important that we have not only a diversity of energy sources, but a competitive energy market. Despite what some environmentalists say, it is important that we do not put all our eggs in one basket and that Northern Ireland has a range of energy sources.
I again congratulate my hon. Friend the Member for Upper Bann on securing the debate. I look forward to the Minister's answers, and I hope that this debate will be the start of an exploration of how we can improve the competitiveness of the Northern Ireland economy.
11.43 am
Dr. William McCrea (South Antrim) (DUP): I join my colleagues in congratulating my hon. Friend the Member for Upper Bann (David Simpson) on successfully securing the debate and ensuring that we discuss an issue that is important to all our constituents. Other of my colleagues want to participate, so I shall not go over a lot of the ground through which my two colleagues have already carefully taken us. Many of those issues will come up, because we must tackle them if we are to deal with the economic advancement of the Province.
I shall make my remarks short, because I want the Minister to have enough time to respond. Often in previous debates, she has been able to say, "I'm sorry, I haven't the time to deal with all your questions," and that was the last we heard of them. We did not get the answers that we needed. It is important that we give her the opportunity to deal with the issues that have been outlined—many of them carefully and in detail by my hon. Friend.
My hon. Friend the Member for East Antrim (Sammy Wilson) rightly mentioned those who are on incapacity benefit, the number of claimants and how the Minister and the Government are trying to tackle the issue across the United Kingdom. I ask the Government to ensure that in tackling a problem, they do not hurt those who are genuinely sick and in need. I make an earnest appeal to the Government: I agree with them that we need to tackle a problem where there is one, but in dealing with it we must be sensitive to those in the community who are weak, sick and unable to contribute. We must not hurt those in genuine need.
There are those on benefits such as incapacity benefit who might be enjoying the mobility benefits available to them while damaging and hurting those who are
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genuinely in need. For example, I know a gentleman in my locality who seems to run an important taxi service from his mobility vehicle. I make my solemn appeal, because with so many immigrant employees coming into the country and taking jobs in agriculture, engineering or the manufacturing plants left in the Province, one must ask who filled those jobs before that influx of people. We must remember that, especially in agriculture, many of those jobs had existed for a long time. In fact, in the past there were more jobs, because agricultural industry was healthier. One must ask why so many people from across the world are coming in to take those jobs when we have persons in the Province who should be economically active. It is important to find out.
Many of our constituencies have known the benefit of Northern Ireland's historic textile industry, but it has been decimated and crippled. It really is no more, or it is at least right down at the bottom, when it used to be right at the top. The firms moved to other parts of the world not because of corporation tax, but because people were paid buttons to do the work. Many of them were really slave labour. I shall not excuse that, and I make it abundantly clear that a labourer is worthy of their hire, and there ought to be proper and appropriate return for a person who goes out and works.
We have problems in industry. In the South Antrim constituency, why is there an industrial wasteland at Corr's Corner—Global Point in Newtownabbey—when Reg Empey, waxing eloquent as the Minister on one occasion, regarded it as what would be the jewel in the crown of practically the whole United Kingdom? I have asked that question on several occasions and have never received an answer. When I was speaking with Newtownabbey council staff at a function the other day, one lady said to me that people are anxious to go there, but it is still lying as waste.
When I mentioned the issue to Invest Northern Ireland, it said that there were some problems with the new metropolitan plan. Let us be quite honest: if the area has been designated for industrial use, instead of it remaining a wasteland, it is about time that we put it to good use. I ask the Minister to ensure that I have a meeting about that, because we must deal with it. I shall not allow the site to remain a wasteland. It is a disgrace that that is so. If industrialists want to go there, why are they not being permitted to do so? Is it because of planning? My two colleagues mentioned planning problems. I shall not go into that issue, which is a hardy annual for some of us, but hon. Members are angry and frustrated at the slowness of planning decisions and what that means.
We face problems with energy costs and overheads. Electricity costs in Northern Ireland are ridiculous, and we must tackle that. The Government must help to deal with those problems because they create disincentives for people to come to Northern Ireland. We want people to have incentives to come to Northern Ireland. One great incentive is that the vast majority of our population are willing to work, and they are workers second to none. We should harness their energy and channel it into economic development.
I said that I would be brief, and I have only one more point for the Minister. The Government are not harnessing all the virtues of the international airport at Antrim. The airport is second to none, but its value is
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not being used. One problem that has been mentioned to me is that there is no train connection between the airport and the city. If that is a problem, we must deal with it. We cannot allow the international airport not to have the proper connections or the proper infrastructure to enable it to be utilised in full. The work force within the airport and within Antrim are energetic. In many ways, they are inspired and they are doing everything within their power to ensure that they attract business, but I want the Government to consider what can be done to assist them and to advance things further.
11.52 am
Mr. Peter Robinson (Belfast, East) (DUP): I shall take only a quick canter around the course. I think that my hon. Friend the Member for South Antrim (Dr. McCrea) was getting at me because in a previous long debate I left the Minister with a very short period in which to respond. I am delighted that she is in her place. I recognise that she came here at some cost, because another engagement had been in her diary for a long time. She recognised, however, that her first duty is to the House, and rightly so. We are glad she is with us.
I join colleagues in congratulating my hon. Friend the Member for Upper Bann (David Simpson) on securing this very important debate and on his contribution. The fact that short speeches followed has much to do with the comprehensive way in which he dealt with the subject. Such slack as remains relates to the most important area of Northern Ireland—Belfast. Not least because he represents Upper Bann, he neglected to deal with that area in any detail, but as a Belfast MP, I will touch on the issues relevant to Belfast.
First, I agree with my hon. Friend the Member for East Antrim (Sammy Wilson)—just to prove that I can remember the name of his constituency—on the importance of the ministerial team for Northern Ireland talking up our economy. The Secretary of State ill served Northern Ireland when he indicated in the United States that the economy is not viable. Such comments will not encourage outside investors to bring their investment to Northern Ireland and provide much-needed jobs.
I also agree with my hon. Friend's remarks on the Planning Service. We have touched on that subject many times in Westminster Hall and on the Floor of the House. The Planning Service in Northern Ireland is a nightmare. It has lost Northern Ireland more jobs than any other factor, including the troubles, and is slow to respond to important applications. It has in place new procedures to fast-track applications if there is a major implication for jobs in the Province. I think that those procedures dealt with the recent application by Coca-Cola and that they are being applied to the IKEA application. I hope that the procedures work and that they improve the situation.
I shall touch on some "up" factors for the Belfast economy before dealing with some negatives. Unemployment in the Belfast area is the lowest ever on record at 4.9 per cent. Sceptics, if there were any here, might say that that is because the figures have again been doctored. The Government have changed the basis of calculation so often, but I suppose that there is an upside
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even to that, because if they are employing people to do that it helps the employment statistics. Fifty per cent. of the foreign direct investment companies are based in the Belfast area, and there are two airports and a seaport, all in close proximity to the city. There are 6,135 VAT-registered businesses, and 183,000 people are employed in the city. There are two world-class universities, a well developed knowledge base, and a good and skilled work force.
I have rattled those figures off not simply to prove that my researcher is earning his money, but to avoid the accusation, when I give the next series of statistics, that I am considering only the negative issues. One reason for unemployment perhaps being the lowest ever on record is the fact that the population has declined by 30 per cent. in the Belfast area over the past three decades. In many cases, that has been due to the violence and conflict in the Province, which have been concentrated to a large extent in the city area.
There has also been a decline in traditional industries. The public sector dominance of the employment statistics in Northern Ireland is uncomfortably great, and 72 per cent. of all civil service jobs are in the Belfast area. There is a mismatch between land supply and demand. The city centre is very poorly developed, and there is a fracturing of neighbourhoods. There are high levels of long-term unemployment. There is confusion in governance, duplication of effort and dilution of resources. There is competition from low-cost economies. The cost of doing business in the Belfast area and in Northern Ireland generally is very high. The dichotomy of standards in the education system contributes to our employment difficulties and there has been a very low business birth rate.
The result of all that is that we have an imbalanced economy. It is vulnerable to external market forces. There is a lack of export potential. There is an inability to attract skilled workers to the city. Everything that is generally the case in Belfast applies to my Belfast, East constituency. Several wards there have the highest long-term unemployment and the lowest educational attainment. Therefore, in seeking to underpin what we hope will eventually become a sustainable peace in Northern Ireland, we cannot overemphasise the importance of a strong, prosperous economy.
Our long-established dependence on the public sector is not helping to achieve the increased innovation and entrepreneurship and the competitive advantage required to survive in the global economy. We need to develop a robust and more buoyant private sector, particularly as regards the manufacturing base. We need to attract increased inward investment.
To do all that, we need, as my hon. Friend the Member for Upper Bann said, a fairer rate of corporation tax. I suspect that the Minister will say that there are difficulties, even from a European point of view, in having differential rates in the region. However, there was a legal case in Europe in which it was indicated that that is possible, although it might have implications for the subventions that are given to that region. I certainly would not want business to receive money that would otherwise go to those in need within the economy, but there are other ways to cook the same goose.
The Minister should consider designating Northern Ireland an enterprise zone, with special rates and other factors that would attract investment allowed, even if
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only for a limited period, until Northern Ireland builds itself up and comes out of conflict, as I hope it will. That extra incentive must be given, particularly as a lot of the competition is competition on the same island. The Irish Republic has the clear advantage in that it not only takes money from UK taxpayers via Europe to build its infrastructure, but provides more attractive corporation tax levels.
Another factor that can help to turn the situation around is more effective research and development support. There needs to be better targeting of funding in the commercial and education sectors and closer co-operation between educationists and entrepreneurs. Research and development uptake is poor, although the available R and D assistance for firms could be better employed.
The creation of a business culture infused by a spirit of innovation would also be achieved with the reduction in the corporation tax rate—in my view, to 10 per cent. I do not believe in harmony with the Irish Republic: if it would give us the edge, we should take that edge by setting the rate at 10 rather than 12.5 per cent. That factor alone could achieve a great deal in economic growth and make Northern Ireland less dependent on subventions from the Treasury and the UK economy.
The news is not all bad, however. IKEA's recent decision to come to the east Belfast area is very much welcome and a tremendous boost, although we must ensure that the local people are skilled up to take whatever employment comes as a result of that, whether directly in IKEA or in kitchen fitting or any other jobs that flow from such retailers coming to an area. Skills training is necessary now, and I hope that the Department for Employment and Learning provides the company with the skills base that it will need.
Forthcoming measures to address the lack of investment and poor social and education infrastructure throughout working-class Unionist areas of Belfast will be important, and I look forward to the ministerial statement on those, which I believe will be made towards the end of this month. I think that the announcement will indicate that one section of the community in Northern Ireland has been bypassed by a statistical sleight of hand. The statistics have been compiled by ward, but much of the Unionist deprivation has existed among areas of plenty.
I could take hon. Members to almost every deprived area in my constituency and show them that those areas are surrounded by detached houses and luxury dwellings. The overall ward statistics hide the deprivation, but I believe that the Government now have a much more compelling case available, indicating that there is significant need in that Unionist community. With that need identified, I hope that the response will be not a search for some quick fix, but a co-ordinated strategy.
Finally, there is much more successful development to be had through call centres, which Northern Ireland has traditionally been capable of attracting. The Northern Ireland accent is so calm, relaxing and therefore easy to understand that call centres go there automatically. The future for Northern Ireland will be in such IT-related activities. In east Belfast, a future for IT must be encouraged in Titanic Quarter—a massive area within minutes of Belfast city centre that is available for employment-led uses.
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We must not see only leisure facilities, apartments and other attractive elements for a developer. We must ensure that the key elements of the area's development plan, whatever it is, encourage more jobs there, so that the yard, which at its height had 25,000 people working in it, can, through new industries, including IT in particular, bring back the industrial life that we once saw in east Belfast.
12.6 pm
Lembit Öpik (Montgomeryshire) (LD): I should also like to thank the hon. Member for Upper Bann (David Simpson) for introducing this debate, which is the first opportunity that we have had to discuss Northern Ireland's economy since the Secretary of State's speech at the Fabian Society in January.
The Secretary of State was right to highlight Northern Ireland's reliance on the public sector, although the manner in which he commented on Northern Ireland's sustainability was—to be euphemistic—suboptimal, as has rightly been mentioned. It was not a great advert for getting money into the Province. None the less, although progress has been made in recent years in encouraging private business enterprises, the public sector still provides about one third of all jobs in Northern Ireland, as compared with one fifth of jobs in the rest of the UK. It is abundantly clear that, ideally, we would shift that balance.
The hon. Gentleman and others were right to discuss enhanced co-operation between the Republic of Ireland and Northern Ireland and, more specifically, to compare the levels of corporation tax, which causes a serious problem for Northern Ireland. I need not repeat that. We have heard what the issues are. Although I can understand why the Treasury might be reluctant to make a special case for Northern Ireland, it seems appropriate to consider a change, perhaps for a fixed period—10 years, for example—to give the private sector a kick-start, for all the reasons that we have heard.
I shall be interested to hear what the Minister thinks or, I fear, what she has been told to say by the Treasury on that point. She is a free-thinking spirit and a shining light of independent thought, but we shall see whether she is given latitude to do the right thing and to agree with Opposition Members.
I was disappointed that the Secretary of State did not take the opportunity to discuss paramilitary crime and extortion in Northern Ireland when he discussed the state of the economy as a whole. When the Federation of Small Businesses gave evidence to the Northern Ireland Affairs Committee at the beginning of February, it reported that 6 per cent. of businesses in Northern Ireland are affected by perceived illegal donations, which equates to some 4,000 businesses. Further, the Organised Crime Task Force has reported that extortion rackets earn millions of pounds for paramilitary groups every year, particularly, it must be said, for loyalist groups.
However, the Government do not seem to be making a serious attempt to solve the problem or even begin to understand the extent of it. Although the OCTF has done a lot of excellent work, the Government must take action to tackle extortion, because we do not feel that they have done enough. Indeed, the FSB has called for
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the commissioning of research on the cost and impact of racketeering and extortion on small businesses and the wider economy. In fact, the OCTF feels strongly that there should be an independent free phone line to encourage victims of extortion to seek help and advice. Will the Minister give a commitment to do those three things?
I was also disappointed that the Government were not willing to discuss the cost to Northern Ireland's economy of sectarianism. I have made the point before, but I shall say it again: a huge amount of money is wasted every year in Northern Ireland by the duplication that has resulted from the difficulties that we had before. For example, there are three leisure centres where there should be one, nine health centres where there should be two, and money is spent on school buildings instead of on schoolchildren. Last year, the Secretary of State said that in the education sector there is
"an urgent need for action to address the problems of overcapacity and duplication that exist across the system."
All that costs money, and that has an indirect effect on the amount that is available to be spent in the economy. A simple solution has been presented to the Government many times. That is integrated education. I will not dwell on it because that is not what we are here to discuss, but I rhetorically ask the Minister again to consider the benefits of integrated education to resolve that problem and, thereby, to release more money that can be invested in the economy of the Province.
While it is useful for us to have a debate such as this on the economy, it is the political parties in Northern Ireland that are discussing the issue and taking responsibility for driving forward Northern Ireland's economy. When the Assembly was functioning, a lot of good work was done by the then Minister for Enterprise, Trade and Investment, Sir Reg Empey, to encourage inward investment in Northern Ireland. We should add to the Assembly's ability to act in the field of economics by devolving tax-varying powers to it. I am sure that, when the Assembly is restarted, there will be an interesting debate on whether that power can be devolved.
Finally, even though there is no Assembly at present, we should still be encouraging Northern Ireland politicians to come together to think and to talk about economic regeneration. Members have displayed a depth of wisdom and almost infinite knowledge today—[Hon. Members: "Hear, hear."]. Unsurprisingly, they agree with me, and I thank them for praising my perceptiveness. Unfortunately, we do not benefit fully from that wisdom, because the Assembly has not been reconstituted. When it is, as suggested by the Alliance party, we should have an economic forum to work alongside the talks process—in fact, some such a forum should operate even now.
There is discussion now about Northern Ireland's political future, but discussions on its economic future are long overdue—as an addition to the political process, not a substitution for it. What is needed is a clear economic package to encourage business and investment alongside a functioning legislative Assembly, with local Ministers who can be held responsible for implementing it.
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Hon. Members have made some interesting points, not least about the under-utilised international airport, which should mean speedier, and perhaps more environmentally friendly, links with Belfast. We have the opportunity for high-value investments. Bombardier has proved that, if jobs are given to Northern Ireland, staff will live up to expectations and provide a high-quality service.
I look forward, after the hon. Member for Tewkesbury (Mr. Robertson) has spoken, to hearing the Minister's dutiful consideration of the points that have been made. If she feels that she has insufficient time, all that she has to say is, "I agree with all the points that hon. Members have made, and I give a commitment to implementing their suggestions sooner rather than later."
12.13 pm
Mr. Laurence Robertson (Tewkesbury) (Con): I congratulate the hon. Member for Upper Bann (David Simpson), whose constituency I have written down so that I do not get it wrong, on having introduced this important debate. I agree with what has been said by him and by the hon. Members for East Antrim (Sammy Wilson), for South Antrim (Dr. McCrea), for Belfast, East (Mr. Robinson) and, indeed, for Montgomeryshire (Lembit Öpik).
The Minister has gone to a great deal of trouble to get back for this debate. The hon. Member for Upper Bann did not come to hear what I have to say, so I hope that he will not consider it a discourtesy if I do not speak for more than one minute. I want the Minister to respond to all the good points that have been made. I shall have to apologise to my researcher, who has dug out a lot of information for me. As is typical in this place, it will not, unfortunately, be read out.
I shall make just one point. I have been going to Northern Ireland for many years, since long before I got this job. People who have never been there ask, "Why do you go? Is it not awful, full of trouble and dangerous?" That is the perception. My one point is that that is what we have to change. Business can be attracted to Northern Ireland in many of the ways that have been described, but if I could change one aspect of the situation it would be that perception, which is wrong. There are problems, of course—there always have been—but it is a wonderful place. The people are very accommodating and that is the message that we need to get out to the world—that is what we should be about. My remarks have been brief. I want the Minister to respond to the sensible remarks that have been made, so I shall not take up any more time.
12.15 pm
The Parliamentary Under-Secretary of State for Northern Ireland (Angela E. Smith) : I add my congratulations to those of other hon. Members to the hon. Member for Upper Bann (David Simpson) on having secured the debate. A lot has been said recently about the sustainability of the economy in Northern Ireland, so I welcome this timely opportunity to discuss the issues with him. As the hon. Member for Belfast, East (Mr. Robinson) said, my first duty is always to the House, and I am pleased to be here today.
The engagement that I am missing is a meeting of the Economic Development Forum of Northern Ireland. The hon. Member for Montgomeryshire (Lembit Öpik)
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said that there should be a forum. There is one, and it is meeting at this moment. Some of the issues that we have touched on today are under consideration there. I give an assurance to hon. Members—I think that it will be accepted in the spirit in which it is given—that, for the Government, the economy is the top issue in Northern Ireland. We need economic prosperity because it provides the basis for living standards and improves public services, but it also aids political and social stability. Those of us who have seen the impact of unemployment in communities across the United Kingdom recognise the damage that it does socially and politically in Northern Ireland, so we are committed to ensuring that the economy is bolstered and improved.
The hon. Member for Tewkesbury (Mr. Robertson) might have been rather brief in his comments because, the last time that he spoke on the economy, I chastised him afterwards, and we had a discussion on the matter. Let us consider the economic issues in Northern Ireland. There has been sustained economic growth for the past 15 years. Its economy is now growing faster than those of many regions of the UK and unemployment has dropped to the lowest that it has been. For the cynics among us, let me add that employment has increased to the highest level ever. Those facts together represent a significant change in employment and unemployment issues. In addition, if we consider productivity, the manufacturing industry is performing well, although there have been some job losses in that sector, which I deeply regret. There is tremendous improvement in many areas, and we need to build on that.
In one sense, we can say that Northern Ireland's manufacturing output is holding its own across the board. However, we recognise that this is a period of uncertainty and distress for individuals who have lost their jobs. We predict that employment will grow, particularly in the tradeable services sector, which is forecast to produce some 54,000 jobs over the next decade. The hon. Member for Upper Bann mentioned comments made by the Secretary of State about unsustainability in Northern Ireland's economy. The Secretary of State was referring to the unsustainability of a public sector that has grown to an extent that has been detrimental to the private sector. He made it clear that he is committed to expanding the private sector in Northern Ireland for the long-term prosperity of Northern Ireland. That is what he said, and he has made such comments on many occasions since. Far from talking the economy down, he was talking it up; he was talking about expanding the private sector and encouraging investment.
The Secretary of State is shortly to lead a delegation to India, and I have led an Invest Northern Ireland trade delegation to China. The efforts that the Government are making to bring inward investment to Northern Ireland should not be underestimated. The comments of the Secretary of State should be considered in the context in which they were made, and in light of the action that he and his ministerial team have taken to improve the economy. The hon. Member for Upper Bann rightly said that public spending in Northern Ireland is at 60 per cent. of gross domestic product, nearly a third higher than the UK average. Despite more jobs and low registered unemployment, the level of economic inactivity is higher than the UK average.
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A comment was made about the number of public bodies, and the extent of their work in Northern Ireland. The review of public administration that was undertaken in November showed that the number of public sector bodies has been reduced from 67 to 20, and there will shortly be an announcement about the responsibilities that will be transferred from central Government to local government.
On the economic side, GDP for Northern Ireland is 19 per cent. below the UK average. If we are to have the prosperous economy that we want and to attract inward investment and additional jobs, there needs to be increased focus on the development of the private sector. One third of all employment is in the public sector. We want the balance to change and increased employment in the private sector.
We must look increasingly at the global economy. We have talked about the Republic of Ireland today, but we will increasingly face challenges not only from there, but from across the world. As the hon. Member for South Antrim (Dr. McCrea) said, we will combat that by competing not on low wages, but on skills and high value. That is our approach. The amazing economic growth in countries such as China and India can be seen as a threat, or as an opportunity for trade, investment and partnership. Invest Northern Ireland recently opened an office in Shanghai—indeed, I opened it—and, as I mentioned, the Secretary of State is going to India. Those things will assist us with inward investment.
It is worth repeating the comment of the hon. Member for Upper Bann that the Government cannot do the work of business, but can create conditions for a managed approach. He said that they are an enabler and supporter of business. Now we are seeing a role for political parties with real engagement on economic issues. As I am not at the meeting that I mentioned and we were unable to have that debate today, I have offered all political parties the opportunity to meet me to discuss economic issues.
With the publication of the economic vision last year, the importance of the debate was never more evident. The Economic Development Forum and economic spokespersons from the five main parties have considered the regional economic strategy, which will help us to deliver the vision. That can start to make a difference. If we do not address the challenges that we face now and ensure that we get investment into the private sector and infrastructure—issues that have been raised this morning—we will not be able to compete. That means ensuring that we have a highly skilled work force, addressing research and development for business and promoting innovation, so that Northern Ireland can compete.
I shall address some specific issues that were raised. Several hon. Gentlemen talked about planning delays. The devolved Assembly took an active role on that matter. It brought in strict planning regulations and rules in the interests of the environment and for other reasons. One problem has been that the rules and regulations are quite strict and build in some delay because of consultation. There has been a vast increase in the number of planning applications, but the modernising planning processes plan that I launched as Minister and the actions taken by my noble Friend Lord Rooker to speed up the planning process were important changes. The Assembly made it clear that we
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need to maintain the integrity of the planning system, but we also need to ensure that economic issues are not hampered by delays in the Planning Service.
The phasing out of industrial derating was brought up. Unlike the position with domestic rating, businesses in Northern Ireland pay similar rates to those in the rest of the UK. Manufacturing firms have been informed of the decision to phase out industrial derating. They will have had over eight years to adjust and to plan for paying full rates. In the UK, that cost had to be included in budgets for several years. It is estimated, based on just 15 per cent. of the rates liability, that in the first year, 2005–06, around £10 million will be collected. That is the other side of the coin. Money that is collected from industrial derating can be invested in infrastructure, the development of skills, and the public sector work that is needed for businesses to grow. It is important to recognise that there are two sides to this coin, and that the money can be used to benefit Northern Ireland—it stays in Northern Ireland.
The economic vision and economic strategy focus mainly on the key drivers of economic change, bringing economic prosperity and investment to Northern Ireland, and what will provide jobs. They are innovation, enterprise, skills and infrastructure. The key target—the hon. Member for Upper Bann asked for targets on a number of issues—is to reduce the imbalance between the rest of the UK and Northern Ireland through productivity and investment. The way to do that is to expand the private sector.
Several comments have been made about corporation tax, on which there has been a lot of debate. It is one of the matters being dealt with today at the Economic Development Forum in my absence. That issue was raised by the hon. Members for Upper Bann, for Belfast, East and for East Antrim (Sammy Wilson). I recognise that there have been calls, in relation to a wide range of interests, for a reduction in the rate of corporation tax. We are competing for inward investment with the Republic of Ireland, which has a corporation tax rate of 12.5 per cent. In this country, the rate is 30 per cent.
However, we need to take account of a number of arguments. Simply comparing headline rates does not give a complete picture. If we take into account other variables, such as the costs of labour, premises and business in Northern Ireland, we are talking about a comparison of about 22 per cent. with 14 per cent., rather than of 30 per cent. with 12.5 per cent.
When businesses are asked about the drivers to investing in Northern Ireland, they tell me that one of them is costs, but that the quality of the work force and support from Invest Northern Ireland also make a difference. To me, the key is investment in skills. We need further debate on these issues. We will welcome suggestions in the debate that I will have with other political parties, which would have happened today, as
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to how the overall fiscal system might be developed to benefit the Northern Ireland economy and how we can make more of the fiscal measures already at our disposal. We are not attracting the interest in research and development tax credits that I would like. There could be an increase that would directly benefit firms in Northern Ireland. I will be happy to give any support that I can on that.
The hon. Member for Upper Bann said that we should look at alternative ways of getting to the same place. I agree. We need to consider ways of giving additional support to businesses to encourage them to grow, invest and develop in Northern Ireland. I will say one thing that he said: companies could uproot from elsewhere to relocate to Northern Ireland, which would not help the UK economy as a whole. That needs to be considered, and there are related European Union issues. There is a case before the Commission concerning Portugal and the Azores. There are European issues as well as local and national issues, but let us look at ways in which we can expand and support businesses investing in Northern Ireland.
The hon. Member for South Antrim spoke about sustainability and incapacity benefit. I visited the jobs and benefits office in Antrim and spoke to the staff there. They are conscious of not trying to force people into work who are incapable of work, but recognise that it is crucial that people who can work and want to do so are given the necessary support, so they target support at individuals. On that ground, the hon. Gentleman should be reassured regarding economic inactivity.
The hon. Member for East Antrim spoke of concern about Invest Northern Ireland and where it is investing. I am sure that he would not have wanted Invest Northern Ireland not to invest £9.8 million in a project in Canyon Europe in his constituency. That investment is crucial. We can talk about propping up companies, but recently all four political parties approached the Government about support for Trivirix in Belfast to prop up that company for another month while a buyer was sought in order to maintain jobs in that area.
The issue of energy was also raised. Bringing new competition to the energy market—I recently made an announcement on that—makes a difference. We are mindful of the costs, but the introduction of privatisation to Northern Ireland brought us a very bad deal, which led to increased energy costs. The Secretary of State's environment and renewable energy fund will assist sustainability of supply.
The real issue with economic activity is to do with skills. I will send hon. Members more information on that. If we can be sure that we have the right skills for our work force so that the jobs of the future can be filled by people in Northern Ireland, we can start to address the bigger and wider issues. Despite our best efforts, there was not enough time for me to address all the issues raised by hon. Members, but I will write to them with my responses.
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