Session 2010-11
Publications on the internet

To be published as HC 803-ii

House of COMMONS



Northern Ireland Affairs Committee

Northern Ireland as an enterprise zone

Wednesday 16 February 2011

Lord Heseltine CH

Professor Greg Lloyd

Evidence heard in Public Questions 65 - 152



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Oral Evidence

Taken before the Northern Ireland Affairs Committee

on Wednesday 16 February 2011

Members present:

Mr Laurence Robertson (Chair)

Mr Joe Benton

Oliver Colvile

Mr Stephen Hepburn

Lady Sylvia Hermon

Kate Hoey

Naomi Long

Jack Lopresti

Dr Alasdair McDonnell

Ian Paisley

David Simpson

Mel Stride

Gavin Williamson


Examination of Witness

Witness: Lord Heseltine, former Secretary of State for the Environment, gave evidence.

Q65 Chair: We will start a little bit early. Thanks very much for coming to our Committee, Lord Heseltine.

Lord Heseltine: Pleasure.

Q66 Chair: Just by way of very brief background, I think you are probably aware we are conducting two inquiries at the moment: one into the relative levels of corporation tax between the UK and Ireland, and the impact that may be having on Northern Ireland; and we are also looking at the wider issue of enterprise zones, because it is something the Government has thrown up. The purpose of this meeting is to discuss enterprise zones, but we can talk about taxation or whatever else we feel is appropriate. We will finish at four o’clock because there will be a vote at that time, or earlier if that is best. Thank you very much for joining us today.

Lord Heseltine: Thank you for inviting me.

Q67 Chair: May I invite you to say one or two words about the rationale behind enterprise zones and your experience of how valuable they were.

Lord Heseltine: My first involvement with enterprise zones as a concept was in 1979, when we were addressing the agenda for urban regeneration, and of course there were many ideas and many suggestions, but my colleague Geoffrey Howe had a strong belief that an enterprise-zone concept would be advantageous in stimulating activity in disadvantaged or run-down areas. My view, which was parallel to his, was that simple incentives of the sort involved in enterprise zones did not address the whole issue, and I was an advocate of the Urban Development Corporation. The simple solution to this duality of approach was to combine it. In the legislation that I was responsible for in 1979, we created Urban Development Corporations and we took through the legislation necessary for enterprise zones. The London Urban Development Corporation embraced in part, in Docklands, an enterprise zone. That is the legislative background, and we can discuss what I know of what happened and the relevance of it in any way you wish.

Q68 Chair: When we talk about enterprise zones, what, in your view, is an enterprise zone? What is it?

Lord Heseltine: The enterprise zone that we introduced was a designated area within which there were preferential tax rates-particularly local authority tax rates-and there were enhanced planning procedures. It was a combination of those two factors, from what I remember.

Q69 Ian Paisley: Did you ever consider altering corporation tax within that zone?

Lord Heseltine: I do not think so. It would have been a Treasury judgment, but I do not think we explored differential corporation-tax rates.

Q70 Gavin Williamson: Lord Heseltine, it is a pleasure to have you here. What kind of incentives did you actually use in the enterprise zones to attract specific business or industry sectors into those areas?

Lord Heseltine: There were two sorts. One was lower tax rates-not corporation tax; from what I remember, I think it would have been local authority taxes. The second aspect was a simplified planning procedure. I think your Committee will obviously have available to you the precise answers to that question, and obviously they are important, but you can play any sort of tune you like by combining all these sorts of incentives. The issue for me was whether that was sufficient and, if you like, I could expand a little on what I think happened.

Gavin Williamson: Please do.

Lord Heseltine: To the best of my knowledge, we did not put an enterprise zone into Merseyside-into the Liverpool Urban Development Corporation. We did put one into London Docklands, but not into the whole of the development corporation, rather that particular part that became Canary Wharf. The chief executive of the London Docklands Development Corporation was Reg Ward, and he, whilst recognising the value of the incentives in the enterprise zone concept, was very apprehensive of what I think loosely could be called the "tin-shed consequence"; that, if you give a relaxed planning procedure and financial incentives, you will move investment into that area, but you might find yourself losing control of the quality of planning and, therefore, the arrival of very large numbers of very low-grade buildings.

Reg Ward had a very clear view about the potential for the London Docklands Development Corporation: he did not want a tin-shed phenomenon; he wanted quality. So, one way or another, he managed to avoid the arrival of low-grade buildings. He used what influence he had, which was very considerable, to make sure that the buildings were high-quality, which is slightly at odds with what you would traditionally associate with the concept behind the fast-speed process of enterprise zones.

Undoubtedly, there were buildings and there were investments that took place in London Docklands, but the big development, of course, was Canary Wharf, and it would be very interesting to call Paul Reichmann, who was the genius behind Canary Wharf, to try to establish to what extent the enterprise zone incentives were relevant to his decision. I am guessing, but I knew him quite well, and my guess is that they may have played a part but it would have been not the whole story by any manner of means, because what he was doing was creating a new facility that was relevant to the financial world that was emerging at that time. They wanted huge trading floors and very fine facilities, and he created those in Canary Wharf, but at the absolute extreme of quality. Beyond any shadow of a doubt, if you go and look at the Canary Wharf buildings, they are phenomenal and highly expensive and very high-quality, so there was none of the cheap and cheerful quick-fix in Paul’s vision.

I haven’t a precise date, but I think it is fair to say that Paul did not emerge on the scene until the beginning of the second half of the 1980s, whereas we set up the enterprise zone from 1979. I think that again would support my feeling that Canary Wharf did not come to that part of our country as a result of the enterprise zone. It might have affected the precise location; you would have to ask him that.

Q71 Mel Stride: Welcome to the Committee, Lord Heseltine. I wonder whether we could just go back to Ian Paisley’s question about corporation tax, which, as you pointed out, was a Treasury matter and was not something that was entertained or came about. Did you deliberate on that as a possibility?

Lord Heseltine: I have no recollection.

Q72 Mel Stride: Do you have any views on what you might have felt at the time about corporation tax-

Lord Heseltine: I haven’t views on what I would have felt at the time, because I was preoccupied with this great swathe of derelict London and how we got life back there, and I had no doubt about the techniques that were necessary. Whilst tax incentives could have played a part, I did not think they were the essence of it. The essence of it was land ownership, dereliction elimination, and the reclaiming of these great areas to let the private sector in. That was basically what we had to. But on the wider issue, there is obviously a very obvious issue in Ireland as an island, because you have highly incentivised Republic tax levels, which are not relevant in the north, and self-evidently that is a major issue for politicians to determine. It is fair to say that as one of my previous incarnations on Merseyside I would probably have views about that subject as well.

Chair: We may come back to that in a minute.

Q73 David Simpson: It is good to have you with us today, Lord Heseltine, to discuss this subject. I remember the 1980s and 1990s; I started my company then and we took advantage of the enterprise zones. But you rightly say that, in those early days, the enterprise zones were concentrated in certain areas, and I assume they were areas with a greater sway in terms of social deprivation or whatever within certain parts of Northern Ireland. The current Secretary of State that we have, Mr Paterson, has put this label of an enterprise zone-and we have not quite got to the bottom of it yet-on Northern Ireland. While the concept was concentrated in certain areas in the days that you were involved in it, we get the impression that the enterprise zone that the current Secretary of State is talking about is possibly intended to cover the whole of Northern Ireland. In your expert opinion, do you think that it is a good move to cover the whole of Northern Ireland and market it as an enterprise zone, with perhaps the lowest rate of corporation tax in comparison with anywhere else on the island of Ireland, or would it be better targeted at certain areas of Northern Ireland?

Lord Heseltine: I am not a member of the Government and I have no access to the thinking of Government Ministers on this particular subject, but in general terms, it is a question of what you are trying to achieve. If you are trying to equate Northern Ireland with the Republic, then, as I understand it, in the Republic there is a generalised corporation tax at the lower level we all know about.

David Simpson: 12.5%.

Lord Heseltine: So, if you are trying to balance that equation, you go for a much wider concept. If you are trying to deal with the subject that I was dealing with in the 1970s and onwards, then you are looking at issues of specific deprivation and trying to attract investment into targeted areas. So, it is a political judgment, depending on what you are trying to achieve.

Q74 Dr McDonnell: I would like to pursue the idea of a concept that applies to all of Northern Ireland versus breaking it down. Although I agree with you, Lord Heseltine, that the Urban Development Corporation can sometimes do a much better job, could we pursue the question of Northern Ireland as a whole as distinct from smaller zones? Do you think the smaller zones work better or do they just suck in initiatives and create a negative effect?

Lord Heseltine: What you cannot know is to what extent the investment that moves to a designated area is being removed from other, adjoining areas: is it new investment or is it targeted to that area because of the incentives? You do not know whether the investment would have gone into Northern Ireland in some place or other, and then you may say, "We want to target it into this particular area with an enterprise zone." You may not be getting enhanced investment; you may be just concentrating what you would have got anyway, but then you have got the other issue of how much you can move from Great Britain into Northern Ireland or, the other way, from the Republic into Northern Ireland, if you equate the tax incentives.

Q75 Dr McDonnell: Could we just touch briefly upon what we were talking about in terms of the term limitation, if you like? A lot of the enterprise zones were for 10 years.

Lord Heseltine: Yes.

Dr McDonnell: Do you feel that exit strategy is necessary? Do you feel it could be allowed to run on for more than that?

Lord Heseltine: I think that you can argue perfectly well that, if you have a 10-year period, that is quite a long time in terms of investment, and people can make a decision about whether that gives them a better pay-off for their investment. It also gives you the opportunity, towards the end of the 10 years, to decide whether you want to extend it. I think it would be bad policy to say "this is forever", because all of us in this room know that nothing is forever in politics, so it is better, I think, to inject a degree of certainty, even if then you review it at the end of the designated time. I would like to see the Urban Development Corporations playing a role in the country today.

Q76 Mr Hepburn: From your experience-obviously, I am from the north-east, so I am aware of the Tyne and Wear Development Corporation-what boxes would need to be ticked for you to recommend a development area for Northern Ireland? In the past, you have concentrated on urban areas, whereas, as we know in the UK, a lot of rural areas have deprivation and very low incomes, such as Cornwall and Devon. What boxes would have to be ticked for Northern Ireland?

Lord Heseltine: That is a huge question. Available sites, availability of skilled labour, good labour relations, good education, incentives that are at least as good as those that are available in equivalent locations-these would be the big issues. But, then again, I myself would not underestimate the significance of someone who is prepared to get off their bottom and go and fight for the investment.

Q77 Ian Paisley: The raison d’être of these enterprise zones: was it to attract inward investment-overseas investment-into the locality, or was it aimed to attract local entrepreneurial drive, or did it not really matter, as long as there was the investment coming in?

Lord Heseltine: I think that the last part of your observation is relevant: it does not really matter, as long as it comes. Whether you get it from overseas or whether you get it by switching it from one more prosperous part of the country to a less prosperous area, it still has the desired effect. The truth is, of course, that a lot of inward investments, the big ones, are necessarily associated with big, specific grants, which, of course, are now covered by state aid rules, but wherever you find these activities of inward investment being competed for, it is very common to find countries trying to find incentives to consolidate the investor’s decision to come.

Q78 Kate Hoey: A lot of things have changed in the 30 years or so since they were set up first, or you set the first enterprise zone up. I just wonder how you feel: has so much changed in terms of all of the Government’s involvement in the private sector and industry that is there actually no need for an enterprise zone? Particularly in relation to somewhere like Northern Ireland, do you feel that, if it was to become an enterprise zone, the effect on the rest of the United Kingdom would cause people in lots of other areas to say, "Well, why them?"

Lord Heseltine: Things have changed very dramatically and for the better-I am absolutely clear about that-and if I had to list two of the things that have changed most significantly, they would be the partnership between the public and private sectors, which just did not exist in the late 1970s, and that was driven by the incentivisation processes that we introduced, whereby we only put money on the table in the public sector if there was an identifiable partner from the private sector. That was simple incentivisation-there is nothing very profound about that idea, but it had a very profound effect, because instead of shouting at each other from the top of mountains, the public and private sector became Bill and Ben, and actually suddenly found that they were of the same flesh and blood and that they could work together in a constructive way. That has had the most profound effect.

The second thing, and it follows on, is that-I think it may well have been relevant in Northern Ireland but for a slightly different reason-in the city I knew best, which was Liverpool, everybody knew who was at fault. There was always a list of people to blame. What there was not was anybody prepared to say, "I will show you how to do it. Follow me." So, they were broken-backed societies. That has changed out of all recognition. If you go to these great cities today-I am thinking of the English cities, which obviously I know much better-there is a can-do attitude. There is a huge cadre of men and women out there, absolutely confident that they can build on what they have achieved over the last 30 years. That is an absolutely vital change.

Q79 Gavin Williamson: Lord Heseltine, politics seems to be so much about compromise, but when you were setting these up, was there anything that you wished you could have grabbed as an incentive-something that would have made them work better; something that would have made them stronger-and, if you could have had anything, what would it have been?

Lord Heseltine: The answer to your question is vision. We do not do vision in this country. If I had said in 1979, "We are going to set up an Urban Development Corporation and I have got good news for you: we are going to have an airport, we are going to have ExCeL, we are going to have the Dome, we are going to have Canary Wharf, and we are going to have an Olympic Stadium," all on the back of the vision of developing the east end of London, I would have been locked up. So, one had to do the minimum, and the basis upon which I won agreement from Mrs Thatcher, against the wishes of the Treasury and Keith Joseph at the time, was to promise that I would spend no money, other than within my departmental budget. I was able to do that because I was Secretary of State for the Department of the Environment and I had a huge budget, so I was able to just take money away from the housing or whatever it was, or roads or something, and funnel it into the reclamation of the east end of London. But if you look today, there are these extraordinary developments that have taken place, but you would be forgiven for noticing that, with one exception, they were all done by foreigners.

Q80 Gavin Williamson: That time-1979, 1980, 1981-was a very difficult financial time, probably worse than now, but you were still able to do that. You were still able to move things along in that way.

Lord Heseltine: Yes, but that was not, with respect, the problem; the problem was public ownership. I do not wish to make a party political point, but I’m going to do it.

Gavin Williamson: Go on-carry on, carry on.

Lord Heseltine: The local authorities were all Labour-controlled, and there had not been any private sector building in the post-war world. There had been massive council developments-huge flats, council houses, whatever it may be-and, over a significant period of time, the docks and the public utilities had gone, leaving massive dereliction and toxic waste in their place. The absolutely essential thing to do was to try to recreate balanced, vibrant communities, because what had happened is that the younger, better educated, more energetic, more skilled children had gone to buy their homes in the leafier suburbs, wherever they happened to be, and the people who were left were the parents living on the council estates. So, it was quite apparent to me what we had to do and it was easy to do, even in those circumstances, because the house-builders were desperate to create private sector houses in the east end of London. The moment we had an Urban Development Corporation and we owned land and we could reclaim the land, led by people like Barratt Homes and Wimpey, I think in 1981, I announced 2,000 new houses in the east end of London. This was basically the first private sector housing opportunity in recent history.

Q81 Gavin Williamson: Lord Heseltine, you mentioned an interesting point just before that: you spoke about the lack of vision and the fact that so much of the development came from foreign businesses. Do you think, as a nation, we constantly lack entrepreneurial vision?

Lord Heseltine: You cannot say yes to that, because there are companies of such excellence that are British. Many of them operate on a worldwide scale. But there is a short-termism about much of the in-built attitude and there is certainly a short-termism within the political culture and much of the media. I can give you a specific example: I think it was the October 1981 announcement of the Docklands Light Railway. That was a sort of Toytown announcement, but it was all I could get. If it had been France or Germany, you would not have done the Docklands Light Railway. It was simply not up to the job. You would have probably done the Jubilee line or whatever it was in an enhanced way. I have not thought that through, but I suspect that is probably something you would have done.

I remember when Paul Reichmann was on the verge of going bust for the first time, I think, in Canary Wharf; the Government had let him down over the Jubilee line. We had done a deal whereby the Jubilee line would be done on time, but the recession came. He was trying to let his properties, but the Jubilee line was not complete and he was in deep financial trouble. If the Jubilee line had been the responsibility of the private sector, he could have sued them, but it was a public sector thing and he did not. There just is not that ability to cast forward on a big scale, and I still believe that that is the case in the east of London today. I think that the dynamism has gone out of the process.

The Olympic Stadium is a very interesting example in that the machine of the Ministry of Transport and British Rail were going to bring the cross-Channel link in through Waterloo to London. Ove Arup spotted the huge opportunity and undertook a private-sector initiative to bring the Channel link in north through Stratford to London, with the potential to go further. Of course, Stratford is now a huge development, but it was a very close thing that we spotted that this transport-oriented concept was going to hit the buffers at Waterloo, and that actually what you wanted to do was the alternative.

Q82 Oliver Colvile: Lord Heseltine, thank you very much indeed for coming to see us, and your wise words are very welcome here. In fact, I should probably make sure that people are aware that I have an interest in that I still have a shareholding in a company that did a lot of work in regeneration as well as in public consultation. Two questions I have for you: first of all, when you set out on to actually regenerate the east end of London, did you have a vision for the kind of business that you wanted to try to encourage into the place?

Lord Heseltine: The kind of building?

Oliver Colvile: What kind of industry? Did you have a view of what kind of industry should be coming in? Secondly, one of the very big key problems which you have when you are doing regeneration is not only making sure that the transport infrastructure is there, but that you have got the skills base too, because people are not going to go and build developments and get industry there without having the supporting skills base too. Were those two things that you considered at the time?

Lord Heseltine: Personally, I am very sympathetic to the thrust of your question, but the skills base had nothing to do with the Department of the Environment, and if I tried to involve another Government Department, it would have been another reason why we just did not make progress. That is the way of the world. So, I took what I could get and it was fortunate then that the Department of the Environment was very big and powerful and comprehensive, so it had the basic ingredients.

But I would totally agree with you: it is no secret that I am a very passionate advocate of the concept of directly elected mayors in our big cities for the very reason that that is precisely how to get that corporate approach to the evolution of the cities. In my view, you need somebody who brings together the policy on education, skills, crime, transport, housing, industrial development and urban regeneration-you need someone with a vision, which is, frankly, what every society broadly equivalent to us has done.

Q83 Mr Benton: Good afternoon, Lord Heseltine. I was interested in your references to Merseyside just a short time ago. As a former councillor for Bootle on Merseyside at the time of your initiatives, I just wanted to, if I may, correct one thing you attributed. It is nice to know, and my constituents will be delighted to hear it, that it was Labour councillors at the time who were responsible for the demise of Merseyside. I would like to correct you on that before I pose a question, but the point was the decline came about through the diminution, if you like, of the sea-going industry, maritime activity and other traditional industries on Merseyside-something similar to Belfast and Northern Ireland.

What I want to do is, first of all, appreciate and place on record, because it would be churlish of me not to do so, the contribution you made and the initiative you took at that time, because it is appreciated, and I would further like to point out, in the light of your comments, that your action at that time was most welcome indeed, because part of the problem was that there was no interventionism by Government, and I think your Government at the time would collectively have agreed with that. In fact, it was the policy at the time not to intervene, so your actions were much appreciated and they were helpful, and I want to say that.

So, we move on to the dilemma that we have got now as a Committee, some 30 to 40 years later, about deciding the effectiveness of an enterprise zone in Northern Ireland. My understanding is that it embraces the whole of Northern Ireland. Obviously, in the light of your vast experience and your knowledge of these things, my question is rather a simple one. Despite the passage of time, and in the light of your experience, if you were now in our present position or now a member of Government, would you think that an enterprise zone was the answer? You have said yourself that there was no way of quantifying the efficacy of the initiative in terms of actual jobs, and I understand that because I have posed it at a previous evidence session.

So, to be absolutely blunt about my question, if you were in our position now or you were in a position of Government now, how would you be looking at the situation in Northern Ireland in terms of setting up an enterprise zone? It is not a question of either/or, because of the relevance of the reduced corporation tax. I think that would be really helpful if you could proffer an opinion in terms of those two points to the Committee.

Lord Heseltine: You raised two issues, and forgive me if I respond to your earlier explanation. I hope I did not say-I certainly do not believe it and I did not intend to say-that I thought the Labour party was responsible for the demise of Merseyside.

Q84 Mr Benton: The Labour council.

Lord Heseltine: No, I do not believe that for a minute. Liverpool was run by Conservative and Labour authorities, and the metropolitan county was a Conservative council in 1980, so I have never seen it as a party political issue. There are obviously exceptions and there are obviously cases one discusses, but in the generalisation I would not say that. I am afraid I also do not agree with you that the decline was because of the decline of the maritime industry. The fact of the matter is that Liverpool has now got a bigger tonnage going through it than it ever had in its history.

Q85 Mr Benton: That would be technology-highly technological, yes.

Lord Heseltine: It is containerisation. But what Liverpool did-and this was not the council but it was a combination of bad management and trade union militancy-was to react to the changing pattern of the maritime industry in a way that persuaded the ship owners to move. That happened at a time when-and this is the vision thing-Rotterdam, Antwerp and Felixstowe and such places were driving a new opportunity of improved labour relationships and massive infrastructure investment. So, we had this extraordinary phenomenon that the Atlantic Bridge, which is the shortest sea journey across from the east coast of America, should have been exploited hugely to the advantage of Liverpool, but actually the ships were going to Rotterdam and breaking bulk, whereas they should have been going to Liverpool.

The vision was not there and the drive was not there to see the way the world was changing. The Dutch did see it, and of course it has had massive consequences; on a lesser scale, Felixstowe, Southampton and Bristol took the same advantage. So, that is the history of it that I believe in but, as I say, there is now a totally new spirit on Merseyside and there are huge opportunities on Merseyside. It is a question of how to unlock them.

Coming now to your second issue, what would I do? I believe in competition, and I would encourage in Northern Ireland a worldwide atmosphere engendered by competition to encourage excellence in whatever field the local people feel they can excel in. So, I would not say, "Here is London’s view. You do it," because the short answer is that London does not know. It is a mistake to think there are a lot of clever people here, but there will be very clever people in Ireland who have ideas, and if you put the money on the table in a competitive environment and you say, "If we give you this money"-capital investment, by the way-"what will you do to add to it?" and they will go out into the world and say, "This is where Belfast is excellent. We have got this facility, that facility. We want to build on it." There are models.

With some trepidation, I did put the following suggestion to the Cabinet in 1990, and I will put it to you: you should look to see what has happened in Hokkaido, the northern island of Japan-the northernmost tip of the northern island of Japan-where they have a directly elected chief executive, passionately keen on developing Hokkaido. There are problems in Northern Ireland, but I tell you there are problems in Hokkaido. It is under permafrost from November to March. But the dynamism I saw when I was there-and I have to say I am now looking back quite a long time-as the chief executive was trying to build that place on myriad different schemes that he had got working with local people was an inspiration.

Of course, a high proportion of those schemes will never get off the drawing board, and that, in this country, would mean that the national media would concentrate on one failure after another and say "It cannot be done", but the mayor that I am talking about just said, "Fine, that did not work. We have got another one." So, competition was built on excellence, stimulated locally by people who live there, work there, dream there, and incentivised by Government putting the money up for bids-not allocating it-on the basis that there would be gearing.

Q86 Mr Benton: Chairman, excuse me if I misheard Lord Heseltine. I apologise but the record will reveal that he did make a reference to the Labour council.

Lord Heseltine: I did in terms of the east end of London.

Q87 Chair: I think that was a reference generally to-

Lord Heseltine: It was the east end of London, and what I said is true.

Chair: We are happy. On Europe-

Lady Hermon: Chairman, can I just pick up-

Chair: Yes, sure. We will come to Europe in a minute.

Q88 Lady Hermon: Thank you, Chairman. I am delighted, Lord Heseltine, to have you here before us this afternoon. Could I just pick up on what you have just said, and refer to your present appointment as the chair of the Independent Approval Panel for the Government’s £1 billion Regional Growth Fund? I understand the Growth Fund only applies to England.

Lord Heseltine: Yes.

Q89 Lady Hermon: Instead of looking at it becoming an enterprise zone, should we in the devolved area of Northern Ireland be looking at a Regional Growth Fund instead, or do the two work in tandem? What would you suggest?

Lord Heseltine: The answer that I gave to the previous question about money up for bids is exactly what the Growth Fund is about: it is a fund for England, the disadvantaged areas adversely affected by the cuts in public expenditure. We have the central pot. What bids have we got from local people to use the money if they win the competition? The other parallel that I would draw to your attention is City Challenge of the 1990s, which is germane to what we are talking about. It said to 30 local authorities, I believe, "We have got enough money to fund a community revival in 10 areas and we will offer"-it does not sound a lot of money now but it was quite a lot then-"£35 million over five years-£7 million a year-of Government capital. What will you add to it? You have to designate the community that is deprived; what are you going to do with it?" The most successful of all of them was the Hulme estate in Manchester, which, as one or two of you may know, was one of the worst slums in Europe. Now look at it: quite extraordinary. That was down to City Challenge.

Q90 Lady Hermon: If I could just press you on that point then, Lord Heseltine, should the Northern Ireland Assembly be looking more towards a regional fund-a growth fund-in Northern Ireland and not be worrying too much about an enterprise zone, if they had a choice to make?

Lord Heseltine: They are all part of a package. You cannot fault the concept of an enterprise zone as a means of focusing on an area that has got incentives for people to invest in, and therefore concentrating investment. That is a concept. It is tried and it works, but I think the question you are putting to me is: is it enough? I am not saying "don’t do it"; what I am saying is, if you really want to get the show on the road, you have to think bigger and see a more comprehensive opportunity.

Q91 Jack Lopresti: Did you encounter any problems with the European Commission over rules on state aid with the enterprise zones?

Lord Heseltine: Not that I know, but this was 1979. But certainly, with the Regional Growth Fund, we have to be very clear that they are state aid complaint, and that would apply, I think, to you as well.

Q92 Chair: How easy is it for you to get advice in advance of doing something though from the EU?

Lord Heseltine: I think there are a lot of very clever officials in Government Departments. They know broadly what the rules are and they can advise people, so I think the answer to your question is that there would be no substantive difficulties in advising people as to what the options are.

Q93 Naomi Long: First of all, Lord Heseltine, it is great to have you at the Committee. You mentioned a couple of words that resonated. One was dynamism and the other was vision. I suppose one of my biggest concerns about the current proposals is that the Government have some good ideas but it does not really add up to a comprehensive vision for actually driving this idea forward. But on another issue that has been raised with us with respect to enterprise zones, a number of people have raised concerns about the issue of dead- weight; so, effectively, things that would have happened anyway that were then rewarded, if you like, for being within an enterprise zone. Did you take any specific steps in order to try to avoid rewarding developers for doing that which they would have done anyway, or did you simply accept that that was part of a price worth paying in order to regenerate those areas?

Lord Heseltine: I think it was closer to the latter, but you are right that this is one of the criticisms. There were quite a lot of economists who studied what was going on and said that the changes had had minimal effect because it would have all happened anyway. It might have happened in some way that was slightly different. But you run into all sorts of complications: you can have an enterprise zone, a designated area, probably fairly deprived, and you get the investment there but the people who take the jobs all drive in from more prosperous areas. How can you control that? This is not perfection.

Q94 Mel Stride: One of the things that we as a Committee and the Northern Ireland Assembly are conjuring with in this whole debate is the cost of actually rolling this out. I guess there are, truly speaking, two aspects to this: there is the cost of the incentives, but then perhaps you have got to weigh that against the growth that would not have occurred had you not had the enterprise zone, and so on. Looking back at what you did in the 1980s, do you have any comments on those two aspects? Do you think it cost the public purse a huge amount of money, or would you argue that, through time, it paid for itself?

Lord Heseltine: In politics, there are things that sometimes are right. If you have a massive disparity of wealth and you have historic dereliction that other people have created, there is a point, if you are interested in politics and you believe in a balance, when you have to put it right. There will be a lot of people with slide rules who will measure what you did but I look back over the urban renaissance of the 1980s and 1990s and I know it was right. I wonder what Disraeli would say if he was sitting here when you asked him, "Did you think that building the London parks was economically viable?" Would he have said, "They did a fantastic job on the basis that it was near Hyde Park, so that ticks my box"? Sometimes, you just have to make a judgment about what you are in politics for.

You will never get the Treasury to adopt that view. I have no complaint about that, because it enlightens the debate between those of us responsible for spending policies and those of us responsible for looking after the cash. You give some, you take some; you lose some, you win some, and that is politics. So, I do not have any difficulty in saying that rebuilding England’s cities has been one of the most exciting processes I have ever been involved in.

Q95 Mel Stride: Less focusing here on the moral judgment of whether it is right or wrong in respect of the costs-and I think I would be on your side of the table on that-and on the purely dry economic point, do you think that the activity in the 1980s across all these zones was a net contributor to the economy at the end of the day, or do you think it was something that absorbed a lot of public money and was more about distribution than wealth creation?

Lord Heseltine: I do not know the answer to that question. There have been studies. They were going on when I was doing it and there were economists saying, "All this is a waste of money," and all that sort of stuff. Frankly, I do not mind how many tables or charts they produce, because I do not agree; I wanted to bring life and hope and opportunity to deprived areas, and it cost money.

Q96 Lady Hermon: One thing just crossed my mind, and that is I wonder if you would be so kind as to come to Northern Ireland and give just as inspirational evidence to the new Assembly after the Assembly election in May. It has been very powerful here this afternoon. Would you mind if I asked: does the present Secretary of State, Owen Paterson, seek your advice? Owen Paterson, before the general election, spent a lot of time in Northern Ireland. He was very, very generous with his time and, in fact, the present Prime Minister, David Cameron, spent a lot of time in Northern Ireland before the general election. They did talk about an enterprise zone and they did start that sort of conversation. I wonder: have either of them sought your views about your experience of enterprise zones and their success and their problems? Would you mind if I asked you that?

Lord Heseltine: No, I do not mind a bit. I have not been involved with the Welsh, Scottish or the Northern Irish Secretaries on any of these matters, but I have certainly been involved with the Prime Minister and he has talked to me at length. Indeed, I was chairman of the Committee that reported to him on urban renaissance about 18 months before the last election, and these ideas were then put to him and they were published and some of them found their way into the coalition agreement.

Q97 Lady Hermon: Would you kindly tell the Committee a little bit about how the enterprise zones worked when they were first established? Was there an overriding body? To whom was it accountable? If we were to do this in Northern Ireland, to whom would an enterprise zone be accountable? How does it actually work in practice to get the best out of it?

Lord Heseltine: I only remember in detail about the London one, and that was administered by Reg Ward as chief executive of the LDDC. There were others but I cannot remember, frankly, where the accountability would have been.

Q98 Lady Hermon: Not to worry; I am sure, if I read my history, I could find out.

Lord Heseltine: I do not think it would have been in my Department, because it was a Treasury-inspired idea, and I guess it had more to the DTI than the DoE at that time, but I do not know.

Lady Hermon: Not to worry. Thank you.

Q99 Mr Benton: You have covered the grounds of the questions I wanted to ask, but I was just thinking: to me, enterprise zones are all about wealth creation and job creation. Have you any recollection, Lord Heseltine, in terms of what actual jobs were created, what type of jobs, what type of skills were required, going back, again, to your endeavours back in the 1980s? Is there on record anywhere the type of jobs that were created, the number of jobs; some record of accountability as to what the initiative actually appreciated? Also, I would like to ask, again, in retrospect: did you ever consider at any time an enterprise zone for Northern Ireland?

Lord Heseltine: It would not have been anything to do with me. I think Humphrey Atkins was the Secretary of State at that time, if I remember. Whether he did or did not, I simply do not know. But on the other aspect of your question about the sort of jobs: again, as I said, there were economists who did studies on these things. My reaction would have been, "Well, what does it matter?" I am not a great one for saying that there is an alpha job and a beta job and a gamma job. People are actually rather interested in whether they get paid, and I leave it to them to decide what sort of satisfaction they get, as long as it is legal. So, I do not have an answer to the question, but I suspect that you could get an answer, but I do not know what you would learn by it because that was 1979 and the world is totally different.

Q100 Dr McDonnell: Lord Heseltine, I have a simple question about the Urban Development Corporations, but before I ask it, I thank you for your inspiration and your leadership and your vision, because I think you have been an inspiration to many of us, and certainly, while you may not have been much in Belfast, I took part in and was a director of an Urban Development Corporation called Laganside that totally renewed the face of Belfast, and a lot of it flowed from your work here. Could you just maybe, in a couple of minutes, tell us why you felt the Urban Development Corporation worked better than the enterprise zone? I think you alluded to it.

Lord Heseltine: Yes, without any doubt, because the Urban Development Corporation centralised in one body land assembly, planning, urban-dereliction elimination; it had the resources to get hold of an area, to draw up a plan for it, either inherit the land by transfer from the local authorities or public utilities, give planning consent effectively and quickly, and if there was a piece of yesterday’s dereliction, they could clear it up and make the site competitive. That was the first thing.

The second thing: it was a partnership of the public and the private sector, and it was a partnership of the central Government and the local government. All of them were resisted bitterly by local authorities, but I designed them very carefully to reflect the legitimate entitlement of local authorities. I put the leaders of the local authorities on to the Urban Development Corporations. I made Nigel Broackes the chairman-he was a very distinguished property developer at the time; I made Bob Mellish, who was a former Labour Minister of Housing and an east end Member of Parliament, the deputy chairman; and I put private sector expertise on. Again, I dare say they would not ever say it, but several of the Labour leaders said to me years later, "You would be amazed what a liberating effect it was to be freed of the constraints of my party group."

Mr Benton: I understand that.

Q101 Dr McDonnell: Lord Heseltine, perhaps you might come back on another occasion and give some advice to the new generation of Conservative MPs, some of-

Lord Heseltine: I wasn’t that good at giving advice to the other generation of Conservative MPs.

Dr McDonnell: Perhaps we might have another session with some of my friends who are here with us today and some who are not quite here.

Chair: That one would have to be in private, I think. Mel?

Mel Stride: Was I question number nine, Chairman? Sorry.

Chair: 12.

Q102 Mel Stride: 12-I am getting ahead of myself here. If you were to instigate an enterprise zone for Northern Ireland-and, in fact, just looking at the last question here, it has more and more dawned on me, the obvious, I suppose-there is a huge difference between what you were doing with enterprise zones as derelict city centres and reclaiming and so on, and what we are looking at in the context of Northern Ireland. Yours might be termed perhaps a very important but micro approach, and this is perhaps a bit more macro, about shifting the balance of the economy in Northern Ireland from the public to the private sector and so on. What sort of things would you instinctively look at in the case of Northern Ireland and an enterprise zone, given the things that we are trying to do in that context?

Lord Heseltine: Excellence on the ground, availability of skilled labour, availability of local leadership; in a word, strengths. Build on strength.

Q103 Mel Stride: If we took the leadership aspect of that, what would you be seeking to do as Government to try to enable that to rise and be strong and happen?

Lord Heseltine: I think that I am going to avoid that question, because the complexities of Northern Ireland politics are not something I have ever been involved in. I know that there are-as I search for my words-many pitfalls for English MPs, or ex-MPs, pontificating on how to run Northern Ireland. I have managed to get to this advanced age without falling into one and I intend to avoid it from now on, if I may. There are just so many local involvements in Ireland that you have to understand the subject like you do, and I do not. Although I have to say I did spend a very happy 18 months in Northern Ireland at the age of seven, in the war.

Oliver Colvile: It has a very good tourist industry as well.

Lord Heseltine: I was at school there.

Q104 Oliver Colvile: We have been over to southern Ireland, where we have looked at how they have been able to encourage multinationals from all round the world to come and invest. One of the things that they also set out to do in a big way was to try to encourage a cluster approach, so they have got pharmaceuticals, they have got information technology and things like that too. We are not talking, as you rightly say, about regeneration of land, because that is another part of the equation, but do you see that clusterisation as being an effective way of trying to get the regeneration going, and would you also, as I do in Plymouth, which is my constituency and where I have similar issues to those in Northern Ireland, try to make sure that you can use the universities much more in order to act as the catalyst for regeneration too?

Lord Heseltine: If I may refer you to my previous answer-I would look for strengths. As for your question about how to identify the particular strengths, such as strong universities or potential clusters of sophisticated industries-find out where there is strength and then try to build on it. Self-evidently, a good university with spin-off activities, a cluster based upon a prestigious company that wants to develop its suppliers or associated companies, whatever it is, are strengths.

Oliver Colvile: Thank you very much. Perhaps you will get so many invitations during the course of it that at some stage we might have a further conversation about the Plymouth economy as well.

Q105 Kate Hoey: You mentioned earlier the politics. Obviously, of course, many of the reasons for people asking for enterprise zones and so on stem from the fact that the Republic of Ireland has much better incentives for businesses to invest from abroad and, obviously very importantly, the corporation tax at 12.5%. Do you see that as something that is being used perhaps just as almost a reason for not doing things in Northern Ireland, unless they get the corporation tax down, and that perhaps, really, it is not just about equalising with the Republic, but more about having much more of a have-do and we-can-do approach and remembering that we are part of the rest of the United Kingdom, who would not actually have their rate going down to 12.5%?

Lord Heseltine: I do not think that the Republic corporation-tax level is an issue related specifically to Northern Ireland, because it has exactly the same effect upon Great Britain.

Kate Hoey: Exactly-that is my point.

Q106 Chair: One of the points put to us is the effect because Northern Ireland obviously shares the land border with Ireland. Do you see that as being particularly significant though? Perhaps not.

Lord Heseltine: I do not think we are conducting an inquiry into whether the border should be changed.

Q107 Chair: No-not today, we are not. Certainly not today, no. But that is seen as being the problem: it is the only part of the United Kingdom that shares a land border with another part of Europe.

Lord Heseltine: Scotland is beginning to throw up similar issues.

Q108 David Simpson: Just very briefly, I have listened to everything that you have said, Lord Heseltine, in relation to economists, and I agree with you from that point of view, and political decisions and all the rest of it. Whenever we look at it all, even if we had lower corporation tax, we had an enterprise zone, all of those things, and all the ducks in a row, would you agree that it comes down to a gamble and taking a risk, along with the vision that you talked about? There is no guarantee, there is no silver bullet, there is no magic wand but, at the end of the day, somebody somewhere has to take a risk and say, "This is what we are doing. We are going to go for it."

Lord Heseltine: I agree with that, and there is no short-term solution.

Chair: Just a few minutes left. Does anybody else have anything they would like to ask?

Q109 Mr Hepburn: What would be the most important for Northern Ireland: to get the corporation tax on a par with the Republic, or to get an enterprise zone, if it was one or the other? For example, if they go ahead with an enterprise zone, is it absolutely futile because they are not on a par with the Republic in terms of corporation tax?

Lord Heseltine: I do not think it is fair to ask me that question, because this is so much tied in with the Anglo-Irish relationships and the issue between Northern Ireland and the rest of the United Kingdom. This is a matter for Government. It is lonely decision making and I do not think I wish to take a stand on that.

Q110 Chair: It is interesting that the Irish Government would be happy to see a harmonisation of the corporation tax. Could I ask a slightly more general question? As you are aware, we have got the debate on youth unemployment at the moment, which is at a quite worrying level, as are the unemployment levels generally across the United Kingdom, and that is even before the impact of the cuts. What comments would you have on that? How would you see that going? What could best be done to improve that?

Lord Heseltine: I think we have gone through a period where the effect of the cuts has become the agenda item, and the dialogue has been conducted very largely between the media and representatives of those affected by the cuts, and those representatives have a job to do. If you ask a trade union official what he thinks about the cuts, he will expand at considerable length about the damage to his membership and everything else that occurs to him or her. If you talk to a representative of the voluntary sector, you will get exactly the same story. If you talk to a representative of local government, you will be told of the harrowing experiences that are going to happen. And that has been basically the backdrop against which this whole dialogue has taken place.

What you do not get is any attempt to quantify what is happening in the private sector marching in parallel. We can all take a cynical view about economists, and I probably share that approach, but as I understand the view of the OBR-the Office for Budget Responsibility-the British economy in this current year is likely to expand at bordering 2%; that is the sort of figure. Make it 1.8%, make it 2.1%-they do not know and I do not know-but we are talking about that sort of figure.

The private sector is four times the size of the public sector and employs 20 million people. 20 million people growing by 2% is 400,000. Job losses in the public sector are something like 80,000 in the current year. If you put that together-or anything like it-we are not going to see soaring levels of unemployment. I do not want to appear harsh or anything like that, because there are going to be lots of people who lose their jobs, and that is painful for them, and they will have to move-that is often inconvenient and difficult and sometimes not successful. But the macro position seems to me that, if the economy is growing as we are told it is, then there will be a very significant number of private sector jobs, which is what the Government’s strategy is based on, and that will be bigger than the losses in the public sector. My guess is that that is what is happening.

We all know, for example, that the manufacturing base is enjoying, in many sectors, very significant export-led expansion because of the devaluation of the pound, and people then say, "But it is only 13% of the economy, so what are you talking about?" The fact is that anyone who knows anything about the manufacturing sector knows that, over the last two decades, they have outsourced anything that can be done by a service-industry company. They all used to do their own printing, they would have their own window-cleaners, they would have their own canteens-they would have all these things within the manufacturing sector. They have now outsourced all of that; the manufacturing sector is, therefore, much smaller, but the dependent service-industry sector is, therefore, still there. If an exporter is doing well, you can be absolutely sure that the hotels near that particular person will be full.

You can go on and on about this, and my own view is that we will look back on this period as a difficult period, but not as harsh and not as long term as it has been forecast to be. Next year, the OBR is forecasting even better growth figures than this year.

Q111 Chair: It has been a fascinating session. May I thank you very much indeed on behalf of the Committee for coming and sharing your experience with us? I am sure it will be very valuable. Thank you very much indeed.

Lord Heseltine: Thank you.

Chair: We will reconvene at 4.15, because I am certain there is going to be a vote.

Examination of Witness

Witness: Professor Greg Lloyd, Head of the School of the Built Environment, and Professor of Urban Planning, University of Ulster, gave evidence.

Q112 Chair: May I apologise for the delay? We will be interrupted in a few minutes. We will have to vote and we will have a 15-minute suspension then, so I do apologise. That is the way this place works, but thank you very much for joining us this afternoon. If I can just get to the right page, I notice from reading your submission that you are not in favour of an enterprise zone being created for Northern Ireland.

Professor Lloyd: No.

Q113 Chair: I wonder if perhaps you could just give us the reason why in summary.

Professor Lloyd: First, may I thank the Committee for the kind invitation to come across?

Q114 Chair: You are very welcome.

Professor Lloyd: Thank you for considering my comments. Really, there are three planks to my argument, the first of which is that-as Lord Heseltine very eloquently described-enterprise zones were an instrument of the 1980s and they were born of a particular context, they were built up upon certain value judgments, particular types of economic thinking, and they were used in particular ways. It was very interesting, for example, that Lord Heseltine referred a lot to the London Isle of Dogs. Enterprise zones were designated in Belfast, for example, on two small sites. In one city in Scotland-in Dundee-the enterprise zone, so-called, comprised seven small unrelated, unconnected sites. They were very different. They were in completely different local contexts, and they had a different property market, labour market and skill-sets, if you like, associated with them.

Rather more importantly, the research evidence-and there was a lot of it-conducted both by the Department of the Environment throughout the 1980s, and also by academic economists and so on, was not unambiguous. The enterprise zones had differentiated impacts at different times, in different places, for perhaps myriad reasons, and they were not all the same.

So, my first point is that what was going on then is not appropriate to what is going now. I will take Clydebank in Scotland as an example. The Singer sewing-machine factory closed, a cause célèbre in Scotland, and an enterprise zone was put in place. It took an old industrial plant and factory-so big indeed, it had its own railway station-broke it down and built new property. That new property then accommodated new, mainly spill-over industry and activities coming out of Glasgow, including a local radio station. So, I think we have got to be very careful about how we deal with this particular concept. The research evidence showed that, in the main, there may have been some successes in certain places, but, by and large, they were not sustainable. Indeed, the 10-year period-in business and industry, 10 years is nothing-was not a substantially significant period. That is my first point.

My second point is that Northern Ireland is undergoing a vast change in its governance arrangements. You will be aware of the Review of Public Administration, which is looking at the review of local government; you will be aware of the modernisation of the statutory land-use planning system, which is currently in front of the Environment Committee in Stormont; and you will be aware of the refreshed Regional Development Strategy, which is out for consultation. You may also be aware that, in Northern Ireland, just yesterday, the Dublin and Belfast Governments published a joint paper on looking at how they can manage their planning ideas across the island of Ireland, because the island of Ireland is a very small place and there are clear economic benefits to be gained from integrating-I do not know-water, sewerage, energy and so on and so forth. That is a technocratic issue; it is not political.

The third point is that we have moved on considerably, and I think an enterprise zone is essentially a property-market device to encourage new-build occupation. That is essentially what it is about and I think it would be very retrogressive at this stage, when Northern Ireland is trying to re-democratise its planning system, when it is trying to create a planning system which can actually provide the vision and can actually integrate 11 Departments of State, to get them talking from the same hymn sheet, and actually to have a strategy, to actually understand what is going on in Northern Ireland within the wider island of Ireland and within the greater Great British context. So, I have three major points of dissension, chair.

Q115 Chair: I think we will come back to the planning issue a little later, so not necessarily dwelling on that, but yes, things have moved on since 1980 in Northern Ireland, the main reason being because of the terrorist situation. There are still, as you will be aware, very many people in poverty in Northern Ireland. Economically, it underperforms, so, in some ways, it has not moved on. Politically, it has, and that is very welcome, but in some ways it has not really moved on. It had a very bad unemployment rate in 1980, and it has a relatively bad rate now, so have things changed that much?

Professor Lloyd: Not really. If we look at the United Kingdom context, it is still a relatively underperforming region/devolved region-state within that context. It has marked divisions; those marked divisions sometimes have particular lines to them. I was privileged to serve as an independent commissioner on Lord Best’s commission looking at sustainable housing in Northern Ireland’s future, and one of the big issues for us was grappling with the problems of affordable housing. It is quite interesting in Northern Ireland at the moment that we have a slightly destabilised land and property sector because, on the one hand, we have oversupply of residential property; on the other, we have undersupply of affordable housing. How we reconcile that is a major issue. As you rightly say, behind that there are marked economic differentials that we need to address. It is a small place of 1.8 million people in a small patch of land, and we have to look very carefully at what the structure of Northern Ireland’s industry is and the way that we can actually understand what is happening and we can begin to develop it. We cannot do that simply by throwing an enterprise zone at it, the effects of which would be very anarchic in my view.

Q116 Lady Hermon: Two questions: one that appears on my paper and the other one that has just floated into my head following what you have just said. You speak very passionately in opposition to an enterprise zone in Northern Ireland at the present time and you feel it is very outdated, so how did you respond when you heard the present Secretary of State for Northern Ireland, Owen Paterson, speaking in such strong support of having an enterprise zone in Northern Ireland? Were you surprised, or how did you respond?

Professor Lloyd: I am not a politician, so speaking as an objective academic I am shocked-I will be quite frank. I was absolutely shocked. The reasons were this: Northern Ireland is undergoing, as I said, the Review of Public Administration, the modernisation of planning and is considering its Regional Development Strategy. The Planning Bill, which is currently before the Assembly, is the largest piece of legislation being pushed through. It has about 258 clauses. One of the clauses just happens to mention an enterprise zone, and I have argued very strongly against it. There is no substantive argument for it. It equally suggests provision for simplified planning zones; I would argue against those, unless they were managed very, very carefully.

But it struck me as being rather odd that, if Northern Ireland is trying to resurrect, refresh, bring about an appropriate and democratic land-use planning system-one that is much more akin to what is going on in Wales, Scotland and England-to suddenly impose a region-wide simplification of planning would not help matters at all. It is not that that is needed; what we need is a strong strategic understanding of what the Northern Ireland economy is going through and how we can actually prepare, provide the infrastructure and start locking in the skills, the labour market and all the other dimensions. We cannot go at this in a very simplistic, lateral way.

Q117 Lady Hermon: May I just follow up on that? Do you actually make a very deliberate and conscious decision to write to the Assembly when proposals come out for consultation and legislation is out for consultation? Are you one of the very good contributors to give the contrary view?

Chair: Sorry, there is a division now in the Commons. We will reconvene at 16.30. If there is a second vote, we will reconvene at 16.45. I do apologise.

Sitting suspended for a Division in the House.

On resuming-

Chair: Back in session-sorry about that. Sylvia?

Q118 Lady Hermon: Thank you very much indeed, Chairman. Just to recap where we were before the break for the vote, Professor Lloyd, you have mentioned with great passion that you are not enthusiastic about an enterprise zone in Northern Ireland in 2011. You feel that it is outdated. And I had asked you if, in fact, you are a regular contributor to the Northern Ireland Assembly when proposals come forward, as you have mentioned, about planning and the words "enterprise zone" appear. Do you then formally write to them? Are you very good about drawing their attention to the fact that it is an outdated concept? I am not checking on what you do. This is just such a refreshing viewpoint for us in the Committee, and it always gives us a balance. In fact, we have just heard from someone who is very much in favour of an enterprise zone, a very distinguished witness in Lord Heseltine, but it is very interesting to hear a completely opposing view. So, I just want to make sure that your opinion has gone on the record within the Assembly.

Professor Lloyd: Thank you very much indeed. As an academic, I am fortunate enough to be involved in planning, development, regeneration, housing-these types of issues-and, at this present point in time, particularly in Northern Ireland, there are a lot of changes in those domains. I think I have got six consultation papers somewhere on my desk that I will have to respond to. I saw this one rather late on, I have to say, just before Christmas, so it did spoil my Christmas because I had to reflect on it and respond.

Q119 Lady Hermon: But you did respond.

Professor Lloyd: I think it is important and I do believe very strongly in a town and gown relationship; I do believe strongly that academics have a role to play in putting forward a voice, because it is just another perspective. But in this case I felt it was important do so.

Q120 Lady Hermon: Thank you. I am very encouraged to hear that. In your evidence, too, a phrase that you used struck me particularly forcefully, and that was that you believe that an enterprise zone "strikes at the very idea of devolution in Northern Ireland".

Professor Lloyd: Yes.

Q121 Lady Hermon: Would you kindly elaborate upon that? It is a very striking phrase to use.

Professor Lloyd: It is just that, in 1999, when devolution took place, I was actually then living and working in Scotland, and I was quite involved, not politically, in advising and being part of the discussions about the modernisation of land-use planning in Scotland, and it struck me that it was very important that, for the first time, the devolved states could actually begin to consider what their particular circumstances required. It was important to have a debate about that and, again, in Scotland, the modernisation of planning has taken since 2001 to 2012 and it is still coming through and the benefits are just being seen, in my mind.

When I then found myself in Northern Ireland and the peculiar characteristics of Northern Ireland’s governance-the relationship between central Government Departments or the Assembly Departments and local government; the way communities and so on operate-it struck me that Northern Ireland has embarked on a journey in which it is finding its feet, if I can put it that way. It is trying to find a set of bodies that can best reflect the needs of the community, bring that community together and have a discussion about things. It is very different from what prevails in England, Wales and Scotland, and that process is well advanced, actually, and it is growing arms and legs. To suddenly have an enterprise zone, if you like, layered on top of it, I thought would be a retrospective step and would effectively go against the spirit of devolution as I understand it.

Lady Hermon: Yes. Thank you. Very interesting.

Q122 Chair: But surely, for some things-for example, corporation tax-the decision could be devolved to the Assembly for them to take.

Professor Lloyd: Yes. Once we begin to look at the powers that the devolved Administrations have, if it is deemed appropriate, of course. But to my mind-and this would apply equally to Wales; it would apply equally to Scotland-what each devolved Administration needs is a strong and robust understanding of what is happening in their jurisdiction. Enterprise zones sometimes are predicated on a one size fits all; it makes certain assumptions about the designation; it makes certain assumptions about the way property markets and conditions are; about the skill markets and how they relate; and so on and so forth. The conversation earlier with Lord Heseltine, I thought, was lovely, because he was demonstrating how complex and holistic this is. The answer is a very simple one: can we please drill back to a concrete understanding and then devise a strategy from that? I think, if we throw everything up in the air and we just hope for happenstance, it all lands in the same place.

Q123 Oliver Colvile: One of the problems is, isn’t it, that you need to get Government Departments actually working together and thinking across the board? We saw that when we had a discussion about the skills base and infrastructure and things like that. Do you think that could be a problem in Northern Ireland?

Professor Lloyd: It is a major problem-there can be no doubt about that-for very, very particular reasons. But if we look elsewhere-for example, if we look to Scotland, we find that, under its planning modernisation, it introduced this wonderful concept of a National Planning Framework, and when that was being deliberated and scrutinised by the Finance Committee and the Environment Committee in Scotland, they said quite unequivocally, "This has to be given statutory force", because it provides consistency and certainty for decision makers, both public and private. It came into legislation in 2006; it is now bedded in. The second version is out. It is debated in the Scottish Parliament. The lovely thing about it is that it is actually promoting a better understanding of public and private relations. So, in other words, we are now beginning to talk and understand each other’s viewpoint, rather than what Professor Sir Donald MacKay notably said in a paper a number of years ago, "Simply shout it at one another and shout it very loudly". I’m sorry: it’s 2012; I think we’ve got to move on.

So, yes, I do believe that it is a devolved matter, but you still need that strategic framework within which to operate. Northern Ireland has started that. It has a Regional Development Strategy under consultation, but that is free-floating, free-flying, away from the land-use planning system, which is the responsibility of a different Department. So, you have the Department for Regional Development and the Department of Environment, and they are not talking. It is a problem.

Q124 Naomi Long: Thank you, Professor Lloyd, it has been very helpful, but from listening to what you have said so far, I am slightly concerned that we are using the phrase, "enterprise zone", to mean what it meant in the 1980s, in which case I think your hypothesis is correct. I am not actually sure-and I think it is important that we drill into this-that the definition of enterprise zone, as used by the Secretary of State, is necessarily the same thing. Part of the difficulty that we have, I think, as a Committee is that we don’t actually know what the definition of an enterprise zone, as it has been put forward by the Northern Ireland Office, actually is in terms of detail. We know some of the ingredients that would go into making it from their perspective, because they have mentioned corporation tax, planning, and a few other things. Do you think it is possible that you are right that the enterprise zone from the 1980s isn’t the right answer for Northern Ireland, but that there are other measures that could be taken, a different definition, that would actually mean that you could take some strategic action, combining what happens in Northern Ireland with what happens here at Westminster, that would make Northern Ireland more competitive?

Professor Lloyd: I think the definition that is currently understood by the Secretary of State is the same as that used in the 1980s. It’s got all the same ingredients-that is my problem. The momentum behind the proposal to have an enterprise zone across all of Northern Ireland was contained in the Bow Group’s report and deliberations-a very substantive report, I may say, with a foreword by Lord Trimble. It advocated the way forward. The thinking behind that, the logic behind that, is identical to that expounded in the 1980s. My argument simply is: we are now 30 years on, we have different contexts, we have different circumstances, we have different changes going on in Northern Ireland, and what we actually need is greater certainty rather than less certainty. So, I think we have to look for an alternative. Northern Ireland does need support and it does need nurturing.

I was fortunate enough, at the end of last year, to attend a lecture by President Clinton, for example, in Magee College, University of Ulster. President Clinton said that Northern Ireland had to look to its strengths, and he cited the green economy, the green environment, renewable energy, tourism, food, and he was quite adamant. He said, "We are faced with food-price inflation, food security; let’s nurture our land." An enterprise zone may not necessarily nurture the land; it might introduce much freer arrangements, which would worry me slightly.

Q125 Lady Hermon: Could I just clarify one little point? Have I understood you correctly, Professor Lloyd-please correct me if I haven’t-that, in fact, it was Lord Trimble-David Trimble-who may have inspired the current thinking of the present Secretary of State?

Professor Lloyd: No, I would not go as far as that. I would not know the background to it.

Q126 Lady Hermon: So, the date of Lord Trimble’s publication then, is this a recent-

Professor Lloyd: No, he wrote the foreword to the publication by the Bow Group, which articulated the ideas and the thinking around the enterprise zone. But, to my mind, it was a reprise of the 1980s.

Chair: We don’t yet know, though, do we?

Q127 David Simpson: No, we don’t. That is one point I wanted to come to, Chairman. I know I have a question later on, but just to follow up on what Naomi was saying, whilst we haven’t got the detail of what the Secretary of State means by it, my understanding, for whatever that is worth, is that the enterprise zone would use the whole of Northern Ireland as a marketing tool, as PR, "Northern Ireland is open for business", but within that there would be the cocktail measures of probably lower corporation tax, help with research and development with companies, and such similar things. My understanding is-and I stand to be corrected-that it is not of the old 1980s and 1990s, and I remember that period and it was good for its day. If that was the case-if it was a marketing tool, enterprise zone, for all of Northern Ireland, but part of a cocktail of measures-would you agree with that?

Professor Lloyd: No.

Q128 David Simpson: You don’t want to think about?

Professor Lloyd: I have thought about it, actually, and that is a very challenging question, I must say, Mr Simpson, and thank you. But I also have to say that, if you look at the planning world in Northern Ireland, it is beset with a number of problems. We know about PPS14, for example, looking at housing in the countryside, and we know that the Planning Appeals Commission has been overwhelmed in the past; we know that the Planning Service staff are being redeployed and it is being weakened, just at a time when we should actually be, in my view, strengthening it to be able to link planning reform to the transfer of those responsibilities to local government, if that is the way we are going.

The thing is Northern Ireland needs more certainty, more understanding at the moment, against which we can then put in place the appropriate development and, more importantly, to my mind, actually have the right infrastructure, because, at the moment, infrastructure is always an afterthought. We always plan backwards; we never plan forward. We can go to lots of countries in the world-New Zealand, for example, or Canada-where they do not have planning; they have Ministries and Departments of infrastructure. They talk about infrastructure and then the regulation of the development to make sure it fits with what the community wants. Because, at the end of the day, planning and development is a highly political process and it takes place in very, very tight communities, and I think we need to recognise that.

Q129 Oliver Colvile: I will go on to my question in a second, but as you know, I have done, as I mentioned earlier, quite a large amount of work in this regeneration stuff, and I am just curious to know if you have any idea at all: when developers actually submit planning applications and try to take them through that process, if they are not successful, what they then do is go for judicial review. Is it the case that judicial review of planning applications is quite high in Northern Ireland, because there’s a real sense of frustration amongst developers that they cannot actually get their way forward?

Professor Lloyd: Yes, that is quite a complex position, because if a developer puts in a planning application and it is refused by the Planning Service-and we need to remember, of course, in Northern Ireland that local authorities are not the planning authority; there is simply a statutory consultation, so there is a mismatch with the community and the elected members-developers then can appeal that on planning grounds or opt for judicial review on procedural grounds. There is an anecdotal sense that there has been a tendency to go to judicial review rather more compared with England, Wales and Scotland-that is correct. But that would simply be related to process, not the details of the planning-the actual planning arguments.

Q130 Oliver Colvile: You wrote in your paper that you supported the Independent Review of Economic Policy, and you have also suggested that you are not very happy with the idea of an enterprise zone as well, but don’t you think the two could actually work much more closely together?

Professor Lloyd: Oh, dear, no. I am sorry.

Oliver Colvile: That’s alright.

Professor Lloyd: The Independent Review of Economic Policy in Northern Ireland was conducted by Professor Richard Barnett, who is Vice-Chancellor of the University of Ulster, and his view was that the way in which the Northern Ireland economy can stabilise and grow is by improving innovation and productivity-that was the key essence-and it had to be highly qualitative. This was a marked change. So, we had to look for sectors that would allow us to demonstrate the returns there, and I think that requires a very sophisticated economic strategy. It is not enough, for example, simply to say it is about rebalancing between public and private. Yes, that may be important, but we don’t actually then, in saying that, understand perhaps how much the private sector is actually dependent on public expenditure. So, rather than simply saying, ‘We will reduce the public and the private will step up’, if the private is totally dependent on the public, it too will come down.

I think we need a much more sophisticated understanding of what is happening in Northern Ireland, how responsive the types of sectors that are ready to grow, innovate and diversify would be to tax changes. Enterprise zones might simplify planning and actually might stop certain investments at that high-quality end, because, if you can build a lovely property, you don’t know what is coming next door, and that could actually diminish your investment, so we have to be careful. To my mind, rather than that, I would much prefer a much more nuanced industrial understanding and economic understanding, and we could then put in place the appropriate regulations and organisations.

Q131 Naomi Long: I suppose the question really that I wanted to pursue with you is specifically about the aims, if you like, behind the enterprise zone. From what we have heard from the Secretary of State, which has been quite free-form-I think that is the polite way of putting it-it has been about stimulating entrepreneurial culture. This feeds into the point which you have made about rebalancing the economy. Part of the difficulty in Northern Ireland is that so much of the private sector employment is actually being now hit by public sector cuts, because it is essentially public sector funded underneath. The Government have been saying that they want the enterprise zone to try to stimulate entrepreneurial activity and culture, to encourage new business start-ups and boost economic activity. If you do not use the enterprise zone nomenclature for this, what would you suggest as an alternative means to try to stimulate the private sector in Northern Ireland?

Professor Lloyd: Again, it’s a tricky one. It goes back to the definition of what the enterprise zone is. When the enterprise zones were first designated and put into place, they were seen as a way in which the land and property sector could kick-start a particular area. It was a land and property sector-driven thing. In certain instances, there clearly was an undersupply of appropriate premises for new investment, and in those certain instances it may have worked. It is very different today in Northern Ireland: we actually have an oversupply of top-quality office space and other types of buildings, so that isn’t our issue.

What we need to do is to take up on what the independent Barnett review said and begin to look at what the needs of industry are in terms of nurturing innovation, of matching those issues to what is happening within the labour market, and linking it to the educational sectors, because Northern Ireland has got two very large universities and it’s got further education colleges, which could nest together. We must try to integrate these particular issues, because we cannot allow them to simply fly in close formation-they have to be brought together. So, my view is that the enterprise zone may have been fit for purpose in 1980, when it was introduced, but I don’t consider it to be so today, because we need to find alternative ways of encouraging industry.

Q132 Naomi Long: Just on that point, in the last few weeks-in fact, in the last few days-there have been a number of significant investments in my own constituency: either contracts that have been won competitively or foreign direct investment. One of the features of that has been based around a clustering effect. So, for example, with Harland and Wolff, and with the two universities, there has been work done on, for example, tidal power and wind power, and there has been a certain clustering effect, where we now have foreign direct investment linked around that, where companies want to come to work in that general area. More recently, there has been some software and technology clustering, where there have been a number of job announcements-in the last 24 hours, actually. Do you see that that model of identifying areas of existing growth, albeit small-scale growth, and then trying to invest further in that as a driver for change, is a more sustainable model than, for example, something like a corporation-tax cut across the board or the enterprise zone concept, which is a more general approach to economic regeneration?

Professor Lloyd: Yes, I do, because if you accept that an enterprise zone would involve the simplification of planning regulations and so on, by actually having a much more proactive, positive planning system, you can encourage those clusters. It is actually the raison d’être of the planning system. The planning is there not only to regulate inappropriate development and to protect property values; it is actually there to promote appropriate development-clustering-to realise agglomeration economies of scale. So, if you could bring together three or four companies in the same sort of sector, the next thing you know a bank might move in to support those four or five firms, or maybe a small technology would go in to offer them the support they need. So, suddenly, instead of four companies, you could end up with eight. That is good planning, and that is the type of planning we need, where planning is actually saying to these companies, "You come in here. This is the type of infrastructure and support that we would be looking to provide". In other words, we are nurturing them and celebrating them. That is the side of planning that does not often get a fair crack of the whip and is often not recognised by many people.

Q133 Dr McDonnell: I just wanted to touch on that. You heard Lord Heseltine say that he was very excited about Urban Development Corporations and felt that they were a more appropriate answer. What do you feel about that?

Professor Lloyd: That is a very interesting alternative, because when they were introduced in the 1980s, the enterprise zones were separate, although they were closely aligned in terms of their political thinking. The Urban Development Corporations were very innovative in many ways: they allowed for this positive development; they allowed for compulsory acquisition of land, and land assembly; they allowed for positive planning, infrastructure; they were champions, and we don’t have that, in many instances. They were actually champions of going out and saying, "Please come in to Cardiff Bay, come in to Laganside, come in to the Isle of Dogs", and so on and so forth, but they were not democratic. They were actually imposed: they were selected; they were not elected; and there were problems in each of those places in terms of the relationship with the local community. If we could overcome that, if we can actually make a development agency or a corporation act responsibly and be accountable to the local community, wonderful. I think that would actually go a long way in providing the technical support.

Q134 Dr McDonnell: I want to follow that because, when you say they were not democratic, that is interesting. But are you implying that they need to be democratic, or are you implying that they work better by being undemocratic?

Professor Lloyd: Gosh, I can see a PhD thesis in there.

Q135 Dr McDonnell: Go easy, because I was the local representative on Laganside, so I want to think that they were democratic-nearly democratic.

Professor Lloyd: I think they were democratic in certain instances, for example to the political system. I don’t think they were necessarily democratic to the local communities, and that is worrying. There is a lot of documented evidence, for example, about what was going on in places such as the Isle of Dogs or Cardiff Bay, where decisions were taken which the local community felt either they had not been privy to those discussions or there was no way they could contest it if that was the case. But the Urban Development Corporations provided the technocratic delivery of positive planning. They had a vision, they had a master plan, they pulled in the finance, they could exercise executive power on land acquisition and land assembly-they could do all that, wonderful, but if only they had brought along a wider constituency, they would have been accepted; otherwise, we are back into the politics of resistance, and I don’t think we want to go there, frankly.

Q136 Oliver Colvile: There were most certainly a number of schemes that I was involved in where we actually got the local authority-it was here in England-to produce a master plan for the whole site. It went out for public consultation. The public consultation then went in. The local authority-obviously, the politicians-ended up by adopting it after there had been a significant amount of consultation, so people had actually had a say in that. That way, when then the planning application went in, it fulfilled all the criteria that had been discussed within the master plan, and that then didn’t touch the sides at all, and that seemed to be a very effective way of doing it. Do you believe that actually taking that kind of approach in Northern Ireland would be quite a helpful way of doing it?

Professor Lloyd: It would be exceedingly helpful, but there is a long journey to go before we can actually get there, because ever since the early 1970s, when planning was centralised in the Department of the Environment, ever since local authorities were removed from the direct planning decision-making process, that centralisation has engendered a suspicion among most people about what planning is about. It has engendered, in some instances, an apathy, where people simply say, "Well, you are not going to pay any attention to me anyway". We need to engender that culture change, as it is quite often called.

Again, if I may just refer to Scotland as an exemplar: in Scotland it has taken 10 years of planning reform to bring about a better sense of understanding that planning is not there simply to stop; it is there to promote the better type of development schemes, but it involves rights and responsibilities. In other words, people have to be able to participate and engage. It is incumbent upon Government and the planning authority to go out to bring the public in, but it is equally incumbent on us to encourage that conversation with the public.

There is a lovely breakthrough, for example, that has taken place in Edinburgh, where, as part of this culture change, the local authority-the City of Edinburgh Council, which is the planning authority-together with the local property sector, have come together and they have agreed what is called an Edinburgh Concordat. Thinking ahead, this has set out, in very simple language, exactly when the developer comes in, so they know exactly what they have to do, and the planning authority has got milestones by which they respond. The anecdotal evidence, because it is just evolving, is that it is working very well. In other words, there is a lot of talk going on and a lot of conversation in Northern Ireland because the communities have not been actively involved in planning, unless they have been just objecting. We need a long time of nurturing to get that culture change going.

Q137 Oliver Colvile: Do Planning for Real weekends take place?

Professor Lloyd: In Northern Ireland?

Oliver Colvile: Yes.

Professor Lloyd: Not that I am aware of, I have to say. Compared with, say, Scotland or England and Wales, there is probably not that support mechanism yet. I think that has to come.

Q138 Dr McDonnell: I just want to go back more to the enterprise zone. Assuming all of Northern Ireland was designated as an enterprise zone-and this becomes a bit difficult with your analogy to it being a land-development operation-what effect would this have on land and property development generally, or what would you guess or perceive might happen?

Professor Lloyd: We would be starting from where we are, and that is a fairly confused land and property-development sector at the moment, because of the effects of the property boom in the last number of years, because of the cutbacks, because of the uncertainty, perhaps, of the NAMA from Dublin. There are also now different decision-making actors coming in through the banks and so on and so forth. My fear would be that an enterprise zone would destabilise that position rather more-that would be my considered opinion.

Q139 Dr McDonnell: What do you think about designating the whole area rather than isolated parts? Isolated parts, I think, would probably imbalance the property side, but taking the whole of Northern Ireland, would that create any sense of stability? Stability is the argument that is used for wrapping the whole thing up together.

Professor Lloyd: Yes. Again, my opinion would be that the whole of Northern Ireland being an enterprise zone would be very destabilising, because the land and property-development sectors have different local conditions in Belfast, in the different towns and cities, the villages and so on and so forth. That would really concern me. I should point out also that the Planning Bill of 2010, currently before the Assembly Government, does include in it reference to being able to designate an enterprise zone, which I take to be smaller ones, which may be appropriate, but I have pointed to the Northern Ireland Assembly Environment Committee that, if we go down that route, you do require specialist skills in master-planning, you need to know exactly where the boundaries are going in and you need to know exactly what the relationship to the local property market is, because if you start destabilising land and property prices further, you don’t know where we are going to end up. We also have to have a template that we know that we are working to. I do despair of just simply saying, "Let’s have an enterprise zone’. Why? For what? What are we actually aiming towards? That does frighten me a little bit.

Q140 Dr McDonnell: Let me take you on to another aim. What do you feel an enterprise zone would do for the construction industry? Would it just siphon whatever little bit of activity we have sideways?

Professor Lloyd: Probably. If we look at the construction sector in Northern Ireland, there has been huge unemployment. I dread to think how the supply-chain relationships have been disrupted. There has been a skill shortage-there is no doubt about that. There is a great deal of uncertainty across Northern Ireland in different little towns and what have you. It is affecting different-sized companies in different ways. Small, family-sized building firms, for example, are perhaps suffering rather more. All I think it would do is simply divert whatever is happening at the moment into different places, in a very ill-considered and non-strategic way. I would be very concerned about that, because I think, again, whereas in the 1980s there was an undersupply of quality accommodation, today there is probably an oversupply. But we have a rapidly changing labour market. There are new investments taking place. The economy does not sit still and there are changes, but for the many investments going in, there may be disinvestment in other parts. We don’t know enough yet.

Q141 Naomi Long: You have touched, I suppose, on one of my hobby-horses, and that is that, with the Northern Ireland planning system, for all its faults, the focus has been very much on development control, and that element of the planning system actually works relatively well. The difficult is that the other end of the planning system-the forward-planning, land-use planning element-does not function well, which makes development control extremely difficult, because they are not working off a template. I raise the issue, for example, of the expiry of the Belfast Area Plan and how long it has taken to get the Belfast Metropolitan Area Plan to replace it, and it still has not happened, yet it expires in 2015. Therefore you have this huge lag and we do not engage, I do not think, communities enough in that part of the development-control system; we only ever do it in response to applications.

You mentioned in your evidence that there were important changes taking place with respect to local government, and obviously one of those important changes as part of the Review of Public Administration was that that land-use planning-not the development-control element-would actually be devolved down to local councils, so they would be able to drive that forward. That is now not going to happen. The Assembly have announced that the Review of Public Administration is not going forward, so are there other plans that you see on the horizon? You have mentioned the Planning Bill, I know, but are there other plans of change that you see on the horizon that would change the context in Northern Ireland in a constructive way to allow that better planning to take place in order that business and enterprise could then flourish?

Professor Lloyd: There are different layers and aspects to this. To my mind, the Regional Development Strategy, which has just been issued, is a very important document. It is equivalent but very different to the National Planning Framework in Scotland, and it should actually have a very clear statement of how the Northern Ireland economy can change over time. My main criticism, or observation, of it at this moment in time is that it is not sufficiently land-use-based.

So, for example, whilst it is looking across the piece and saying, "This is where economic activity could go" and so on, does it pay attention to floodplains, does it pay attention to coastal erosion, does it pay attention to where we might be allocating fields and land for biomass for renewable energy? There is a lot in there for which we need to redraw the map of Northern Ireland in terms of its development potential, and that needs then to be married to the available infrastructure and then coupled to an understanding-a strategic understanding-of how the Northern Ireland economy is changing. So, that regional strategy has to be a very sophisticated document. Then it should be linked to the development plans, but, under the Planning Bill, the proposal is that they will be changed. My hope would be that, instead of being something like BMAP-the Belfast Metropolitan Area Plan, which I believe has taken 11 years and counting –

Naomi Long: Yes.

Professor Lloyd: Which, frankly, is a disgrace-

Naomi Long: Yes.

Professor Lloyd: Because we have lost a generation somewhere in that process-

Q142 Naomi Long: I am sorry to interrupt but it has also led to an increase in the number of speculative applications, because it has no weight. The previous plan had less and less weight. When developers had money, it was a developer’s dream, because there was a complete absence of policy.

Professor Lloyd: I think the intention is that the plans will become very much more strategic and then very much more action-focused. Going along with that, of course-and I am excited about this in the Planning Bill-is that the development-control system is going to be replaced by something called development-management. That is not just nomenclature; that is actually an attitude. There will be very much more pre-application discussions; developers will be talking; planners will be talking back, saying, "This is what you need to submit", to keep the developers on line, and I think that is important.

There is, to my mind, a potentially new awakening here. Planning is an important part of Northern Ireland’s wellbeing. It is about the control of land in the wider public interest, whichever way you cut it, but we have to find those arrangements. But we also have to link it to the strategic development of the Northern Ireland economy, because, as people have observed, we do have unemployment, we do have affordable-housing issues, we do have communities that need to be brought on to a more sustainable footing, and we also need to anticipate change, because Northern Ireland is not exempt from ageing. It is not exempt from perhaps younger people coming forward facing unemployment for a long time. These are major issues that we’ve got to look after.

Q143 David Simpson: We have concentrated very much on the enterprise zones. If enterprise zones were taken off the table, and they do not exist anymore and the proposal was taken off the table, would you have a difficulty with lowering the corporation tax to 10% to make us competitive right across Europe and with our near neighbour in the Republic of Ireland?

Professor Lloyd: I think that would be a separate thesis, because I think we are then talking about the responsiveness of different sectors, different scales of activity, to tax and fiscal reliefs. There has been a lot of work done, largely based on American experience, of how different places and companies and institutions respond to different types of taxes, and there are different models that are floating around; tax incremental financing, for example, is one that has been mooted rather more recently.

I heard Lord Heseltine say very clearly that, in a sense, Wales is as disadvantaged as Northern Ireland with respect to the corporation tax, because we are actually working with highly mobile, global capital and financial capital. Frankly, it will take some time for me to be convinced that a potential inward investor perhaps located in Florida, at random, sees Dublin or sees Belfast and will make a distinction on that corporation tax. I think there will be lots of other things coming in to the decision, like skills, networks, other centres of excellence. It is too complicated. Having said that, we all know that people do respond to a tax relief, probably very positively, but how we disentangle all that and try to separate it out is very important.

Q144 David Simpson: But it certainly could be part of the strings to the bow in relation to another cocktail of measures.

Professor Lloyd: Certainly, and, in economic terms, as long as the returns from the fall in whatever tax revenues were coming in were outweighed.

Q145 David Simpson: Very briefly, when we look again just at the whole enterprise zones issue, broadly speaking what did work well within them and what did not? In particular, could you mention Belfast or Londonderry? In your opinion, what did work well and what did not?

Professor Lloyd: The research evidence that was undertaken by the Department of the Environment at the time-there were a series of annual reports, and then there were a series of academic studies conducted in different localities and so on-to my mind remains ambiguous. I am not absolutely convinced that they worked conclusively. I think, in some instances, yes, the local economy benefitted from the provision of some new buildings. I think, in other areas, they worked possibly well by, as you mentioned, marketing and identity-raising. Suddenly, the Clydebank Enterprise Zone became a motif or whatever. But in terms of trying to disentangle the dead-weight-the relocation from outside the zone and into it to get the hold of the tax incentives-I think it is too close to call. Certainly, it is highly questionable whether they made a sustainable contribution. Again, some of them may have generated some buildings that are still there. I noticed the hotel in the Dundee enterprise zone is still standing, long after, although it has changed hands, I believe, twice. I am not convinced the policy was effective.

David Simpson: That is interesting.

Oliver Colvile: We have talked quite a bit about planning, taxation issues and a bit about labour. If I were a developer or an investor and I wanted to invest in Northern Ireland, there are certain things I would want to consider: first of all, I would want to make sure that I’ve got a highly skilled workforce who actually will work for me; secondly, I would want to make sure that they are going to be productive, and I would be interested to know what the productivity levels are like in Northern Ireland; and thirdly, I would be quite keen to know that a policy of employment deregulation was in place, so that I would not be subject to constraint. I would have thought those issues could be incorporated in the whole concept of an enterprise zone. We have had a long debate during the course of the last six months about Hong Kong, and how it is that they have been able to cut-

Chair: Well, you have had that debate.

Q146 Oliver Colvile: They have cut tax, and we have debated how all that worked. What is the USP that would encourage someone to actually come and invest into Northern Ireland, and what are the barriers that are actually stopping that, apart from the planning system?

Professor Lloyd: If I can give a personal example: in 2008 I was invited by Minister Arlene Foster to become her independent ministerial adviser on planning reform. I was then based in Liverpool, as it happened, at the University of Liverpool. I liked the planning system so much I moved to Northern Ireland in 2008. I say that jestingly; there were, obviously, other reasons. Northern Ireland has got so much going for it. It is a highly accessible regional economy. It is a highly mobile regional economy, to be quite frank. Mobility and accessibility is not a problem in Northern Ireland-people will drive vast distances every day, if need be. It is a region of incredible industrial heritage and skills, and this is what worries me about the contraction of the construction industry: we are leeching; we are losing those skills. If you look at the demography of that labour force, we are going to lose them forever, because there isn’t succession-planning coming through. That frightens me.

Northern Ireland is a stunning place to locate in terms of quality of life and in terms of accessibility. I frequently fly back and forth from George Best Airport to John Lennon Airport. I think it is 25 to 30 minutes on the plane. I had to go to Glasgow the other evening to talk, and it took me 40 minutes on the plane. I am far closer than many other places to London. But I would go back to this point that we need a strategic understanding of what the Northern Ireland economy has got, what is its potential now, and I happen to believe it is at the high-value end, it is in the sorts of investments we were just talking about-renewable energy, tidal power and so on. There is a whole skill-set that can be developed there, especially when you think about all the educational institutions that are in place.

The lovely thing about Northern Ireland is it reminds me very much of Scotland. Political scientists used to describe Scotland as being a very small community-a policy village; people knew one another-and that is the same in Northern Ireland. At 1.8 million people, it is probably smaller than some of the London boroughs, and that gives us something to work with.

Q147 Lady Hermon: Professor Lloyd, you have referred a number of times to the Planning Bill. You are obviously very familiar with its passage as it makes its way through the Northern Ireland Assembly. Could you just give us your prediction: will it make it onto the statute book before the Assembly is prorogued in March?

Professor Lloyd: I could not possibly tell, because it is the largest legislative proposal, I think, in Northern Ireland’s history.

Q148 Lady Hermon: If you were a gambling man?

Professor Lloyd: I am Welsh; I was brought up not to gamble. Sorry, I am sitting on the fence here.

Q149 Lady Hermon: Would you be sorry if it did not make it?

Professor Lloyd: I would, but I think, equally, I would not want it to be rushed. I think there are issues that we need to tease out and test, one of them being that we cannot simply assume that the culture change will take place. We need to look at that very carefully. We need to explore possible ways of contractualising relations between communities, developers and planners. There are lots of lovely things we can look at. We should not rush it. On the other hand, there is an urgency about it as well. I am sitting on the fence-I do beg your pardon.

Lady Hermon: No, that is very wise advice.

Q150 Oliver Colvile: You talked in your evidence about planning zones and how you saw that operating, similar to the ones in the 1980s, which were not particularly well defined, so how would you define those planning zones? How would it be helpful?

Professor Lloyd: The simplified planning zone?

Oliver Colvile: Yes.

Professor Lloyd: Historically, these came out of the enterprise zone experiment. When the enterprise zone experiment was first introduced, it did come at a time when Government thinking and the initiatives to deal mainly with inner-city problems had gone stale-there were no two ways about that-and there was a lot of inertia on the ground. The new Conservative Government in 1979 then brought forward the 1980 legislation, Lord Heseltine being heavily involved, with enterprise zones. As that grew in momentum-I think there were three tranches over time and the numbers increased-more and more local authorities were saying, "We would like to be part of this". It got caught in the zeitgeist, effectively. However, enterprise zones are competitive instruments. You cannot have them everywhere, so the Government then introduced the idea of just stripping out the simplified planning bit, so there was no tax incentive, and allowing local authorities to allocate them. That is what that idea came from.

Again, I am not absolutely sure that there was an official evaluation of that experiment-I would have to go back and check-but certainly anecdotal and academic evidence showed that they, again, were very variable. Some worked; some did not. Again, to my mind, I think it was because what we did was we imposed rather than understood what was happening, and came up with a strategic agenda for them.

Q151 Mr Benton: That is a very appropriate point to come in. My original question was going to be about planning and, in particular, reforms-Government reforms in Northern Ireland-but I think you have dealt with that. I was about to pose another question. Your remarks just now referred to evaluating the success of these. It is quite clear that you are against enterprise zones per se, but I am not quite sure about whether it is the old mode that you are against or whether you would tolerate, if that is the right word, an enterprise zone modified to some standard that you think appropriate. This is what I want to come down to, because you referred-as did Lord Heseltine-to the principle of state intervention. Forget there were enterprise zones and everything else, what we had was a deliberate initiative to apply Government intervention in an attempt to enhance an area. I remember it all very distinctly.

If one agrees with the principle of Government intervention-and everybody certainly around this Committee wants to do the best they can for Northern Ireland-we have, taking it from your point of view now, a damper on enterprise zones. Any initiative that you would consider appropriate has to be taken against a background of internal reform in Northern Ireland in terms of government, planning reforms, and so on. It is clear that the Government are concerned-rightly so-and want to do something, whether that means reducing corporation tax, the creation of an enterprise zone or some other initiative. Seeing as you are against enterprise zones, my simple question is: what would you suggest to Government if you had the power? What would you say? What would be the way to go about it?

Professor Lloyd: The first thing is that the Westminster Government has the reserve power on tax, so the decision rests here. In Northern Ireland, the devolved powers allow for it to undertake planning, development, regeneration and so on. I think what Northern Ireland needs is the support and the ability to build its own internal and appropriate local and regional government system. We need to be able to integrate the regional with the local. We need to have conversations around infrastructure, for example. In England, the National Infrastructure Plan is a very bold statement of intent. That, again, I think, should be replicated at the Northern Ireland level. There is a green infrastructure initiative; I would like to see that writ much larger. We need to be able to allow Northern Ireland to create its own sense of purpose and design things that are appropriate to its local circumstances-and highly differentiated local circumstances-across the piece. My only fear with an imposed enterprise zone across the whole of the territory is that it is too blunt, it is too brutal, it is too reductionist and it is not sensitive to the needs of Northern Ireland and where Northern Ireland wants to go. There is a job of work in there. Those are not just words: there is a job of work in building up that.

Q152 David Simpson: You said in your evidence earlier on, Professor, that, when Arlene Foster was the Minister, you were taken on as a consultant or –

Professor Lloyd: Adviser.

David Simpson: Adviser. Did they listen to you?

Professor Lloyd: They did, surely. I was very impressed, actually, I have to say. It is very rare that I get listened to. They were receptive, absolutely.

David Simpson: It was taken on board.

Professor Lloyd: Totally.

Dr McDonnell: He is trying to tell you, Chair, that the DUP does not listen to anybody.

Chair: I am not quite sure if that was the point. Professor Lloyd, thank you very much for coming today. You have put an alternative point of view forward, which is very welcome, and there is much food for thought, so thank you very much indeed.

Professor Lloyd: Thank you very much indeed.