Corporation Tax - Northern Ireland Affairs Committee Contents

Examination of Witnesses (Questions 240-260)

Q240 Chair: Thank you very much for coming to our Committee. As you know, we're conducting an inquiry into the relative levels of corporation tax between the United Kingdom and Ireland, and the effect that the difference has on Northern Ireland, so we're very glad that you're able to join us today. Could I ask you just briefly to introduce yourselves and, if you'd like, to tell us a little bit about what your organisation does and how it does it? We'd be very glad to hear that.

Mark MacGann: Thank you very much, and thank you to the honourable members of the Committee. My name is Mark MacGann and I'm the senior Vice President and Head of Government Affairs for NYSE Euronext, which is the New York Stock Exchange Euronext, which I'll explain in a moment. With me today is Tony McManus who is the Head of Operations for NYSE Technologies, which is probably about one-third of our business and the core of this activity is in Northern Ireland—in Belfast—and Tony will, if you wish, explain a little bit more about our Northern Ireland operations a little bit later during the proceedings.

NYSE Euronext was born in 2007 through the merger of the New York Stock Exchange with Euronext, which is the Stock Exchanges of Paris, Amsterdam, Brussels, Lisbon and last, but certainly not least, LIFFE, the London International Financial Futures Exchange, which is the second largest derivatives exchange in the world. So we are a global operator of capital markets, both in what we call cash equities—stocks—and derivatives. Our technology business, which is now flourishing—we expect to be approximately €1 billion within about five years—is the third part of that activity.

While many parts of the financial infrastructure and the financial system were shaken or, perhaps, failed during the crisis of the past three years, it's worth noting that the capital markets—the stock market—including, of course, our colleagues at the London Stock Exchange, functioned normally and properly. As the Governor of the Bank of England reminded us this morning, this is the core of the financial system both here in the United Kingdom and also globally. We did not cease trading for a single minute. So, we are very proud to operate in the largest group of stock exchanges in the world and we are very grateful and humbled by the invitation to speak at this Committee today.

Chair: Thank you very much. Did you want to add anything, Mr McManus?

Tony McManus: Sure. I hope that some of the success and that ability to keep on trading was due to the technology that we're building in Belfast.

Chair: Good.

Q241 Lady Hermon: How many people do you actually employ in Belfast and Northern Ireland at the moment?

Tony McManus: At the minute we're just hitting about 220, but that has grown from about 140 since March of last year, so we've had about 50% growth in about nine months.

Mark MacGann: And we expect to reach about 400 people in the foreseeable future.

Q242 Lady Hermon: And are those people locally recruited in Northern Ireland?

Tony McManus: Yes. I would guess probably more than 98%. What we've done is we've brought people over to the Belfast office where we need very particular expertise that we didn't have available to us in the local market, primarily some veterans, for want of a better term, within the Exchange. But that's one or two individuals, rather than any significant number.

Chair: We'd like to discuss with you why you decided to locate to Northern Ireland. Oliver, would you like to start?

Q243 Oliver Colvile: What was the process that you went through when you decided to locate generally, and at what stage would the corporation tax have become an important issue to you?

Tony McManus: I think it's very important to set the context. There was a company operating out of Belfast called Wombat Financial Software, which was really operating in the major financial centres—New York and London primarily, but also in Asia and continental Europe. Wombat Financial Software had its offices in central Belfast with, again, the vast majority of people working out of that office, and it was acquired by the New York Stock Exchange in early 2008. So, at the beginning of the exercise there was the hook, if you like, that created the original relationship. Running in tandem, and parallel to that, the Exchange— to go back to some of Mark's earlier points—was looking at diversifying its portfolio and hence growing its technology business, and so was looking at centres globally that could potentially service that need. So the correlation of an acquisition of a local company with the Exchange wanting to become a significant technology vendor really got the process running. Then there was a process of due diligence across various centres when finally the decision to move to Belfast was taken.

If you think about what the primary drivers of that are, it's the sort of things that we very often hear: very high quality graduates in the local market; much lower operating costs, of course; very strong relationships with local government and with Invest Northern Ireland; and of course, geographically, a very good location—close to London, close to Paris, direct flights to New York. When you add all that up—the relationships, the resources and infrastructure that's available, the fact that there was an existing arrangement there due to the acquisition of Wombat Financial Software—Belfast and Northern Ireland very much came out at the top of the table.

Q244 Lady Hermon: So did the corporation tax feature at all in that calculation?

Tony McManus: I would think not.

Mark MacGann: I don't want to disappoint the Committee—

Lady Hermon: Oh, we're not.

Mark MacGann: —but it was not very high up on the list. If you look at, first, Ireland—both Northern Ireland and the Republic of Ireland—it is renowned in the United States for the quality of its workforce. So I think, like other companies—and I think 55% of foreign direct investment south of the border comes from the United States—the primary reason, usually, is talent. The talent of the people was certainly a primary motivator for us, along with: the acquisition of Wombat and the continuous investment subsequent to that acquisition in 2008; the quality of the graduates from Queen's University and the University of Ulster; and the very strong support from the Northern Ireland Executive and Invest Northern Ireland in particular. I would say that it was a factor that was taken into consideration, but it was certainly not a prime motivator for us.

Q245 Mel Stride: Was it the location of the acquisition target, really, that drove you to make that move? If they had been based in the Republic, for example, you might have been inclined to go there.

Mark MacGann: I think, to be very candid, it was the excellence at Wombat, which was a domestic company. When it was founded back in 2004 it was five people. So, it has grown from five to 400 people in a very short period of time. It was first of all, the excellence of that particular company that, to be perfectly honest, happened to be located in Northern Ireland. It's when we identified the company and the value we thought it would create in our exchange group that we realised that Northern Ireland had much more to offer than just—no disrespect—the five people in Wombat. I think that our motivation to invest has been proven by the quality of the output and the fact that, if you look at the technology that we are creating there and what we're doing with that, we are now primary vendors of exchange trading technology to many of the largest stock exchanges in the world and many of the largest investment banks. For example, just last week, the Warsaw Stock Exchange became privatised and went to the market with its IPO, and is now running on NYSE technology primarily coming out of Belfast.

Chair: Interesting.

Q246 Oliver Colvile: You're obviously a very strong player, and for you to have moved has been a very good thing as far as Northern Ireland is concerned as well. Do you have a feeling as to why other people with whom you work in Northern Ireland might have relocated to Northern Ireland?

Mark MacGann: We are familiar with the financial services sector in the United Kingdom. If you take the United Kingdom of Great Britain and Northern Ireland, this is our largest location outside the United States. We have roughly 3,200 people worldwide; approximately half of those are in Europe and I would say over 50% of the European contingent is in London and in Belfast. I think we're a major player here and also in the City of London, but if you look at the composition of the financial services industry in Great Britain, it's not located purely in the City of London. Many jobs have been created in Manchester, in Liverpool, in Birmingham by some of the largest banks and associate financial services companies. I think we would probably be motivated to invest even more in Northern Ireland if this decentralisation of financial services activity were to make it across the Irish Sea. Particularly south of the border, of course, it has been a motivating factor, but I'm not sure to what extent it's the case with our colleagues in Northern Ireland.

Tony McManus: One of the things I believe, being a local, is that there is potentially a real opportunity for Northern Ireland at the minute if we can create the right kind of business environment. We have Citigroup making major investments, New York Stock Exchange, of course, indigenous companies like First Derivatives growing quite rapidly and we've other financial technology vendors like Fidessa moving in. I've always taken the view that this could be a momentum-building exercise and, as the word starts to get out that there's a pool of talent, not just coming out of the university with the right technology skills but with financial capital markets industry experience, and also that other firms have taken that step and succeeded, and are growing as a consequence, there could be a snowball effect when momentum starts to build. Back to the context of the meeting, I think it's very important that the right business environment exists in order for that to happen.

Chair: That's encouraging.

Q247 David Simpson: Gentlemen, as you know, the Chairman has outlined that we have had a long discussion on the whole issue of corporation tax. Certainly, the target of 400 jobs within Northern Ireland—as a businessman myself in the area—is very welcome. It is very welcome indeed in these economic times. I find it—not "amazing"; that's the wrong word—but strange that the corporation tax issue didn't really feature for the location of your company into Northern Ireland. I find it strange because we have spoken to quite number of organisations. The Federation of Small Businesses, I think, made a comment—they weren't here, but we spoke to the CBI and Invest Northern Ireland. I mention Invest Northern Ireland because the guy who gave evidence was adamant that corporation tax was, if not the main tool that would be in their armoury if they had it, one of the main components to attract business to Northern Ireland. I find it amazing that it really wasn't a consideration. I'm glad to hear that the skills and the people of Northern Ireland, of course, are the bigger attraction—the skills side was good—which we know we have. What other countries across Europe, or wherever, did you look at before finally deciding on Northern Ireland?

Tony McManus: Just a couple of points on that. I think it's important to understand that the NYSE Euronext Centre of Excellence in Belfast is a cost centre, so the operating costs were much more important for us than the corporation tax.

David Simpson: Sorry for cutting across you, but do you think that if your company had been a processing or manufacturing company, the corporation tax issue could have been different or the attitude might have been different?

Mark MacGann: It's important to know that Northern Ireland and thus the United Kingdom is only one of five countries in Europe where we have a significant presence. I just looked at a comparison of the standard corporate tax rate in the other countries. When we acquired Wombat and invested in Northern Ireland, of course, the rate in the United Kingdom at the time was 28%. At that time and still today it's 33% in France, which is our main centre in Europe outside the United Kingdom, 34% in Belgium, 25% in Netherlands and 25% in Portugal. So, I would hate you to get the message that we're indifferent to the level of corporation tax. I think there's no reason why bringing down the level of corporation tax shouldn't have the positive benefits that it has clearly had south of the border, where the Irish Government has, again, recently insisted that it's the cornerstone of their industrial policy. Coming from south of the border, having left it during the last depression in the mid-1980s, I can fully comprehend that. It is clearly a motivating factor for foreign direct investment.

As you know, France has always been critical of the Republic of Ireland for what it terms predatory tax policy because of corporation tax; in the current negotiations with the European Union on the bailout, France and Germany are putting tremendous pressure on Dublin to raise its corporation tax. In the details of the budget it has just published this afternoon, it has made many changes, but has been resistant to raising this level. Many economists believe that, under the hypothesis that the Republic of Ireland was forced to raise its corporation tax level, those companies, or that capital, wouldn't move to France or Germany; they would probably relocate—especially the American companies—to Switzerland, where one can negotiate corporation tax rates as low as 6%, or to Luxembourg, or to other perhaps fiscally advantageous countries.

I think that for countries to say that it ought not to be a driver of industrial and economic policy, that would be missing a trick. Clearly, there has been tax competition in the European Union for the past 20 years and I think, notwithstanding the current crisis, that will continue. So, we are certainly not indifferent; we certainly share the views of Invest Northern Ireland and of the CBI that a lower rate of corporation tax would be a fairly substantial driver for further investment in Northern Ireland, which has, as you know better than I do, a particularly serious problem with the ratio of public sector to private sector.

Chair: You mentioned Invest Northern Ireland—in fact, you've mentioned them once or twice now. I wonder if we can look at their role a little bit closer now.

Q248 Mel Stride: Welcome, thank you for coming to see us and congratulations on the business success in Northern Ireland, which I'm sure the whole Committee welcomes. Just so that I'm clear, it seems that, for what we're discussing here— an inquiry into corporation tax and the effect it might have on inward investment into Northern Ireland—you're a rather atypical witness, in a sense. Firstly, you were led to Northern Ireland primarily by an acquisition target, which could have been somewhere else. That was a prime driver for why you came to Northern Ireland. Secondly, as I understand it, you're running, basically, a cost centre rather than a profit centre. Therefore, issues of tax are clearly less relevant to the decisions that you took. That said, could you tell us a little bit about your interaction with Invest NI and at what stage they got involved with you? Presumably you obviously started getting involved in the deal; did they then come to you and what sort of discussions and incentives were they looking at?

Tony McManus: Firstly, it is really important to point out that, although the acquisition took the New York Stock Exchange to Belfast, that only introduced the initial relationship. It would've been very easy for the New York Stock Exchange to have acquired Wombat Financial Software and left it at that. There has been significant growth and diversification of the technology that we deliver out of Belfast since that acquisition. So the first stage was the acquisition. The subsequent stage was to grow our technology centre of excellence in Belfast. Clearly, the first was a factor in the decision, but it was by no means a foregone conclusion; there were other locations in the mix.

The relationship with Invest Northern Ireland goes right back to the very early days of Wombat Financial Software. Wombat Financial Software actually grew out of a relationship between a chap from Glenavy in Northern Ireland and an Australian gentleman in New York. When they realised they were on to something, they decided to grow the company out of Belfast. So, Invest Northern Ireland were involved in the very earliest days of that relationship, then not only helped build Wombat Financial Software through grants and funding but remained involved with the New York Stock Exchange post the acquisition, and have remained very close partners ever since.

Q249 Mel Stride: So in terms of expanding the business going forward, Invest NI would typically stay close to those companies such as yours that have come in.

Tony McManus: Yes.

Mel Stride: What kind of incentives and things are they suggesting that they might be able to do to help you with your future development?

Tony McManus: It has really been twofold. It's primarily financial, but it's also in terms of helping us grow the skills base that we need. They've made very good introductions into the Department of Education and Learning, for example, in order to enable us to get graduates coming out of Queen's University and the University of Ulster up to the level of skills that we need for the very directed focus around capital market and financial services. So there has been close collaboration on that front as well as financial. Another element to it, which is somewhat new and has come out of the woodwork this year, is around R&D, so we've also kicked off, for the first time, really significant investment into technology R&D. We're working with Queen's University, University of Ulster, Invest Northern Ireland and, of course, the other capital markets technology folks in Northern Ireland: the group that I mentioned previously—First Derivatives out of Newry, Citigroup, Fidessa and of course ourselves.

Q250 Mel Stride: You have this cost centre in Northern Ireland. I'm just intrigued as to how you might make some kind of tax benefit at some point or somewhere across the company, across the group.

Tony McManus: If you think about it, our profit centres exist where capital markets activity exists. One of the things that you could absolutely foresee is—obviously this would be in the longer term—that if a capital markets or financial services market spun up in Northern Ireland as a consequence of advantageous business environment and reduced corporate tax, then of course suddenly we have a captive audience on our doorstep. That could certainly change things for us, but I think that something of that nature would be required. Other than that, we would probably require a tax specialist to come and tell you whether there's some other means of looking at that, but certainly I wouldn't be qualified to comment on that.

Q251 Gavin Williamson: Certainly. You touched a little bit on the influencing factors on the growth of the business because obviously it has grown quite spectacularly and, I hope, going to grow again. What other organisation other than Invest Northern Ireland have been supporting you in that growth and the development of the company from a Government perspective or an educational perspective. You mentioned Queen's; are there any others?

Tony McManus: Yes. We have very tight ties with the local universities. In fact, on Monday, I was in attendance at the Industry Advisory Board, where we work very closely with Queen's University to ensure that the curriculum, particularly in the engineering and computer science department, maps directly onto our requirements. It wasn't just ourselves; there were other representatives from other businesses there as well, so there's a very close collaboration in that respect. To refer again to the R&D element, both the University of Ulster in their campus up at Magee and Queen's University are helping us get that whole function off the ground, to be honest, so there's that. The other element is, of course, we get a lot of support from the First Minister and Deputy First Minister. There is a good working and personal relationship now between Duncan Niederauer, our group CEO, and the First Minister, Deputy First Minister and Enterprise Minister. Obviously, I think that those relationships and those ties have been key factors in the decision to grow the operation in Northern Ireland.

Q252 Lady Hermon: So how would you actually describe having a devolved Administration at Stormont: an incentive, a benefit, an advantage? You've touched on it several times in some of the answers that you have given, but I would like you to elaborate.

Mark MacGann: I think, viewed from the global, international level and the very top of our company, we would view it as an enormous positive.

Lady Hermon: An enormous positive?

Mark MacGann: Yes. An enormous positive. And I can see that, for example—again like in most companies, the decision making is consensus-based, but it's taken by one person at the top. I ought to tread carefully politically, but he views the relationship with the Prime Minister, the Taoiseach of the Republic of Ireland based in Dublin, and the First Minister of the Northern Ireland Executive as equal in terms of a foreign company coming in and working with local Government and local investors as well, in order to make an economic investment and to grow. It would be remiss of me if I didn't invite the members of this Select Committee—every year, we do an Irish day at the New York Stock Exchange on the floor—to ring the bell in March of next year, to encourage not us, but other US-based companies to invest in Ireland. No distinction north of the border/south of the border because both economies and both parts of that island have a lot to offer. I would say that, again, if you will allow me to put the obvious politics aside, we view it as a tremendous positive because it allows us to talk/agree/negotiate with the democratic elected representatives on the ground.

Q253 Gavin Williamson: I know both these factors are massively important to any business, but if you have to single one out as having the most important edge in terms of whether you're investing extra money in order to expand the operation—and I know this is slightly odd with your company—as business people, what do you think is more important: corporation tax or the people?

Tony McManus: I think it depends on the nature of the business. For us, I always viewed it as a three-stage process. There was the hook, which was the acquisition. That's what created the initial relationship. There's then the second phase, which is does Northern Ireland check all the boxes in terms of infrastructure, communications, people, resources, etc? Then the last one is, who is going to go in and close the deal? I think that the relationship with Invest Northern Ireland and the Executive was absolutely critical in that. I think that that model could be rolled out and could happen in other instances and bring investment in: what's the hook; what's going to get the FDI companies interested in the first instance? Does Northern Ireland check all the boxes? I think it does. Finally, how are we going to close the deal?

Mark MacGann: That's what attracted us to Northern Ireland; that's what attracted us to Wombat, but I think what kept us in Northern Ireland was primarily the talent. It's the people, and we would encourage the honourable Members, which I'm sure you're doing, not to look at this issue of corporation tax in isolation. Infrastructure is tremendously important; education is a very determining factor for how we're going grow our business and how we're going to diversify from the technology base in Belfast.

Tony McManus: Certainly, the assumption has to be that if it is going to cost significantly less money to do business in Northern Ireland, then that's going to be attractive. It's going to come down, I would have thought, to whether the Exchequer can afford it or not.

Q254 Lady Hermon: I'm just curious about one aspect, and it came to light in Northern Ireland in a completely different context, and that was over the Presbyterian Mutual Society. Who actually regulates your business or organisation? Is it DETI, because you're established in Belfast, or is it the Financial Services Authority? PMS seemed to fall between two stools at one stage. You're not comparable with the PMS; I'm just intrigued just to see who actually regulates your business in Northern Ireland and was that instrumental or one of the factors that you took into account when increasing business there?

Tony McManus: All the regulation of our business comes internally. My assumption is—I'm not sure I really know the exact answer—that it's the FSA, which would then come in through the main group.

Mark MacGann: Well, for our business in Northern Ireland, which of course is not a capital markets trading business, so it doesn't operate exchanges, it's not the FSA. Here in London, of course, it's the FSA. The operation of financial markets is a very regulated industry.

Lady Hermon: It is.

Mark MacGann: Within that industry we're a hyper-regulated company because of the integration of Euronext—so France, Netherlands, etc—which took place 10 years ago. We are regulated on a daily basis by five regulators: the FSA and its counterparts in Paris, Amsterdam, Brussels and Lisbon. Of course, our activity in Northern Ireland is a technology business, which is not subject to capital markets regulation.

Lady Hermon: Thank you. That's very helpful.

Q255 Mr Benton: I think the questions I was going to put to you have been covered in your replies to other members, but I'd like to go back, for a moment, to one of your earlier answers about local employment figures; the people you employ locally. We've had, on previous witness occasions, only one incident I think of direct opposition— from the Assistant General Secretary of ICTU. One of the points that he made was about the purpose of the inquiry, and our raison d'etre, being the corporation tax. I take on board the point you were making before and I certainly won't get lost just solely on the corporation tax because it's very clear that are other factors governing the wellbeing and the wealth, if you like, of Northern Ireland and also generating the healthiest economy. I still think it's a factor that one of the yardsticks by which you would measure that is the extent of local employment; it has to figure in it.

While we want to see companies and firms profit, develop and benefit Northern Ireland, one of the things I think one has to keep in mind is the effects of reducing corporation tax. Uppermost, certainly, in my mind is the factor of job creation and the number of local people. I wondered if you could be a little bit more specific about the recruitment of local labour. What percentage, in fact, of your workforce is there? Really and truthfully, what I'd also like you to give an indication of is at what level would you consider corporation tax, even now that you're well-established in Belfast, best to be of benefit to you?

Tony McManus: In terms of the demographics of our workforce, it should be known that virtually everyone who works in the company is of graduate level and above; almost all are graduates of Queen's University and University of Ulster, and native Northern Irelanders. As I've said previously, a very small number—fewer than 10 in a workforce of over 200 and growing, as Mark says, to a target of about 400—come from locations outside Northern Ireland, so it's very heavily weighted towards the local population. One of the things we do grapple with is, of course, what's the availability of skilled resources should suddenly there be a surge in activity in Northern Ireland, particularly around financial services and technology? In other words, how do we cope with the situation when it suddenly gets more competitive to get the very best resources available? I've always been of the opinion that we would welcome that because although the landscape is certainly more competitive in terms of the availability of resources, the overall health of the economy and the local skills force is very much in our favour. So, although we might take a short-term hit if someone was to make a major investment and try and hire 400 or 500 people similar to the profile of candidates that we're after, we would still be very supportive of that. In fact, we very often do; we speak to people who are considering investing in Northern Ireland with Invest Northern Ireland to help with the pitch, so to speak.

Mark MacGann: I would add, if I may, that in our view at the end of the day jobs come from entrepreneurs. If there is to be a recovery—which for the time being in the markets in which we operate is a jobless recovery, if there is a recovery—it is going to be driven in Europe, and in Northern Ireland in particular, primarily by small and medium-sized enterprises. So, we need to incentivise, we need to encourage entrepreneurship. I would just convey our view to the Committee that punitive tax rates, including excessively high levels of corporation tax, would certainly not encourage such entrepreneurship and therefore job creation.

Q256 David Simpson: Why do you say it will be driven by SMEs?

Tony McManus: Because if you look at the large multinationals, and we see this also in the United States, people have had a very tough time. Right now, we're seeing the health of balance sheets being progressively restored in the larger public companies, but there is enormous reticence and hesitation to create new jobs and to hire. We think that's going to remain the case for the foreseeable future, given the lack of economic certainty or given the difficult outlook that we have. A good measure for us, of course, is the companies that do their IPOs and that come to the stock market to raise capital and to finance their growth. We're seeing that 90% of the IPOs that we've seen in 2010 have taken place outside Europe. If we look to France, for example, there have been very few large IPOs on the Paris Bourse and the Paris Stock Exchange, but we've seen significant IPOs from small and medium enterprises that have to come to the stock market to finance their growth because the banks simply aren't lending. We think that the banks are going to be excessively cautious for the foreseeable future, so the unique source of additional finance is to come to the market and raise capital. With the right preparation and education to try and reassure investors and to try and regain confidence in the markets, SMEs are showing that they're willing to go down that road. I think that the London Stock Exchange would tell you a very similar story: there's much more growth in IPOs in the small and medium-sized companies rather than the large companies.

Q257 Naomi Long: You're very welcome; it's good to have you at the Committee. A bit has been made, I suppose, of the fact that your business and the model that drove you to invest in Northern Ireland was slightly atypical, but it resonates actually with some evidence we took last week from Esmond Birnie, because we asked him to give us three things that we could do in terms of the economy that would help. The first one that he said was to offer incentives to encourage research and development, which is why there was such a strong acquisition target in the first place with Wombat—it had been a really strong research and development activity. The other thing that he mentioned was to try and encourage clustering of sectors. The third, he said, was something along the lines of the low corporation tax, but not as a standalone tax package; there needed to be more to it than just that.

I'm just interested in terms of your own experience, in whether or not Northern Ireland has the capacity to attract and, more specifically, to retain a cluster of financial services, given that many of the businesses that they've attracted of late in that sector have been, like your own business, cost centres. If the cost shifts, the business is actually quite mobile in terms of being able to go elsewhere. So, in terms of attraction and retention of those businesses, do you think that that clustering effect is possible?

Tony McManus: It goes back to the point I made earlier: it's not only possible; it's highly likely. There is no doubt in my mind that when investors of a similar nature to ourselves, or who are operating in capital markets, come to Northern Ireland to consider investing, when they're speaking to ourselves or speaking to Citigroup and companies of that nature, it definitely has an impact. I'd be very surprised if it doesn't. I've noticed that at lunches, meetings and whatever I've had with these individuals, who are really now starting to take this seriously. I would expect to see some further investments of similar companies in the coming months. I believe that, similar to what has been seen in Dublin around financial services and technology outside financial services, this kind of momentum effect, and hence clustering, does seem to happen, so I would expect there to be some more. As I said, it goes back to what I said previously: in order for that to happen, there has to be a positive business environment, including things like tax rates that enable this to happen, in order for this snowball to get rolling and to get growing.

Again, on Mark's earlier point, it's also vitally important that the correct resources are made available to those companies, particularly if retention is going to be important. I don't mean resources just in terms of people; I mean in terms of training and even simple things like the availability of a direct flight between New York and Belfast. These are very important factors, so it's important that the Executive, the Committee, local business, Invest Northern Ireland and all the stakeholders look at what all those factors are and make sure that all the bases are covered.

Mark MacGann: The nature of our business has been transformed. You no longer have women and men on the trading floors buying and selling stocks; everything now takes place on computers and very high-powered servers. I would insist on the issue of infrastructure policy as being also critical. We have just migrated all of our data centres across the European Union to one location. The good news is it's in the United Kingdom; bad news is it's not in Northern Ireland; it's in Basildon in Essex. You have several football field-size servers, and the quality of the telecommunications infrastructure and links to London are really important there. So, in terms of expanding to a broader financial services presence in Northern Ireland, infrastructure policy would also be a major factor.

Q258 Naomi Long: Just on that: you say that clustering is possible and you set out some of the conditions that you need. You need the staff and you need the linkages, both the physical infrastructure but also the technological infrastructure, to make that possible. Is it possible, if you've all those other pieces in place, to do it without touching corporation tax at all?

Mark MacGann: I would proffer the view that it depends on the taxation rates of close neighbours that have similarly attractive education infrastructure and other policies, and come back to the issue of competition with other Member States of the European Union and other regions.

Tony McManus: I think would be difficult to have a really significant step change without it. It has already been stated that our investment might have been somewhat atypical. Then, all you're really going to attract is those atypical-type investments. I think if you want to get the mainstream type of FDI, you really do need the preferential tax rates as well.

Naomi Long: Thank you.

Q259 Gavin Williamson: I've always been a great believer that businesses invest on a whole range of different things and it's very rarely just one thing. When you are actually looking at investing, in terms of as a cost centre as you have done, is the actual cost—because tax is many things; it's not just corporation tax, but there's the tax of employing people—an important consideration when you're considering investing, through National Insurance and other forms of taxation?

Mark MacGann: The straight answer there is it is fundamentally important. We have somewhat of a mixed experience in Europe ranging from Belgium, for example, where income tax levels and social security costs are extremely high and the top rate of income tax for professionals is between 55% and 60% plus social security contributions. So, when one wants to incentivise the workforce and very much a base of intellectual capital, it becomes extremely difficult. So, of course, it's not just the corporation tax policy, but the broader public policy on taxation that is important. I would say that the United Kingdom right now, unless I'm mistaken and I don't think I am, is probably that country in Europe with the lowest rate of income tax compared with Belgium, France, Portugal and the Netherlands.

Q260 Oliver Colvile: Last week we had a riveting conversation with Richard Murphy, who didn't approve of the thrust of my argument. However, about two weeks ago there was a television programme on Channel 4 that talked about what had gone on in Hong Kong, as to how they had actually cut not only corporation tax but a whole series of other taxes, and they had just seen mammoth growth immediately. What's your view about that because ultimately, at the end of the day, one of the things we have to do here in Britain is, rather than selling into Europe—which is important obviously—to sell to China, India and so on? That is much more important. How do you think that that could actually be achieved?

Mark MacGann: Again, Hong Kong is an isolated example. However, I would say that we have seen other examples—and I'm sure that Invest Northern Ireland and the CBI have given these examples to you either in oral or written evidence—in Europe with the Basque region, with the Azores and Portugal. When the political courage is necessary—I do understand that it takes a considerable amount of political courage to allocate, or designate more favourable tax conditions in one region of the nation—it clearly does give results. We're comparing apples and pears to some extent, if you allow me, between Hong Kong and Northern Ireland—two extremely different regions—but at the same time, if the courageous step is taken for a substantial decrease in corporate taxation, one sees the evidence from other parts of the world and other parts of Europe that it has been largely beneficial. Again, not in isolation from other policies.

Chair: Okay. We're just about at the time to say thank you very much for the evidence you've given us; very useful indeed. Thank you for coming.

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© Parliamentary copyright 2011
Prepared 9 June 2011