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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