Corporation Tax - Northern Ireland Affairs Committee Contents

Examination of Witness (Questions 112-152)

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.

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