Examination of Witnesses (Questions 190-229)
Q190 Chair: Thank
you very much for joining us. I am sorry for the slight delay,
but you sat in for most of it. I wonder if I could ask you to
introduce yourselves and perhaps tell us a very little bit about
your role within Invest Northern Ireland, and perhaps a little
bit about what the organisation is working on at the moment? But
if we can keep the introduction fairly brief, I'd be very grateful.
Bill Scott: I am
Bill Scott. My current role is Director of Regional Economic
Development with Invest Northern Ireland. My colleague is Oonagh
Hinds, who is a manager in our Regional Business Team. I'll explain
a wee bit about the work of both of our areas. As you probably
know, Invest Northern Ireland is a non-departmental public body
sponsored by DETI—the Department of Enterprise, Trade and
Investment—and our specific role is around accelerating
the growth and the development of the Northern Ireland economy.
We specifically do that through looking at how we can encourage
exports, how we can encourage enterprise and entrepreneurship,
and how we can encourage new inward investment to Northern Ireland.
Those are the three broad areas. My specific role is in that
area of encouraging enterprise, so a lot of the work that my team
would be involved in is at a regional or sub-regional level, if
you like, across the five regional offices and the three regional
sub-offices that Invest Northern Ireland has throughout Northern
Ireland.
Q191 Kate Hoey:
How many people do you employ in Invest Northern Ireland?
Bill Scott: In
total, I think it's around 580 at the moment. Some of the work
that Oonagh would be involved in is specifically in one of those
areas—the Eastern area—which includes Belfast city.
Q192 Lady Hermon:
Do you have a good working relationship with the CBI? We have
to give you a right to respond.
Bill Scott: Well,
I think there are a number of areas that Nigel focused on that
we would be largely in agreement with, but maybe not so much the
specific areas related to Invest Northern Ireland. We can certainly
discuss those, and I'm quite happy to explore those.
Q193 Oliver Colvile:
First of all, welcome and thank you very much for coming over.
What do you understand by the term "enterprise zone"?
Bill Scott: As
Nigel, your previous witness, said, I think that's the crux of
the matter here: what is an enterprise zone in this context?
Broadly, Invest Northern Ireland would be supportive of the concept
of an enterprise zone, if what we mean by an enterprise zone is,
I suppose, a number of incentives, programmes, products and services
that we package together to attract the appropriate investment
into an area and into Northern Ireland. In very broad terms,
we would be supportive of that.
Q194 Oliver Colvile:
What specific incentives would you want to see?
Bill Scott: I would
start off with corporation tax as one of those, but we are also
looking, as the previous speaker said, at other tax incentives
around that that might encourage specific development and investment
around specific sectors, and that might encourage investment and
spend in particular areas of capability development, such as skills
training, R and D incentives, and that might encourage venture-capital
investment. There is a broad range, I think, of incentives that
could be packaged as an enterprise zone. If we are talking about
the enterprise zones of the '80s and '90s that were very much
property-based and focused on that, we are not sure that there
is a strong argument for that at the moment. We would like something
much wider than that.
Q195 Oliver Colvile:
I rather agree with you. I think the thing has moved on quite
considerably since the '80s and '90s. Having an enterprise zone
for the whole of Northern Ireland—would that be helpful
to you? Do you think there should be individual zones within
Northern Ireland?
Bill Scott: I think
there is some evidence to say that the wider the net is cast,
the more beneficial, for a number of reasons, and I think it is
much more easily understood and it is much easier for us to market
it as well if it is for the whole of Northern Ireland. Certainly,
if it were corporation tax-based—if that was the starting
point for it—that certainly would lead to a Northern Ireland
and province-wide enterprise zone being the best approach.
Q196 Mel Stride:
A Government review of 22 enterprise zones in Britain concluded
that they might have cost something between roughly £800
million and £1 billion in total—a huge expense. Do
you feel that the cost, as we might be able to estimate it at
the moment, to Northern Ireland would be worth it in terms of
the development that might accrue, or do you think it is too much,
given the current circumstances, for the public finances to bear?
Bill Scott: The
difficulty in answering any questions about what it costs is that
we are not sure what the assumptions are around those, and what
the potential benefits are down the line, so it is very, very
difficult to have a sensible debate around the costs issue until
we know specifically what range of measures we are talking about,
and what the likely totality of that is to the UK public purse,
and to Northern Ireland, in terms of the block grant. Also, on
the timing, how would that phase in over a period of time? For
example, if it is corporation-tax-based, one would imagine you
would take a much greater hit very early on, whereas if there
are other incentives that might roll in over time, you would be
looking at that.
When it comes to the benefits, it depends again on
the particular package of measures; what sectors that might impact
on; to what degree it might encourage FDI; to what degree it might
encourage indigenous investment; to what degree it might encourage
profit centres along with cost centres; and what impact those
sorts of measures might have on the cost centres in Northern Ireland
at the moment. I am not avoiding the question, but I think there
are an awful lot of unknowns in there and there are an awful lot
of assumptions to be made before you can come up with a proper
cost structure.
Q197 Mel Stride:
I totally understand and accept that, because we have not really
defined exactly what we are considering here, but if we were looking
at something that was going to cost some hundreds of millions,
for example—figures of £300 million-plus have been
mooted—do you think that there is the political appetite
or the political capital within the Northern Ireland Executive
to take that kind of step, or do you think that it would just
need too many cuts in too many other places for it to even be
something that could ever conceivably get off the runway?
Bill Scott: In
some ways, that is a political question, but I think this is the
best way I can answer that. We talked about transformational activity
and, I suppose, game-changers. If there are a number of game-changers
and transformational activities that can be sold, and the wider
community can see the benefits of those over a reasonable time
scale, then I think that a proper cost-benefit analysis can be
carried through and explained publicly. I am not sure whether
that answers your question or not, but I think you've got to understand
the benefits when you are looking at those hundreds of millions.
You've got to be able to articulate how that is going to benefit
the Northern Ireland economy.
Q198 Ian Paisley:
Following up on that last point about time scale, I think Sir
George Quigley said, a couple of weeks ago—I hope I am paraphrasing
him correctly—that if we got corporation tax, it would probably
be 25 years before we saw the benefit of it. That is not really
a time scale that most people in Northern Ireland want to work
to, but it is realistic that whatever we do should be long-term
and durable. Do you agree with Sir George Quigley that it would
take 20 years before we saw the benefit of corporation tax?
Bill Scott: On
corporation tax, that is a difficult one to answer, in terms of
the time scales and when we might see the benefits. We might
see benefits over a shorter time scale in terms of bringing a
transformational change in the types of inward investment that
we attract. For example, Jeremy Fitch, who was speaking to the
Committee last year on the corporation tax issue, would have put
the case that at the moment, we are attracting a fairly defined
market of inward investment to Northern Ireland that tends to
focus around cost centres. A lot of that is from North America.
A lot of it is from companies that could also invest in profit
centres within Northern Ireland. If we were to see that sort
of investment over a short period of time, say, from existing
investors—I'll not name specific investors, but if some
of our existing cost centre investors started to invest in profit
centres in Northern Ireland—then I think we could see some
benefits fairly early on.
When it comes to enterprise zones, there are some
studies throughout the world on benefits in India, the Republic
of Ireland and America that talk about benefits over a 10-year
time scale, which I think is a much more reasonable time scale
to work with, in terms of trying to assess the impact of an enterprise
zone. That is much wider, obviously, than corporation tax.
Q199 Ian Paisley:
In terms of driving us forward, obviously Invest Northern Ireland
and the ministry, DETI, would have a role. Do you see any specific
role for Her Majesty's Government, in terms of continuing to drive
change?
Bill Scott: Again,
it very much depends on what is the enterprise-zone arena. I
think the Government can drive change in a lot of areas. If we
are about transformational change and if we are about game-changers
for the Northern Ireland economy, it is much wider than that one
Government Department, I think. We have already talked about
DEL; you could also include DARD and DSD. Across the piece, and
in terms of the UK Government, they all have a part to play in
it, so there are a number of things that could come together there
to bring focus to it. I think the Government can also play a
huge part in, again, the marketing of all this. The key thing
with an enterprise zone is that it does give us a headline-grabber,
and once we get into the detail, it is what is in there, but it
does give us something to focus our inward-investment activity
on. It also gives us something to encourage local investment
as well—indigenous investment.
Q200 Ian Paisley:
I want to give you the opportunity to respond on the tourism issue.
You heard what Nigel Smyth—I nearly called him Nigel Kennedy—said
with regard to tourism and how the good draft strategy of June
has disappeared, or words to that effect. Where is this draft
strategy on tourism? What has happened?
Bill Scott: The
difficulty I have in answering that today is that while Invest
Northern Ireland has some responsibility around tourism, specifically
for capability development of hotels and guesthouses and so on,
the core responsibility for tourism rests with the Northern Ireland
Tourist Board and within the Department. I am not sighted on
where that is, to be honest.
Q201 Ian Paisley:
Maybe you could ask the Department to write back to us. That
would be useful.
Bill Scott: Yes.
Q202 Jack Lopresti:
You and other witnesses have suggested a range of possible incentives
that could be provided within an enterprise zone. What would
be your top priorities?
Bill Scott: As
we have said before, we believe that corporation tax would be
a game-changer, precisely because it would change the types of
investment that we get. It is probably the most straightforward
change, in terms of the types of investment that we could attract.
There is an awful lot more than that around tax incentives and
imaginative grant packages that can be brought together in an
enterprise package. We would focus very much on those sorts of
wraparound services that might come with an enterprise zone.
It is around encouraging mobility, investment, capability in terms
of skills, R and D, ability to export, ease of export, and attracting
new investment. For example, some countries have got involved
in very innovative tax and other incentives around attracting
venture capital, and that might be something that we bring to
it, because we could attract global starts, for example, to Northern
Ireland through that. We have a fairly tried and trusted programme
around export start activity and global start activity, but we
could accelerate that through other types of investment.
Q203 Mr Benton:
You appear very keen on corporation tax. I put it to you that
corporation tax and, indeed, enterprise zones would involve the
Northern Ireland or UK Government in a very, very high cost factor.
I wondered if you had done any spade-work, any investigation,
into what I would call a compensatory factor: what the Government
might lose in terms of loss of revenue through deferential rates
of corporation tax. Have you quantified or costed in any way the
benefits that might accrue from the implementation of either corporation
tax or, indeed, an enterprise zone?
Bill Scott: Again,
the difficulty in doing that is: what specifically is involved,
and what assumptions do we make around that? In terms of corporation
tax, we have worked with some of the existing assumptions and
some of the headline published figures of, I think, around £200
million or £300 million for the annual costs of corporation
tax. Winding that out to the enterprise zones, it really depends
on what package of measures you come up with, but obviously that
cost-benefit analysis would need to be done specifically before
you could say, "Yes, that is the particular basket of incentives
that you would come up with in this area."
The important point that we would make is that you
would be trying to be much more intelligent and smart around how
you would implement an enterprise zone. You would be trying to
bring together a set of incentives that would minimise deadweight.
At that point, you would then have to cost that and see what benefits
we are likely to get out of that, what particular sectors we will
be targeting, and what levels of investment we are likely to get
from those sectors. Our position is that it is much too early
to say.
Q204 Mr Benton:
Yes. You would agree with me that there is a huge risk element,
in terms of what could possibly be large quantities of lost revenues
to the Government. If, for example, a corporation tax initiative
was not successful and did not bring about, at the end of the
day, increased jobs and productivity and so on and so forth, it
is a huge thing for industry to lose if there was no compensatory
factor. Likewise, you are obviously right about the enterprise
zone: it depends what it all means. Really the point of my question
was to see if you had made any attempt at all to identify this
cost equation thing.
Bill Scott: I suppose
the only thing I could add on that is that, in terms of the objectives—what
we are trying to achieve here—we would start off with the
assumption that, first of all, we are trying to rebalance the
economy so that we grow the private sector, so we are rebalancing
there. Ultimately, I suppose, from the UK Exchequer point of view,
hopefully, over a period of time, you are reducing that subvention—you
are having an impact on that. There is absolutely no doubt that
if it could not be proven that we were having an impact on that,
you would have serious concerns as to whether you undertake any
of these strategies, and it would be exactly the same for the
enterprise zone.
Q205 Oliver Colvile:
Our role, Mr Scott, as you may know, is to make a recommendation
as far as the Government are concerned, and they will then decide
whether they are going to give the Northern Ireland Assembly the
powers to decide whether they want to go ahead with it. One of
the big conundrums, I suspect, that the Northern Ireland Assembly
is going to have will be in working out whether this is actually
going to pay dividends and what the reduction is going to be in
the block grant that they receive from Whitehall and Government.
How long do you think it is going to take—and has anybody
done any modelling on this—if we were to either create an
enterprise zone or, for that matter, allowed the Northern Ireland
Assembly to actually determine the level of corporation tax, actually
to see an increase in the economy and turnaround?
Bill Scott: It
is a very difficult question, but I think it gets back to the
previous answer: I think there are some quick wins in there, and
there are some things that happen over a much longer period of
time. Some of your quick wins could come around attracting profit
centres to Northern Ireland, and those could be game-changers.
You will also see, hopefully, some quick wins around the growth
of indigenous businesses in servicing some of those types of investors.
You could also see very early wins in terms of venture capital
investment, for example, in Northern Ireland. You could see very
early wins in terms of attracting new types of investment that
bring new types of skills and management skills to Northern Ireland.
Those are things that could happen within a relatively short
period—in, say, one to five years, you could start to see
those starting to come through—but there is no doubt that,
in terms of the transformational change that we have been talking
about, that will happen over a much longer scale.
Q206 Oliver Colvile:
I get into a lot of trouble with my colleagues here because I
point to Hong Kong as a place where there has been success in
actually reducing taxation. Apart from the Republic of Ireland,
who else do you see as your main competitors?
Bill Scott: In
terms of FDI, it can change, depending on the types of project
that we are focusing on at any one particular point in time.
Obviously, the Republic of Ireland would be very much a competitor
in terms of North America. In terms of looking for a European
base for a call centre, it is Eastern Europe. Some of the developing
or re-developing areas in Europe are definitely competitors, because
they can be cost-competitive, and they can be in the centre of
Europe and have the same sort of access to parts of Western Europe
that those investors are trying to target. If we are looking
at cost-centre investment that is really interested in a European
base, then our competition could be across Europe.
Q207 Oliver Colvile:
When you are talking to potential investors, what do they say
to you? Do they say, "If only you were to do this, then
we would most certainly be there like a shot"?
Bill Scott: There
are definitely investors that will say to us, "Taxation is
an issue." Jeremy Fitch, in some of his evidence, referred
to some of our financial services investors who did look at whether
there were tax benefits, and if there were no tax benefits, at
what else there was that could make up the difference.
Q208 Oliver Colvile:
Do you reckon part of that, though, is cost of employment and
regulation on employment?
Bill Scott: Part
of the deterrent?
Oliver Colvile: Yes.
Bill Scott: Yes,
and there could be a perceived peripherality, as well. It could
be a case of: "Why would we put it in Northern Ireland when
we can put it in"—
Oliver Colvile: Plymouth.
Bill Scott—"Other
parts of the UK or ROI", or wherever. If you take a company
like HBO, which I know has been mentioned before, or some of the
huge television and film production companies, those are very
mobile investors, and they have looked at the taxation incentives
as well. They are saying, "if we don't have that, what else
can we have to balance that up?" There is no doubt that
it is a factor.
Q209 Gavin Williamson:
Mr Scott, can I ask you a bit of a hypothetical question? If,
for example, you had been promoted to First Minister—I think
that is a promotion, but anyhow -
Naomi Long: You are learning
about Northern Ireland.
Ian Paisley: You would
have to take a pay cut.
Gavin Williamson: Let
us say that you are in the role—shall I rephrase it—of
First Minister, and you are sat there with the decision of whether
to make a tax cut costing £220 million; you could put that
as a tax cut, or you could actually give it to, let's say, Invest
Northern Ireland to invest in businesses and structural growth.
What do you think you would do? Would you go for the tax cut,
or would you go for, let's say, three to five years of investing
£200 million-odd a year towards creating incentives and developing
businesses right across Northern Ireland?
Bill Scott: Again,
it is a very difficult question in terms of an either/or. If
it is a straight either/or -
Gavin Williamson: It is.
Bill Scott: If
it is a straight either/or, there would have to be some detailed
cost-benefit analysis involved in that.
Q210 Gavin Williamson:
Which do you think would deliver more jobs?
Bill Scott: Let
us just say that some would say that corporation tax is a relatively
blunt instrument, and there are some issues of deadweight around
that; for example, you can benefit the retail sector in the short
term and you have to guard, to some extent, against brass-plating
and so on—evidence that I am sure this Committee has heard
before. If you are looking at other types of incentives, then
you can target those at particular sectors, and you can target
those at specific types of investment that you are trying to attract.
You would have to take those two things into account in assessing
that. I don't know whether that answers you or not.
Q211 Naomi Long:
This comes in quite neatly after that question. You already have
the power to do targeted work, in terms of attracting inward investment
and so on. We have talked about how important corporation tax
is. If you just keep doing what you are doing, are you going
to see a step change? If you are not going to keep on doing what
you are doing now, what, other than corporation tax, do you have
on your agenda, in terms of what could be on offer that would
make a big difference? That is the question, I suppose, we need
to ask. We have a range of targeted incentives. Corporation
tax would be a new arrow in our quiver, but what would be the
alternative that would be a game-changer?
Bill Scott: I think
the alternative that is a game-changer is to have a full table,
if you like, of products and services that you can work with.
At the moment—and I think Jeremy Fitch made this point
as well—we are playing with one set of criteria that is
attractive to a certain type of investor, and that includes indigenous
investors as well. If we add a range of incentives around an
enterprise zone that includes significant tax change, then it
allows us to tailor our products and services to the particular
investor. In an ideal world—and this is maybe coming back
to that either/or question—you would have maybe a set of
tax-related and capability development related incentives, products
and services that could help attract a certain type of profit-centre-type
investor, would attract venture capital to Northern Ireland, and
would attract new technology to Northern Ireland.
On the other side, you would have a set of products
and services maybe even based around grant, but a different use
of grant—a much more selective use of grant—around
capability development for those businesses that would not necessarily
see, in the short term, the benefits of a change in the tax regime.
For example, if we bring in tax change, and that impacts negatively
on our ability to offer grant support across certain areas, we
could inadvertently penalise cost centres and existing investors.
When we talk about an enterprise zone within Invest Northern
Ireland, we do talk about these intelligent or smart enterprise
zones that minimise the potential for consequences that we did
not expect or we did not want to see—the deadweight issue.
Q212 Naomi Long:
In relation to that, you have said that you need, if you like,
a range of incentives, essentially, in this basket of options
that you would have. You have talked, for example, about tax
credits for research and development and so on. Other witnesses
have been suggesting something similar. Could you maybe give
us some perspective on what is available to people at the moment
and what is the level of demand for tax credits that you have
had from businesses coming into Northern Ireland to say, "This
is something that would change what we do as a company?"
Bill Scott: Largely
around inward investment, again referring back to previous evidence,
the opportunity that we do not have at the moment is to pitch
to those organisations that tax would be a key issue for. We
are not geared up and we are not focused and targeted on trying
to attract profit centres, purely because we realise that we do
not have that competitive advantage there within the island of
Ireland. First of all, it does allow us to open up to targeting
that group. We have limited conversations around that issue, but
that is not to say that it is not a key issue. I think if we
were able to open up that market, there would be a much more intelligent
conversation around that.
In terms of what we are doing at the moment that
we could do more of, that is very much around attracting venture
capital investment, and attracting investment in those capability
development areas. That is very difficult particularly for small
and medium-size businesses at the moment, because they have an
eye to the bottom line; that really does have an impact on them.
It can take some time for the benefits of that investment to come
through. If we can target our support around that capability
development, it allows them to do something that they cannot do
at the moment—it is additional.
Q213 Naomi Long:
In relation to small and medium enterprises, you said in your
evidence that you felt that they should access some benefit from
lower taxation rates, and obviously many of them would not be
affected by the change in corporation tax directly. First of
all, what do you have in mind in terms of taxation that would
affect the small and medium enterprise sector in Northern Ireland?
Also, do you accept the argument put forward by those in favour
of the reduction in corporation tax that when you bring in those
large companies, small and medium enterprises benefit by servicing
some of those large companies, so they gain from corporation tax,
if not by direct tax incentive, through opportunities to grow
and expand their business?
Bill Scott: I think
the tax advantages for small businesses are very much around,
again, that capability development, so it is around that investment
in areas where they do not see the benefit over a short period
of time. There is no doubt that that can help, as well as the
grant structure. We have seen some of that around. There is
some very good evidence on that around R and D, which, in very
small companies, is increasing and has increased in the last year;
we've got very strong evidence of that. We've got evidence that
says that, over the last five or six years, R and D investment
by SMEs in Northern Ireland has more than doubled. There is evidence
that changes in taxation and relief around those sorts of areas
of expenditure can help.
In terms of the knock-on effect of profit-centre
investment or inward investment, there is no doubt of that. We
have seen that in Northern Ireland. We've got a history of that
in Northern Ireland, but we have particularly seen that in the
Republic of Ireland as well, where whole industries have grown
up around inward investment. We have seen it in Northern Ireland
around the ICT sector. A game-changer there was the likes of
Allstate in the late '90s coming in and investing, and that just
gave scale to that sector that wasn't there before. It is obvious.
Q214 Oliver Colvile:
I have already declared my interests, so I presume I do not have
to do it again, do I?
Chair: I would if I were
you, just to be on the safe side. This is in property, not in
Hong Kong
Oliver Colvile: I would
like to have some interests in Hong Kong, I can tell you. You
talked in your evidence quite a bit about how you feel that there
should be a package that included something to do with land values
as well, which I think is going to be very difficult, but do you
think there is a huge demand for lower property values in Northern
Ireland, and how do land values compare to what goes on in the
Republic?
Bill Scott: Sorry,
on the last part of your question: is there a huge demand in—
Oliver Colvile: For reduced
property costs.
Bill Scott: The
reduced property costs that we were talking about were very much
more on the SME side. Yes, for the early start-up stage or the
early growth stage, we certainly see on a daily basis that the
costs of property definitely are a barrier for first-time entrepreneurs.
What that means is that the growth of those businesses can be
held back, because what is happening is they are not prepared
to invest in capital, they are not prepared to invest in a suitable
building at a very early stage, so the growth of the business—particularly
that early-stage growth—is stunted to that degree. There
are issues around that.
As to whether there is a huge failure in the property
market at the moment, we do not believe there is. We would concur
with what the CBI has said on that, in that we do not see a huge
failure in the property market. We are not saying that we need
to build loads of advanced factories and we need to clear huge
swathes of Northern Ireland for industrial land use and get an
awful lot more investment in that. It is not an "if you
build it, they will come"-type strategy; that is not what
it is about. It is about capability rather than just putting
property up for the sake of property.
Q215 Oliver Colvile:
How does it compare with Southern Ireland?
Bill Scott: Property
prices in Northern Ireland would be significantly less. I am
not sure of the specific differential, but it would be significantly
less. For how long that will remain the case is a key issue,
I think.
Q216 Jack Lopresti:
Would you like to see changes in the law governing intellectual
property rights?
Bill Scott: Specifically
around—
Jack Lopresti: That is
my question. It is a very generic question. If you think there
should be specifics, please tell us.
Bill Scott: I suppose
it depends on what the specific objective of that would be. If
we are talking about making it much easier for R and D-type investment
to take place in Northern Ireland, then we are absolutely all
for that.
Q217 Dr McDonnell:
I suppose there could be many things included in the proposed
enterprise zone, but what role do you see for Invest Northern
Ireland in helping to promote a culture shift towards a more entrepreneurial
culture and towards greater private sector development and less
dependence on the public sector?
Bill Scott: That
is a good question, and I think it is across those three broad
areas. Maybe Oonagh will want to come in on some of this as well,
but it is across those three broad areas of entrepreneurship—encouraging
entrepreneurship, awareness around entrepreneurship, and encouraging
and nurturing early-stage growth. It is then around exportability
and FDI. Those are the three strands, and promoting a culture
around that is about showing that the Government, Assembly, Department
and, ultimately, ourselves are serious about making it easier
for investment to take place in Northern Ireland. We need a real
culture of encouraging investment in all those areas—a culture
of investment that makes it easier to consider self-employment,
that makes it easier to expand into markets and invest in export-related,
high-risk activity, and a culture of attracting inward investment
right across the piece, not limiting ourselves to types of investment,
but encouraging high-value investment right across the piece.
I think we have an important role to play in that,
and I think there are an awful lot of other players. Local councils
have a role to play in that, particularly at the enterprise end.
Other Government Departments have a role to play in it at the
FDI end, through education, through skills training and through
assured skills. When we talk about areas like the food sector
and so on, other Government Departments have a role to play in
that as well. It is a joined-up approach, and certainly we think
that the Department and the agency have a key role to play in
corralling that and making sure that it happens.
Q218 Dr McDonnell:
You touched on a number of things there. The private sector,
such as it is, is largely small business. What do you think are
the barriers to those small businesses expanding or getting involved
in export? How do you think we can help them break down those
barriers?
Bill Scott: There
is a whole range of things we can do in terms of helping them
break down barriers to export. The key issue for first-time exporters
is they are often dealing with a very familiar market. It is
the market they grew the business in, in the early stages. They
are moving potentially into a new currency, a new language, and
a whole new culture and way of working. We try to introduce them
to those markets. If we could do more around encouraging top-market
targeting and increasing the capability of our marketing management
within Northern Ireland, then I think we could remove a lot of
that fear of exporting. It is an early-stage fear of exporting.
There is an awful lot more we can do around that. We can reduce
the risk that comes with that early-stage exporting. I don't
know if there is anything you want to add there, Oonagh.
Oonagh Hinds: I
think, to come back on some of the issues around the culture change,
that is a major factor for us, and it is an area that we have
tried to deal with over the last number of years, in terms of
some of the marketing campaigns that Invest Northern Ireland have
been involved in. With export start companies, you tend to find
that a lot of the smaller companies would very much be the lifestyle
businesses, and what we are trying to do is encourage them. Nigel
referred to this earlier: the first obvious export marketplace
for these companies is the Republic of Ireland, so we work very
closely with companies in trying to encourage them to at least
take that first step into the export market, but it is all about
the capability and working with management teams, marketing, et
cetera. You have talked about the culture change in the low business
starts within Northern Ireland, and trying to encourage more start-ups—particularly
quality start-ups that are going to export.
Bill Scott: If
I can just come back on something that was said earlier, I think
it was said that Invest Northern Ireland's budget around this
area of exporting was around £3.5 million. That is a very
specific figure, which is really just our Trade Division budget
for previous years, but Invest Northern Ireland would also commit
a significant amount of budget through its selective financial
assistance to exporting. We would also commit a substantial budget
towards encouraging sales and marketing teams and the development
of those teams, so to assess £3.5 million is not strictly
true—it is much more than that. It is a multiple of that,
if we take into account all the other assistance that would have
an indirect impact on export capability.
Q219 Dr McDonnell:
We all talk a lot about university spin-outs. If I could perhaps
use another example, the university spin-outs are fine when they
are born. How do we increase the antenatal work that basically
ensures that university spin-outs occur in the first place? How
do we increase liaison with universities? How do we persuade
the universities? What is your feeling about how well the universities
are geared up to commercialisation? My sense is that some of
the departments are hostile, particularly in the life and health
sciences—they are all geared towards pure research for research's
sake; they are very hostile to commercial research that might
actually make money.
Bill Scott: In
terms of how we can help them at that early stage and how we can
get them get beyond that university incubation stage, a lot of
that is about putting them in touch with people who have capability
in this area. Again, I keep coming back to this word "capability",
but I am talking about entrepreneurs who have come through this
and investors who have cash to give to it. We try very much to
do that, but I think there are some interesting products and services
out there in other countries; for example, going back to the tax
issue, in parts of India they will give tax relief to investors,
in terms of capital gains tax. They will remove capital gains
tax for investors when they are selling on businesses that they
have invested in through VC at an early stage, so something like
that can be a game-changer, again, for VCs. At that early stage,
it is all about putting them in touch with expertise from outside
that business. A lot of them are coming from a technology background;
they do not necessarily have the skills to run a business, but
they've got fantastic skills in terms of developing a particular
product, so it's putting them in touch with people who have that
business acumen and also the means to resource it.
In terms of the capability of the universities, actually
in life sciences we have some very good relationships with the
universities around life sciences and health technologies, and
some of the academics, it has to be said, have been very helpful
to us in our FDI in this area, and in our exporting. Our experience
is, yes, there is a difference between academia and the commercial
world, and a difference between academia and the business world,
but as long as you accept those differences and where they are
going to be, and where the rubber is going to hit the road in
some of those, you can work with academia to demonstrate a capability,
again, within Northern Ireland, and we have done that.
Oonagh Hinds:
One example that you will be very aware of is Andor Technology—an
excellent example of a spin-out from university. I think this
goes back to the earlier question around IP: obviously, there
is an issue with IP within universities, so if they want to commercialise
something, are they going to release the IP that is within the
university? That is, I think, something that we need to work
on with the universities.
Q220 Dr McDonnell:
We have a difficulty, not just with IP, but rationing out who
gets the reward, for instance, for anything that does come out
of there. Quite often, they do nothing, rather than allow something
to flourish, but that is my sense, sorry.
Bill Scott: To
some extent, there can be conflicting objectives. That is the
issue.
Dr McDonnell: Yes, that
is exactly the issue.
Q221 Naomi Long:
In terms of your corporate plan for 2008 to 2011, you said you
wanted to "drive a shift towards high-value economic activity
by attracting FDI in target industries, notably financial services,
software and ICT, and by boosting indigenous businesses and start-ups
in high-value sectors including certain tradable services, niche
manufacturing, life sciences and the creative industries".
You have given us the example of Andor Technology; I am also
aware, in recent weeks—as recently as that—that you
have had some successes in my own constituency, in attracting
inward investment and developing, I suppose, target sectors in
terms of, for example, tidal and wind energy and so on. I am
just interested if you could maybe outline some of the other successes
that you have had, to give the Committee a broad feel for just
how closely you feel you have, in 2011, achieved the objectives
that you yourselves set at the start of the period.
Bill Scott: I'll
take a few of the key targets around R and D, I think, which is
particularly relevant today. We fairly well exceeded the target
there. I think we were trying to leverage investment of around
£100 million-plus; we ended up leveraging investment in R
and D around £320 million over that period, so there has
been a significant exceeding of that target. Our export focus
is very much around creating new exporters. We had a target of
630 and we achieved a result of 630 new exporters, which was a
good result, given the period, again, that we are dealing with—2008
to 2011. We have seen significant investment in innovation overall
through R and D, and also in terms of sectors. For example, over
that period, we have seen, as you have alluded to, a step change
in terms of wind-energy sectors, and also growing some of those
out of traditional sectors. Again, in the previous evidence,
for example, the construction industry was spoken about, and it
was asked whether that was really a target. We see that high-value
jobs can come from any sector; we have seen that over this period.
For example, in the food technology sector, we have seen high-value
jobs come through; the construction services sector, we have seen
high-value jobs come through. There has been a terrible impact
on the construction sector as a result of the downturn, as we
know, but there are, again, some high-value areas within that
sector that we have been able to nurture over the period, so that
was part of that focus on tradable services.
The health technology sector and the e-technology
sector have just grown in that period. It has come from a fledgling
sector to one of our key priorities and something where we have
seen businesses coming through from all over different regions
of the Province. In our export start area, which is very close
to what we do, we have seen a significant change in terms of where
the start-ups are coming from. They are not coming from the traditional
sectors anymore; it is a real challenge for us, because they are
coming to us with new ideas—internet-based ideas, web-based
ideas, very much creative ideas. It is the whole creativity sector,
and it is very much a young person's environment as well, and
very challenging for some of us who have been doing this for a
lot of years, in terms of just trying to understand those early
concepts. Maybe around Belfast, you have seen some of the recent
investments there.
Oonagh Hinds:
Yes. There were quite a few recently,
obviously, in your constituency that I am aware of, but it is
interesting to see the change. I have been working now with Invest
Northern Ireland for 20 years, and it is interesting to see the
change in the type of businesses that we are dealing with and
the way that technology has developed—and, particularly
for me, to see the young people coming forward with really new
creative ideas, and obviously a lot more. They are talking about
technology and ideas that I do struggle with personally. I just
say, "Look, tell me what the benefit is here. What is it
going to do? That's great." I think it has been very rewarding,
particularly, as Bill mentioned, in the economic downturn. We
certainly have seen a lot of new projects and new ideas still
coming forward, even within that context.
Q222 Naomi Long: There
is one other question that I wanted to ask: obviously, Northern
Ireland has a certain notoriety—let's put it that way—internationally,
because of our historic difficulties. In some places, that is
an upside. For example, in the US, the peace process and so on,
and the transformation in Northern Ireland, has opened doors.
In other places, it must still be a disincentive; people are
not sure what they are dealing with when they come to Northern
Ireland or what problems they will face. To what degree do you
think that the legacy of the past impacts on attracting investment
into Northern Ireland, and on being able to unlock potential within
Northern Ireland to actually be able to service those industries
that you can attract?
Bill Scott: It
is certainly much less of an issue than it was, obviously. It
tends to be an issue—and I had some experience on the foreign
direct investment side specifically in relation to North America
a few years back—in encouraging someone to come and visit
the place in the first instance, but I think you can overcome
that through a lot of what we can show them now through the use
of technology. We can show them what it looks like; we can almost
let them feel and touch Northern Ireland before they get to see
it. When they get to see it, it almost always—in fact,
I cannot think of a case where it has not done so—exceeds
someone's expectations, and that is a great thing to say, as someone
who loves the cities. When someone comes in and they see the
development of the cities and towns throughout Northern Ireland,
it is much better than they thought it was going to be. In some
ways, it is a great sale once they actually visit, and it is much
easier to win them over once they actually visit. It is all about
attracting them, and that is what our sales team are very much
focused on—selecting those targets and then saying, "Come
and see it", making it as easy as possible for them to come
and see the place.
Q223 Naomi Long:
Also one of the impacts, I think, of the troubles is that it has
made people slightly risk-averse in Northern Ireland, both in
terms of business and, I would have to say, in terms of Government
Departments and their interventions. As you will know from personal
experience, when you do take a risk on something, there will be
occasions when that does not pay off. Do you think that we are
starting to change that culture as well? We have talked about
entrepreneurialism, but are we changing that risk-averse culture
so that business can thrive—so that people are willing to
take chances that are well thought-through but are still chances
nevertheless?
Bill Scott: Yes,
and I think, again, a lot of that comes from the structural change
in terms of the age change, in that an awful lot of the ideas
and activity has come from young people, who do not see the barriers
that even my generation saw. One of the key issues for us in
the past was this peripheralism, where someone would come to you
and their vision for their business would be selling to their
local community, and there still are some of those very good social
enterprise businesses, but that would be the vision for some individuals.
Now, nine times out of 10, the vision is immediately a global
market, so that is a step change as well, I think.
Chair: Thank you. We
come to the final area of questioning. Sylvia?
Lady Hermon: That's awfully
nice of you, Mr Chairman.
Chair: Last but not least.
Q224 Lady Hermon:
You will be pleased to know that, in fact, these are three fairly
straightforward questions. We have not actually heard Oonagh's
voice that much, with the greatest respect; it has been wonderful
having the two of you, but would you mind answering, Oonagh, because
this is your area of expertise, I think? If we had an enterprise
zone right across Northern Ireland—we do not know if that
will be the case—how effective would that be in ironing
out the regional differences that we have at the moment, particularly
for businesses with activities around Belfast and some in North
Down—obviously even more in North Down—and then rural
investments in the west of the province? How effective would
it be in changing that?
Oonagh Hinds: I
think that is what really does need to happen. The concern would
be, I suppose, if we did look at it on a regional basis, with
designated areas, that all we are going to do is to move investment
from North Down, say, to a designated area such as parts of Belfast
or, indeed, some of the rural areas. Personally, my opinion would
be that we need to look at an enterprise zone across the whole
of Northern Ireland, and I think it would benefit on a sub-regional
basis. I also think that it would encourage, in some areas, potential
clustering of companies. For example, if we had IT companies
that locate in a certain area that were going to encourage clustering
around ICT, or if we have an inward investor moving into a rural
area, that will also benefit small companies in terms of some
of the supply chains in the areas as well. To me, I think it
is important that we are looking at it as a whole, rather than
designated areas.
Q225 Lady Hermon:
Yes. If the recommendation were to be that, in fact, corporation
tax in Northern Ireland should be reduced, do you think that an
enterprise zone has to come with a reduction in corporation tax?
Would there be more effective tackling by one without the other?
Oonagh Hinds: As
Bill has shown, I think, it is the range of benefits that we can
offer both the inward investor and the indigenous companies.
It is probably very difficult to say which one would be of most
benefit. Obviously, when we are talking to lots of companies
and inward investors, they will talk about the reduction in corporation
tax, and obviously that disparity with the Republic of Ireland.
I think it's a difficult question to answer, personally, but
I think the corporation tax would be part, I think, of the range
of offers that we could provide.
Q226 Lady Hermon:
Again, assuming that, in fact, they follow your wise advice and
the enterprise zone extends right across Northern Ireland, what
impact would you expect it to have on land and development prices
across Northern Ireland—consistently good or not?
Oonagh Hinds: I
suppose it would depend, again, on what is on offer within the
incentives. I would have concerns, looking back to the previous
lessons that we have learned, where we had property developers
going in and making a bit of money, about the long-term sustainability
of property in the enterprise zones. I think, with the enterprise
zone across Northern Ireland, in terms of infrastructure investment
and property, it has to be a good thing. It will, I think, increase
value.
Q227 Lady Hermon:
That brings me to the final question. This Committee has taken
evidence from a very learned gentleman, and I do mean that most
sincerely, but he was highly critical. I will just quote what
he said: "The concept of a simplified planning zone, as with
an enterprise zone, will send out a very 'negative' message to
Northern Ireland—just as the Planning Bill is approaching
a positive and confident planning hierarchy". Speaking,
if you are allowed to do that, on behalf of Invest Northern Ireland
this afternoon, how would you rate the importance of the changes
to the planning system at a time when we are also considering
the introduction of, possibly, an enterprise zone right across
Northern Ireland?
Bill Scott: I will
just come in on that, because I think there are some interesting
questions in there. I think, around the simplified planning zones,
we are supportive of that approach. We are supportive of the
simplified planning zones. We do think it gives a greater degree
of certainty to developers, at an early stage, on what is likely
to happen down the line in the process. Anything that does that—[Interruption.]
Lady Hermon: I do apologise
on behalf of my very young colleague here.
Bill Scott: Not
a problem.
Jack Lopresti: Thank you.
Bill Scott: It
does give it a level of surety there. If the quote means significant
change to the planning side and the over-simplification of that
could lead to unwanted consequences—if you like, if it could
lead to deadweight and if it is a very blunt instrument—I
think we would be saying that as well. We think that anything
that just basically says, "Let's relax all the planning issues
to make it much easier for everybody to invest and to encourage
new investments in property" per se, I think that is a difficult
one, because I think what you are coming in with is something
that is designed to help the developer but it does not have the
safeguards in place that will mean that you get the specific types
of investment that you want. You have to be much more selective
about it, I think.
Q228 Lady Hermon:
Yes. I know you do not have a crystal ball, but we are moving
swiftly now towards the end of the life of this particular Assembly.
Will the Planning Bill make it onto the statute book before the
Assembly is prorogued? You do not have a crystal ball.
Bill Scott: I could
not possibly say. I have no idea. I would not be qualified to
answer that question, to be honest.
Q229 Lady Hermon:
Do you think it is a good move, simplifying planning issues?
Bill Scott: Anything
that makes much clearer at the outset what is likely to happen
and the extent of what is likely to happen down the road—I
think, yes, we would be broadly supportive of that, but as to
changing the planning regulations in such a way that it makes
it all very nebulous and creates a degree of chaos in there, I
think we would not be supportive of that under this enterprise-zone
measure. In the past, it has created property bubbles and it
has been a bit of an advantage to property developers, but has
there been any long-term economic value out of that? That is
very much questionable and we have examples of buildings that
were built, never occupied and knocked again. We really would
not want to be there.
Chair: We have kept you
long enough. Thank you very, very much, both of you. Those were
very interesting answers.
Oonagh Hinds: Thank
you.
Bill Scott: Thank
you.
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