Examination of Witnesses (Questions 230-261)
Q230 Chair: Thank
you very much for joining us again, Mr Simpson; it is good
to see you. I am sorry that we are a little bit depleted; I think
there are one or two things going on in Northern Ireland, which
has not helped.
John Simpson: The
heavyweights are here, sir.
Chair: It is kind of you
to describe us as that. I will take it as a compliment, but thank
you very much for joining us again. As you know, last time we
spoke to you we were talking principally about corporation tax
and maybe we will touch on that again today. We are broadening
the investigation or the inquiry into enterprise zones in general,
so we would be very happy to hear your thoughts on that. Of course,
George Osborne announced on, I think, Saturday or Sunday
that there were going to be some enterprise zones across the United
Kingdom. Does that fill you with some optimism?
John Simpson: Chairman,
as a brief reply to that sort of issue, which is not the core,
I think the announcement runs the risk that it could confuse precisely
what we are playing at and it does present your Committee with
a dilemma when you write the report—if you commend the projects
or something of this nature, doing it in a way that does not lend
itself to the shorthand of, "Here's the Northern Ireland
version of what the Chancellor of the Exchequer has announced,"
because I will be recommending there be very significant differences.
Q231 Chair: With
the specific reference to local authorities keeping business rates,
how do you read that across to Northern Island?
John Simpson: Can
I come to answer that question by putting in a preliminary paragraph
if I may, Chairman? I am not constrained in trying to cope with
the questions that arise from this concept by whether or not this
Parliament has the responsibility or whether in another place
they have key responsibilities. You won't be surprised to know
that one of the issues that diplomatically will have to be resolved
is if there is a thrust all around the scheme that is agreed,
the placing of the responsibilities must be clarified. I am sure
you will be the first to want to say that.
The second thing is that in terms of what we are
discussing today, dare I suggest, as I listened to your previous
hearings—of which I had the pleasure at a remote distance
on a personal computer—that we seem to be talking about
different things and this takes me into questions of terminology.
If we are talking about Northern Ireland being an enterprising
region, and forgive me if I use the word in order to make it a
distinction, I am certain that is what everybody would want the
outcome to be. If we were talking about Northern Ireland being
an enterprise zone, the question is, "Well, does zone mean
bits or the totality of the area?" Obviously, we might think
about that.
My preference is—a subject your Committee will
take in its own direction—that we should now be directing
our attention to how to make Northern Ireland an enterprising
region. I am using the term in order to make a distinction with
the other terminology, which will be enterprise zone. I am not
pretending that the impact is not to try and get the same answers,
but to avoid the confusion of terminology. So there is a question
of: what is the concept we are looking for? Who has the responsibility?
Then there are questions of the content, which is, I guess, Chairman,
where you are taking me in terms of questioning.
To remind myself of your question, you were talking
about the role of local authorities?
Q232 Chair: Specifically
local authorities and keeping the revenue from business rates.
John Simpson: In
Northern Ireland, the local authorities essentially have a core
set of rates set at a level for the region, just one set of rates.
I know districts do vary a bit, but essentially, any variation
in business rates is likely to be involved in terms of the Northern
Ireland Administration having to determine to have a different
level of business rates across Northern Ireland. That could be
a factor. Forgive me if at this stage I say one of several or
more factors for which we might see a difference made in order
to encourage development of enterprise. It would take you into
the role of, "By how much and for how long, and for all businesses?"
I will give you one complication. There exists in
Northern Ireland at the moment a 30% cap on the level of rates
charged to manufacturing businesses—not other businesses—and
that is an inheritance from several decades ago. It would have
been abolished in the period just coming up to the end of Direct
Rule, but the incoming Administration decided they wished to retain
the cap on business manufacturing rates. Any change now in terms
of Government involvement with financing business of any kind
will be examined by the state aid authorities in Brussels. One
of the casualties we might see is that Brussels will be reminded
of this operating aid, which is a cap on business manufacturing
rates, and may well insist that time is long overdue for it to
be abolished. All I am saying is I do not dissent from the view
that the cap on manufacturing business rates should now be removed
because it has a lot of deadweight. It is very popular with certain
businesses, but nevertheless, in order to get an incentive effect,
a shift in emphasis to encouraging businesses of all kinds for
a limited period—say, a 10-year holiday—might be a
dramatic change in the way in which this is perceived.
Chair: Okay, we will explore
some of those subjects as we go on.
Q233 Kate Hoey:
Hello, John. We had a very interesting session with Michael Heseltine,
who of course was talking about the urban development emphasis
of enterprise zones. How different do you think—and I quite
like your terminology of not using an enterprise zone but getting
an enterprising Northern Ireland—it would have to be? If
you had to pin it down, what would be your core objective of having
this enterprise region?
John Simpson: Thank
you. My core objective is that Northern Ireland would be a much
more marketable area in the business communities at home and outside
Northern Ireland—much further afield. For me, that
comes in two dimensions. I think we have deficiencies in terms
of the way in which we manage regional Government to encourage
enterprise at the moment. If I now go on to make those criticisms,
please let me enter the caveat: there is much that we are doing
that is positive and is trying to bring Northern Ireland into
a more prosperous position in the years ahead. Simply to say
that there are faults to be put right is not to say everything
is wrong.
Nevertheless, if you gave me a list of the things,
high on my list would be the fact that many businesses regard—you
will probably expect me to say this—the planning system
as being loaded against them. Many businesses regard the process
of the regional development strategy as being too rigid and would
ask that these institutional arrangements should be loosened up
to be more liberal in their approach. You will have heard the
argument, if I may pick it up, that we need to get a more understandable
and a quicker planning process to make decisions. To make that
argument stand up, all you have to do is to say, "Look where
we are in terms of the proposals for John Lewis. Look where we
are in terms of the proposals for the development of an electricity
plant to generate and maintain the poultry industry using you-know-what
as a fuel." We are making those things into real hurdles
when they ought to be processed.
However, what I would be saying of the planning system
is if you read the planning documents, they contain so many conditions.
We have a very elaborate, legalistic planning process in the
regional development strategy and it will forever be a difficulty
until we actually change the mindset. We are trying to run planning
by asking people to apply for planning permission and to get over
a whole series of things. There is no proposal that I could not
write a valid objection to by studying the regional development
strategy. It is not written to the theme of: by and large, we
hope you will respect these principles, but there will be occasions
on which we have to get the compromise. I suspect that we too
often have a planning outcome that is too rigid and that is then
supported by a process where disappointed parties seek judicial
review. What does the judicial review quote? It quotes the planning
ambition statements as being of statutory authority. I presume
that is not what everybody would intend and certainly I would
try to argue we should move away from it.
Q234 Kate Hoey:
So you think the importance of the businesses being able to be
entrepreneurs is more important than the views of local communities
seeing their areas destroyed, ruined or whatever?
John Simpson: The
danger in the argument I am making is it might seem as if I am
trying to deny local communities the right to a strong enough
voice; I am trying to deny—I won't call it vested interest—legitimate
interests their chance to have a voice. The short answer to that
is, so long as we take planning decisions that say the decision
is on balance—it won't necessarily be pure in terms of every
element of the criteria—then it is acceptable. At the moment,
we have a situation where the planners do not seem to appreciate
fully what it is we are getting at when we say that they are not
effective. They think we are saying they are not quick enough.
We are not. We are actually saying, "You have surrounded
yourself by a set of rules and you are interpreting them in a
way that is not helpful."
There is no sign that we will actually be able, in
Northern Ireland terms, to say, "Your regional development
strategy should be reworded in a way in which it can be interpreted
to allow things to happen." At the moment, if you cannot
satisfy rule No. 10, the fact that you might satisfy rules one
to nine counts for nothing.
Q235 Kate Hoey:
I think there are some more questions on planning later. Could
I just take you back a bit to the specific zone or region? Would
you see it as being time limited or would you see this as something
that is ongoing?
John Simpson: Whatever
we do—and I listened to Lord Heseltine on this point—time
limited measures are to be commended, if only for, after a given
time period, the discipline of saying, "Is this worth continuing?"
and many will have reached their sunset period. It may be that
if we decided on some sort of variation in terms of planning or
some sort of variation in terms of national insurance, we might
after 10 years say, "Let's review. We will keep it,"
but the idea that you actually are forced into a predetermined
time review makes a lot of sense.
Chair: Naomi, did you
want to come in on this one?
Q236 Naomi Long:
I will probe the planning issue later, but on the time limiting:
that would be contradictory to some of the evidence that has been
given by others in business who have said that actually having
the time limit could create a sense of instability or some uncertainty
for businesses going forward. For example, it may suit those
who wish to come and invest for a five or 10-year period and then
move on to the next enterprising zone around the globe, whereas
what we are actually after in this case is a restructuring to
get business that is willing to commit in the long term. Therefore,
certainty in the long term is important. Why do you see it differently
than that?
John Simpson: I
appreciate your point. The argument I would make in return is
that I would like to see Northern Ireland established as an enterprising
region on a continuing basis at a much more persuasive level than
at present. As part of the addition to the fundamentals, there
would then be variations in a number of pieces of legislation.
I do not think the business community would reasonably object
if they were told, "Well, if you are a new business we will
give you now a 10-year holiday from, say, business rates"—Chairman,
the point you took—because this is to encourage new businesses
to start up. I am trying to load the incentives of the particular
enterprise area onto something that encourages business. Once
they are up and running they will pay their way, I hope. Therefore,
I understand the point that Mrs Long is making, but I would still
believe a time limit for periods to encourage things to happen
is a useful device. Otherwise you get into exactly the problem
that we have with the present cap on manufacturing rates; there
is no date at which we are actually saying, "And, by the
way, we are going to think about it again now."
Q237 Mr Benton:
Welcome back, Mr Simpson. In your evidence, you talk about the
need for stronger marketing in Northern Ireland and I think you
suggest that an enterprise zone might help to serve this purpose.
I wondered why you see the new enterprise zone in marketing terms,
per se. The other point is, following on from that, what would
you have in mind when you refer to a stronger marketing for the
region? Who would be responsible for that? Do you have confidence
in whoever is responsible having the skills to progress it? These
are the questions. Finally, I know you have already made comments
on the corporation tax, but would you think that to underpin a
stronger marketing effort, a major reduction in corporation tax
would be beneficial in that direction?
John Simpson: Working
backwards, a reduction in corporation tax or the devolution of
authority to vary corporation tax—not necessarily a reduction
in the rate, but to do other things—and the exercise of
that authority in a sensible way would be, there is no doubt about
it, an additional useful marketing tool for people who are talking
to all the businesses around the world and saying, "Come
to Northern Ireland," bearing in mind the proposition is
"come to Northern Ireland because it is a profitable place
to do business". At the moment, there are several serious
handicaps to being able to make that argument. I would make that
argument if I was outside Northern Ireland. I would tell you
how wonderful Northern Ireland is, but when I am back at base
I will be prepared to enter the caveats of the things that now
could be better.
You talked about marketing and who would do it.
As I watched Lord Heseltine give evidence to you, obviously
he carried the persona of everything that happened—was it
1979, 1980; that period anyway. I am not suggesting that he might
now commute or migrate, but someone with the central responsibility
and, indeed, the ability to do it is actually needed. Take my
argument in its steps: I actually believe that in terms of selling
Northern Ireland as an enterprising region, the main responsibility
must rest on the Northern Ireland Administration, and it must
rely on you and Westminster to be supportive where that fits.
If the responsibility lies in the Northern Ireland institutions,
it does actually lie somewhere in terms of the leadership that
comes out of the Northern Ireland Administration.
As I look over what has been happening in the recent
past, the core elements that need to be sold in this marketing
plan rest partly on the Department of Enterprise, Trade and Investment,
partly in the Department for Regional Development, and maybe peripherally
in other departments. The interesting thing is at the moment
I do not get the coherence that I would look for in terms of the
physical side, which is the Department for Regional Development
and the business side, which is the Department of Enterprise,
Trade and Investment. It would be helpful if the next Northern
Ireland Executive managed to find a focus and it may need to be,
perhaps, not one of the Ministers, but someone with enough authority
and the confidence of Ministers, to lead the concept of an enterprising
region in the next three or four-year period.
Forgive me, underlying my comment, what I am saying
is the effective leadership to make Northern Ireland an enterprising
region needs to be developed. I am not saying we are very bad,
but what I am saying is we can be a lot better.
Q238 Mr Benton:
Just on that point, are you saying then that it should be driven
by entrepreneurship or by a political figure? How should it be
driven? It is a big question; I know it is a big question, but
it is a very important one because unless it is driven correctly,
like any mechanised vehicle, it won't go properly. That is the
point of the question, really, to see how it should be driven.
With the responsible body, what background has essentially to
be the overriding one?
John Simpson: I
will only but agree with you; it needs to be driven. It needs
to be driven centrally and needs to be driven from a point at
which there is sufficient influence to ensure that all the various
contributors know where authority lies and know how they expect
it to respond. It does, in part, need those who are in the senior
positions in Government to have what Michael Heseltine called
"the vision" and it also requires that they should be
looking around and be able to select someone who can do it. Up
until now, we have not had an organisation—in our region—that
produced this sort of leadership, and we now need it. It is the
local equivalent of Heseltine of 1979. I won't venture into naming
names in the presence of this august body.
Q239 Gavin Williamson:
Actually, I was going to ask you to name a name. I just wondered
if you wanted to use it as an opportunity to invite Lord Heseltine
or someone else, or someone within Northern Ireland—actually,
do you think it needs to be someone from within Northern Ireland
probably to take that leadership role?
John Simpson: Yes,
because much of the effort is talking to the people who are around
you in Northern Ireland as well as then conveying the message
further afield. If you are an enterprising region, a lot of your
work will be coping with people who have come to see you as an
enterprising region. You need, therefore, to have your cast ready
to go on the stage.
Q240 Gavin Williamson:
Do you think there is almost a benefit, Mr Simpson, to that person
being a politician or is it a disadvantage for that person to
be a politician?
John Simpson: In
our circumstances, forgive me, I suspect it has to be someone
who is not an active party member.
Ian Paisley: I forgave
you a long time ago, John.
Gavin Williamson: Thank
you very much, Mr Simpson.
Q241 Mel Stride:
Welcome back. I very much enjoyed your first evidence session,
so I am really pleased that you have come back to see us. Just
on this individual: what kind of skills and attributes are they
going to have to have? Second question: where we are looking
at marketing, where are we going to direct that marketing in particular
in terms of other countries around the world?
John Simpson: The
main marketing will be within 500 miles of Belfast in that it
will be within the European context, but particularly within the
British/English/Scottish context. Part of this has to be the
evolution of a stronger business community and much of it could
be from within. There must be more entrepreneurs within Northern
Ireland than we have managed so far to bring forward. I recall
writing in the paper I sent you that we have remarkably few big
success stories to tell you about. We have some and we need to
encourage more.
We are talking about somebody who has the ability
to push very lethargic Government departments into a completely
different attitude. We are wrong on our planning; we are wrong
on our day-to-day planning; we are poor on our skills development;
we are poor in our orientation of the way in which we make appeals
to the business community. To say we are poor, we can improve
it if we put our minds to it. The person who does this—if
it is a person; you may call it a group around them—I think
is more likely to be a leader; the chairman/chairwoman will be
the key person, and they have to be found and put in place.
Q242 Mel Stride:
And put in place fairly early in the sense of shaping the offering
as well as promoting the offering, developing it.
John Simpson: Yes.
This is what would happen in parallel at the moment to the economic
strategy review that is being undertaken under the umbrella of
the Minister for Enterprise, Trade and Investment, and is being
led by Kate Barker. Kate Barker will be known to some of
you. Kate Barker, in my book, proved an exceptionally valuable
influence on planning processes in England. I do not know whether
you all agree, but nevertheless she was there and she had the
concepts and she delivered it. If she were to agree with these
concepts, I think the group that she is leading should now become
at least a source of inspiration for this next step, if not the
actual core for it.
Q243 Naomi Long:
There are a couple of things that I wanted to look at in terms
of planning. You have mentioned that it is not just the speed
of planning, and I would accept that, though I have to say a lot
of the evidence we have is that that is a large part of the frustration—that
decisions take so long to be reached, not just that the final
decision is unsatisfactory. In terms of planning, I sat on the
town planning committee in Belfast City Council for nine or 10
years—a thankless task because you do not take the decisions.
You simply give advice to the Department and they then ignore
it.
I am just wondering, in terms of good planning and
bad planning, because you have talked about simplification of
planning, surely the fundamental issue is that there is a difference
between good planning and bad planning. At the moment in Northern
Ireland the problem is that we do not have sufficiently sophisticated
plans in terms of our overall development plans and strategies
for Northern Ireland. We rely too heavily on development
control-driven planning, so that individual planning applications
take a long time to process, but the framework within which they
are processed is already flawed before we start. Is that something
that you feel would make a big difference, if we had more clear
land use planning to start to frame the question?
John Simpson: You
and I would not be very far apart in terms of reaching the conclusions
from what you have just been saying. Yes, time is a factor, but
my consideration is that simply to put it down to time is to make
it too narrow. It is actually the approach in terms of what are
they doing and how are they balancing the pros and the cons, and,
may I say it too, as someone who has been on a planning committee
for a local authority, you were not exactly the most powerful
committee in the world as you sat there issuing advice that might
be taken or might be ignored.
We are now talking about changing the administration
of planning; we are talking about delegating it to the new local
units—a dangerous step unless we have a better rule book,
without being too rigid. There is a contradiction there. Here
am I suggesting rules and saying they should not be rigid, but
perhaps you understand what I am getting at. We now have the
move to change things. My concern is that we are not necessarily
going to change the things that matter most. The view that our
planning system is one of the biggest difficulties in terms of
business approach to what they want to do is not just mine. It
has been expressed by other business organisations as well.
Q244 Naomi Long:
Just, I suppose, to comment on that, my view is that if we delegate
planning authority to local councils without having a robust land
use planning framework, we will end up with a planning system
that is completely held in limbo, with no one able to take any
difficult decisions at all because the framework won't be appropriate.
So I think there has to be clarity around that and I would agree
with you on that. The other issues that you suggested were needed
to improve the fundamentals to attract people to Northern Ireland
were things—physical planning was one aspect—like
road and transport, water infrastructure and those other things.
I am not sure if I need to declare an interest; I have been away
from civil engineering so long that I probably do not. Where
do you feel the problem lies in terms of infrastructure planning?
I see it as tied to the wider land use planning issue and the
lack of forward planning rather than simply to lack of resources,
which is where the blame has often been laid. I actually think
part of it at least is about forward planning and the kind of
scale that is required for large infrastructure projects. Do
you have a view as to what needs to be done within the Northern
Ireland system to make it more efficient?
John Simpson: I
think I know the direction I want to travel in and I will illustrate
it in this way. At the moment we have a regional development
strategy developed by the Department for Regional Development.
We have the planning rules implemented by the Department of Environment.
We have enterprise strategy developed by the Department of Enterprise,
Trade and Investment, and sitting somewhere else we have the Strategic
Investment Board. The logic of this is that those three strands
should somehow or other come together. One of the thoughts that
I was writing on is that land, property and people, and funding
for infrastructure all interrelate, and at the moment they act
not independently—let's not be too rude about it—but
they act with a silo-type dimension to what they are doing. We
would all like it to be better, and that takes me down the road
of: if we are going to be an enterprising region, this is where
somebody must have the ability to pull the bits in one place.
Q245 Jack Lopresti:
Hi there. Do you think the Executive is doing all it can to establish
Northern Ireland as a place to do business?
John Simpson: Do
I think the—
Jack Lopresti: Executive.
John Simpson: Can?
Jack Lopresti: Is.
John Simpson: Is?
Jack Lopresti: Or can—whatever.
John Simpson: For
"can" the answer is yes. The "is" is: let's
do it better. One of you picked on the list of things that I
put in my paper that gave me cause for concern. The short answer
is there is no reason why those should not be put right. I think
I have a difficulty in that I suspect that many of those in the
Northern Ireland Executive would say, "Well, we have people
who have responsibility for each of these, and they are each doing
their best." All I have to say is their best does not come
together to give a synergy of a corporate purpose. Can you say
synergy of a corporate purpose? The linguists might or might
not approve of that, but still, it sums it up. Interestingly
enough, here we are talking in Westminster; the net result, if
you and I were agreeing on the answer to that question, is that
we are actually passing that particular parcel to the Northern
Ireland Executive, saying, "Go do it." For a lot of
what we are talking about here, I would be joining the club that
says, "Go do it."
Q246 Jack Lopresti:
My next question is: wouldn't we be putting the cart before the
horse if the Executive were trying to produce an economic strategy
at the same time as the UK Government were drawing out its consultation
on designating Northern Ireland as an enterprise zone?
John Simpson: We
have to agree that we are looking for the concept of an enterprising
region. That is our starting point. We then have to ask who
delivers it, and a lot of the delivery rests with the Northern
Ireland Executive. Bits that are Westminster delivery—obviously
the issue of changing anything to do with corporate taxation must
be part of that, but we can get an enterprising region concept
in place much quicker than Westminster will approve the change
in legislation to allow difference in corporation tax structures.
We could be getting on and doing that; it could be something
that the new Executive could pick up and get on with.
Whereas the corporation tax change may or may not
be approved, whatever else we are all saying to each other will
not be approved for two to three years. That is two or three
years when the enterprising region should become evident because
it is doing things that attract attention because, "Look
at how efficiently we do things in Northern Ireland to attract
business. Look at the way we changed the circumstances so that
business can be profitable"—whether it is in planning,
whether it is in national insurance, whether it is in taxation
or whether it is in our regulations in terms of employment legislation,
whether it is an area in which we say, "Time has come to
improve our industrial tribunal system," which at the moment
is a major handicap, although it is probably not much different
from an industrial tribunal system in England.
Q247 Naomi Long:
John, you have already outlined, I suppose, your concerns about
the impact that the disparate nature of Northern Ireland government
within the Executive brings to the table when we are trying to
deal with business. You have talked about the silo mentality
that you have. People here will be learning about coalition government,
but we have a very complex and very disparate coalition, even
in comparison with what we witness here. I suppose what I would
like to ask you is this. When Lord Heseltine was with us
giving evidence, he talked about two things: political leadership
and vision. In some ways it is not about the structures; it is
about leadership and vision. If you have leadership and vision,
you can overcome the deficiencies of the system. Do you believe
that there is leadership and vision on these issues? If so, how
do you harness that and how do you believe you can best harness
that through an enterprise zone or other means to actually show
delivery?
John Simpson: The
second part of your question is: if I don't believe it's there,
how do we find it?
Naomi Long: Well, I was
trying to be optimistic in my phrasing.
John Simpson: There
is no denying the thrust that you are exploring—vision and
leadership. My own feeling is that there is almost a degree of
complacency. Forgive, because it is a bit unkind to people who
have survived the last 15, 20, 30 years. There is almost a degree
of complacency: "We have the St Andrew's Agreement; we have
devolution; we have an agreement on the way in which a coalition
will work; wasn't that terribly good? Now, let's just tick over."
The short answer is that the next generation coming in, having
inherited the St Andrew's Agreement, has the responsibility
for recognising the need for the vision and leadership that will
take it further. We must not be content with the fact that we
can keep the Administration in Northern Ireland going on a day-to-day
basis. That is not actually taking it further.
I will only give you a very superficial illustration:
I watch for the type of public comments that are visionary in
terms of what might happen in Northern Ireland as a successful
region, and I am not hearing it. The civil servants who write
ministerial speeches are writing very conservatively and I think
some of the people who are in the political leadership role need
to turn on the system that is supporting them to say, "Now,
come on. We are not just going to keep it ticking over. We are
actually going to lift things to a higher level." I am sorry;
this sounds a bit philosophical and I am not a philosopher, but
it is very difficult to put it in precise steps.
I am reminded that Lord Heseltine, when asked questions
of this kind, resorted to, "You have to have the belief and
the vision. You have to have somebody who is driving it."
The last thing you want is somebody to say, "We want industry
A but not industry B. We want people C and not people D."
That is not what it is about; it is about actually liberating
the processes so that it is worth doing enterprising things and
people who see it is worth doing will do it. The short answer
in terms of this part of Europe is: profitable opportunities tend
to produce people who exploit them. That would not be a bad thing.
Q248 Naomi Long:
Just on that, there is the issue of coherence of vision, if you
want to put it that way, in that different people will have different
aspirations in terms of what the economic strategy would look
like. Everyone would want a more prosperous society, but people's
definition of what that will look like will vary. I am just interested
in the reasons that you feel people are being slightly conservative
in articulating those aspirations as leaders in their community.
Lord Heseltine said something that I thought was
very striking, which was with respect to the Olympics 2012 and
the work that he had done in the east end of London during his
term and he said, "Had I set out my stall and said my dream
would be to have the Olympics in the east end of London in 2012,
people would have thought I was mad. I would have been written
off." You cannot always give the full picture because people
will not accept that there is anything of substance behind it.
I am just interested: do you think one of the reasons that people
are afraid to sound aspirational is because they are afraid of
the kickback from people who are maybe feeling the pain today
and feel it is being dismissed by saying, "Things can get
better"? I would love to know how you get that balance right,
in some ways, between being able to inspire, encourage and present
the vision, and at the same time not being insensitive to the
current difficulties.
John Simpson: Perhaps
the beginning of the answer to your question is to agree that
we would like to see it happen. I suspect there are a lot of people
in Northern Ireland who would think we are searching now for the
end of a rainbow and, "Stop playing that game; we're doing
what we have to do." The short answer is we are not doing
it at a pace and with a zest that is carrying conviction. Of
course, there are success stories, but what we are looking for
in an enterprise region is that there should be more of the success
stories and they should be to a greater degree. We cannot measure
that in advance.
Q249 Naomi Long:
We had evidence from Invest, for example, and they said that they
had met many of their targets in terms of what they were wanting
to achieve, which is really laudable. It will also go down very
well, for example, with the Public Accounts Committee. What I
am asking is: would it be better if they had not met them, but
their targets had been stretching them further and they might
have done more, if you understand what I mean. So, not met their
target, but got 90% of the way to a higher target? Is the problem
not that people are looking over their shoulder at the gap between
their aspiration and the realisation of it, and are afraid that
they will be criticised for the gap rather than lauded for the
delivery?
John Simpson: When
an organisation like Invest Northern Ireland writes its corporate
plan, it should always be read against a background. They are
writing a corporate plan for what they should deliver; they won't,
therefore, be hanging themselves out on extreme risks. They will
be, to a touch, conservative and I think that is exactly what
has happened. Given the announcement of recent days, we have
had, at least in the recent past, two different chairmen of Invest
NI, and Stephen Kingon has now said he is coming to the end of
his period of office. If the authorities were so minded, they
could now change the remit of what is happening in Invest NI so
that it broadened its focus on enterprising regions; it was not
just simply narrowed in terms of the concepts of development for
industry and tradable services, which is what they are good at—there
is no doubt they are good at it—but they are not asked to
go wider. We might ask them to go wider or we might find some
other method of setting this wider agenda, but you need to be
looking for it.
Q250 Mr Benton:
Professor, you have made many helpful suggestions—numerous
suggestions actually—in terms of enterprise zones. I wondered
if you would like to say what additional tax allowances you had
in mind and why these and many other concessions should apply
only to new business as opposed to successful, established businesses.
I also would like to put a point to you, which I think is probably
a very important one inasmuch as the object of any enterprise
zone or any measures that are taken would be to enhance and encourage
industry. Going on the basis of witnesses we have heard previously,
one would hope to see a healthy resultant factor emerging in terms
of the export markets. How would you see an enterprise zone actually
assisting that end?
John Simpson: I
think, Chairman, I have to resort to my two-part answers to your
question. The objective of an enterprising region is that we
will change conditions such that more and more businesses are
profitable and are prepared to invest—that is the fundamental—and
to have a continuing existence on the basis that they pay their
way. Then the second thing to mention is that in order to build
that up, perhaps, I think we do need measures that will encourage
new risk takers, new start-ups to add to the existing numbers.
That gives me the justification for arguing that not every continuing
business should be given the benefit of, say, a holiday from national
insurance, if that were even being envisaged.
It is useful to say that for the first five or 10
years, back to where the Chairman started, there would be certain
fiscal advantages. The Northern Ireland authorities would not
have the ability to say, "We will make it in terms of concession
on national insurance," because I understand that that may
be a UK-wide matter, but forgive me if I am not too precise.
Equally, there is a suggestion from the Chambers of Commerce that
there should be a reduced rate of VAT on certain types of business.
It seems to me that if we start playing with those marginal distinctions
that is wrong. We should think of something that fundamentally
alters the bottom line in start-up. That is where a period when
there are no rates on a new business would be beneficial. I will
immediately admit that we then enter the territory of when is
a business a new business as opposed to a takeover of an existing
business? Let's leave the tax lawyers to solve that problem because
if we give them it as a principle I am sure they will invent a
rule book to fit.
But there are those types of fiscal incentive that
could be very dramatically illustrated and lend themselves to
publicity. Some of the other variations in corporation tax could
lend themselves to it as well. If the authority is devolved—and
do not forget that is three years down the road—we could
begin to talk about different discretions for capital spending
in relation to taxation; fine. I would like the enterprising
region concept to be under way more quickly than that. Therefore,
I am looking at some of the other suggestions. Incidentally,
Chairman, I am referring—at the same time I will make an
apology—to the document that was published by the Chamber
of Commerce recently, Enterprise Zone Blueprint for Northern
Ireland, which you may or may not have seen. It has not got this
far.
Chair: Not yet.
John Simpson: It
is coming by pigeon post. They have made a number of suggestions.
It looks like it is about 15 suggestions, not all of which I
would support. The other thing is that I would apologise in that
I was with them in their committee meeting when they talked about
this, and you do not have to go back to check, but somebody made
notes at the same time as we were talking, of the points that
I was going to make in my paper to you. Therefore, you will recognise
a certain amount of commonality in the language, for which I apologise
in advance for those of you who think, "Who did what and
why?" I claim the authorship. Did I answer your question?
Q251 Mr Benton:
Yes, I think so. I am still a little bit doubtful about whether
you have answered the one in relation to exports because to me
this is a major plank in any initiative for obvious reasons.
I am not quite sure you have answered that question.
John Simpson: Something
to encourage businesses to trade to a wider market in order to
grow their business—we cannot fault that as an ambition.
In terms of encouraging firms to export, there would be objections
from elsewhere if goods were exported from Northern Ireland with
some sort of a fiscal advantage and they ended up in Manchester
in competition with Manchester suppliers. Equally, if they went
to Antwerp there would be European Union rules, so the business
of assisting exports per se has a difficulty. That does not mean
we could not have some variation or some supplement to export
credits of a local kind. Indeed, the Chamber of Commerce in Northern
Ireland have asked, and I quote, for "an enhanced export
guarantee scheme" to promote export-led manufacturing. That
is their idea, but I do not mind reporting it as part of an answer
to your question.
In terms of encouraging exports, the other thing,
and I have seen the evidence, is this: many an exporter needs
the knowledge of where the market is rather than some sort of
financial incentive. The export missions led by Invest Northern
Ireland end up frequently with businesses making contacts around
the world that they did not know about or had not sussed out the
customers. What is happening is that they are being encouraged
to meet customers—not literally but almost—at the
cost of a return airfare. That is working and all you have to
do is to watch the press releases from Invest Northern Ireland—two
or three times a week there will be an example of that kind.
It is possible that the export dimension of an enterprising Northern
Ireland is happening and it will be frustrating that we cannot
do too much more, but we hope it is there because there is profitable
business.
Chair: We now turn to
skills and education.
Q252 Naomi Long:
John, you are obviously aware of some excellent work that goes
on in places. For example, like the QUESTOR Centre at Queen's
or the Northern Ireland Science Park in my constituency, where
you have spin-out business that comes from university research
and development and so on. However, there is a perception by
those who have come and given evidence that there are things that
could be done to strengthen that growing of new local business,
and capitalising on the intellectual property that we have in
our universities. Do you believe that the current arrangements
are strong enough in terms of developing links and knowledge transfer
between higher education and further education and business?
If not, how would you go about improving them?
John Simpson: Thank
you. There is a lot to be said in terms of that general agenda,
but to summarise, the knowledge transfer partnership arrangements
work quite well. Queen's, in particular, has done remarkably
well in terms of spin-outs of business and the consequences from
the science park. University of Ulster is not far behind. I
suspect that the real weaknesses lie in a less prominent level.
If I have a criticism, it is that we have not learnt how to harness
the further education sector. The further education sector, in
my opinion, and I have heard others say something similar, is
the Cinderella of the system. The best thing that happened in
terms of the further education sector in recent years is that
they issued a report of which the title was Further Education
Means Business. That was a very good title and was the best
thing about the report because the rest was not there.
I keep repeating this one: we do need to get a curriculum
development philosophy plan for the FE colleges. We rely on the
FE colleges plugging gaps, which they try to do, but the coherence
of changing the skills mix of the next generation requires them
to be playing a big part in terms of vocational training. They,
I think, would be the first to admit they do not have full leadership
on that, and obviously in present circumstances they would say
they do not have enough resources to do that, but that is going
to be the complaint of every Government department at the moment.
So our biggest weakness at the moment is that we
do not really have a successful skills delivery mechanism below
the level of postgraduate. Postgraduate we know what we are trying
to do and we could do more of it, but at the level of what used
to be called—for those of you who grew up with it like me—HNDs,
etc., which we now call foundation degrees, we have lost our way
and there is a gap in the skills provision. The Department will
tell you they have introduced a scheme called Assured Skills.
Assured Skills says, "Any employer who needs more skilled
staff, we will immediately take on board skills arrangements to
match." To which I have to say, "Hear, hear,"
but I go on to say this means that you wait until you have found
a leak and then you plug it. You are not actually coping with
the structure of skills that you know will be needed in the next
five to 10 years.
Of all the pieces of work that have been done that
is actually seminal, professional and all the rest of it, there
is a piece of work being done by Neil Gibson on the likely
skill needs of the Northern Ireland labour force by 2020. It
shows without a doubt that we are going to be very deficient in
terms of the number of people with, if you use today's terminology,
level three and four qualifications and we are going to have far
too many people down there with level 2 qualifications, and there
will not be enough jobs for them. This skills deficiency is part
of my regional enterprise proposal. The Department for Employment
and Learning knows, incidentally, that I am their biggest outside
critic, so I am not saying something to you I have not said to
them; you will have to ask them why they are satisfied with where
they are because I could not be.
Q253 Naomi Long:
Can I just probe a bit? For example, Belfast Met have identified
one of the growth areas in the city as creative arts and creative
industries and, therefore, they do a lot of work in that area
and provide people with a really targeted and focused education,
and with skills that are directly transferrable into the workplace.
So there is clearly someone there who understands how that industry
works and can deliver that. Do you think that there is a lack
of communication from business to further and higher education
about their needs, or do you think that it is more about long-range
planning rather than that ongoing conversation?
John Simpson: Yes,
the official defence of the way things are working is that the
Department is only too keen to listen to business and say to business,
"Tell us where you think the deficiencies are; give us good
advanced warning so that we can take account of what you say."
That is good intentions and, indeed, the example you quote from
Belfast Met—I don't want to take away anything from the
strength of that one. However, the short answer is to wait for
businesses to identify gaps is inadequate. You actually need
to be ahead of the game, preparing people's skills, and some of
them might have skills that will go elsewhere. They will not
necessarily stay within 100 miles of Belfast. Educating the next
generation to meet the skills needs of 2020—first of all
possibly near to home, but certainly somewhere in labour markets
close to hand—is not a crime. It is something we should
be doing.
Q254 Chair: When
you talk about the skills gap, are you specifically talking about
Northern Ireland? The issue is the same in England—exactly
the same—in my judgment.
John Simpson: I
agree with you, Chairman. The educational structures and the
training structures we have throughout the United Kingdom are
a bit behind what is necessary. It is interesting that this is
an area where the Republic of Ireland was actually ahead of the
game. I am, at the moment, working on a particular project where
the lead is being taken by the Dundalk Regional Institute of Technology
and they, in common with the other institutes of technology, have
had several years of the thrust, which is that we must lift the
educational qualification standards, and they got ahead of any
comparable regions, I think, in the United Kingdom, to their credit.
Now that it has been done, we should look at and learn from it,
whether it is for Manchester or for Belfast.
Q255 Chair: I
have my own ideas on why it all went wrong, but in your judgment,
why did we start to create this skills gap across the United Kingdom?
What went wrong? It did not used to be the case.
John Simpson: Part
of the answer is that we can blame it on the teenagers. Really,
they should be motivated to look after their careers. Why don't
they continue their studies, get their qualifications and get
the things that would serve them well? The colleges are there,
if they but put in the applications. The colleges sometimes do
not have the capacity; let's admit there is another problem.
The other side of it is somehow or other the incentives
for people to gain the vocational skills are not producing the
result. I asked of the further education colleges in Northern
Ireland—I do not know how well it fits with the area of
your knowledge, Chairman—"What is it? Why are you
not getting as many as you like? Is it a question of fees?"
To which the answer, for those who are 17 or 18, is that is not
relevant. If they go on as a continuation from their full-time
schooling there are not any fees, so that actually you get into
a discussion of perhaps you need some sort of education maintenance
allowance that is a bit more generous that incentivises them so
that they can do a bit better to maintain an educational structure
or training structure, rather than taking a low-paid job, which
in your late teenage years you may think, "Well, it is paid,"
and they are prepared to accept it. We have to remotivate the
generations as they come through. At the moment we are not succeeding.
Q256 Gavin Williamson:
I was going to ask you one specific question in terms of how you
feel about the creation of enterprise zones. Often in the past
there has been some comment that this has sucked in investment,
short-term profit. Do you think this is a risk that could be
run in Northern Ireland? Obviously, it depends on the structure,
but in your professional opinion?
John Simpson: My
only close recollection of enterprise zones goes back to that
period that Lord Heseltine was talking about, from a Northern
Ireland viewpoint. There were earmarked areas and the main incentive
was some variation in rates and a notional easing of planning
restrictions. There were lines on maps and there were quite tight
little areas. There was clear evidence, I thought, and other
people also wrote about this, that within a city like Belfast,
these lines on a map actually caused businesses to cross the road
to get on the right side of the line. That was a deadweight effect
that we did not need to have and this is why now that the Government
is reconsidering enterprise zones, I will be watching to see how
they avoid causing distortion within an urban area.
I suspect that any definition of an enterprise zone
in the style that the Chancellor of the Exchequer is talking about
must be a big enough catchment area so that there are not artificial
lines either side of a main road. It has to be a bit more than
that. In terms of Northern Ireland, and I am twisting your question
to suit my purposes—forgive me—
Gavin Williamson: You
should have gone into politics.
Chair: You would not be
the first to do that.
John Simpson: —the
concept of something on the ground, if I go away from the terminology
of the enterprising region, is there a possibility of something
called a zone or several zones within the region? If so, then,
yes, I want to play with that idea. As a result of my experience
in the last decade trying to work on some proposals that were
relevant to the Greater Shankill and West Belfast, in a particular
exercise that I was doing in conjunction with Padraic White, who
led the West Belfast team, we debated whether or not there was
a case for an urban development corporation approach to a significant
area of Belfast. The logic of it is that the inner Belfast area
needs something. I am not sure if East Belfast is the most needy.
Naomi Long: It has its
needs. We have some of the most deprived wards in Northern Ireland
in my constituency.
John Simpson: I
could have relied on a little support for my argument, couldn't
I, Chairman? The concept of a physically defined area for inner
Belfast and for inner Stroke City commends itself. I have felt
over the years that the Ilex concept for Derry/Londonderry could
well do with the support of some sort of corporate structure that
gives it certain advantages. I would like to see the same for
a major area of inner Belfast and, in terms of getting employment
generated for the area I was interested in, West and Shankill—and
it does extend to one or two other spots—the idea that there
might be some sort of corporate thrust of an institutional arrangement
with its own particular added dimension of planning powers and
maybe of some compulsory land acquisition and assembly of areas
powers.
I put this alongside my plea for some of these inner
urban areas. I would join anybody else who cared to be very critical
of our regeneration strategy at the moment for Belfast and Derry,
which is far too weak. Our regeneration strategy at the moment
is led from the Department of Social Development and I think that
begins to explain a tension. Regeneration is about much more
than social development. It is about full development of the
area and therefore we need to move from a social development influence
into something of a development organisational role—call
it an urban development corporation if you want. I do not know
if it needs to be dressed up with that title, but something like
that.
Q257 Gavin Williamson:
Mr Simpson, at the very start of your answer, actually, if I could
reel back to there, you actually raised something about the Chancellor's
announcement at the weekend. I was just interested in your thoughts
on this. He has announced that there are going to be 10 enterprise
zones within England. Obviously, we do not have any information
as to what they are going to have or anything else like that.
Do you think the creation of 10 English enterprise zones will
ultimately cause a problem in creating a Northern Ireland enterprise
zone, in whatever context that is?
John Simpson: The
simple answer is it makes it more important that we do not use
the same terminology for two different things. It makes it more
important at this stage. Maybe you can not reorientate, but redirect
the language of what you are looking at in terms of, "We
want Northern Ireland to be an enterprising region that is impressive
because of its successful delivery of good business circumstances."
The enterprise zone, as now defined by the Chancellor, is going
to be a narrower concept. We may well want to read across some
of the ideas the Chancellor has for his 10 into Northern Ireland;
that is still open for debate, but I do think the terminology—the
accident of using the same words—would be a mistake.
Q258 Mr Benton:
Following on from there, the cost factor of setting up an enterprise
zone, of course, is unquantified; it could be anybody's guess.
The point I would like to put to you is: in your opinion, would
there be a general willingness to meet the cost, whatever it may
be, of setting up an enterprise zone? Could it be justified in
the mind generally because it would have the effect of taking
or making a shift from the public to private sector? Do you think
there is there a willingness to accept that generally?
John Simpson: I
think, Chairman, the concepts that we have been exploring in the
last so many minutes are not major costs. They are marginal costs
by varying programmes. I think the cost of forgoing, say, rates,
for some businesses or the costs of changing—that is the
most demonstrable cost. There might be a cost in terms of reviewing
tax allowances if that so happened. I suspect though that what
we are talking about today ought to be seen in terms of getting
the policies right. It is not necessarily about introducing huge,
extra costs. I hope we can find our way through to do it with
minimal costs—not zero, but minimal.
Mr Benton: So it is well
justified.
Q259 Chair: But
in general terms though, when we talk about cost, in your view
what is the balance between, perhaps, grants as far as they can
be given and not taking tax from companies in the first place?
How would you see the ideal weighting of that?
John Simpson: As
an order of magnitude, I think £10 million a year would
go a long way.
Q260 Chair: Is
that spent or not collected?
John Simpson: Sorry?
Chair: Is that spent?
John Simpson: Spent,
yes.
Chair: Or not collected?
John Simpson: Spent
or not collected—yes. Those who think it would work would
be quick to add the plus in the equation three or four years down
the line when new businesses were in place and they were adding
to the revenue. I do not subscribe to the quick switchover argument
that that implies, just as I do not subscribe to those who think
corporation tax would have such a quick swing-round. It might
be the right change, but let's not be too optimistic.
Q261 Chair: What
about national insurance? The contributions holiday that has been
announced? Is that going to be helpful or not?
John Simpson: It
is helpful, but it has had surprisingly little impact and I am
not sure why. Is the concept on too narrow a basis? Let's give
it more time. It might work.
Chair: Okay. Are there
any other questions just before we finish? Again, it has been
a very interesting session, so thank you very much for joining
us. It has been a pleasure.
John Simpson: Thank
you very much.
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