Corporation Tax in Northern Ireland - Northern Ireland Affairs Committee Contents

Written evidence from the Northern Ireland Council for Voluntary Action

NICVA (the Northern Ireland Council for Voluntary Action) is the umbrella body for the voluntary and community sector in Northern Ireland. It provides over 1,000 members with information, advice, training and support services on a wide range of issues, together with representation for the sector as a whole.

NICVA works to achieve progressive social change, based on equality and equity, working through a community development approach, to empower local communities to pursue their own needs and agendas.


NICVA recognises the need for making Northern Ireland's economy more sustainable and independently viable; with public expenditure accounting for some 70% of GDP there is a need for reform to a more sustainable and balanced economic model.

Exploring the concept of Northern Ireland as an enterprise zone is welcome and should form part of the wider debate on the economy. NICVA notes that the general direction of economic policy in Northern Ireland is geared towards increasing levels of Foreign Direct Investment (FDI), higher productivity levels and more jobs that deliver higher wages, whilst at the same time increasing exports in similarly high productivity areas. Both approaches have the potential for making Northern Ireland's economy more outward looking and creating the potential for market expansion.

Whilst NICVA recognises the validity of this approach it is concerned that unless significant consideration is given to making higher productivity driven growth as accessible to everyone in Northern Ireland as possible, we may produce a relatively jobless recovery for a significant proportion of the population. This could result in Northern Ireland failing to tackle the underlying social and economic problems it faces. NICVA believes that Northern Ireland will only sustainably transform its economy if underlying social problems are tackled. In short any enterprise zone proposals must be fully integrated into the Northern Ireland Executive's wider social and economic objectives.

The conception of an enterprise zone for Northern Ireland is not entirely clear; historically enterprise zones have been concerned with creating incentives within a specific geographical area within a given region. However, recent proposals appear to be focused on making Northern Ireland itself an enterprise zone.

NICVA believes that any consideration of an enterprise zone, be that for Northern Ireland as a whole or for a specific region in Northern Ireland, should take into consideration the lessons learned from the previous experience of enterprise zones in the 1980s and 1990s; should form part of a long-term and sustainable plan for Northern Ireland's economy; and should focus on ensuring that any policy package seeks to address Northern Ireland's wider economic and social challenges.


NICVA notes that the main policy levers of previous enterprise zones throughout the United Kingdom consisted mainly of relaxed planning restrictions, enhanced capital allowances and rating relief. NICVA notes that the majority of these levers are now devolved to the Northern Ireland Executive.

The previous approach targeted 32 specific areas throughout the UK, two of which were in Northern Ireland.

NICVA notes the research paper Do Enterprise Zones Work by The Work Foundation which concluded that:

"Most of the jobs created in Enterprise Zones are displaced from other areas. Evidence from previous enterprise zones suggest that 80% of the jobs they create are taken from other places";

"Enterprise Zones do very little to promote lasting economic prosperity. Most Enterprise Zones create a short-term boom, followed by a long-term reversal back into depression; and

"Enterprise Zones are hugely expensive. Evidence from the 1980s suggests that Enterprise Zones cost at least £23,000 per new job they create".[16]

This suggests that designated enterprise zones can have a negative impact on the economy of those locations from which jobs are displaced and that they do not have a sustainable positive impact on the population within the zone in terms of job creation and economic growth.

When the cost of £23,000 per job is considered, the benefits of an enterprise zone based on supporting capital investment in a specific location, has not had the desired long-term effect required to transform Northern Ireland's economy.


As well as the obvious challenges regarding the size of Northern Ireland's private sector and its limited growth, there is significant poverty in Northern Ireland with a number of wards facing serious long-term cycles of deprivation.

Latest figures estimate that unemployment in Northern Ireland has now reached the UK rate of 8%,[17] whilst long-term unemployment as a percentage of total unemployment has increased by 17% since January 2008,[18] with long-term unemployment sitting at 48.3% of the total unemployment figure.[19]

The Northern Ireland economic inactivity rate for those aged 16-64 stands at 28.4%. This is significantly higher than the UK average rate (23.3%) and is the highest of the twelve UK regions.[20]

The number of 16 to 24 year olds in Northern Ireland who are not in education, employment or training, (NEETs), has increased to 49,000, 22% of the 223,000 people between 16 to 24 years old.[21]

The claimant count in NI at February 2011 was 59,100 (6.6% of the workforce), an increase of 300 over the previous month. There was an increase of 6.3% (3,587) over the year compared to a decrease of 8.1% across the UK. Five years ago the total was 28,970 (3.3%).[22] NICVA also notes that the changes due to welfare reform are likely to have a significant negative impact on the claimant count and unemployment figures.

NICVA believes that in order to create sustainable economic growth, a balanced approach, which actively seeks to tackle segregation and extreme inequalities, as well as increase GDP, is crucial. Leading economist Richard Florida asserts that there are three necessary factors for developing a vibrant and creative economy-tolerance, talent and technology.[23] NICVA strongly agrees that only by dealing with issues such as sectarianism, racism, inequality and division, investing in the regeneration of disadvantaged communities, providing strong protection for our most vulnerable citizens, making the most of our arts, creative industries, tourism and environment and ensuring that economic reform is inclusive can Northern Ireland develop a sustainable and world class economy.


NICVA believes that any proposals for an enterprise zone in Northern Ireland must have clear objectives which are linked to Northern Ireland's long-term economic and social objectives.

They should be targeted incentives aimed at specific sectors which will increase exports and FDI as these are the areas that have the capacity for significant growth and job creation. Areas such as the creative industries, tourism, food and drink and ICT are crucial.

Any proposals should not be exclusively weighted towards incentives for capital development which have historically had limited impact on local populations, especially the most vulnerable. Reform of the planning system in Northern Ireland should be accelerated.

Proposals should focus strongly on creating incentives for developing the skills of Northern Ireland's population and linking those to business needs, increasing productivity.

An Examination of the Comprehensive Spending Review's impact on the Department for Employment and Learning's Success Through Skills and Lifelong Learning programmes should be undertaken. Strong consideration should be given to linking specific business or sector incentives to greater business contributions to skills development and training. This would increase the inclusivity of any enterprise zone proposals whilst simultaneously increasing workforce capacity and productivity.

NICVA notes the Department for Social Development's Social Clauses Initiative which focuses on work placements for the long-term unemployed linked to Department for Social Development contracts.

NICVA believes a social clause initiative for any incentives delivered under an enterprise zone should be examined by the Committee. This should include the examination of linking the development of greater childcare facilities to enterprise zone incentives, encouraging people into work.

Social Enterprises have the capacity to tackle some of Northern Ireland's underlying social problems. NICVA believes that the Committee should examine the potential for a Social Enterprise Zone/s in Northern Ireland to offer tax reliefs to lenders and investors, as well as tax relief for those social enterprises that re-invest their profits for the benefit of the community.

NICVA strongly believes that in order to sustainably transform Northern Ireland's economy the benefits of economic growth and job creation need to be as inclusive as possible. This means whilst incentivising businesses on the one hand we need to increase their social and corporate responsibility on the other. This means collaboratively tackling social deprivation and educational underachievement at an early age, with a goal of integrating people and deprived wards into the wider economy.

This objective means that any proposals for making Northern Ireland an enterprise zone or creating an enterprise zone within Northern Ireland must seek to address these longer-term objectives.

30 March 2011

16   The Work Foundation (2011), Do Enterprise Zones work? P.3  Back

17   DETI, Labour Market Statistics, March 2011.  Back

18   DETI, Labour Market Statistics, Unemployment by Duration.  Back

19   DETI, Labour Market Statistics, March 2011. Back

20   DETI, March 2011, Labour Market Statistics.  Back

21   DETI, Oct-Dec 2010 Labour Force Survey.  Back

22   DETI, March 2011, Labour Market Statistics,. Back

23   Richard Florida, 2005, The Flight of the Creative Class, Harper Collins Back

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Prepared 9 June 2011