Corporation Tax in Northern Ireland - Northern Ireland Affairs Committee Contents

Written evidence from Professor Greg Lloyd

This submission makes a number of points regarding the possible designation of Northern Ireland as an enterprise zone.

How does an enterprise zone operate?

1.  In 1980, the Local Government, Planning and Land Act introduced the concept of enterprise zones to the UK. The measure was an early expression of the (then) neo-liberal or supply side economic thinking and combined a reaction against existing government measures to deal with uneven economic development with a belief in private sector actions. This is important as the measure effectively led to the imposition of a one size fits all framework with little or no reference to the underlying and localised circumstances of the zones. The anti-thetical nature of the measure was also important - as it reflected a frustration with the previous regeneration regimes which involved public expenditure, planning regulations and other forms of industrial intervention.

2.  The enterprise zones comprised, in the main, of tax and planning measures for a 10 year period. The tax incentives in the form of relief from local rates to occupiers of commercial and industrial properties and 100% capital tax allowances which could be set against corporation or income tax were intended to encourage private sector investment. A simplification of the land use planning regime - in effect creating a permissive zoning arrangement was intended to reduce administrative and procedural burden on land and property development initiatives. The zones were intended to create a regime in which investment in land and property development would be rendered easier and the financial incentives were designed to encourage the building and occupation of new accommodation.

3.  Following the enabling legislation, a number of zones were designated across the UK and these took place in different designations. An enterprise zone was designated in Belfast. The rationale for their establishment was as a response to the issues created by systemic economic restructuring or concentrated industrial contraction. In many ways, enterprise zones encouraged new construction and development in the defined areas in the short term but the overall long term results were not unambiguous. There were issues around the nature of the re-engineering that took place in the local economy, the overall net effect and the spillover impacts on wider regeneration.

Why should Northern Ireland be declared an enterprise zone?

4.  It should not - the original shift to enterprise zones (as a radical alternative to the then conventional regeneration policy) took place in very different circumstances. Today, Northern Ireland has a relatively more sophisticated regional economy as shown by the careful deliberations of the Independent Review of Economic Policy published in 2009 (The Barnett Review). This pointed to the need to address Northern Ireland's fragmented economic governance. There is need to secure stronger convergence and integration - which an enterprise zone would likely inhibit. This process is in train with the forthcoming reorganisation of local government to a more strategic set of arrangements (The Review of Public Administration) and the current review of the Northern Ireland Regional Development Strategy.

5.  The Independent Review of Economic Policy stressed the importance of productivity in the future economic wellbeing of Northern Ireland. The key here is the emphasis on innovation and asserting that innovation to the outside world. This would not be served by the designation of an enterprise zone which would encourage land and property development in the zones rather than the focus on innovation and productivity in Northern Ireland's industrial sectors. This could be achieved through a fusion of economics and the environmental agenda - a "green collar" economy in Northern Ireland -which would not be served well by a measure fixated on de-regulation.

6.  Attention must be drawn to the state of the land and property development sector in Northern Ireland. The effects of the economic recession have impacted relatively severely on the construction sector - the Construction Employers Federation in Northern Ireland estimate some 30,000 jobs lost in the sector. There is over supply in some areas (paralleled by under supply in others - particularly with respect to affordable housing). It follows then that an enterprise zone which is aimed at land and property development would not meet the reality of life in Northern Ireland.


7.  It is important to note that there are important changes taking place within Northern Ireland with respect to (i) local government, (ii) the regional economic development strategy and (iii) modernisation of the statutory land use planning system. The latter is important as it is long overdue and can potentially transform the regulatory context for land and property development in Northern Ireland to the better in order to promote confidence and certainty. At present, land use planning in Northern Ireland involves a centralised system of decision making, with local authorities divorced from the essential processes around planning and development. In effect, there is a lack of a democratic foundation to planning in Northern Ireland - existing local authorities are marginalised (as a consequence of the centralised arrangements) to a consultative role.

8.  The Northern Ireland planning system is effectively divorced from the strategic regional planning infrastructure provided by the Department of Regional Development, the housing and regeneration functions of the Department of Social Development, the sustainable development agendas of the OFMDPM, and the rural priorities of the Department of Agriculture and Rural Development. Reform will seek to create a more integrated framework.

9.  The Planning Bill proposes the introduction of proportionate governance arrangements in order to address regionally significant, major, local and minor planning applications. This is to be welcomed as it suggests that the overall planning resource can then be more appropriately dedicated to realise real efficiency gains in the regulation of land and property development across Northern Ireland. An enterprise zone provision for Northern Ireland as a whole would militate against this thinking in Northern Ireland which has emerged under devolution.

10.  The Bill makes reference to the concept of simplified planning zones which also reprise earlier thinking from the 1980s. Again, this proposed element of the Bill is based on an idea where the evidence on their earlier designation was ambiguous and the long term benefits contestable. 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 promoting a positive and confident planning hierarchy with an emphasis on asserting economic, social and environmental benefits, the simplified planning zone idea works in reverse. In effect it introduces a zoning device into an essentially positive regulatory planning framework. The Bill also includes a prosaic and unjustified reference to an enterprise zone.


11.  Finally, I believe that the argument for an enterprise zone in Northern Ireland as a whole is highly flawed. It does not meet Northern Ireland's current conditions, it is an out of date measure of dubious provenance and it strikes at the very idea of devolution to Northern Ireland. The reforms taking place in Northern Ireland will create a new planning and governance regime which will prove to be more advantageous in the longer term than an outdated measure which itself is an apparent sop to the corporation tax reduction lobby. Life in Northern Ireland is far more complex than this simplistic thinking.

22 January 2011

previous page contents next page

© Parliamentary copyright 2011
Prepared 9 June 2011