Economic Development Policy

Ministerial Statement – in the Northern Ireland Assembly on 25th January 2010.

Alert me about debates like this

Photo of William Hay William Hay Speaker

I have received notice from the Minister of Enterprise, Trade and Investment that she wishes to make a statement.

Photo of Arlene Foster Arlene Foster DUP

I wish to make a statement on how I propose to take forward economic development policy in Northern Ireland. My decisions are based on the independent review of economic policy, the outcome of the consultation exercise on that review and my discussions with key stakeholders on the report and its recommendations.

As Members will be aware, I commissioned the independent review in December 2008. Its overarching aim was to assess the policy of the Department of Enterprise, Trade and Investment (DETI) and Invest NI to determine whether it was sufficient to help to deliver the productivity goal contained in the Programme for Government. In light of that, I asked for a root and branch review of economic development policy. I am grateful to the panel for its report, which was published on 29 September 2009, and for its detailed and wide-ranging recommendations.

Given the strategic importance of the review, not least because the economy is the Executive’s top priority, I issued the report for a short six-week period of public consultation, which ended on 16 November 2009. I am grateful to the 69 respondents, and, as part of today’s statement, I will publish a consultation report containing a summary of what was said during the consultation and provide access to the more detailed responses. Those responses added to the review and helped to shape the actions that I will outline.

Aside from responding to the recommendations, which I will detail shortly, I must say that the timing of the report is of immense significance. It comes at a time when we are working to rebuild the local economy, which, in common with that of other parts of the United Kingdom and beyond, has suffered and continues to suffer as a result of the global downturn. Since December 2008, the number of unemployment claimants has increased by almost 18,000, and many businesses have been forced to cut back or cease operations. Compared with the previous year, those factors contributed to a 63% increase in the number of redundancies notified to my Department. Moreover, the construction sector has been significantly hit by the downturn, and there have also been marked declines over the year in the output of other sectors, including manufacturing and services.

I welcome the fact that many economic commentators are beginning to forecast some improvements in the local, national and global economies in 2010. There are some signs that the impact of the downturn may be starting to ease in Northern Ireland. For example, the latest increase in the claimant count is significantly below the average monthly increase experienced over the past year. As we work to implement the findings of the review, my aim is to improve further the prospects for economic growth and higher living standards throughout Northern Ireland.

Turning to the independent review, I warmly welcome the report and its recommendations. The report recognises the need to provide short-term support for companies along the lines of what we have being doing to ease pressures resulting from the recession. However, for the medium to long term, the review also endorses the policy ambitions of the Executive, namely to build a more value-added and productive economy. As I will describe later, many of the recommendations will be implemented by my Department and Invest NI as soon as practicable. Others, by their very nature, will require further analysis and discussion, which is to be expected given the strategic nature and importance of the issues that they cover.

A vital aspect of the review is that it clearly states that efforts to raise living standards and productivity in Northern Ireland cannot lie solely at the door of DETI or Invest NI. Other Departments also have important roles to play, particularly in terms of skills, planning and investment in infrastructure. Furthermore, as the review highlights, it is ultimately the responsibility of companies in the private sector to invest in areas such as skills, exports, R&D and innovation to boost competiveness. I will return to how I intend to handle the cross-departmental proposals later in my statement.

Notwithstanding those issues, the report of Professor Barnett and his colleagues represents a significant piece of work that will help to shape economic development policy in Northern Ireland, particularly as we enter the new decade with its challenges and opportunities. Today’s statement outlines my position on the recommendations, and I have asked my Department’s permanent secretary to establish, with immediate effect, a steering group to implement the actions that I wish to take forward.

The group will include representatives from Invest Northern Ireland, and I will look to the group to report regularly to me on progress towards implementation. To add a degree of independence, Dr Ian McMorris, who is an independent board member of my Department, and Dr Bill McGinnis, who is the Northern Ireland skills adviser, have agreed to join the steering group. They will each add an important external voice, particularly in respect of their considerable experience in the business community.

The steering group will be supported by four implementation groups, which will be chaired at a senior level and will include, where appropriate, officials from other Executive Departments. Each of those groups will oversee the implementation of recommendations that fall within the areas of the co-ordination of economic policy in Northern Ireland; DETI and Invest Northern Ireland’s assistance to industry; autonomy, flexibility and decision-making; and policy development and monitoring.

I will now outline my response to the major recommendations of the independent report, and I will do so in the four areas that I have just mentioned. I will begin with some comments on the recommendations that were made on strengthening the co-ordination of economic policy in Northern Ireland. The most significant is that the core economic functions that cover existing DETI and Department for Employment and Learning (DEL) areas of responsibility should be brought together under a single Department of the economy. As I have mentioned previously in this House, that is something that I support strongly. It is imperative that we work to reduce the number of Government Departments in Northern Ireland, and the rationale for bringing together the responsibilities of DETI and DEL is very strong and clear. Without doubt, skills are a critical factor in economic development, not just for businesses locally but as a means of attracting value-added and internationally mobile companies to locate and develop their business operations here in Northern Ireland.

Of course, DETI and DEL already work together closely in order to align policy and match the demand and supply of skills. That has been acknowledged in the report, but the panel has stated rightly that we can and should go further. It has argued that bringing together the responsibilities under a single Department would ensure the maximum possible flexibility and respons­iveness to business needs, both for local companies and to attract and retain international businesses.

As I have indicated, the merits of the proposal are very clear. I support the recommendation to create a Department that has a much broader policy remit than either DETI or DEL. However, as I indicated earlier, a number of the panel’s recommendations will inevitably require further analysis and discussion. In some instances, they will also require agreement with Executive colleagues. This is clearly one such recommendation. Therefore, I have today issued a paper to my Executive colleagues seeking their agreement to consider the creation of a Department of the economy as part of the planned review of strand-one institutions. However, I also recognise fully, as the review panel did, that getting agreement and implementing new departmental structures is something that presents its own challenges and will inevitably take some time. That is why I also advocate in the Executive paper that we take the interim steps that were suggested by the panel to improve the structures that are currently in place.

Central to that is the establishment of a subcommittee of the Executive to prioritise cross-departmental action on the economy and to address not only the recommendations that fall to my Department but those that cover issues such as skills, planning and infrastructure. I welcome the proposals that Minister Poots put forward as part of his Executive paper on planning reform. I welcome particularly the fact that a number of the proposals in the Executive paper on planning are aligned with the recommendations that were made in the independent report.

In reaching Executive agreement on the establishment of a subcommittee, it will, of course, be imperative that we are clear on its membership and remit, and discussions will need to be held about those matters. However, while recognising that developing the economy cuts across all Departments, I envisage that, initially, the subcommittee should comprise Ministers who are currently responsible for the delivery of the Programme for Government goal of improving private sector productivity. That embraces DETI, DEL, and the Department for Regional Development (DRD), but it should also include the Office of the First Minister and deputy First Minister (OFMDFM) and the Department of Finance and Personnel (DFP), given their central role. I expect that other Ministers will be involved as specific issues arise.

The panel suggested that the subcommittee should take forward the development of an economic strategy for Northern Ireland that builds on the findings of the review. Given that Northern Ireland is a small region, we should work to produce a single overarching economic strategy that aligns with and helps to shape other Executive strategies. It is vital to have that strategy in place to grow the economy as Northern Ireland emerges from the recession to ensure that we are able to compete more effectively, regionally and globally and to help to prioritise resources. I further suggest that such a new economic strategy should be at the heart of the next Programme for Government. Therefore, my paper to the Executive proposes that the subcommittee should begin to work on the development of an economic strategy, which should be completed well before the end of this calendar year in time to inform the Executive’s next Programme for Government and Budget, which will take effect from April 2011.

I look forward to discussing those important issues with my Executive colleagues and to agreeing on how we take them forward as a matter of urgency. I stress that I am not relying solely on the new measures that I have outlined. To that end, I today welcome two important and significant initiatives on skills. First, as part of the incentive to attract new investments and expansions in Northern Ireland, DEL and Invest Northern Ireland will take forward a pilot project designed to offer an assured provision of a skilled workforce tailored to companies’ specific needs, based on a successful model of support in North Carolina. The details will soon be announced by the Minister for Employment and Learning. Secondly, DEL and Invest Northern Ireland are collaborating in the development of an integrated framework for management and leadership to improve support in that important area, as highlighted in the independent report.

Members are also aware that the independent panel made recommendations about how we might better tailor the assistance that DETI and Invest Northern Ireland offer business. Before I turn to those recommendations, I will touch briefly on the range of businesses that we assist.

The review panel highlighted a concern that Invest Northern Ireland support is not available for a large section of businesses in Northern Ireland that fail to meet eligibility criteria. In particular, it has been recommended that the concept of Invest Northern Ireland “clients” should be removed to allow Invest Northern Ireland to work through the entire business base to provide support for innovation, research and development, and export growth.

In reflecting on that recommendation, I acknowledge that Invest Northern Ireland currently supports the wider business base through many initiatives, including export programmes, which are available to any company in Northern Ireland that wishes to explore new markets; new schemes, such as innovation vouchers and the growth programme, which target small and micro businesses; advisory support, such as the credit crunch initiatives that I launched in 2008; and, of course, nibusinessinfo.co.uk, an online business advice service.

It is important to recognise the need to maintain an ongoing relationship with businesses in which many of our investments span a number of years. It is also imperative that Invest NI can fully monitor the performance of individual companies through the various stages of financial assistance. In that light, I have asked Invest NI’s chief executive to review how the organisation could develop a tiered portfolio of support across the wider business base to accelerate innovation and export growth. As part of that review, I have also asked for the development of a small business unit to be considered. It could fit within the model to provide a more dedicated resource to supporting small businesses throughout Northern Ireland, in particular to open up supply chain opportunities similar to those that have already been developed for the aerospace sector. Invest NI will bring forward its proposals by September 2010.

An important aspect of the review will be to examine how small business support is co-ordinated with district councils in the context of the review of public administration. It is evident today that, although I am keen that support be offered as widely as possible, it must be stressed that we are in a much tighter public expenditure environment than we have ever been before. That inevitably means that difficult decisions must be taken to prioritise our limited resources in favour of businesses and projects that offer the greatest potential for raising living standards and private sector productivity in Northern Ireland. In doing so, we must focus on projects that offer the greatest return to the economy.

It is important to recognise the fact that support is not just about financial assistance. The companies that I meet often comment on the real benefit of the practical, advisory help that they receive from Invest NI on a diverse range of issues, such as researching new markets, intellectual property or the strategic direction of a business.

That leads me to comment on the assistance that DETI and Invest NI provide to industry. A fundamental issue at the heart of the independent report is the view that there needs to be an accelerated shift towards support for innovation and R&D from employment-based schemes, such as selective financial assistance (SFA). First, the report highlights the very real prospect that regional aid limits for the support that we offer to projects through SFA will be reduced significantly. That process has already started, and we will see major changes from the end of 2010. Secondly, the panel drew on a substantial body of evidence that suggests that innovation should be considered as the primary productivity driver for a regional economy such as Northern Ireland. In particular, innovation is critical if local firms are to maintain and improve their competitive­ness in export markets. Together, those factors provide both a push and a pull in the direction of increasing support for innovation and R&D. I fully accept that analysis, and, indeed, it must be recognised that, in recent years, Invest NI has already taken action to skew more resources towards innovation and R&D support.

For example, the independent panel acknowledged that, in 2008-09, compared with the previous six-year period, assistance for innovation and R&D increased by 20% in real terms. In the current financial year, that level of assistance accelerated as a result of Invest NI increasing its budget allocation for innovation and R&D by a further 30%, which represents a shift of more than 60% in the past two years. Expenditure on innovation and R&D now accounts for 38% of programme spend. I have asked my officials to continue to look for ways to maintain that trend.

The independent panel made a number of specific recommendations in relation to the portfolio of innovation policies and support programmes that are currently on offer. In particular, the panel suggested that the innovation system in Finland is an example of best practice and should be explored further. My Department has already started a thorough and comprehensive review of best practice in economic development policy in other small, open economies throughout the world, including Finland, aimed at identifying transferrable lessons for Northern Ireland. The report on that work is due in late spring, and it will be used to inform the development of future policies and programmes.

The independent panel further recommended that additional support for innovation and R&D should not involve new public expenditure. Instead, it should be financed from savings in other areas, particularly grant support, in respect of which there were concerns about the low value-added nature of some of the projects that were supported, and, most notably, business expansions, in which there was lower additionality in certain areas.

That touches on the key issue of DETI and Invest NI assistance to industry. I shall, therefore, highlight a number of points on the use of financial assistance. First, I repeat my firm belief that there is no evidence in the report that resources have been wasted. Indeed, the review panel recognised that Invest NI has made a significant contribution to economic and employment growth in Northern Ireland. Furthermore, the panel reported that, per capita, Northern Ireland has the most successful record in the UK for attracting foreign direct investment.

Secondly, the review report makes specific recommendations about the assistance that is offered to business expansion projects. However, it is important to recognise the realities of business investment, whereby companies often test the market with an initial investment before building an operation to a critical mass using a series of subsequent investments, often by adding new and other mobile functions. On occasion, those subsequent investments may require support from Invest NI.

Thirdly, the panel rightly recognised that we are entering a period when the availability of public expenditure is tightening and, against that backdrop, it did not wish to present a set of proposals that would, unrealistically, require significant sums of additional moneys. However, in recognising that reality, it is also important to reassure Members about the existence of the industrial development guarantee, which is designed to ensure:

“that no worthwhile proposal for eligible support to investment in industry or tradable service will be lost”.

As I mentioned earlier, we are entering a new policy framework in which changes to state-aid limits from the end of this calendar year mean that, going forward, we will not be able to support business using SFA in either the way that we have done to date or to the same extent. Therefore, we must look to increase support for businesses using other existing or newly developed instruments.

The critical issue is how we should be deploying SFA now and in the run up to 2013 when we may lose it as a policy instrument. My view is that we should continue to use SFA for as long as we can, particularly as we seek to rebuild the economy in the aftermath of the recession. However, going forward in non-recessionary years, we also need to consider how we best deploy SFA effectively to improve productivity. That was a key point in the report. My view is that SFA should be used in the future to support investment in indigenous companies and to help to attract new and potential follow-on investments to Northern Ireland. That must be the key to improving relative living standards here.

I accept that it is a challenging area and one on which there are a number of views. During the consultation process, concerns were raised, principally from business organisations, about increasing the level of support for innovation and R&D at the expense of SFA. In that light, I have asked the implementation group covering DETI and Invest Northern Ireland assistance to industry to bring forward recommendations on when and where we should be using SFA. That could potentially involve setting higher job-quality thresholds than those that are currently in place. It may also improve supporting certain strategically important projects and those that are in areas of particular economic need. However, I stress that given the nature of our work, where multi-year financial support packages are agreed with businesses, it should be recognised that there will be limited scope to change Invest NI spending in 2010-11. It is, therefore, about preparing for change for the new Programme for Government period starting in 2011-12, although we will, of course, need to ensure that we are careful not to take any actions now or to enter into new commitments that would unduly compromise our room to manoeuvre in the future.

Moreover, looking forward to 2013, with the very real prospect of significant reductions to regional aid, I reassure Members that I and my Executive colleagues will be doing all that we can to secure the best deal for Northern Ireland. I have, therefore, asked my officials to begin preparing a case with other relevant bodies to seek to maximise state-aid cover for any future SFA-type programmes post-December 2013 and for other programmes that are designed to support business competitiveness, particularly in the areas of innovation and R&D.

My comments so far have focused on SFA. That is appropriate, given that the programme accounts for around 40% of Invest NI support and given that it was also the subject of much of the panel’s analysis. However, Invest Northern Ireland also offers a wide range of other programmes to assist businesses; indeed, the independent report also commented on those. In fact, the report suggests that Invest Northern Ireland’s offering is unnecessarily complex, and it proposes that the number of programmes be reduced. I know that Invest Northern Ireland has made good progress in rationalising its programmes, but I believe that further progress could be made. Therefore, I have asked the chief executive of Invest Northern Ireland to review the number and breadth of Invest NI programmes with a view to producing a consolidated suite of offerings in a business-friendly format that will support the growth of export and innovation in Northern Ireland businesses. I have asked Invest NI to complete the review by June 2010.

The panel also commented on Invest NI export assistance, suggesting the adoption of a more professional and fee-charging model. Entering new markets outside Northern Ireland is an important way for local businesses to realise their growth potential. I have seen at first hand the real value that Northern Ireland companies get when they take part in market visits, and I am encouraged that Invest Northern Ireland is committed to further developing its export assistance.

Obviously, the merits of the proposal need to be given more detailed consideration, and, when introducing or revising any fee-changing structure, we need to be careful to ensure that it does not become prohibitive. However, I am aware that Invest NI has already carried out some work in this area and will be bringing forward new proposals in March 2010 for the next financial year.

Furthermore, the Department had already planned to evaluate Invest NI’s export assistance. Work is due to be completed towards the end of 2010. Clearly, the implementation group that covers DETI and Invest NI assistance will need to reflect on the findings of the evaluation when it becomes available to ensure that we offer the best-quality exporting support to Northern Ireland’s businesses.

The review panel also made proposals on assistance for training; financing of businesses; industrial land provision; exploiting telecommunications infrastructure; and the social economy.

The review panel recommended that Invest Northern Ireland should further reduce its support for company training and concentrate support mainly to small firms and projects with a high innovative content. Unsurp­risingly, concern was expressed, principally from business organisations, about the impact of that recommendation. I understand that evidence that underpins that recommendation was drawn from an evaluation of the company development programme, which has been superseded by the business improvement training programme. That new programme is the subject of an evaluation that is scheduled for completion by autumn 2010. That will help to inform company training.

As regards financing of businesses, I recognise that high-growth businesses are a key driver of economic growth, not only because they develop themselves and generate significant employment growth but because their dynamism stimulates competition and innovation throughout the economy as a whole. In many instances, equity funding is the most appropriate type of financing for such companies. Recent evaluations demonstrate that an equity gap still persists in Northern Ireland, particularly covering the seed, early, and development stages for deals of up to £2 million. Therefore, my view is that Invest Northern Ireland continues to intervene to support development of the venture capital market in Northern Ireland.

Today is not the time to respond in specific detail to the full list of recommendations. However, my position on all of them and, indeed, on all the other proposals that are contained in the independent report are set out in the detailed paper that I have included with my statement.

The third area on which the panel made recomm­endations was autonomy, flexibility and decision-making. The panel’s review of global best practice suggested that successful development agencies benefit from having freedom to operate in a way that allows them to be entrepreneurial and responsive to business needs. I fully support that sentiment.

Indeed, a key element of the original rationale behind the establishment of Invest NI in 2002 was the desire to create a development agency that was more businesslike in its operations. However, a criticism that is often levelled at DETI and Invest Northern Ireland is that the governance system remains too complex and time-consuming and that that impedes Invest Northern Ireland’s responsiveness.

I can indicate to Members that my officials have already held discussions with the Department of Finance and Personnel (DFP) to explore how current delegated limits might be extended. I have asked that the relevant implementation group conclude on that issue as soon as possible. My aim is to try to establish new departmental governance arrangements by April 2010.

Furthermore, where major projects require DETI and DFP approval, I accept the panel’s recommendation that those cases should be considered in parallel by a central project review group. Again, I have asked that officials from my Department and DFP agree the mechanisms that need to be established for that group to be operational from April 2010.

The panel’s report also contains a number of recommendations that relate to the organisation of Invest Northern Ireland. In accepting the principle of greater autonomy, those are, for the most part, internal issues for the agency to consider. I have asked Invest NI’s chief executive to reflect on those recommendations and to advise the implementation group of any steps that he plans to take. That will cover areas such as the structure of Invest NI and training of its staff.

Finally, with regard to decision-making, the independent report recommended that all ex post assessments of value for money should be taken on a portfolio basis. I support that strongly. My long-held view is that we must manage risk better. However, in doing so, we cannot afford to be risk-averse. I have asked the permanent secretary in my Department to engage with DFP and the Northern Ireland Audit Office to explore how best that balance can be struck in practice.

Before I conclude, I turn to the independent panel’s recommendations on the roles of DETI and Invest NI in policy development and performance monitoring. I agree that it is right that the Department have lead responsibility for policy development and performance monitoring and that it is important to have appropriate resources in place to deliver that.

The permanent secretary has begun to review the DETI structures, and I have asked him to look for ways to strengthen the Department’s policy analysis and development function. The panel also recommended that DETI should assume responsibility for reporting on Invest NI’s performance, and I can confirm that that will be the case for the next Invest NI performance report, which will be published at the end of the current corporate plan period. I can also confirm that Invest NI’s operating plan for 2010-11 will include targets specifically for investments new to Northern Ireland, as per the panel’s recommendation.

I also agree that it is important that my senior officials and I have access to top quality and timely economic and business advice. The panel has made a number of recommendations in that regard, particularly in relation to the future of the Economic Development Forum (EDF).

(Mr Deputy Speaker [Mr Molloy] in the Chair)

Since its establishment in 1999, the forum has played a very important role in advising on the direction of economic development in Northern Ireland. During my tenure as chairperson, I have found the engagement with members to be beneficial. Of particular benefit is the work that has been undertaken by the forum’s subgroups on various issues, including recent work on such areas as the economic downturn, manufacturing and exports. However, as Members will be aware, the review panel suggested that the current mechanism for the delivery of independent economic advice, through the EDF, was not optimal. A recommendation was made to stand down the forum and replace it with a new, smaller advisory unit, comprising representatives from the business and economics sectors. In making that recommendation, the panel also stressed the importance of continuing to engage with stakeholders on a bilateral basis.

I have given those recommendations very serious consideration, and I believe that the time is right to change the way in which I receive independent advice on the economy. I have, therefore, written to EDF members advising them that the forum will be stood down and replaced with a new advisory unit, which is to be established by April 2010. That unit will include representatives from Invest NI and the business, skills and economics sectors. The unit will also address a further recommendation that was made by the panel, namely the appointment of an independent economic adviser. I will continue to meet with stakeholders on the economy, bilaterally, as and when necessary.

In conclusion, I have set out my position on the independent report and the steps that I plan to take to promote economic development in Northern Ireland. There is no doubting the fact that the challenges are even greater now, given the impact of the recession on the Northern Ireland economy. Invest Northern Ireland uses the appropriate phrase, “Building locally, competing globally”. The course that I have outlined today will help Invest NI continue to do that in order to strengthen our competitive position — regionally and globally.

Photo of Alban Maginness Alban Maginness Social Democratic and Labour Party 12:30 pm, 25th January 2010

I welcome the Minister’s detailed statement on Professor Barnett’s report. The Enterprise, Trade and Investment Committee, in general terms, supports the Minister’s position. I particularly welcome two things. First, I welcome her intention to set up an implementation group. I hope that that group will produce an operational plan as soon as possible so that the report can be implemented as quickly as possible. Secondly, I welcome the Minister’s intention to pursue the establishment of an Executive subcommittee for economic policy, which is important in light of our present economic difficulties.

With your indulgence, Mr Deputy Speaker, may I say that Invest Northern Ireland should be given as much freedom as it can to get on with the job of regenerating our economy? I believe that the Minister is dedicated to that. Will the Minister assure the House that she will do all that she can to bring about a more flexible, robust and independent Invest Northern Ireland to deal with the specific difficulties of our economy and the development of a robust and worthwhile economy in the future?

Photo of Arlene Foster Arlene Foster DUP

I thank the Chairperson for his comments and for highlighting the implementation group, the Executive subcommittee and the issue of more flexibility for Invest Northern Ireland.

I want to make the purpose of the implementation group very clear. Along with my statement, Members will have received my responses to each of the recommendations. The recommendations have all been answered with regard to whether we agree or disagree with them, and we disagree with a very small proportion, as we agree with most of Professor Barnett’s report. However, I recognise that some proposals will take longer to implement than others. Therefore, to ensure that they are implemented in a timely fashion, I felt that there was a need for the implementation group, which will report to me directly, and I can ask it how the implementation is going. The Member is right to point out the importance of the implementation group in ensuring that we do not lose the momentum of what we have achieved so far with regard to the Barnett report.

The Executive subcommittee is also a key factor. If the current recession teaches us anything, it teaches us that it is felt right across Government and not just in one Department. If we develop an economic strategy in that way, we will get buy-in from the other Departments, and it will not be seen as being in a departmental silo, as it never should have been in the first place.

More flexibility for Invest Northern Ireland is also a key factor. Invest Northern Ireland was set up in 2002 with the aim of being flexible, so that it could meet the needs of business in a more meaningful way than that which Government could achieve directly. This approach is a way of doing that, and it will allow Invest Northern Ireland to become even more flexible and fleet of foot. There is a need to get answers quickly in today’s business world.

I recognise that we are dealing with public money and, therefore, we have to strike a balance between having the flexibility that I want for Invest Northern Ireland and, at the same time, taking account of the use of the large amounts of money that the Government instruct us to look after. There has been ongoing good engagement with the Department of Finance and Personnel, and we will be able to deal with that issue quickly. By April this year, those issues should be dealt with, and we will then be able to move forward.

Photo of Gregory Campbell Gregory Campbell Shadow Minister (Transport), Shadow Minister (Work and Pensions)

I warmly welcome the Minister’s statement. It is unfortunate that a significant section of the press draws massive attention to an issue over which we do not currently have any control, while matters such as this, over which we do have control and which could make a significant difference to the wider population, do not attract the same attention.

The Minister has outlined comprehensively her suggestions for a new Department of the economy that would be sufficiently flexible to offer the skills training that is needed in the downturn — a need that we have seen, unfortunately, in some of our constituencies, for example, in Limavady, where 1,000 people lost their jobs in one go — and the flexibility of introducing help and assistance for the small-business sector in times of recovery. What would be the dramatic difference between any new Department of the economy and what we have at present?

Photo of Arlene Foster Arlene Foster DUP

It is fair to say the Department for Learning and Employment (DEL), DETI and Invest NI are working well together. However, a new Department would allow us to align our policies more closely and to take action quickly when necessary. Although I have put in place various measures to help to deal with the current economic downturn, such as the credit-crunch seminars or the short-term assistance scheme, Sir Reg Empey introduced a programme for skills, and those two schemes would have had more of an impact had we been able to wrap them together and deliver them from one Department. Moving forward and having a single Department of the economy would send out a clear message to other Administrations that we see the economy at the top of the Programme for Government and that we want to drive it ahead.

Photo of Paul Butler Paul Butler Sinn Féin

Go raibh maith agat, a LeasCheann Comhairle. Fáiltím roimh ráiteas an Aire. I also welcome the Minister’s statement to the House today. My two questions follow on from what Gregory Campbell said about reassuring the business community. A potential merger between the Minister’s Department and the Department for Employment and Leaning was mentioned. In the interim, will the Minister ensure that economic policy is kept in line and that it will go hand in hand with a skills and training strategy to meet the future needs of businesses?

Invest NI has accepted the need for performance measures, but there does not seem to be much evidence that it is an ongoing feature of its work. At the end of her statement to the House, the Minister said that her Department would take on that responsibility, but will Invest NI continue to analyse performance measures and assess how far it has gone in attracting business? Go raibh maith agat.

Photo of Arlene Foster Arlene Foster DUP 12:45 pm, 25th January 2010

The answer to the Member’s last question is yes, absolutely. In my statement, I said that specific targets will be included in the new operating plan for Invest Northern Ireland. That will allow the Department to determine whether those targets have been met, and it will help to counter some of the allegations that are made against Invest Northern Ireland, which bear no relation to what I see on the ground. As my Department does not currently have such a responsibility, it is unable to produce a report. That change will add significantly to future transparency and openness.

In the interim, and as I said in response to a question from the Chairperson of the Committee for Enterprise, Trade and Investment, the subcommittee on the economy will be crucial in tying up the skills agenda with my Department’s agenda. All large companies, whether indigenous or new foreign companies, want to be assured that the appropriate skills base is available here for any business expansion they wish to take forward. To my knowledge, to date no company has been unable to expand or invest in Northern Ireland because of a lack of appropriate skills, and we must ensure that that continues to be the case.

Photo of Leslie Cree Leslie Cree UUP

I also thank the Minister for her thorough and detailed statement to the House. I have two questions, the first of which relates to the proposed phasing out of support for business expansion. Will that action place Northern Ireland at a competitive disadvantage in attempting to attract inward investment and be to the detriment of future growth?

Secondly, businesses and trade unions disagreed with the panel’s view that high energy costs have been addressed, and they suggested that more action is needed to bring down relative energy prices in Northern Ireland. Does the Minister share that view?

Photo of Arlene Foster Arlene Foster DUP

Conflicting evidence was heard on financial assistance. Professor Barnett felt that there was a need to move away from that quite quickly and to support research and development and innovation instead. However, in his original report to me he stated that:

“the severity of the ongoing recession highlights an important policy consideration, namely that financial assistance to industry will vary depending on the economic cycle.”

We must take into account the short-term difficulties that we face and retain all of the tools, including selective financial assistance, that are available to us. Why should we throw away that tool when other regions of the United Kingdom are retaining it? I understand the panel’s point about research and development, and we are keen to move into that area in the medium to longer term. In the shorter term, however, DETI and Invest Northern Ireland must take cognisance of the fact that we are in the midst of an economic downturn.

As a member of the Committee for Enterprise, Trade and Investment, the Member will also be aware that money has already been indicatively offered for 2010-11 and that the financial assistance that has already been offered to companies cannot be removed simply to satisfy the report. The retention of selective financial assistance (SFA) is the right way to proceed in the shorter term. It will be up to the implementation group to consider whether SFA should be used in the future when, for example, companies offer jobs of higher value. There is a lot of work to be carried out in that area.

In relation to the Member’s second point about high energy costs, regrettably, a lot of large business users have seen an increase in their energy bills, particularly over the last couple of months. The Member will be aware that the Utility Regulator is carrying out a review into energy costs. I met the regulator briefly just last week to establish how that review is going, and at that meeting it was indicated that all the energy companies have been working very closely with the regulator and that the review is being carried out as expeditiously as possible. I know that the cost of energy is a big worry for a lot of large firms here, and the Member has my commitment that we will do everything that we can to deal with those issues.

Photo of Séan Neeson Séan Neeson Alliance

I thank the Minister for her statement and for the speed with which she and her Department dealt with Professor Barnett’s report. That report states that Invest Northern Ireland should concentrate more on small firms and projects with high innovative content. Does the Minister believe that the small business unit that she proposes to establish will deal with that?

In her speech the Minister said that the new economic strategy will form the heart of the next Programme for Government. Surely something can be done within the present Programme for Government to deal with the issues that have been raised.

The Minister of Enterprise, Trade and Investment: The Member will know that a lot of small businesses have for many years expressed the opinion that Invest Northern Ireland was not for them. Today, I have tried to highlight the fact that Invest NI actually did work with small businesses — [Interruption.]

Photo of Arlene Foster Arlene Foster DUP

However, there is a need to be more focused in helping our small businesses. The Member will know that our economy overwhelmingly consists of small and micro businesses.

I looked closely at what had happened in the aerospace industry. I know that it is a very specific sector, but that sector has been able to operate with a supply chain that works, involving companies such as Bombardier right down to small precision engineering companies that may have a couple of people working for them. Instead of having a large business unit and a small business unit, I want to see an integrated approach to business right across Northern Ireland, so that businesses in a particular sector can work through that sector without being labelled as a small business and not really being an Invest NI client. It is right to move away from Invest NI client status to a more integrated approach for small businesses.

In relation to the Member’s second point, I referred to the economic strategy forming part of our Programme for Government in the next term. It is absolutely key that we do that, but I hope that the Member can take from the rest of today’s statement that I do not want to sit around and wait until then to move the economy forward. I have set out a number of ways that we can move forward quickly. I hope that the delegated limits and all the initiatives to make Invest NI more flexible will be in place by April 2010. Programmes have already been rationalised; I think immediately of the grant for R&D and the way in which it rationalised all the research and development programmes. A lot of practical work will happen before then, but I do realise that money has been committed for 2010-11. We are setting the economic strategy for the medium to longer term while dealing with the short-term challenges that are before us now in the most effective way that we can.

Photo of Stephen Moutray Stephen Moutray DUP

Like others, I welcome the fact that the Minister has brought this important and timely statement to the House so speedily. Will the Minister indicate whether the role of the Invest NI board will change as a result of her statement?

Photo of Arlene Foster Arlene Foster DUP

The members of the Invest NI board have worked very well together. The board provides a good challenge to the work of Invest NI and its chief executive. It has always fulfilled an important role in the work of Invest NI; for example, it sits on the case-work committees and helps to fulfil a challenge role. However, the precise role and remit of the board will be reviewed in the context of dealing with the revision of delegated limits. I have already said that I hope that that piece of work will be completed by April 2010.

Therefore, a slight change may be made to the role of the Invest Northern Ireland board. I thank the people who sit on the Invest Northern Ireland board, many of whom run successful businesses. They give much of their time and energy to Invest Northern Ireland. I pay tribute to the public service that they contribute to Northern Ireland, and I hope that they continue to provide that service.

Photo of Jennifer McCann Jennifer McCann Sinn Féin

I thank the Minister for her statement. She said that today is not the day for her to respond to questions on specific details in the recommendations. However, I am disappointed that, when she mentioned that the report says that there is no evidence of resources having been wasted, she did not take the opportunity to demonstrate that the political will exists to develop and grow the social economy sector and to recognise the contribution of that sector to the economy and to the creation of employment in areas of disadvantage and need. Will the Minister recommend that adequate financial investment be given to the social economy sector to enable it to develop and grow?

Photo of Arlene Foster Arlene Foster DUP

The Member has asked me questions about the social economy before, and it is important to recognise the role that that sector plays in Northern Ireland. When many other parts of the economy were not growing, the social economy grew, and I appreciate the work that is carried out in the sector.

I take issue with the Member’s mention of money being wasted. The report recognises that Invest Northern Ireland has made a significant contribution to economic growth and growth in employment in Northern Ireland. At the time of the Barnett report’s publication, scare stories, hype and noise were going around about money that had been wasted. The evidence of that is simply not there, and I urge people to reread the Barnett report on that issue.

The Member mentioned the need to deal with regional disparity. I asked that the report address that issue, and it does so. It says that companies should be allowed the scope to locate where they can operate most profitably. For external investors with increasingly tradable services, that means — unfortunately for me and my constituency — locating in large urban areas. I urge people to look at what the report has tried to do; it has tried to bring a step change to the Northern Ireland economy. That is what it is about, and it provides a good basis for moving forward.

Photo of Simon Hamilton Simon Hamilton DUP

I will resist the temptation to engage in a discussion on the impact that regional disparity has on the Strangford constituency. The Minister talked about a consolidated suite of programmes. Can she outline what those programmes might be and any rationalisation that has taken place already?

Photo of Arlene Foster Arlene Foster DUP

I have already referred to the fact that Invest Northern Ireland has looked at its suite of programmes and decided to rationalise in the research and development field. In December 2008, I launched the grant for R&D, which brought together all of the R&D and innovation programmes and allowed a single application to take place. That allows companies not to waste time giving consideration to what is the most appropriate programme for them to apply to but allows them to apply and get through the process more quickly. Business groups have told me that they found that that worked well, and they hoped that that would happen with other Invest NI programmes.

Photo of Alan McFarland Alan McFarland UUP

I thank the Minister for the report and for her courage in pushing through much-needed reform to our economic policy. Many local authorities have expressed concern that Invest Northern Ireland has bought up property in prime locations that has not then been used and is denied to other businesses. Is the Minister minded to review Invest Northern Ireland’s operation of its property strategy?

Photo of Arlene Foster Arlene Foster DUP 1:00 pm, 25th January 2010

I accept what the Member said. Paragraph 3.29 of the analysis of responses to the consultation exercise states that:

“Many local councils expressed their concern that Invest NI had purchased property in prime locations to hold for clients, which has then remained vacant and prevented other businesses from using the land.”

I presume that that is what the Member was referring to. However, contrary to that, a number of councils indicated that they would like Invest Northern Ireland to purchase more land as a means of attracting investment to their areas. Therefore, there are conflicting views on that issue.

It is important to look at our land acquisition strategy. The Member is right about that. An evaluation of Land and Property Services is under way, and I am due to receive a report on that in spring 2010. I hope that that means March 2010 as opposed to later in spring 2010 — I think that it does. That report will then go to the implementation group to take the matter forward. As I said, there are conflicting messages about the land acquisition strategy, and clarification is required.

Photo of Alasdair McDonnell Alasdair McDonnell Shadow SDLP Spokesperson (Business, Innoviation and Skills), Shadow SDLP Spokesperson (Health), Shadow Minister (Europe), Shadow Spokesperson (Northern Ireland)

I thank the Minister for her extensive reply to the report on the independent review of economic policy.

Although it may not have been specifically mentioned in the report, the Minister mentioned some fairly radical changes, including a closer relationship between DETI and DEL. However, it strikes me — we have discussed this before — that the missing link is a functioning postgraduate business school in Belfast that would embrace components of the universities. Has the Minister considered that as part of the radical restructuring, or has it been put on the long finger?

Photo of Arlene Foster Arlene Foster DUP

I thank the Member for his question. It is not a matter of me putting it on the long finger. The Member is right that that specific issue was not addressed in the Barnett report. The review was, from a strategic point of view, more about considering the need for a Department of the economy. At present, such issues reside with my Executive colleague Sir Reg Empey and are to do with the skills and training agendas. However, I am happy to pass on the Member’s comments to my colleague and, indeed, have a discussion with him about that issue.

Photo of Alastair Ross Alastair Ross DUP

I thank the Minister for her statement. I know that many businesses across Northern Ireland will support the establishment of a Department of the economy. Will Invest Northern Ireland continue to offer financial support to relatively low-paid tradable service projects, including call centres?

Photo of Arlene Foster Arlene Foster DUP

The key to all this is that Barnett was considering selective financial assistance in the medium to longer term. I made that clear today. I said that there was a push and a pull factor. There is a need to do that because we want to progress Northern Ireland through research and development. I nearly said Vorsprung durch Technik; I was thinking of that old Audi ad.

At the other end of the scale, Europe is looking at us and saying that regional aid may come to an end in 2013. Therefore, there is a need to consider the whole issue of selective financial assistance. However, given that we are in the midst of a recession, in the shorter term, we need all the tools that are available to us. Therefore, given the present circumstances, I firmly believe that selective financial assistance should remain available to us.

A lot of FDI companies come to Northern Ireland and initially place perhaps 15 to 20 employees here, do some research and development and, by doing so, attain Invest Northern Ireland’s support. However, 75% of those companies then invest for a second time, and they grow what they have in Northern Ireland. It would be a retrograde step if we were not able to assist such firms with greater expansion in Northern Ireland. It would be detrimental to the economy. Therefore, I firmly believe that we may need to keep SFA available to us in the short term.

Photo of Declan O'Loan Declan O'Loan Social Democratic and Labour Party

I commend the Minister for what she is trying to do. I agree with her that simplistic criticisms about wasted millions or billions do not make any useful contribution to improvement. The amalgamation of DEL and DETI is an interesting proposal. That would be a major change, the full implications of which would have to be thought through, including how it might be done.

Will the Minister reconcile the need for innovation and sharp focus in the support systems for business with her very complex statement, which included a large number of specific initiatives? We want to encourage innovation and sharp focus in the business community. If they are not present in the support mechanisms, they will not be encouraged in that community.

Photo of Arlene Foster Arlene Foster DUP

I am not sure that I follow the Member. Is he asking whether there is a need to rationalise Invest NI programmes? That is certainly what we will do. I have asked the chief executive to bring forward that review to the date specified in my statement; I cannot recall that date just now. There is a pressing need to crunch down on the myriad of programmes available. It is too much to expect managers of small businesses to go through them all and see which ones apply to them. If the Member is asking whether I am talking about rationalisation, the answer is that I am.

Photo of Jim Shannon Jim Shannon DUP

I thank the Minister for her lengthy statement, which lasted 40 minutes. At one stage, I was going to pass her my throat lozenges to help massage and soothe her throat.

We are clearly in an economic recession — I hate to use those words — and jobs are being lost. Will the Minister confirm that it is right to continue to focus on improving productivity?

Photo of Arlene Foster Arlene Foster DUP

I thank the Member for his ex post facto sympathy. I did not see any sweets coming forward as I read my statement.

It is right that we continue to focus on productivity, particularly in the medium-to-longer term. If we want to produce a step change in Northern Ireland’s economy, we must focus on it. However, Barnett and his colleagues on the review team recognised that there was a need to take the current economic cycle into account, and I have already referred to that in comments addressed to another Member. We must recognise where we are at the moment. Everything I have said about selective financial assistance should be understood in that context, and I know that the Member appreciates that.

Photo of Gerry McHugh Gerry McHugh Independent

Thank you, a LeasCheann Comhairle.

Almost every aspect of the Minister’s statement has been covered, but there was a lot in it. I welcome the statement and the Minister’s intent to look at Invest NI’s delivery and try to leave us in a more competitive situation worldwide. It is important that industries become more R&D-focused to allow us to stay in the high salary bracket. We have to approach the problem from that angle.

My question has a local focus, and the Minister is aware of my position. We are moving forward to a new position and taking the new approach of R&D and innovation. Will the new Department reposition, and will mindsets change? All the innovations may take place, but it seems from all the Minister’s answers that the Department is still adopting a Belfast-only position.

Photo of Arlene Foster Arlene Foster DUP

I do not know how the Member infers that we have a Belfast-only position. No one can accuse me of looking solely at Belfast in anything that is done in relation to DETI’s policies. The Member knows that only too well, as Fermanagh will be the recipient of much telecommunications infrastructure in the near future. Advancing innovation and research and development can help any number of firms, regardless of location or size. With our excellent and growing telecommunications infrastructure, I envisage that many firms across the country will take advantage of research and development and innovation assistance.

Research and development and innovation are not just about people wearing white coats; they are about new products, developments and processes, in whatever sector people work. I urge the Member not to see bogeymen where none exists and instead to work through the process and grasp what we are trying to do for the whole economy. Let me be clear: this is about the whole Northern Ireland economy, certainly not just about Belfast.

Photo of Stephen Farry Stephen Farry Alliance

The Minister has said that there is no waste in Invest Northern Ireland. Does she draw a distinction between waste and inefficiency, bearing in mind that, relative to other jurisdictions and compared with other inward investments, our job creation costs are high? Does she think that opportunity costs will arise from that?

The Minister also spoke about the importance of dealing with the current economic cycle. I had hoped that the report would have looked more to the future by focusing on restructuring the economy. Will the Minister speculate on how the recommendations will contribute to addressing the structural difficulties in the economy, which has a high dependency on the public sector, and the low level of productivity?

Photo of Arlene Foster Arlene Foster DUP

I will answer the last question first. The report is about a new economic focus for Northern Ireland by moving forward with higher productivity. That is why we are examining research and development and innovation, and it is why we are encouraging more private sector companies to be export-focused. We have seen many companies become more export-focused out of necessity over the past 18 months, and we want to support those companies in moving forward. Many smaller firms have grown from family structures, and they, therefore, do not have the necessary management structures to move ahead and make a difference through productivity.

Dr Farry also raised the issue of waste. I understand his point about additionality and about SFA having a lower additionality for research and development. However, when I visit different locations around the country for job opportunities, very few MLAs say to me that they do not want Invest Northern Ireland to give those companies assistance because they are providing low-value jobs. Members have choices to make. If they do not want Invest Northern Ireland to become involved in the so-called call centre phenomenon, much more work remains to be done to get foreign direct investment of that nature into Northern Ireland, because many of the firms that currently come here receive assistance from Invest Northern Ireland. Therefore, we have big choices to make about the sort of economy that we want for Northern Ireland. For my part, I want an innovative economy that is based on research and development. I have seen the difference that research and development has made to the economies of countries such as Israel, and I think that it can do the same for our economy and do it very well.

Photo of Dominic Bradley Dominic Bradley Social Democratic and Labour Party

Go raibh maith agat, a LeasCheann Comhairle. Gabhaim buíochas leis an Aire as an tuairisc seo a chur faoi bhráid an Tionóil inniu. Tá ceist agam ar an Aire faoi fhorbairt eacnamaíoch ar bhonn fo-réigiúnach.

Will the Minister assure the House that future economic development policy will ensure that subregional disparities will be addressed through the use of Invest Northern Ireland resources to produce a more balanced programme of economic growth throughout the North?

Photo of Arlene Foster Arlene Foster DUP

As I said in response to a question about regional disparity from Ms McCann of West Belfast, I specifically asked the Barnett review group to consider regional disparity. It has said that companies should be allowed the scope to locate their premises wherever they feel that they can operate most profitably. That in itself presents a challenge for MLAs, because they must consider what they can give to their regions to mark them as out areas where companies will want to invest.

Through its regional offices, Invest Northern Ireland will continue to work with all the companies that come to it for assistance. In fact, given that Invest Northern Ireland’s client status will now go into the history books, many companies have the opportunity to move forward in partnership with Invest Northern Ireland and put themselves on the map, whether it be in research and development and innovation or in new export markets.

Photo of John Dallat John Dallat Social Democratic and Labour Party

I thank the Minister for her lengthy statement. Paragraph 90 states that the permanent secretary will engage with the Audit Office to present a balanced way forward. Will the Minister assure us that the independence of the Audit Office will not be undermined in any way and that it will continue to evaluate the work of all Departments to ensure that taxpayers’ money is accounted for in every way?

Photo of Arlene Foster Arlene Foster DUP

I am not responsible for the Audit Office, and I think that it would take unkindly to the suggestion that a conversation with my permanent secretary would, in some way, damage its independence.

I have long said that, if we want Invest Northern Ireland to manage its risk better, there must be an understanding across the Chamber, the press and the Audit Office about what we are trying to achieve, and that is the reason for the engagement between the permanent secretary and the Audit Office. We are trying to achieve a situation in which that body can act more flexibly when faced with entrepreneurial business people. However, in doing so, that body must recognise that it is dealing with public money. That is why I asked my permanent secretary to have discussions with the Audit Office. I am quite sure that the Audit Office will remain independent at all times.