Volume 2 - MINUTES OF EVIDENCE RELATING TO THE REPORT
Ordered by The Committee for Enterprise, Trade and Investment to be printed 22 March 2001Report: 2/00R (Committee for Enterprise, Trade and Investment)
COMMITTEE FOR ENTERPRISE, TRADE AND INVESTMENT: MEMBERSHIP AND POWERS
The Committee for Enterprise, Trade and Investment is a Statutory Departmental Committee established in accordance with paragraphs 8 and 9 of Strand One of the Belfast Agreement and under Assembly Standing Order No 46. The Committee has a scrutiny, policy development and consultation role with respect to the Department of Enterprise, Trade and Investment and has a role in the initiation of legislation. The Committee has 11 members including a Chairperson and Deputy Chairperson and a quorum of 5.
The Committee has power:
- to consider and advise on Departmental budgets and Annual Plans in the context of the overall budget allocation;
- to approve relevant secondary legislation and take the Committee Stage of relevant primary legislation;
- to call for person and papers;
- to initiate enquiries and make reports;
- to consider and advise on matters brought to the Committee by the Minister of Enterprise, Trade and Investment.
The membership of the Committee since its establishment on 29 November 1999 has been as follows:
Mr Pat Doherty (Chairperson)
Mr Sean Neeson (Deputy Chairperson)
Mr Alex Attwood
Mr David McClarty
Mr Jim Wells*
Dr Alasdair McDonnell
Mr Wilson Clyde
Ms Jane Morrice
Mr Duncan Shipley Dalton
Dr Dara O'Hagan
Mrs Annie Courtney*
*Mr Campbell was replaced by Mr Jim Wells on 3 October 2000.
*Ms Lewsley was replaced by Mrs Annie Courtney on 29 January 2001.
TABLE OF CONTENTS
VOLUME 2
APPENDIX 4
MINUTES OF EVIDENCE
Strategy Steering Group (SSG)
Northern Ireland Economic Council (NIEC)
Dr John Bradley
Northern Ireland Committee Irish Congress of Trade Unions (ICTU)
Institute of Directors (IoD)
General Consumer Counsel for Northern Ireland (GCC)
National Energy Action (NEA)
Office for the Regulation of Electricity & Gas (OFREG)
Northern Ireland Science Park Foundation
Ulster Farmers' Union (UFU)
Northern Ireland Food and Drink Association (NIFDA)
Mr John Simpson
Federation of Small Businesses (FSB)
Northern Ireland Textiles and Apparel Association (NITA)
Northern Ireland Tourist Board (NITB)
Belfast City Council
Derry City Council
UNISON
Northern Ireland Hotels Federation
The Queen's University of Belfast (QUB)
Association of Northern Ireland Colleges (ANIC)
MINUTES OF EVIDENCE
WEDNESDAY 14 JUNE 2000
Members Present:
Mr Doherty (Chairperson)
Mr Neeson (Deputy Chairperson)
Mr Attwood
Mr Campbell
Mr Clyde
Ms Lewsley
Mr McClarty
Dr McDonnell
Ms Morrice
Dr O'Hagan
Witnesses:
Mr G Loughran )
Dr C Gibson )
Mr S Kingon )
Mr F Bunting )
Mr J McGinnis ) Strategy Steering Group
Dr P Haren )
Mrs T Townsley )
Mr B Robinson )
Mr D Gibson )
1.
The Chairperson: I welcome you all to our first public hearing. We shall start with the authors of this strategy document 2010 and we have met for some 20-25 minutes in private session where we allocated the questions to various Committee members.
2.
Dr O'Hagan: My question is directed at Gerry. It is in terms of the make-up and the terms of reference for the Steering Group so there are a few questions around that. Basically, how were the terms of reference for the Steering Group and for the Strategy Review determined? How was it decided who should sit on the Steering Group and what criteria was used for it?
3.
I ask this question because a number of concerns have been expressed, particularly in the voluntary and community sectors, about the distinct lack of representation. Specifically, there were concerns that the Strategy Steering Group was top-heavy with civil servants. As far as I know, this is the first time that the group has had to face public accountability over 'Strategy 2010'. The last time there was any discussion among economists, for example, it was behind closed doors and under the Chatham House rules. Can you explain to the Committee why the group has been so reluctant to discuss 2010, which is a key public issue, and to bring it into the public domain?
4.
Mr Loughran: Mr Chairman, I shall introduce the members of the Steering Group present today. We have nine members out of 13. Starting on the left: FrankBunting, PatrickHaren, GerryLoughran, ChrisGibson, TeresaTownsley, JohnMcGinnis, StephenKingon, DavidGibson and BruceRobinson.
5.
The Chairperson: You are all very welcome.
6.
Mr Loughran: We welcome this opportunity to discuss 2010 with you. My colleague, ChrisGibson, will want to say a few words to show that we see great value in this exchange and I will be glad to respond to your questions.
7.
'Strategy 2010' was initiated by AdamIngram, the Minister responsible for the economy, and that point needs to be made very strongly. The people here today did not make that decision. It was taken by the Minister and the Government of the time at the beginning of 1998. The original intention was that a report would be ready for the Assembly when it started to operate. As we know, things did not work out quite that way, but the report was nonetheless produced in March1999 by which time the Steering Group had finished its work and had ceased to exist. The report was then considered by the Minister, and I will say a word or two about that. The process, as determined by the Minister, was that it should be as participative as possible and should involve a partnership between the Government and the private sector, with the private sector having the responsibility for driving business forward. He initiated discussions with the private sector and, as a result, the terms of reference and the membership of the committee were determined. In referring to the private sector, I mean the private sector in the broader sense including, for example, the trade unions.
8.
To fulfil his desire that there should be the widest possible participation, the process involved the creation of 18 working groups and a consultative panel involving a total of 300 people. While the Steering Group played an important role, it was part of a much wider grouping of people. That group was drawn from various sectors and other groups, including voluntary organisations were involved, particularly through the consultative panel set up. Without question you are right to say that the business community and private sector dominated the membership of the various groups making up the structures of 'Strategy 2010'. It is not correct to say that it was top-heavy with civil servants. Of 13steering group members, four were civil servants, - certainly not top-heavy - and hardly any civil servants were involved in the various working groups.
9.
The report was produced in March1999, and the Minister of the day decided that the report's main principles should be accepted, something he announced publicly. Subsequently, JohnMcFall announced his intention to implement those recommendations which needed to be addressed urgently, and that process has started.
10.
Since May 1999, a number of steps have been taken. First, and perhaps most importantly, the key recommendation in 'Strategy 2010' is that a social partnership should be created for driving forward economic development policy, and I make no secret of the fact that the Steering Group was influenced by experience elsewhere in that recommendation. The social partnership concept was central to the philosophy underlying 'Strategy 2010', and the Minister proceeded to set up what is called the Economic Development Forum, which includes the social partners. I think you will agree that the Economic Development Forum is representative, taking in employers and trade unions, the community and voluntary sector, and farmers. We made further adjustments to ensure proper regional representation, since, when we looked at the social partnership, we realised there was a slight skewing towards Belfast. Knowing the strong views on these matters, we thought there should perhaps be some adjustment to take account of that.
11.
The Economic Development Forum, which has met on about four occasions since being set up, is considering some quite significant recommendations from 'Strategy 2010'. I am sure you have heard of the Information Age Initiative, which is designed to drive forward the use of e-commerce and e-business. We have also established a venture capital fund, the Viridian Fund recommended in 'Strategy 2010'. The building of a science park is underway. The recommendations relating to improved education, training and preparation for work are being addressed. An energy statement has been produced.
12.
At the moment, serious consideration is being given to Selective Financial Assistance, an extremely important policy area which I hope the Committee will discuss with us. We are looking at 'Strategy 2010''s recommendations on it, and the Committee's input would be extremely helpful, for it is currently a red-hot issue. I hope to have an opportunity to discuss that further with the Chairman when we meet SirRegEmpey tomorrow.
13.
One other point I would like to pick up, Dr O'Hagan, is the question of public accountability. It is fairly clear from what I am saying, that what was done under 2010 was done under the direction of Ministers. Nonetheless, the Steering Group always considered that it was important to have dialogue with everybody who was involved in the economic development project. For example, prior to the production of the report, several meetings were requested between Assembly Members and the Steering Group - and I know some Members present today were involved in those meetings. After the report was produced there was a series of briefings; about half of all the district councils in Northern Ireland have commented, and most of them have had meetings with departmental officials and members of the Steering Group. We have also had discussions with various social partners - several very large meetings were convened, including a conference in the Waterfront Hall. Therefore, there has been a series of contacts, debates and discussions between those who were involved in this process and the wider community.
14.
Dr O'Hagan referred to one particular seminar involving economists which was held under Chatham House rules. The sole reason for using Chatham House rules in that case - every other occasion I have referred to has been absolutely open - was to enable people to say exactly what they wanted. There was no other purpose. That is what Chatham House rules are for - to allow you to say what you want in the knowledge that it is not necessarily going to be reported elsewhere. It is not an unreasonable provision and is widely used in consultative processes to give people the maximum possible encouragement. That is all I want to say, but maybe Mr Gibson has something to add.
15.
Dr C Gibson: All I want to do is re-emphasise what Mr Loughran has said in terms of how the committee was constructed, and, indeed, the spirit in which we did the work. We are really delighted that the debate is under way and that discussion about the document has started. The document is simply a piece of paper which tries to capture the end point of our deliberations, but that end point cannot be an end in itself. If we want to build a strategy for this region's future, it must be a dynamic thing, it must be worked at, and it must have wider input. I do not disagree with DrO'Hagan that that is necessary, but I want to re-emphasise to her that the 300people who had the opportunity to consult with us did so as representatives of their own organisations and brought with them many interesting points. Unfortunately, when you write a report such as we did, you cannot put all of them in. I, therefore, commend the Committee to look through the sectoral reports which MrLoughran referred to.
16.
I also want to re-emphasise the point that those of us who sat on the committee did so as individuals. Although I was chairman of the CBI at the time, that is just one of the things that I do. We were all invited on to the committee to contribute as individuals, not to represent any particular interest or organisation. I believe we achieved that, and it is on that same basis that we are here today. We are here, at your request, as the individuals who produced the report. To emphasise what MrLoughran said, the Economic Development Forum is different. On that body, as members of a social partnership, we do represent our separate organisations. Indeed, there are alternates on the Economic Development Forum which allows someone to speak for the CBI if I am not there. That is a very different basis from that which was constituted for the report.
17.
I think the report itself is an excellent example of how the public and private sector could do business in a new way: open, transparent, with dialogue and with an ability for anyone to add value to what is being created. That is why I say it is not a static document. It is an ongoing, dynamic document to which each of us can add value.
18.
We all take responsibility for what we said in it. I would not deviate from that or from the things that were said. Some of the recommendations are targeted at business through growth challenge and the formation of the business alliance. Where the business organisation speaks collectively is an example of that.
19.
The short timescale was in no small measure due to you, the politicians, who were then having some difficulties in coming to a resolution of the issues which we, the people, asked you to resolve. So do not look at us and say "You were slow about 'Strategy 2010'". We produced it to a very tight timescale to meet you at the point when the Assembly should have been formed. The fact that there was a vacuum, was not our fault - look at yourselves. The report was created in the short time of one year, and a very good job was done in that timeframe. We want to develop that report and have dialogue with you. We look forward to doing that over the coming months, as this debate gets well informed, articulate and open throughout the community. We want everyone to participate in it. I thank the 300 people who contributed to the initial stages, but let us have all 1·6million people making an input - the initial committee would have welcomed that.
20.
Mr Bunting: When the Irish Congress of Trade Unions (ICTU) was invited to participate in the development of this strategy, about 2½-3 years ago, we thought that it was an excellent opportunity for us. I was Chairperson of the ICTU at the time and I was elected to go, but it was made clear that I was serving in a personal capacity, so the views are my own. Three years ago things were quite bleak on a whole range of issues - job creation, the promotion of the private sector in NorthernIreland, the services needed for that to happen, and a joined-up approach for everything. There were fewer copybooks for us to use.
21.
One of the things we looked at was the 'Forfás Report', the Republic's equivalent of our 'Shaping our Future'. It was very similar. There was a very small group of people, one representative from the Irish Congress of Trade Unions and a range of other bodies, like the 300-odd people who were involved in bringing forth this strategy. We were trying to make a number of recommendations that would make relevance to the Assembly. We worked very hard over a restricted period. We would like to have had more time to finish it off - dotted the "i's" and stroked the "t's", but we thought that you were going to come on board about 12-13 months ago and we wanted to have the report ready for you then, so everything was telescoped in towards the end. Central to some of the key recommendations, like the establishment of the social partnership body in the Economic Development Forum, was the question of social cohesion and the involvement of all the main partners in NorthernIreland. I am talking about the community and voluntary sector, the trade unions, the business representatives and the government bodies. That body has now been established on an equal basis, and it has an agenda. It needs to have the energy and thrust, which will come from you, to make the whole thing live.
22.
We were trying to move from a vacuum into a socially inclusive situation where all of the main partners in NorthernIreland were involved. We share the view, and made the recommendation, that things should grow from the ground up as well as come from the top down. It is important that all communities are involved and that underrepresented and disadvantaged groups get priority in the new process. Because of the lull in the Assembly's coming forth, some of those recommendations had to be moved on.
23.
We were pleased that the Economic Development Forum was established. You need to add a lot of value to that to ensure that it works effectively. A similar process went on in the Republic, and it worked very well for them. We can learn from them. During the process we took the opportunity to learn from other European regions and from Britain. In addition, I was at the time a member of the Northern Ireland Economic Council, and we commissioned a number of research studies into how a region like Northern Ireland could develop and what key characteristics would be needed. We brought that through into the strategy and the recommendations. We share your commitment to social inclusion and representation. We have made recommendations on established bodies that we think will ensure that they develop. What we have to do now is to make that work. I hope that is helpful.
24.
Dr O'Hagan: I thank Gerry and Chris for responding specifically to those questions. To pick up on something Chris said, as far as I am aware none of the criticisms of 'Strategy 2010' related to the time frame. That was not the issue. What has to be taken on board is that there are very genuine, real concerns about the accountability and the makeup of these bodies. 'Strategy 2010' is a big document. It is hard going, and at times it is heavy on the rhetoric of social inclusion, but it is not always there in reality. That is why I am raising concerns about accountability and makeup.
25.
There are other issues, certainly from our point of view. There is a lack of radical or innovative policies, and of an all-Ireland dimension to the economic strategy. Also, take, for example, the Industrial Development Board (IDB), which is the biggest spending body within the Department of Enterprise Trade and Investment. Over the years there have been serious concerns about a lot of issues around the IDB. None of these were even referred to. There is a body of evidence, there are reports available, and in a sense you do not want to reinvent the wheel. There is a vast amount of work already done that, in a lot of cases, was not referred to. There are serious concerns. At the end of the day, 'Strategy 2010' is going to be the main economic development strategy for the North of Ireland. It is very important, it has far-reaching implications, and it is going to affect every single person. That is why the community and voluntary sector in particular needs to be brought in. Departments need to adhere to equality guidelines, TSN and all of that. That is why I am raising those concerns.
26.
Dr C Gibson: I take that point, but I ask you to look at the overall remit that we were given. We were asked to produce an overarching strategy document that would give some lead as to where we should take the region. I think that what you are referring to are the implications, the procedures and the ways in which we do it. In many of the things we do, we need to be conscious of the issues that you raise, but I suggest that that is an implementation issue. As you said yourself, the report is a thick document. If we tried to dot every "i" and cross every "t", no one would read it, and we would never get the message across. With due respect, the things that you suggest are things we will be picking up on in many of our activities. The report should be read in that sense. What we tried to do was to put an overarching strategy together to meet a globalising world where no one will be left in isolation and everyone has to interact with the outside world in a way which makes economic sense. It makes economic sense to focus on wealth creation, adding value by participation and bringing things to the party before trying to divide the outflows from that. If you cannot create it, you have no mission of dividing it.
27.
Mrs Townsley: I will just add one point for clarification. When we sat down at the outset to look at the terms of reference and how to take this forward, a report had been completed, reviewing the structures in the Department on how matters were delivered. We all thought that there had to be strategy before having structure. However, one of the 'Strategy 2010' recommendations is that the structures should be looked at to ensure that we can deliver on the final document, or whatever the final way forward for the economy is. We must ensure that the right and proper structures are in place to deliver that. We were very conscious of that.
28.
Mr Loughran: Dr O'Hagan's point about learning from past experiences and reports is a very fair one. As MrsTownsley has pointed out, those concerns are addressed as the whole structural issue and the way in which Selective Financial Assistance is allocated are being addressed. Therefore, the agenda referred to is actually handled in 2010 although maybe not quite from the angle referred to. We agree that it is important that the wider community should be drawn in.
29.
The Steering Group may not have been as well balanced as you would have liked, but, in all fairness, it came up with a recommendation that there should be a social partnership. The Steering Group therefore recognised that point. The Economic Development Forum, which is now in place, includes representatives of the wider interests that you believe should be involved.
30.
The Chairperson: I have been advised by Hansard staff, who are recording this session, that those speaking should identify themselves clearly and regularly.
31.
Mr Neeson: I welcome the Steering Group to the Committee. I also congratulate GerryLoughran and wish him well in his new role as Head of the Civil Service. We look forward to working with him in that role.
32.
The 'Strategy 2010' document, along with the 'Shaping our Future' document are two most important documents in helping to restructure Northern Ireland for the future. In many ways, the two documents should never be looked at in isolation. That takes on board Frank Bunting's point.
33.
Which of the 62 recommendations are your major priorities? GerryLoughran has referred to some of the recommendations that have already been implemented. Are there any in the current year that will be instituted with a Department or its agencies?
34.
Mr Loughran: I will respond first on behalf of the Steering Group and then as an official. The Steering Group believed that the recommendations should be presented to the Government and the private sector, as ChrisGibson has pointed out. It is really for those who are taking delivery of the recommendations to take a view on priority.
35.
As far as the Department is concerned, we have looked at prioritisation. While I do not want to add to the mountain of paper that I am sure the Committee already has, we have brought along what members might find to be a very useful guide. I am not asking you to read it now. It is the Department's analysis of what it believes priorities might be. It is fairly straightforward and not too difficult to understand - even people like me can understand it - so it is potentially useful to the Committee as it gives an idea of the Department's views. This is not the view of the Steering Group as it did not carry out this exercise. This is the Department's view.
36.
As regards where we are in the implementation of the recommendations, we have also prepared a return. We saw these questions only in the last few days, so I apologise for bringing them along this morning, but we do have a return that shows where we are in relation to each of the recommendations, and we have copies for your Committee.
37.
That is all that I wish to say about prioritisation. ChrisGibson may wish to add to that. If you were to ask me, as a departmental official, what is important this year, I would say that as a Department we are looking at Selective Financial Assistance - the way in which industry is encouraged to invest. That is an absolutely crucial issue. If we get it right, we will do better, and if we get it wrong, we will become uncompetitive in relation to other regions. So that is a very important issue, and, as I have already said, it is something on which we would welcome the Committee's views. I am sure that SirRegEmpey will want to pick up on that point with you and with the Chairman when we meet tomorrow.
38.
Dr C Gibson: The 62 recommendations have been put to you, and the entire Assembly needs to consider them. We need this debate to take place quickly, clearly and openly, and we need to keep a measure of dynamism in it. Because so many of these recommendations have implications in terms of resource allocation and in terms of changes which will affect others, an implementation plan needs to be drawn up, which, of course, is not contained in the document. The prioritisation must take place alongside of that. It would be invidious of us to say "Do that one and not that one". One must look at the construct of the total strategy and say "Yes, we think that that is in the right general direction" or "We need to add the following things to it". Then we need to work out an implementation plan and proceed with it - you might even call it a programme for government.
39.
Mr Neeson: The issue of financial assistance has been raised, and there are two questions that I want to put to the group. First, how do you respond to the criticism that the high level of grants is not properly addressed? One of the recommendations suggests
"The existing grant regime should be maintained unless and until new measures become available".
40.
Concerning the old issue of corporation tax, you have made recommendations that there should be a change to the rate of that tax in Northern Ireland. I do not disagree with that, but given the fact that taxation is not a devolved matter - although from my own perspective, and from my party's, the Assembly should have taken on tax-raising and tax-varying powers - and that we are governed by the rules of the EU and the World Trade Organisation, how realistic is that recommendation?
41.
Mr Loughran: In discussion before this meeting we agreed that StephenKingon would answer that particular question.
42.
The Chairperson: For the benefit of the members of the public, I must stress that the Speaker has ruled that only five witnesses may sit at the front table at any one time.
43.
Mr Kingon: Regarding the high level of grants, we felt that the whole question of fiscal incentives needed to be looked at. We were very clear that we had to attract mobile foreign investment. We have got to be competitive.
44.
From my personal experience of dealing with potential inward investment clients, they have a shopping list in Europe, and our package has to be able to match that in order to attract inward investment. We have suffered from a negative international image for 30years, so we start three paces back. We have got to make sure that whatever weapons we have in our armoury are sufficient to be able to address what the competition is doing.
45.
As a part of the review we looked at various other regions in the United Kingdom, the Republic and Europe. Everybody is trying to be creative in terms of financial incentives. But we were very keen to stress that we had to have value for money and that we wanted to break the grant dependency. We had to see if we could be a bit more creative in terms of fiscal incentives. We recognised that there were legislative constraints in terms of fiscal matters and what the Treasury would allow you to do. However, we put forward some suggestions as to how we could be creative within the framework of the United Kingdom, without changing the corporate tax rate.
46.
There are three key issues that Northern Ireland businesses really need to get smart in; one is marketing to get that external look; the second is innovation in R&D; and the third is training and skills development. If you do not get those basics right, then we are not in business.
47.
For example, without any additional increase to the exchequer we, at the moment, have a system where businesses submit their accounts, the Inland Revenue looks at those and comes up with a taxable profit. You could make allowances, for example, if somebody said that they spent £100,000 on marketing, that would already be proven in the accounts to the revenue. You could have an investment allowance that would give you 200% relief on that expenditure, and you would actually reduce the taxable profit. The rate of tax would remain the same, but we could be quite creative, and I think the Steering Group felt that the Assembly should have looked for further fiscal flexibility. A big selling point with the Americans is property taxes. Our manufacturing sector is industrially de-rated. If you tell an American there is no property tax, that would be a big selling point, yet a lot of the new knowledge-based industries such as software and the call centres will not qualify for industrial de-rating. There are many areas where we could be flexible.
48.
I have dealt a great deal in mobile investment, and I believe we should not penalise our indigenous companies. They should have a more international outlook, but they will need some support, and criteria must be set out for obtaining that support whether the company is indigenous or international. We could take the whole fiscal incentive and be quite creative with it. Perhaps that is an area that the Assembly needs to pick up.
49.
Mr Neeson: Mr Steven Kingon has touched on Europe, although I will not ask him about the Euro at this stage. One of your early recommendations is that a properly-resourced office should be set up in Brussels - one that represents the interests of Northern Ireland. I think that that should be done as a matter of urgency. Would members of the group agree with me on that?
50.
Mr Loughran: I was very glad to take delivery of Sean Neeson's congratulations, but, of course, that refers to my future office, and the matter to which he refers also falls to my future office. I would not dare to say anything about that without the authority of my Ministers, but you can take it that we are working on that.
51.
The Chairperson: I am aware that you have to leave at twelve, so to facilitate that I will ask Gregory Campbell to speak at this stage.
52.
Mr Campbell: I have a couple of questions that follow on from Sean Neeson's comments. In looking at the report, there are a number of almost self-evident areas of weakness which need to be addressed, but I think that we need to try and come to the nub of them. There is low productivity, low R&D expenditure, high long-term unemployment, the traditional industrial sector, the large public sector and that high dependency on grants.
53.
How do you think those shortcomings can be specifically targeted?
54.
Mr Kingon: The vision statement set out the fast-growing economy. We also had the five key themes. It was clear - again this was linked to targets - that the key themes were to set a direction. Take for example low productivity. We are at about 80% of the productivity of the rest of the UK. We must close the productivity gap. We see the knowledge-based industry as being one of the key themes. The target we have set for that is a growth in GDP of three and a half per cent. We must achieve that sort of growth if we are to close the gap.
55.
Lack of innovation is another problem. A recent study showed that there were leaders, followers and laggards in the area of innovation. Our percentage of GDP places Northern Ireland among the laggards. We rank alongside Greece in the league table. We consider it necessary to tackle lack of innovation by increasing the percentage of research and development spending. That was one of our targets, along with encouraging the enterprise culture to increase innovation and knowledge-based industry.
56.
One of the other weaknesses was the high level of long-term unemployment. That was why the underpinning theme was equality and social inclusion. We tried to find ways of measuring some of the outputs to ensure that we can accurately comment on the area of social inclusion. One of the problems of a regional economy is that we do not necessarily have all the performance indicators available in the national economy. It is more difficult to ascertain measurement points. We looked at weekly earnings and employment growth levels, because if there is no growth in overall employment it will be difficult to address social inclusion. We looked at issues dealing specifically with the percentage of the long- term unemployed. We looked at the area of education, such as NVQ level four. We wanted to make sure that we were not depending on anecdotal statements, so that we could not be accused of merely 'ticking the right boxes.' We tried to get some quantitative information.
57.
We know that the traditional sectors are in decline due to the current twin-speed economy. We wanted to encourage the growth in the percentage of high-tech industries as part of the total GDP, so that we could be sure that we were pushing the knowledge-based economy.
We looked at the dependency on grants. We looked at rebalancing the incentive package and the need to look at fiscal as well as at straight cash incentives. The rebalancing of the package was mainly concerned with spending on marketing, training and innovation so that companies had to make a commitment before they got any sort of payback. The money should be targeted much more efficiently.
58.
It is clear when one reads the document that there are links between these various areas. Working groups made other recommendations that were subsidiary to some of the key themes. Behind the vision statement and the five key themes are objectives and measurement targets to ensure that they are not just qualitative.
59.
Mr Campbell: There has been a distinct lack of intense public debate on this matter. Its nature and bulk probably led to this. How, in three minutes, could you summarise your report of a fast-growing, competitive, innovative, knowledge-based economy and to convince the public to give it its support and participation?
60.
It may be impossible but in order to get out there, either we summarise 130 pages and capture people's imagination or we will miss the boat and waste our time. How do we summarise it?
61.
Mr Kingon: Knowledge-based industries - that is where we have to be. People understand the term as meaning high-tech but some of our traditional industries also have a knowledge momentum. We need to lift the quality of the jobs and our competitiveness with the rest of the world in going forward. My next point is linked to the earlier question of grant dependency. The Assembly, in my opinion, has got the biggest change-management process in Western Europe, and it has got to sell this to the public. However, there is a perception that this is all going to be easy, and we need to manage expectations. There is no quick-fix solutions for the NorthernIreland economy. This is a 10 to 15 year process. You have to put some building blocks in place, particularly in the education and training areas. There will not be a payback in the short term.
62.
The message we need to convey is that we are building for the future. We have a very good basis on which to do so. We have come out relatively strong and have performed very well. There is resilience, but that in itself will not meet the challenges. In order to sell this, we must try to look at the challenges, some of which we outlined earlier, and establish where we are on the Richter scale, what we need to do to move forward. We must give the public the vision that we are going to be proactive. We have got to change the culture. We need to create an enterprise culture in which people celebrate success. In order to achieve this the education system must meet the needs of this new knowledge- based economy. There is no resting place for a regional economy. We cannot hide anymore. Technology is moving at such a pace that we will be dead in the water unless we understand that vision and start to move. We have got to drive it down the education system.
63.
We have got some very good building blocks at the top end, but at the bottom end we have people coming out with no qualifications. That is why, as a group, we felt equality and social inclusion are absolutely important and must be addressed. We might solve our political differences, but we will have social issues on our agenda that the Assembly will be choked with. We want to get the message across that we have an action plan to move the type of businesses, industries and sectors which concern us up the scale. We are working on the education system so that people are properly equipped and skilled to meet these challenges. The working group said that 82,000 jobs can be developed. This is, however, in the context of a skills shortage, and unless people have the proper skills, that cannot be delivered. It is a chicken-and-egg situation. We need to make sure that we re-skill our people, that the education and the training systems are properly equipped. The big message is that we are going to have to commit resources. There must be investment to get the payback.
64.
The Assembly along with the local input has to say that it is putting the economic and social issues at the top of the agenda and is going to put the investment in. There has been a massive underfunding in many areas. Not only has there been a democratic deficit in the Province, there has also been an infrastructure deficit, and you have got some harsh realities to face. We need to get the message across that collectively the private and public partnership that we talked about is going to address that, that we can see the aim and that everyone will participate because we are going to drive it through at the education and training level. You need to manage those expectations. It is not all glitz, but it is very important that people understand the magnitude of the challenges that will have to be faced.
65.
PriceWaterhouseCoopers has recently done some work which shows that we are probably going to have to double our job creation over the next decade to meet the demographic trends, even assuming the same migration policies that we have at the moment.
With the growing workforce that is quite a challenge. The 1990s was not a slouch, we achieved much despite all of the negatives.
66.
Dr Haren: I want to add a couple of thoughts, although it will extend our time a little more. The question is important because it provokes the issue of how we communicate a vision of what we are trying to do. That is why this debate and the engagement of politicians is vital. We have been discussing this document in its various forms for almost two years, but people should understand that while we are debating this, others are not standing still. We need your help to communicate this fact to the community.
67.
We can examine all sorts of examples, but I suggest the tremendous economic success of the Republic of Ireland. Few understand the combination of factors that is making that economy successful, but know of some of the components of that success: a consensus of where to take the economy; the ability to take decisions on where it should go; and the need to take those decisions in an entrepreneurial and rapid way.
68.
Even since the publication of 2010 there have been four or five major initiatives in the Republic. The Republic is not the only exemplar - there are many other examples around the world - but it is a close neighbour. We are correctly grappling with what it means to have a knowledge-based economy which is competitive. Others are saying "We know that the vision that we have for our economy is knowledge-based and based upon competition."
69.
From the reports published in the Republic by the National Economic and Social Council, which is a partnership council, we see clearly that it has a vision that relates to some issues raised by the Committee. It has a vision for a society which is socially inclusive and that social inclusiveness is based on economic success and on a society which is able to grapple with the opportunities associated with an increasingly knowledge based-economy.
70.
The reports talk clearly about the importance of competitiveness and say that this is not just about economic growth. To combat social exclusion, we must recognise that there is a reciprocal relationship between being competitive and being able to create the conditions for social inclusion. It is that competitiveness that generates the resources which are needed to enhance social inclusion. In turn social inclusion facilitates competitiveness. If people are included in society and given skills, they become part of the available pool of resources that makes that society work.
71.
Many of the questions that we are trying to deal with go back to the fundamental need to reach a consensus in Northern Ireland on what will make this economy and society work, and 2010 attempts to set down some of the framework and parameters for that. The Steering Group members have said in the report "Here is what we believe it should be - we believe that these are recommendations that point in the right directions, but we ask the Assembly and the political establishment to take control and set the framework for going forward."
72.
I am involved in Growth Challenge, which is attempting to make progress on some of the recommendations. One of the greatest difficulties we face in trying to maintain the momentum of the private sector behind this type of initiative is that people are asking "How well do all of the parties understand what it is that we are trying to do?".
73.
Mrs Townsley: Everyone has questioned the definition of the knowledge-based economy and asked how we may make people in Northern Ireland realise that they all have knowledge to contribute to it.
74.
We were very conscious of the phrase "the digital divide" which recognises that within the system are people who may not be equipped to grasp opportunities. One of the key recommendations is to look at the formation of an information-age initiative to ensure that this divide does not occur and that people with fewer opportunities are brought forward and given the chance to embrace this knowledge-based economy.
75.
Dr McDonnell: I am very keen to congratulate all of you for the work you have done on this and, indeed, congratulate those who are not here. I participated peripherally in a meeting or two and found it very useful.
76.
The document is useful in many ways. It certainly marked a new beginning for us in terms of economic strategy in that we have started to sift out the views of various partners. But there are some gaps and shortcomings, and they need to be bridged. That is what we are here today to discuss. I take the point that you made, Dr Haren, about the framework and the parameters, and that is ideal. My concern is that this is set in tablets of stone and parked there which is a big risk. We need it fleshed out, and we need to ensure that the gaps do not become holes or problems which may sink the thing down the road a bit. The biggest tragedy of all would be if we were to spend the next 10years analysing this to death and doing nothing about it.
77.
My concerns are about how we get moving on with this; how we start making things happen; how we get the structures; and how we drive those structures. The one thing that is worrying me is the need for a driving force to make things work. This is where a number of problems emerge because, in the analysis in the first phase, it appears that, until the structures are put in place and until there are concrete proposals to back them up, it is somewhat in mid-air.
78.
My general concern is that we did not lay enough emphasis on the new technologies; in particular, biotechnology and life and health science. There is still a major gap there. I think that this is where new jobs will be created. I also have concerns that local government's role, or potential for playing a role, may not be what it should be, and I will not put it more strongly than that.
79.
I am also concerned about restructuring our organisations and gearing ourselves to face the challenges. In relation to research and development and innovation, we are not geared to this, and we must rapidly get on to that track. As I mentioned earlier, we are heavy on analysis in NorthernIreland generally but perhaps less heavy on marketing. Marketing has begun to seep through in a number of points this morning. We should get out and start selling ourselves rather than remaining introspective.
80.
There are a couple of specific points I want to address in terms of the 49recommendations made by the Sector Working Groups as key priorities. You mentioned, DrHaren, that you were involved in the Growth Challenge. Perhaps you could throw some light on which of these recommendations we are now moving on and which have been implemented already and are now included in operational plans.
81.
Dr Haren: We should recognise that the 49 recommendations carried into the report from the Sector Working Groups were the best we could bring forward within the space available in the review document. They were the recommendations that we asked the sectors to prioritise so that we could carry them forward. However, as one member of the group said, it will be very important that people refer to the very detailed background Sector Working Group reports for an understanding of what was being said about individual sectors in this review.
82.
Many of the 49 recommendations, which have been carried forward, relate to public policy initiatives in the areas of education, investment, the Information Society and its development, the promotion of business start-ups, the promotion of research and development, and access to and promotion of tourism. As Stephen Kingon mentioned, there are recommendations in relation to the re-rating of, for example, the tradable services sector and what that might do for its development. Inevitably, a large number of the recommendations relate to public policy initiatives and therefore await decisions taken in the public policy arena.
83.
There have been a number of very specific developments. Growth Challenge has been working on a remit from the Department to try and develop implementation plans with six individual sectors based on their sectoral reports. Those six sectors are: health and life technologies; food and drink; textiles and apparel; engineering; software; and tradable services. We have had a number of successes in those sectors and we await the final output of the type of plans that they are going to be able to put together.
84.
Some of the successes overlap in time. For example, we have been looking at 'Strategy 2010', containing the Sector Working Groups reports. However, the sectors have inevitably moved on, as people have emphasised. There have been a number of very specific successes in the textile sector, which everybody recognises as being a difficult one. A recent trip to Jutland provided a learning experience concerning something that looked as if it might be applicable in Northern Ireland. The question was how do we apply it? There has also been something as basic as a health and safety initiative, which asked how we can have a workforce that can be protected in its environment, be more productive and, from the point of view of the individual and the firm, be able to deliver much more. There has been a code of practice in training for the textile sector, which is perhaps less structured in training than it might have wanted to be. This provides a shared experience which allows individual firms to catch up with best practice. There has been an emphasis on the Design and Marketing Forum - which helps get added value into the sector. A textile industry review has been undertaken. This was orchestrated by Growth Challenge, in conjunction with the Northern Ireland Textile and Apparel Association which has 90 members from the sector. The review was supported by the IDB and the Department. It showed that there is a very strong consensus on the issues and on how they should be addressed.
85.
The software industry has produced its own very detailed sectoral plan. Most people believe that that plan represents a very good path for the sector going forward.
86.
The area of engineering is quite a difficult one because it is relatively disparate. There has been some very good work done by a unit in Growth Challenge called the Regional Supply Office, which has found new work worth about £9million over the last 18months to 2years for local companies in the engineering sector.
87.
We have formed a Northern Ireland aerospace consortium which is bringing together a group of firms capable of supply, not only in the area of Shorts Bombardier, which one would recognise as normally being in aerospace, but in areas such as plastics and in sub- supply within that sector. That consortium is bringing together a group of firms representing 94% of what we estimate the sector to be in Northern Ireland. They have structured themselves as a commercial entity representing 14 member companies, with a combined turnover of about £500million and with 7,500 employees. Those companies are working together to try to market Northern Ireland to the outside world and to take forward their own ideas about what can be done within that sector.
88.
There have been steps taken in those areas, and in others. Inevitably the steps taken and the rate of progress are always inhibited by the continuing debate as to where it is that we should all be going and the extent to which everybody is committed to trying to make some of these recommendations work. All of these recommendations, or many of them, are inputs to all sectors across the economy.
89.
Mrs Townsley: In terms of implementation, we were very conscious when we sat as a review group of looking at the knowledge-based economy and at the speed with which that economy moves forward. Originally we quoted the statistic that an internet year was equivalent to three months. While we were going through the review process another report came out which halved this timescale. One of the initiatives that has moved forward is the Information Age Initiative. This consists of three driving factors, looking at the connectivity chain, connecting Northern Ireland, and making sure people were aware of how to access the technology; looking at driving knowledge-based business forward; and looking at the whole skills sector to see what is happening in education, and whether the skills base required will be there in the future.
90.
The Information Age Initiative has now put out its action plan - you should have a copy of the document. In the timescale we have been moving things forward in those three key themes, we have discovered that there was a Department of Trade and Industry survey which considered Northern Ireland as one of the regions of the UK and reported us bottom in terms of our connectivity and in our implementation of ICT. We are aware, however, that DTI has studied Northern Ireland again recently. We believe that some of our actions and recommendations will have influenced Northern Ireland's position in that league table, and we will be reporting on these issues in July.
91.
Dr McDonnell: One thing which concerns me is that a lot of this stuff could be perceived as pious platitudes and exhortations that we should do this and do that. The difficulty is, particularly in the new technology, whether in software, or in the web as a whole, that there is a lack of driver. We are saying that somebody should drive and get these things done, but I cannot identify who will push this forward. Who is going to take the risk on it and who will make it happen? I have developed an interest in this over the last two or three years, and I find the system scattered and disorganised in comparison to what I have seen in locations in North America - where they have taken it by the scruff of the neck. They have glued it together. I am delighted with your mention of the aeronautical engineering industry where a consortium has been developed. How do we get that type of co-ordination in the software industry, or in communication technology? The industry is as scattered as the number of individuals involved in it. The aeronautical initiative which you referred to, Dr Haren, in terms of getting those 14companies together is where it is at and this is the sort of driver we need. Any one of those companies is limited in what it can do alone but 14 together form a critical mass. There are pious thoughts in this, and good intentions, but who is going to do the hard work? Who is going to sweat the blood?
92.
There has been a lack of strategic thinking about the external marketing of our potential here. I wonder how we can increase and expand? We do not need to analyse the thing to death, but we are not very good at selling ourselves. There may be very good reasons for this over the last 30 years, but we do need to get a marketing dimension that allows us to sell all our good products.
93.
Mr Loughran: I shall ask Mrs Townsley to pick up your last point.
94.
Mrs Townsley: We need to consider where the review came from and how it developed. The sectoral and cross-sectoral groups specifically looked at their own areas - for example, life and health technologies looked at their sector and where their individuals markets would be within the overall market. Where we were driving forward the knowledge-based economy we were looking at the global market.
95.
We saw the opportunities for the global market. Life and health technologies may focus on one part of it, saying, for example, that North America may be a strategic partner geographically speaking. However, where we drove the knowledge-based economy, we said that in the past it has been difficult to make Northern Ireland's small businesses look outward. There have been a number of very successful initiatives to take people abroad to enable them to see what is happening and give them the opportunities to export. A population of 1.7 million in Northern Ireland - or four to five million on the island - is not enough.
96.
Our strategic thought on external markets was that, if we took this knowledge-based economy forward, by virtue of information and communication technologies and mechanisms such as the Internet, we would suddenly have companies with a global market like Blackstar in east Belfast. Admittedly, they have only one part of the global market, since their product is focused predominantly on English speakers. The challenge in the recommendations and in how we brought this forward is to make Northern Ireland realise that, with information and communication technologies and the new ways of doing things, one can sit in Belfast and access the global market, or at least a certain target group within it.
97.
Dr Haren: I should like to echo some of the thoughts that Mrs Townsley has touched on. In my own company, the Viridian Group, we have a very successful business-process outsourcing and software- delivery company called SX3. Over 1000 staff are employed, and by drawing on Northern Ireland's skills and cost base and our own marketing capability we are winning work in Great Britain and bringing it back to Northern Ireland. We are acquiring companies in Great Britain to extend our distribution channels. Through those acquisitions, we find ourselves with a toehold in markets like Hong Kong and Canada. Individual firms will set their own pace and take their own decisions on moving ahead. Returning to the original question of how to find a driver which works for the economy as a whole and for sub-sectors in it, this necessarily depends on the setting of directions at Government level, so the Government must say what they are committed to.
98.
If we look at what has been happening in other regions, we see that Government initiatives set the infrastructure, for example, for information and communication technologies. They set the policies and drivers to support for research and development, which in turn set the support structure for human resources. That combination of things at a public-policy level must be the basis of a framework in which everyone begins to react.
99.
Without being more tedious than usual, I should like to refer to some comparative documentation to answer the question of whether 'Strategy 2010' is in some sense too strong on platitudes or aspirations and not strong enough on specifics. Among the reports I refer to is the Competitiveness White Paper produced by the Department of Trade and Industry for the Government, which simply says that there will be a knowledge- based economy in which we must be able to operate. I am trying to appeal beyond that type of document, which is relatively straightforward in its intent.
100.
In the Republic of Ireland, a document was published in January 2000 called 'Enterprise 2010 - A New strategy for the Promotion of Enterprise in Ireland in the 21st Century'. The key points in it necessarily begin at an extremely high level. It says that Ireland has high exposure in sectors of the economy that will be strongly affected by changes in information and communication technologies. It goes on to say that we must be able to live within that framework. Electronic business will affect all sectors of the economy, forcing structural change and altering the nature of competition, both in home and international markets. Another key point says that, with the emergence of global value chains -companies that operate globally and add value in their chain through interlinkage across a number of countries -, future jobs will be knowledge-intensive, requiring a highly skilled, creative and flexible workforce. Ireland needs to accelerate progress in building a knowledge-based economy.
101.
In this type of document there are people who are saying "This is where our stall sits, this is how we read the international environment, and here are the steps that we are going to take." They are not, however, taking steps which are all quantified. They are starting at the consensual level, first of all, and saying "Do we all agree that we are dealing with and grappling with the issues of knowledge-intensive jobs in the future, with the need to make jobs knowledge-intensive so as to increase the value added, and to increase the value added in order to raise the GDP per head of population." That goes back to the points which StephenKingon made earlier about targets, how those targets knit together and how they are brought together through higher value added and more people in employment.
102.
Similar documents produced by other people attempting to grapple with these same problems, do by way of necessity, initially ride at a high level until consensus is reached on where people want to go. In the particular context of the Republic, they have the benefit of having moved beyond this debate quite some time ago. You will have noted, in the last year, electronic commerce initiatives aimed at making the Republic of Ireland a European hub for e-commerce. They have been addressing the issues surrounding data encryption in order to encourage people to come in and invest, by ensuring that they can operate in a safe and secure electronic environment. They have also been addressing the matter of legislation directly - as they have in the UK - but doing so in relation to the smaller economy of the Republic to make sure that they are facilitating electronic business for the future. They have investments such as the Global Crossing investment, which is to give massive broad band capability in telecommunications injected directly into the economy. And they have relationships such as the MIT Centre of Excellence relationship which aims to bring the best knowledge in information and communications technologies to their universities and move people's thinking on from there.
103.
It goes back to a process of understanding what you want at a high level, agreeing a vision, and having public policy initiatives to drive that vision. What happens then is that the private sector, individual entrepreneurs, and the ordinary person walking into a job in the morning, will be operating within that context. They are saying that those are the things that they need to do for the future. What we have had for the last 12 months or more, is a problem in moving beyond the statement which lies within 'Strategy 2010' and giving that statement effect.
104.
Mr McClarty: Being so far down the pecking order, I find that most of the questions have already been asked. I do, however, welcome the document, which is very thought provoking. If we can work together on this, we can build a better economic future for everyone in Northern Ireland. Of course, the document, being the document that it is, is not without its faults. One of the criticisms I would have is that it lacks leadership in dealing with North/South and East/West future relationships. How do you respond to that criticism?
105.
Mr Loughran: I would ask Dr Haren to respond to that.
106.
Dr Haren: In a specific area that I am close to - the energy sector - there has already been a considerable amount of interaction, North/South and East/West, aimed at ensuring that Northern Ireland's energy infrastructure, particularly its electricity infrastructure, is very strongly connected to the systems in GB, and through those systems, to the international environment. In the North/South relationship we would emphasise interconnection to try and make sure that we enjoy the benefits of economy of scale derived from joining two systems together - primarily at the generation level, bearing in mind the particular problem in Northern Ireland of generation costs. Joining the two systems together, and sharing future generation investment costs across two systems is a particular example of what I am talking about.
107.
I know that Mr Loughran's Department has struck up a very strong relationship with the Department of Energy in Dublin and with the new people in that Department. There is a very strong intent to put the best thinking together to see how the systems may be operated - both in physical terms, as I have described, and also in regulatory terms - to allow the benefits of competition and the benefits of integration to be felt by consumers within both systems.
108.
The ability to respond to these things is best within identified spheres of activity, and some very significant progress is being made. It is fair to say that in other spheres it is not always quite as easy. Again I would go back to Growth Challenge. In Growth Challenge we have put a lot of emphasis on the need to look outside of Northern Ireland, to recognise that a sector inside Northern Ireland, like the aerospace sector, is, a very small sector. How do you resonate with what it is that other people are doing in a similar sector in the Republic of Ireland, in Scotland or across in the other parts of mainland Great Britain. People are very much tuned into these things, but we all suffer from having only a certain number of hours in the day. It is not possible to drive all things forward at the same pace. The questions are right, and the revisiting of those issues to ask what it is that people can do or might be able to do in the future is an appropriate thought.
109.
Mr McClarty: Alasdair McDonnell earlier touched on the concerns of district councils about the nine proposed key locations and the proposal to reduce the economic development role of district councils. How do you respond to these concerns?
110.
Mr McGinnis: Thank you very much for the opportunity to contribute to the debate this morning. In the report we referred to nine key locations in Northern Ireland. These locations are more or less the centres for economic activity in the Province and therefore the drivers. The Steering Group in its consideration of these matters endeavoured to strike a balance between ensuring that people throughout Northern Ireland can benefit from any economic success and the requirements of industry. We were very mindful of the 'Shaping our Future' document that the Department of the Environment produced. Within 'Shaping our Future' the Department of the Environment identified a possible nine key locations. We felt that in the composition of an economic strategy or proposal for Northern Ireland, it was important that all of government was somehow seen to be working together and that we were not coming up with proposals that were in isolation. We felt that it was certainly critical that this document reflected the work that was done in 'Shaping our Future'.
111.
As far as the economic effects of concentrating activity within nine key areas are concerned, that is something that will provide this balance, and that is why we have referred to it within the paper. It is a compliment to the group that put this paper together that part of the national development plan in the Republic is now looking at similar hotspots of economic activity. From an island-wide perspective, the fact that there will be key centres of economic activity throughout the island of Ireland will be to the benefit of people and industry and commerce.
112.
Mr Loughran: Further to that, I can reassure the Committee - I know AlasdairMcDonnell raised this point as well - about the role of district councils. The Steering Group did not in fact consider that there should be a diminution in the role of district councils in economic development. As someone who works for the Department of Enterprise, Trade and Investment, I can say that that is not something we as a Department would want to see. There needs to be a strong partnership there. Indeed, without that partnership the Department is not going to be successful.
113.
A few weeks ago I had occasion to talk to some councillors in Belfast and ask for their help in negotiating with a potential investor. Only the councillors could give that investor a proper insight into the area that they were thinking of investing in. With the best will in the world, the Department cannot do that. We can give them facts and figures, but when it comes to adding colour and explaining in more detail, councillors have a very important role. We would certainly hold that view.
114.
What we did in 'Strategy 2010' was draw attention to the need for co-ordination. There is an example on page 123 of a survey of food companies in six district council areas. The survey identified approximately 150 food companies and 105 agencies offering those companies assistance of one sort or another. It would take an extraordinarily competent company to absorb such a wide range of offers of assistance.
115.
This is an issue, if I may say so, where the Assembly is in a great position to help improve the situation in Northern Ireland through better co-ordination. This is not something that direct rule Ministers, with the best will in the world, tend to take an interest in. The Assembly, with its local expertise and knowledge, could make a great contribution. Indeed, one of our recommendations is that efforts should be made to improve co-ordination at local level so that companies - you have to look at this from the perspective of the company - understand what is coming at them. That is the key: does the company really understand what is coming at it?
116.
Mr McGinnis: What Gerry is really saying is that the proliferation of local organisations within each district council, all trying to create and enhance the economic prosperity of that particular region, can be counter-productive and can seem to work against some of the main agencies which are trying to provide and encourage investment in those distinct locations.
117.
Ms Lewsley: I also welcome you to this Committee this morning. The debate has now started and will be ongoing, and obviously we hope to come to a conclusion. I want to ask Frank about the targets that were set by the review group. Do you still think that those targets are attainable? If so, how do they relate to the objectives of the strategy? We have heard about inclusion and social partnership, and even once or twice mentioned the issue of equality. Why was a target not set in relation to the equality objective?
118.
Mr Bunting: To take the last question first, the 2010 document is actually very strong on equality and social cohesion. The problem is that people have concentrated on the targets as a definition of what the thing is about. If you look at what is in 2010, it is mostly in the section on vision and key principles.
119.
On equality, there are recommendations to empower the disadvantaged and under-represented groups mentioned in sections 8.5 and 8.6, including
"the development of specific measures to encourage the full participation of .. under-represented groups, including women, ethnic minority groups and people with disabilities"
and
"creative and flexible policies .. to encourage ..full participation."
120.
Two of the examples given then were high quality public transport networks and better childcare facilities for women to enable their participation in the workplace. On targets, I would argue that, as Harold Macmillan said of the problems he faced, it was the "question of events". When it came to the final drafting of the report, it probably would have been useful to have included a target for childcare so that people could see the seriousness with which the group went about addressing the whole issue of equality.
121.
We also looked at other issues. We accepted the main terms of the Belfast Agreement in relation to equality, and the Government policies that were emerging on the mainstreaming of equality in all public sector programmes. We went further in considering how to try to bring that into the private sector. We recommended that there should be positive private sector strategies to meet the needs of all disadvantaged groups in Northern Ireland. So, in terms of generalities and principles, there are a number of recommendations that are very helpful in the promotion of equality and social inclusion in Northern Ireland in relation to employment and enterprise. However, there was not a specific target when probably there should have been. The reference to high quality public transport networks would have tied in with 'Shaping our Future' and the nine centres for the promotion of development. We were very concerned to ensure that public transport facilities would actually be there to enable people to travel easily to where jobs were being created.
122.
These are throughout the report, and we would like to draw attention to them. There was a reference earlier that the 2010 document was strong on platitudes but not on recommendations as far as equality and social cohesion were concerned. However, I would argue strongly that it is strong on recommendations for equality, but that it should perhaps have had a specific target.
123.
The other question was about whether the targets are workable. Yes, they are. There has been the hiatus, with a year's delay, but there are many things going for the achievement of the set targets. Unfortunately, SirRoyMcNulty is not here, but he had a large input to the development of very challenging targets to help concentrate people's minds. We felt that people were going to concentrate on the negative aspects of Northern Ireland's problems rather than what could be done about them. Therefore, we brought forward very challenging targets for earnings, long-term unemployment and GDP.
124.
With everybody working together, we should move very fast over the years ahead. The last eight or nine years have been difficult, but in the next eight or nine we will all be working to add value and ensure that the problems are being addressed.
125.
If one looks at some of the problems which are faced in the area of social inclusion and equality - ones that Patrick Haren has referred to in the textiles and clothing sector, where jobs are inevitably being lost due to the global market place- they are mostly in areas of social deprivation, including the north-west. And there is a necessity for you as political representatives to work with us, to ensure that strategies are put in place to re-train, re-skill and bring forward new jobs in those areas.
126.
The debate has started - as you say - and it should move very quickly on to what this document has at its core, which is a strategy rather than an elongated process of analysis. It is a strategy of trying to ensure that things get better for the people of Northern Ireland and that linkages and added value come from our links with the Republic of Ireland, the rest of the UK and with the European regions.
127.
Mr Kingon: On the attainability of the targets, I have to say they were challenging, but one needs to set them in context. We had some underlying assumptions; one was that we would have political stability in which to achieve those targets. Another was that we would take a radical approach to education to sort out the problems of a lack of qualification in a large part of the population, and the third was that we would pro-actively address the skills shortfall.
128.
Many of the targets cannot be delivered unless action is taken in those areas. We have many challenges to face. The demographics mean that we need to create about 132,000 jobs over the next decade in order just to stand still - to keep unemployment at its current level. That is very important.
129.
On linking the targets to the objectives, we have taken the vision; we have taken the five key themes and tried to get some output measures that say "This is not just anecdotal; how do we actually quantify?" The committee was very keen that there should be some method of measurement and an answer to the question "Have we actually succeeded?" rather than just a qualitative assessment.
130.
All the targets from the equality social inclusion agenda can be slotted in: weekly earnings, employment growth, reduction in the percentage of long-term unemployed, NVQ Level 4 going up, the knowledge - based economy. We were driving GDP up from its current 80% to 90% of the UK average. That means outperforming the UK over the next decade. Other targets were a high level of high-tech employment growth, and in innovation - moving that percentage spend of GDP and innovation up.
131.
Those are demanding targets and are linked directly back into all the themes, but we still believe that they are realistic. They are potential, and one should not underestimate the magnitude of the task to achieve them. They are not easy objectives that we can beat with our eyes closed.
132.
Ms Lewsley: The buzz words that will come out of this vision are "knowledge-based economy". In order for that to be strong, the bedrock or future of any economy is in its education system. I welcome the issue here about greater integration of economic and educational policy. In Northern Ireland our schools are very academically driven with regard to the league tables, but what is going to happen to our other young people with regard to the need for a skills base? In particular, I am worried about duplication, because 'Strategy 2010' recommends the new valued qualification at sub-degree level.
133.
Surely such a qualification already exists in HNCs and HNDs. Are we going to reinvent the wheel? Do we not need to put structures in to make current courses stronger and more accessible across the board?
134.
Dr C Gibson: That is correct. We do not need to reinvent the wheel, but we do need to put in the necessary support and resources. People in the workplace need to be offered opportunities to do NVQs, to get time to put in the training and receive the support. That is something that industry needs to deliver, but, at the same time, the education system needs to deliver sufficient capacity to ensure that that happens. That is one of the secrets of the Republic of Ireland's success. It did put capacity in that middle ground for supervisors and people in businesses. Certainly that is a great strength when it comes to attracting inward investment.
135.
I cannot leave this issue without putting on my Queen's hat, as pro-chancellor, to say that that does not mean we take away from the third level. What we need to do there is increase the capacity. We need to ensure that we have more places between the two universities so that young people do not have to leave Northern Ireland. I am not saying that people should not leave, but there should be the capacity for them to be educated here and for others to come here to be educated here so that we attract people to come and work. That is another way to increase a resource for inward investment.
136.
Ms Morrice: I was very impressed by 'Strategy 2010'. It is an excellent starting point, and I congratulate you on all the work that has gone into it. I was also very impressed by many of the recommendations. One that is of particular interest to me is the recommendation that foreign languages be taught more in schools and at primary level. Those ideas are new in Northern Ireland and are very valuable.
137.
I think that we are tending, while we focus on this knowledge-based economy, to forget what we are good at. This is an important element which has not been properly addressed. The easiest way to describe it is to look at the housing market. What sells a house? Location, location, location. If you look at the global market and realise that we cannot compete on prices, what sells? Reputation, reputation, reputation. That is the quality. What are we good at? Let us look at it in three sectors. There is our clean, green image, our manufacturing and our exporting of bright, brilliant, young people. Those are the three things that we are exceptionally good at. Take the clean, green image of farming and farm produce. I cannot get an Armagh apple in Belfast, let alone in Barcelona. Why are we not getting Mourne Mist? We have all heard of Perrier, but how many of us have heard of Mourne Mist? Why is Irish linen not in every clothes shop in the world? Why are Tayto crisps and potatoes not sold throughout the world? Why are we losing shipping contracts not to world builders but to other European builders?
138.
DrMcDonnell pushes for the new, and it is nothing to do with the age difference that I push for a balance with the old and what we are good at. We do not want to end up with Northern Ireland people having a reputation for being very good at answering the phone. That is not a skill. We are good at textiles, shipbuilding, farming, we are good at producing bright, brilliant young people. Germany did not give up Mercedes just because the Japanese started producing cheap cars. I want to know what you think we should do to start really capitalising on what we are good at and on the reputation we have.
139.
Mr Loughran: I am going to ask Dr Haren to comment on the second part. I agree with what you have said. From a departmental perspective, that is absolutely right. We have been doing well and it is important that we take pride in our success and continue to build on it. We have just produced statistics which show that manufacturing output in Northern Ireland has risen by 11% in the last year - a huge increase. I have never witnessed such an increment in one year; the national increment is 2%. Clearly, the same factors are affecting manufacturing industry here and in the Republic of Ireland. Although I hope we can avoid an inflation rate of 5·2%.
140.
The so-called traditional industries are driving this increment. Our recent export statistics suggested that, despite the very high value of the pound, we are succeeding in increasing our exports to the European Union. It is a tribute to Northern Ireland's manufacturers that they have achieved such high levels of productivity and export performance in such difficult circ*mstances. I agree wholeheartedly with what you said about able young people. When we talk to potential investors, one of the first things they comment on is that we have a good, able young population. That is what they are interested in.
141.
Dr Haren: I would like to make a few comments on the matter. First, we must establish what we mean by 'knowledge-based economy' so that we do not talk at cross-purposes. The DTI Competitiveness White Paper, for example, particularly emphasises that knowledge industries are not just about computing. They are about bringing knowledge into every workplace and into every aspect of industry in order to re-invent it and add value to it.
142.
Speaking of the 'knowledge industries', our experience is within the Viridian Group and with our own company SX3, which is in the business process out-sourcing area. We believe that it is now one of the largest companies in Ireland offering this service. We are highly dependent on the skills of local people and on our ability to integrate those skills into our operation. We have a tremendous advantage over the south-east of England in that we can hold on to the people who work for us, people who will stay with the firm to train and reskill and grow with it.
143.
Firms make a selling point of their reliability and of the consistency with which they can deliver; that they intend to continue providing a service for customers. We are working in Growth Challenge with the Northern Ireland textile and apparel sector to add value to the textiles chain; to share and apply that knowledge across firms in the sector for the best results.
144.
Take, for example, the Northern Ireland Food and Drink Association (NIFDA) which represents 175companies making up some 85% of the industry. NIFDA is operating initiatives with Sainsbury's and Tesco's as multiples who are buyers. It tries to ensure that they recognise the quality of local produce and shows them the reliability of local suppliers. NIFDA has a set of product and process innovation awards which are sponsored by the large retailers, demonstrating that local suppliers can meet the very demanding requirements of those multiples.
145.
The Department of Agriculture in Northern Ireland introduced the concept of livestock chain management to provide traceability in the food chain. Essentially, traceability in the management of the livestock chain is about information management. It is about promoting quality so that people understand what quality is. We should compare it to the area of economic and social inclusion: we should understand that we are all saying basically the same thing but in different ways.
146.
If we go back to the issue of economic and social inclusion, I do not think there is anybody in the Steering Group who would want people to be unaware of what the dimensions of that problem are, what the issues are, and how those issues are to be resolved. In this same area of knowledge-intensive industry if it comes down to something as simple as fixing a car in a garage, there is a knowledge intensity involved in that job which did not exist 20 years ago. The trick and the magic is for people to be able to translate the concept from a generic description down to practical things that people can relate to and practical skills that can be given to people. That requires a commitment on the part of the Government, the education system and private-sector firms to make sure that people are constantly skilled and reskilled for the future.
147.
Ms Morrice: One of the recommendations is that business should take every opportunity to minimise their environmental impact through measures which will also enhance their competitiveness. That is a grand phrase, but I do not see any mention of something like organic farming, for example. This is one area where we could really capitalise on our clean, green image and make something different that is not trying to compete on price. Where is organic farming? Where is renewable energy? Where is innovation? Where is excitement and enthusiasm? That is what economic development is all about. It is not about sitting here discussing things, it is about getting out there and making Northern Ireland not just good, but fabulous - plc in world terms. We can do it, but we need more energy, enthusiasm, innovation and excitement.
148.
Mr Loughran: I take that point, although as you know, the reference you make to businesses and minimising the environmental impact was not a recommendation, it was a comment in the report. We have referred to organic farming, but it is treated nowhere near as significantly as it ought to have been. You can read into that what you will, but there is an issue to be addressed in respect of that, that there is a market opportunity. We have heard in the news this morning that Iceland is buying 40% of the available output of that industry - at least that is what they are saying; it seems a very high proportion - but nonetheless it emphasises the opportunity that is there. I am not sure that in NorthernIreland we are well placed in Northern Ireland to pursue that opportunity. We are not as well placed as we should be.
149.
Dr C Gibson: I cannot resist adding to the previous point made. What you are suggesting is that people need to set out to meet customer requirements. If customers say that they wish to see more organic produce, then I am quite certain the economic drive would be to produce more. The unfortunate situation is that that is not the case. People will not pay the amount of money which is necessary to produce the products in a manner which meets these requirements.
150.
Ms Morrice: If the marketing is good?
151.
Dr C Gibson: The marketing does need to be good, and as MrLoughran said, Sainsbury's, Tesco and people that are at the front end are, in fact, setting that up - and Iceland as we heard this morning.
152.
We ought to be meeting customer requirements in all situations, not only in respect of organic produce, but also in respect of produce which is produced in other ways. We need to meet minimalist requirements in all aspects, and we need to ensure that we do that against a background in which our competitors are doing likewise. We need to remember that. One of the ways of doing that is - and I do not mean that small is beautiful, that in a global world you need economies of scale, and critical mass to be able to do the things that you want to see happen. You need to put enough money into marketing, to extend your reach to places that are outside the general locality, and then you can take products like the bramley apple out of Armagh and far away. I agree with you. But you need to have money available, and to do that, you must work with others. There is a great tendency for those of us in Northern Ireland not to work with our neighbours. We will work with anybody else, but we will not work with the person who has a common interest, who has that business just beside us. I have worked in the food industry, and it fails to take regard of this. It is still working in small isolated companies which could be combined, not necessarily into one company, but simply working together on issues where they have a common interest. Maybe politics can give us a lead in that respect. If we see you working together, I am quite sure those of us in the commercial world would follow that example.
153.
Ms Morrice: The report says that in 10 years, 50% of jobs in certain sectors will be part-time. What are your suggestions for dealing with this huge increase in part-time workers? Secondly, since the demographics show that they will be mainly women, what are your recommendations to accommodate that change?
154.
Mr Loughran: The change in direction towards increasing the proportion of part-time work may well prove to be beneficial in Northern Ireland. One of the issues that has become much more difficult since the Strategy 2010 Steering Group started its work is the position of the farming community. In less than two and a half years, the position of farmers has deteriorated dramatically - and not just the farming economy but the whole social fabric around which the industry is based. It is very important that we address that.
155.
I believe that there is a current need to find increased numbers of part-time opportunities for those who are living off the land, because it is likely that part-time farming will become much more prevalent than at present.
156.
Dr Haren: In relation to the previous question on food, Members may find it helpful, if they can find the time, to look at the detailed background sector reports where some of these issues are touched on in greater detail. Three of the recommendations in the agri-food and food processing area are directly related to the question raised: a new green image must be developed for Northern Ireland produce; the possibility of closer co-operation with the Republic of Ireland should be explored; and a consumer food group should be established to advise on market opportunities, research and development requirements and investment needs. Also recommended is the establishment of a single body to market Northern Ireland's clean image, product quality and achieve greater cohesion between the private sector and government in matters relating to the sector. It has been difficult to capture all of the details of what the sectoral groups are saying in the review document.
157.
Mr Neeson: I know that time is not on our side, but to me one of the most radical, yet most sensitive of the recommendations in the strategy is the creation of a single industrial development body. It is such a big issue that I think it should not be dealt with at this meeting. However, I want to give notice that it is one that the Committee will need to look at very carefully indeed.
158.
Mr McGinnis: Referring back to Ms Morrice's comment about putting the zest back into Northern Ireland industry, I want to remind the Committee that there were five key themes set out in the report. For example, the equality and social cohesion aspect provides us with a ready-made opportunity to consider such matters as sustainable development and the minimisation of the environmental impact on business. The idea of having knowledge-led industries in Northern Ireland provides us with the opportunity for innovation and creativity. Ms Morrice's other key theme of enterprise provides us with the opportunity for success in business and to celebrate success.
159.
If we have outward-looking businesses in NorthernIreland, that will give us the opportunity to foster global perspectives and deal with marketing issues. Self-help is very important in our rural communities and leads us to all sorts of local economic development issues. Those five key themes will provide a great springboard for business in NorthernIreland for the years to come.
160.
The Chairperson: It is clear from the report that you have obviously looked at other regions in Europe, Britain and in the South. But when reading the report vis-à-vis the South I was sometimes getting conflicting signals. Clearly, there is a dimension of an island economy, particularly an island-based energy policy, but I got the distinct feeling that there is a competition going on between the IDB in the North and the IDA in the South. Could you clarify that and also elaborate on the experiences of some of the other regions in Europe and Britain in relation to this energy policy?
161.
Mr Loughran: Teresa is probably the best person to comment on that. But, to pick up your point about the IDB and the IDA; yes, they do compete. The IDB also competes with "Locate In Scotland", with the Welsh Development Agency and with the North- Eastern Development Co-operation and, throughout these regions, there is competition. Strangely enough, because of the incentive package available in the Republic of Ireland and the way in which it is skewed towards taxation, a slightly different type of investor tends to be attracted there compared to the investors who target the United Kingdom regions. So, while there is competition, it might not be as intense as people sometimes feel. Teresa, would you like to pick up on the regional element?
162.
Mrs Townsley: You are absolutely right, Mr Chairman. A number of studies and various pieces of information were available to us as a review group. We felt it was very important to look at where we were as a regional economy within the United Kingdom and where we sat with the Republic of Ireland. We looked at Scotland, Wales and further afield. We did not want to duplicate other research and comparisons made by, say, the Northern Ireland Economic Research Council; we deliberately chose other areas we could learn from. The area that I want to refer to is Denmark.
163.
I was involved in a study visit to Denmark which has a population about the same size as Ireland's. It is a country where there are high wage levels, and already, they have had to face a number of problems similar to those in Northern Ireland with the textile industry and manufacturing industry going off-shore. We learnt some very valuable lessons from Denmark.
164.
We are all Europeans, and in this context, they were more than helpful in opening doors for us and letting us see what they did well and what they did not do well from agriculture right through to industry. It was startling to see how much of the Danish economy comes back to the small business sector and SMEs. Denmark was able to show us that what we have is the knowledge of design and innovation, and we can build on this. A number of our recommendations came from these visits.
165.
Ms Morrice: What about Lego?
166.
Mrs Townsley: Yes. We are asking the Assembly to take forward, some of the things we saw in Wales and Scotland and, particularly, Scotland, where they have moved down the road of devolution. There appeared to be much more of a joined-up approach to economic development. It would be good if we could move forward with this same approach. An approach in which we take the responsibilities of the private sector and say that we must have a joined-up private sector. We can work positively for Northern Ireland and we can work better for ourselves if we have a joined-up approach.
167.
The issue of joined-up Government emerged from a number of the regional visits. We asked ourselves if we could move forward with that approach to economic development-and we did. We very much benchmarked ourselves against other regions, and we took that experience through into our recommendations and our report.
168.
Ms Lewsley: I am aware that we are winding-up. Earlier, we mentioned the whole issue of the representation of the social partner in the economic forum. However, considering the lack of public debate on the report, how do you see its future implementation developing with respect to the person on the doorstep, and in trying to sell this at grass roots level?
169.
Mr McGinnis: As a Northern Ireland business person, I think that the vacuum that has existed during the last 12months has been very unsatisfactory. Speaking on behalf of my colleagues in the business community, we really need a conclusion to a strategic way forward in Northern Ireland from an economic point of view. The Assembly, and the elected politicians can help us big time, to really pull things together and to lead us. I speak for all my colleagues in the business community in saying that we will be very pleased to weigh in behind the devolved government and to deliver on some of the views we have put forward in the past. However, time is money, and therefore we need action. Within the global economy in which we are now working, time seems to be moving very fast indeed.
170.
Dr C Gibson: Chairman, I would just make a point from the CBI perspective. The CBI will certainly wish to add to the Committee's deliberations. We will be putting forward a written submission jointly with other business bodies to emphasise again some of the things that the business world collectively wishes to see. I hope that backs up what Mr McGinnis has said.
171.
We definitely support the Assembly, and we hope to see leadership coming from this Committee, the Assembly and beyond. You will not find the business community wanting in terms of support when it comes to implementation once we reach that stage having dotted a few "i's" or crossed a few "t's", or have decided which bits we want to do first. That is the message from the CBI, and indeed I am sure that that is also true of the other business bodies.
172.
Mrs Townsley: Mr Chairman, One of the key things we want your help with is in letting the Northern Ireland population know what a knowledge-based economy is. We have so much knowledge in Northern Ireland that we have kept to ourselves; in shipbuilding, design, and innovation. No-one realises the potential of what we have and how we can develop it, build on it and sell it. We have got to let the Northern Ireland population know that they have the knowledge. The question is how do we capitalise on it?
173.
Ms Morrice: And the rest of the world as well.
174.
Mr Loughran: Ms Lewsley raised a very important question. I suggest that 'Strategy 2010' will be a useful input into the Programme for Government. That has got to be produced in fairly quick time. Perhaps the economic dimension of the programme can be properly informed through the outworking of 'Strategy 2010'. My other point is that there are things we cannot wait for. The world is moving on and, as Mrs Townsley said, the Internet is developing by a year in only twomonths. If, in two months time, we are still where we are now then we will have missed out a year. My view is that, if there is one message that needs to be sold above all others is that this must be a knowledge- based economy.
175.
The Chairperson: The IDB is one of the key agencies that will be driving forward the whole process of enhancing the economy. There has recently been a Select Committee Report from Westminster, and the Minister and the Department have advised us that the IDB cannot respond for eight weeks because of a convention. That is fair enough. However, there have been previous reports: the Economic Council Reports of 1983, 1990, 1992, 1997, the Auditor General's Report of 1998, and the West Belfast Economic Forum's Report of 1999. These reports all made similar points, and we would like a response to these points. Some of the criticisms of the IDB were very sharp. The reports say, for example, that the IDB claims to create many more jobs than it actually creates, that it violates its own criteria for providing grants, that its internal performance appraisals are inadequate, that its monitoring of performance by grant recipients is insufficient and that there is sometimes a waste of public money. These are sharp criticisms, and we need a response to them. From our Committee's perspective the IDB is clearly going to be the driving agency of a lot of outworking of a Programme of Government - of 'Strategy 2010'.
176.
Mr Loughran: We came today to talk about 'Strategy 2010', with particular reference to the contribution of the Strategy Steering Group. Your questions relate to the IDB, and they are important questions and deserve a response. As you mentioned, the Minister will be responding to the PAC report shortly, but, since I am the outgoing Permanent Secretary, I will comment on this. The IDB has been operating in a very difficult environment and in this context has - I believe - done a very remarkable job. I am proud of the IDB's record, of its achievements and the records that it has broken in recent years. In the fullness of time the Minister will respond to the comments of the Public Accounts Committee.
177.
Dr C Gibson: From the perspective of someone who has been in a company that received an IDB grant - not from the perspective of IDB, and I make a clear distinction because I sit on the board - all that I can say to the Committee is that when you plan prior commitments, and when you put proposals to a body such as the IDB, you estimate job numbers and you submit your company plans. Since - as Teresa Townsley said - the world changes very rapidly, by the time you reach implementation some of those numbers will have changed. You then have to go back and discuss with IDB. One point that needs to be clarified is that this is a rapidly evolving, rapidly developing situation, and numbers most definitely change. Against the economic situation that we have been through in the last number of years - I think those are the years that the Committee looked at - there has been a fairly turbulent set of conditions in a number of the industries in which IDB were attempting to develop. IDB was working against a very uncertain background, as the Secretary has just made clear.
178.
We need to interpret the words of a Committee in the light of the environment in which this has all taken place. I say this from the perspective of a company that has changed its mind, that has modified its numbers and that has found a responsive IDB.
179.
The Chairperson: The 'Strategy 2010' document was produced some 9, 10, 12months ago, and things have now moved on. Is there anything that you would have added to the report given the time lapse from its production, given the experiences here in the Assembly and given the questions that have been asked here? Would you like to add anything? Is there anything you want to say to the Committee that would help us in pursuing these matters?
180.
Mr Loughran: A fundamental point is that 'Strategy 2010' is not a blueprint, but rather an agenda for discussion, and by definition that agenda changes. Even the year which has elapsed since its publication has brought changes which we did not fully expect, for example, the extent to which we have become much more attractive to investors from the knowledge-based e-businesses. This is now a significant part of IDB's work. Change is taking place much more rapidly than we anticipated, and there are issues which urgently need to be addressed.
181.
Looking at the 2010 agenda, two such issues have been identified by today's discussion. We have mentioned Selective Financial Assistance, and the Deputy Chairman has mentioned departmental structures. I suggest to you that those two important issues still need to be resolved. They need the input and advice of your Committee, and a full discussion must take place between the Department and yourselves so that Northern Ireland gets the outcome it needs.
182.
There are, of course other questions, the most important of them being what we have discussed time and time again today - how to ensure we create a knowledge- based economy. If we do not continue to return to that question, we will slip down the competitiveness league.
183.
The Chairperson: I should like to bring the meeting to a conclusion by thanking you for coming here today and answering our questions. We have tried to develop - and I believe we have succeeded - a good working relationship with the Minister and Department, and there are ongoing meetings. If our questions are at times pointed, it is because we see our role as being to probe and develop. We are aware that the Minister, with whom I spoke yesterday, is anxious to take account of our deliberations in his thoughts about moving things forward. We shall therefore pursue this, in line with our remit, but in co-operation with the Minister and the Department, for whatever criticisms we have are meant to be of a constructive and positive rather than destructive nature. Once again, I thank you for the time and energy you have quite clearly put into producing this report and for coming to meet with us here.
TOP
MINUTES OF EVIDENCE
WEDNESDAY 21 JUNE 2000
Members Present:
Mr Doherty (Chairperson)
Mr Neeson (Deputy Chairperson)
Mr Attwood
Ms Lewsley
Mr McClarty
Dr McDonnell
Ms Morrice
Dr O'Hagan
Witnesses:
Mrs J Trewsdale )
Mr A Gough ) Northern Ireland
Dr P Wylie ) Economic Council
184.
The Chairperson: I apologise for the delay. We started at 9.30am with private business and only got one third of the way through it. We ran late trying to deal with a backlog on the agenda.
185.
You are all very welcome. I am pleased that you found the time to come here, to make your submission.
186.
Mrs Trewsdale: I am Janet Trewsdale, acting chairman of the Northern Ireland Economic Council. On my right is Aidan Gough, acting director. As you know, Paul Gorecki left on 12June to go to Dublin. On my left is Peter Wylie, a senior economist with the council.
187.
The Chairperson: We would like to ask some questions, but perhaps you would like to give us a short presentation first.
188.
Mrs Trewsdale: We welcome the opportunity to give evidence to the Committee. I understand that you have all read our memorandum, so we do not need to read chunks of it out to you. As far as 'Strategy 2010' is concerned, the situation has changed since we published our original document in September 1999. The council looks positively upon the developments. We have welcomed the vision of 'Strategy 2010' with its emphasis on growth and success coming from the innovation and a knowledge-based economy. However, we did and still do regard it as work in progress. We are pleased that the emphasis has changed from what was initially treated as the last word but is now being described as an agenda for discussion. It would seem that at last consultation is taking place and we are glad to be involved. We reiterate our willingness to play a part in the discussion, which was first planned for September 1999.
189.
The council's main concerns were, and still are, the absence of any detailed analyses of the key drivers, that is productivity growth and research and development. It appears that these concerns have been noted and are under consideration. I refer you to Mr Kingon's evidence to the Committee last week. There appears to be an attempt now to relate certain targets, for example, growth in Gross Domestic Product, to the problem of Northern Ireland's low productivity. At last there seems to be some movement in that direction. There appears also to be some recognition of the council's criticism of the lack of prioritisation of the 62 recommendations and, indeed, of the lack of a framework. If we had the prioritisation and the framework, we would have a coherent view of how the economy works based on economic evaluation and evidence. We are still concerned to see 'Strategy 2010' joined more tightly around the key drivers of the economy, they being productivity and innovation. Putting it simply, we are looking for a more effective use for existing resources in Northern Ireland.
190.
We are happy that there will be a wider debate on the substantive issues raised in the autumn of 1999. However, we still await a response from the Steering Group. We cite as an example of a good consultation process the consultation before 'Shaping Our Future'. That was efficient and included all areas. The blueprint is there, but why was it not followed for 'Strategy 2010'?
191.
We look forward to an open debate and we will endeavour to respond to your questions succinctly.
192.
Mr Attwood: You are very welcome. This first question should probably be asked at the end of the session, but as I am leading today I will ask it now. I exchanged correspondence with MrGough's predecessor about the future of your organisation, which appears to be uncertain. There is a need for independent policy development and proposal outside the Government bureaucracy. What is the future of your organisation? I do not want you to labour the point, but we consider you important enough to give evidence to the Committee, and you made a very relevant submission on 'Strategy 2010', so we would be glad to know what your future might be. There has been much uncertainty on 'Strategy 2010', and correspondence with Mr Loughran, the Permanent Secretary of DED, confirmed that.
193.
Secondly, you described productivity as one of the key drivers of the economy. Other witnesses will be here later to talk about knowledge-driven issues in the economy. Can you elaborate on why the absence of productivity growth as a driver was so important in your submission to 'Strategy 2010'? How do you think that issue might be developed through the better consultation that appears now to be arising in relation to 'Strategy 2010'? What growth targets would be appropriate if this matter is to be more fully reflected in a revised 'Strategy 2010'?
194.
Thirdly, you will be aware that the issue of equality is central to the Assembly. The responsibility for equality has been given to the Office of the First Minister and the Deputy First Minister. There is a Committee that revises equality issues. What is your thinking on the equality issue and 'Strategy 2010'? How could it be acknowledged in a revised strategy?
195.
Mrs Trewsdale: Is that it?
196.
Mr Attwood: I have supplementary questions for later.
197.
Mrs Trewsdale: Your first question was about our future. Our understanding at the moment is that there is no intention to close us down, which seemed to be your implication. The Economic Policy Unit (EPU) is going to recommend a review. Initially it was going to be on the reporting procedures of the council, but they have changed since the setting up of the Assembly. Now it is going to be - we do not know for certain yet; this has been recommended up to the politicians, it is not as if the civil servants decide what will happen anymore - a review of all the economic-advice-giving bodies in Northern Ireland. As we understand it, they are keen to keep an independent voice in advice given to the Assembly and the Ministers. That perhaps is the most important aspect. The Economic Council is itself an example of the social partnership which, it is claimed, the proposed Economic Development Forum (EDF) represents. We were established in 1977 and are well practised at social partnership.
198.
The important thing about the Northern Ireland Economic Council (NIEC) is the independent advice that we give. The Economic Development Forum cannot be regarded as being independent. While it has independent social partners, it also has Government representation in terms of the Civil Service. The chairmanship was held by the Minister of the Economy - and now, presumably, will be held by the Minister of Enterprise, Trade and Investment. In the case that the Minister is unavailable then this responsibility falls to the permanent secretary of what was the Department of Economic Development and is now the Department of Enterprise, Trade, and Investment. I fail to see how that can really be regarded as independent advice.
199.
We have not met any hostility towards the idea of independent advice. In fact, the situation is quite the opposite. There is support for this approach within the Economic Policy Unit and, I believe, within the Office of the First Minister and the Deputy First Minister. We are in a time of change, and we must accept that certain changes may take place, but not the fundamental concept of the existence of NIEC.
200.
Mr Gough: The other two issues that you raised, Mr Attwood, were productivity and equality. Why do we think that productivity is important? The targets in any strategy should translate your vision into a quantifiable set of outcomes, and these should be linked to the key drivers of economic growth. The key driver of economic growth is productivity. In order to sustain a high rate of economic growth the key target has to be to improve productivity, which is output per unit input.
201.
Productivity is the key target in the British Government's economic strategy as outlined in their White Paper on competitiveness. In 'Enterprise 2010' which is the Forfás equivalent of 'Strategy 2010', productivity is the key target. However, productivity is not a key target in 'Strategy 2010' in fact, it is barely mentioned. It is implicit one could argue, but we think it should be made explicit. With regard to meeting targets then, there is a lack of connectivity between the targets and the key drivers, and also between the recommendations and the targets. We can go into that further later.
202.
The other issue was equality. The key inputs into the knowledge-driven economy are people. In order to improve productivity know-how per person must be increased. Equality is absolutely vital through the education system through developing skills and, we believe, through local development which is given scant attention in 'Strategy 2010'. We will be publishing a paper on local development around mid-August. We take a step back in this paper and try to look at a role and rationale for local economic development. Everybody knows that there have been problems with the processes but there exists a key role for local development in the mobilisation of resources and the generation of social cohesiveness. As regards promoting equality, the two key policy areas are education and training and social cohesiveness, and here there is a role there for local development initiatives.
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Mr Attwood: Other people will deal with your final point later. Two questions arise from what you have said. First, have you outlined what productivity growth targets might be appropriate, given the fact that they are only implicit in 'Strategy 2010'? Secondly, why do you think that the Steering Group has not responded to your paper so far, and why do you think that the consultation exercise, in spite of 'Strategy 2010', has been different from the consultation exercises that were appropriate in other circ*mstances?
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Mrs Trewsdale: I will take that last point first. Alex, you will have to ask them. That is the obvious answer to that. Our original paper clearly stated our views on this. Look at the actual press statement that the Minister issued at the launch of 'Strategy 2010'.
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He said that it was open for discussion and debate. We did not suddenly decide later that this would be a good idea - it was anticipated that this was going to happen. We do not know why it has not happened. We have kept pushing and asking for it; we have not just let it go.
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Mr Attwood: You mean the British Government Minister rather than the Executive?
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Mrs Trewsdale: Yes, 'Strategy 2010' was launched before -
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Mr Attwood: I just want you to confirm that that is what you meant.
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Mrs Trewsdale: Sorry, I was referring to the chronology. It was launched before there was a Minister from the Executive. AdamIngram is the name.
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Mr Gough: It was asked if productivity growth targets were appropriate. Based on 'Strategy2010', a target of increasing GDP per capita from 80% to 90% of the UK average has been set. There, should have been another chapter in 'Strategy 2010' showing how these figures were worked out. It is likely to entail a rate of growth in GDP per capita per annum of some 4%, which is very high. This will mean a step change in the performance of NorthernIreland's economy to attain that rate. It would probably require productivity increases of around 3·5% per annum, which again is an exceptionally high rate of increase.
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Dr Wylie: Productivity growth in the Northern Ireland economy has been running at about 1·4% per annum over the last 10 years. We agree with the demanding target in trying to attain a higher per capita income in Northern Ireland. However, much growth in recent years has been through labour force growth, but that is likely to slow down. You cannot achieve increased output by increased activity rates for ever. In the long-term, the way to increase per capita income is not through increasing activity rates, but through increasing productivity growth. That lies behind 80% of per capita income improvements. We are having to look at raising the rate of productivity growth to 3% to 3·5% from the existing 1·5% or so.
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'Enterprise 2010' in the South is looking at a productivity growth rate of about 3% per annum over the next 10 years. We are going to have to do at least as well as that, or outperform it. That should be a target in the strategy, and all other targets should be linked to it. Given the strategy's recommendations, we do not feel that that target can be reached, as the strategy stands.
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A recent economic development strategy issued by the Government of Denmark has only three targets - productivity, innovation and global market share for Denmark. It puts productivity at the top, stating that that is the key to raising overall living standards. Behind productivity growth lies innovation and that is seen as the second key to growth. If 80% of per capita income growth is due to productivity, maybe two thirds or 80% of that is due to innovation, which is producing better products across all sectors of the economy. It involves better products, better processes, marketing innovation in products, and having innovation index targets. Behind innovation lies research and development.
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We agree with the research and development target for the private sector in 'Strategy 2010', but there is no research and development target for the public sector and innovation depends on developments in both the private and public sector. It depends on universities and hospitals, and what they are doing by way of new products and processes. There is no public expenditure target for research and development or comparison to 'Enterprise 2010' which has both public and private targets for research and development. Specific targets are important.
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Calculations show that if GDP per capita is to be raised by 4% per year then overall growth must be about 5%, because population growth is approximately 1%. If the overall growth rate is 5% per year - which is a very good rate and one which the South is forecasting for over the next 10 years - GDP will increase to quite a high level in 10 years time. The target in 'Strategy 2010' for private research and development is 1·5% of GDP. At present private research and development is £80million, but for it to treble as a share of GDP - because GDP will be growing so fast - it will have to increase by four or five times to over £350million. That is a very demanding target.
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However, that level of private research and development cannot be sustained without increasing investment in the public research and development sector, because companies need trained researchers from the universities. There cannot be a target on private research and development without a target on public research and development. The South of Ireland has a target for the public sector of 1% of GNP. To achieve this target by 2005 in Northern Ireland investment in public research and development would have to double from approximately £70million or £80million to about £170million.
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It was recently announced that an extra £5million a year was going to be spent on research in the universities, but that does not go far enough. In our view, the strategy has to be radical and focussed on productivity and innovation. It has to back up those commitments with real resources and real initiatives. We do not believe that the strategy is prioritised in this way. The strategy also needs more education and training targets, because an innovative economy requires a trained workforce. There is only one education target - NVQ Level Four - we think that there should be other education targets and training targets. 'Enterprise 2010', for example, has targets on company expenditure on training.
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These are the things that we see as key: productivity growth, innovation, human skills and enterprise and entrepreneurship which we can discuss later.
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Mr Attwood: I draw the conclusion from what you have just said that Enterprise Ireland should take responsibility for 'Strategy 2010' - then we might be more successful.
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Mrs Trewsdale: You may say that, but we could not possibly comment.
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The Chairperson: Mr McClarty has to leave early, so I invite him to speak.
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Mr McClarty: In the Northern Ireland Economic Council's view, what are the priorities for the recommendations, and what are your views on the nine key locations set out by the Department of the Environment's regional plan which will be the main focus for the future location of industry?
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Mr Gough: Productivity and innovation are the two key drivers; they should be our priority. The council will be publishing an innovation index for Northern Ireland, and that could be developed into a target for future policy. We also need to prioritise research and development, human capital and enterprise. MrWylie can discuss research and development, and we have already mentioned human capital. The other is enterprise - how do you encourage enterprise? It is mentioned in 'Strategy2010', with the key recommendation being the reduction of Selective Financial Assistance to create a more entrepreneurial culture. That is nothing new it was around 10 years ago in 'Competing in the 1990's. - The Key to Growth.'
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I think that it is even in the Pathfinder process of the 1980s. It is time that we took action on that. Another key is enterprise, and we are working on that. 'Enterprise' is a bit of a buzzword, so we are trying to define what exactly it means and are focusing on defining the characteristics of entrepreneurial firms.
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Dr Wylie: We agree with a lot of the recommendations. However, they are a list rather than a set of targeted priorities. The strategy should first have set out how the economy works, what activity and innovation drive it, along with setting out its equality concerns. Once one has established what is driving the economy, one sets one's targets for productivity growth and for an innovation index. Once the targets have been established one must ask oneself what instruments and recommendations are needed to meet them. They would be one's priorities. However, recommendations on innovation and on raising productivity must be properly worked out, and not just focus on such things as new shopping centres, for example.
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They will not be worked out if there are delays in trying to decide what order we move on first or where we should put the resources. There has been no discussion of economic resources, of how the recommendations in the strategy are to be costed; no commitments on public funding have been given. Economists would have looked at how other countries prioritise them before deciding.
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Mr Gough: Mr McClarty's other question was about the development hubs.
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Dr Wylie: We understand that when the 'Shaping Our Future' document went to public consultation and when the report on the public consultation was published these development hubs were largely downplayed. The idea that one should prioritise regions or towns and direct development to them is not going to fly, and it should not be emphasised. We believe that 'Shaping Our Future' has changed somewhat since it was in the draft form that was used by the 'Strategy 2010' committee.
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'Strategy 2010' was a bit more rigid in that it said that only these nine hubs should be developed, whereas 'Shaping Our Future' included the nine hubs but it also mentioned what it called 'gateways.' It mentioned other regional service centres - there was a hierarchy. It said that everything was open, but there was a need to prioritise. However, it did not exclude anywhere, while 'Strategy 2010' was quite dogmatic in saying that it would only direct to these nine hubs.
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We believe that 'Shaping Our Future' has softened its stance on this point. 'Shaping Our Future' has been an evolving document under public consultation, while 'Strategy 2010' seems to have been written in the spirit that the first draft is the last word. It does not change, and one cannot change or influence it. It will not be redrafted to take account of subsequent developments. This particular recommendation would not be consistent with 'Shaping Our Future'. It is perhaps not likely to be pushed - I cannot see how it could be.
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Ms Morrice: That was very interesting, and it is valuable to hear an independent voice such as yours. A pet project of mine is the more effective use of key resources in Northern Ireland. Great emphasis is placed on what are considered the industries of the future, call centres, for example. However, we are not looking hard enough at what we are good at: the agri-food, textile and shipbuilding industries as well as at our bright young people. A lot more emphasis should be placed on these. I would be grateful for your opinion. Am I barking up the wrong tree when I am promoting these old smokestack industries?
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Mr Gough: Not at all. In the modern economy this dichotomy between so-called traditional or old sectors and new knowledge-driven sectors is very much breaking down. What we should be focusing on now are not low-tech and high-tech industries but firms who use low-tech processes and firms who use high-tech processes. You can have within what is deemed a traditional sector companies using very high-technology processes. However, the focus has to be on the technological processes that firms are using and on encouraging the adoption of high-performance work systems and the upgrading of quality within firms. So that dichotomy between traditional and knowledge driven sectors is very much breaking down.
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If we have strengths in traditional sectors we can upgrade the use of technology in those sectors. There are examples in Denmark where they have successfully restructured what is deemed a traditional sector - the textile industry. In fact, employment there has now gone up over the last 11years. They had an initial slump, but now employment is rising again.
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Ms Morrice: We have been asked at the last moment to advise on the spending of a possible £18 million extra that may be available for certain areas. Could you advise the Committee as to where that should go?
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Mrs Trewsdale: One of the main areas that we would look at, particularly as we have been looking at it recently, would be the new research and development side of things. That, in the broadest sense, is one of the areas where Northern Ireland needs extra money. I am not necessarily talking about the really high-flying research and development, but the technicians level and above that. There is a need for skills which can come along with the idea of research. We are not necessarily always referring to Nobel prizewinners when we are talking about research and development. There is a whole infrastructure that needs to be built up.
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Dr Wylie: If we are looking at extra money we would not be thinking of giving a capital grant, for example, or a subsidy to a firm to build a new factory. This comes in with the restructuring of industrial assistance. Rather than capacity building we would be looking towards the building capabilities of existing institutions and existing people. So there would be a shift in focus of money going towards building things that will benefit in the long term, rather than making short-term fixes. That is where the real test of economic policy comes in because sometimes it is hard to justify. You are not creating instant jobs by doing this, but to build the long-term capabilities of the economy you have to put money into research, development, innovation and training and not necessarily into big projects. You must also look at encouraging firm start-ups, entrepreneurship and enterprise. Again it could be very small-scale amounts, but you are looking to seed long-term capabilities. This is the point we would argue.
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Ms Morrice: I am sorry to have put you on the spot like that. I want to come now to the regional office in Brussels. Do you support what has been done about a regional office in Brussels and how the plan is being taken forward?
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Mrs Trewsdale: We know that that issue is very close to your heart, but, to be perfectly frank, we know very little about the detailed proposals. At this stage of the proceedings, we consider it to be a relatively unimportant issue in comparison with some of the issues in 'Strategy 2010' that need attention. I hope you do not take that personally, Ms Morrice.
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Ms Morrice: So, with regard to the £18 million to be spent, it would not be on the top of your priority list.
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Mrs Trewsdale: No. Definitely not. It would be a long way down the list.
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Ms Morrice: Regarding Selective Financial Assistance (SFA), what are your views on the recommendations that it should be less readily available, and do you foresee any problems?
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Mrs Trewsdale: Our view is already well documented, but perhaps Mr Gough would summarise it.
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Mr Gough: Reducing SFA is nothing new. It has been contained in economic strategy documents for the last 12 years and was probably the key recommendation in 'Northern Ireland Competing in the 1990s'. So we do not need to come out at the end of the process with the key recommendation being that we reduce SFA. What we need now is implementation. There is widespread agreement that this must happen. As Dr Wylie said earlier, we need to switch from capital assistance to capability development, to softer forms of assistance, such as marketing, quality, education and training, but, yes, SFA must be reduced; there is no disagreement about that.
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Mr Neeson: Over the years, I have found the reports from the council to be invaluable. Your critical appraisal of 'Strategy 2010' - although it may have ruffled a few feathers at the time - was a very helpful intervention in the process.
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One of the major recommendations arising from the document is the creation of a single development agency through the amalgamation of IDB, LEDU and IRTU. How does the council feel about that? Would it help to increase inward investment and create the sort of environment which is necessary to maximise indigenous industry?
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Mrs Trewsdale: The council did not completely rule out the idea of the single agency as a structure for the delivery of 'Strategy 2010'. It felt that any new arrangements should build on the success of some of the present economic development agencies. Some have been relatively successful, such as LEDU and the T&EA. At present it is premature to talk about a single agency, but, if it is intended that we go down this line, consideration should be given to bringing together the best parts of each, and there are good parts. The idea of a single agency managing everything is all very well as a blueprint, but, as far as working on the ground goes, consideration should be given to what experienced people have done up to now, and that it should not be thrown out simply because of a blueprint.
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Mr Neeson: Have you looked at models in other European regions? I see Northern Ireland developing as part of a Europe of the regions?
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Dr Wylie: Yes, we have looked at agencies such as the Welsh Development Agency and Scottish Enterprise. Some single agencies convert well if they have sorted out their priorities first.
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Unfortunately, no priorities have been set in 'Strategy 2010'. If the priority were innovation and not capital grants, then the single agency would be a little different. We would worry that an agency such as the IRTU, which has been very successful in promoting research and development, and innovation, might be subsumed into a larger body before its priorities have been put on the agenda.
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Last week, we listened to the Steering Group and heard that the single agency is one of this year's priorities. In our view, and it would be our submission, that that would not be a priority. The priority would be to set the targets and fit the recommendations to them rather than look at cost saving. In the report, the single agency is purported largely to save costs, but there is no strong economic argument for the single agency in 'Strategy 2010'. Strong economic arguments for a single agency can be made, but an economist always has two arms, on one hand it is good, but on the other hand it is not. It is something that would have to be carefully looked at.
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Ms Lewsley: You have talked about research and development, and innovation. As part of those areas you have talked about training and education. Does the council have any further recommendations beyond the implementation of the Dearing Report?
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Mr Gough: With respect totraining and education, we believe that there need to be targets on skills and education below NVQ4 level. We believe that they need to be considered.
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Ms Lewsley: It is also known that you have criticised the report for not costing its recommendations. Have the council costed the recommendations and, if so, do you think the recommendations can be implemented in the timescales put forward considering the Enterprise, Trade and Investment budget?
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Mrs Trewsdale: No, we haven't costed the recommendations. The reason we, as a council, have not costed them is because we only have four economists. We do not have enough resources. Perhaps, more importantly, we consider that costing should have been done before 'Strategy 2010' was published. A detailed costing should have been made, even if it was not published in detail as part of 'Strategy 2010'. The departments should have been asked by the Steering Group to do some costing. Only the government departments know whether the costings, when complete, are attainable within the departmental budgets. There is a cake that has to be cut up - and the cake is not infinite.
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Therefore, one would have assumed that, as part of 'Strategy 2010', there would have been an attempt at costing. That brings us back to prioritisation, as naturally everything cannot happen immediately. However, if priorities had been set, they could have been costed. I am not suggesting that costing should form part of the reason for prioritisation, but once priorities had been set and costed, it would have given us some idea of what was going on.
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We do not have the resources or the information to be able to do a complete costing. I do not think that that is our job. We roughly estimated a few recommendations as an example of the route we felt should have been taken.
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Ms Lewsley: In general, what would you like to see included in the report regarding public transport policy?
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Dr Wylie: Our submission stated that there is a target for roads expenditure as a percentage of GDP. This is one of the few areas where there is a productivity rationale input to the report. It has not been proved that there would be a rise in productivity as a result of building roads. It would depend on where you build them and other factors would need to be taken into account.
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Increasing expenditure on public infrastructure is very important in economic growth. It has been shown to be important in economic research. It is not just roads; all public infrastructure - schools, hospitals and public transport - are very important for economic growth. The Republic of Ireland is putting very strong emphasis on public infrastructure growth as an underpinning for productivity growth. The targets and recommendations in 'Strategy 2010' should in our view be wider than just roads. It should include expenditure on public transportation. If jobs are going to be created (and this is an equality issue as well) people need very good public transportation to get to those jobs. We believe that targets should have been included for expenditure on public infrastructure, including roads and railways.
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Perhaps in a way 'Strategy 2010' ignores a lot of the public input into economic growth. Last week, FrankBunting for the Steering Group, agreed that there probably should have been more discussion on public transport.
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Mr Gough: On that issue we also question and would like to see the rationale behind the target in 'Strategy 2010' which relates to increasing expenditure on roads from 1% to 1·5% of GDP. There is an assumption that it will lead to a 1·5% increase in productivity, or something like that. We question the reasoning behind that in our memorandum.
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Dr O'Hagan:. In relation to the shortcomings of 'Strategy 2010' I think a lot of your concerns are shared by many people across a broad spectrum. With regard to the lack of consultation, it was only your organisation that was on the receiving end of that. People in the voluntary and community sectors felt very much excluded from the whole process.
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I have a number of questions. I will ask them all together and then let you answer them. First, on the issue of corporation tax, experts and commentators felt that not only was the corporation tax suggested in 'Strategy 2010' unrealistic, but it may have actually been in breach of European Union Law. What financial package do you think would be better put in place? A related matter is the question of the IDB. It has received the highest budget from within the Department. It has been a source of study and of concern among a wide range of commentators, the latest being in the Public Accounts Committee's report from Westminster. I suppose I am going to put you on the spot but can I ask you what your views are on that report? Also how do you see the future of the IDB and how would it be better placed in the future? There has also been reference made to 'Enterprise 2010.' How do we in the North learn from the South? How do we ensure that there is greater economic co-operation between the two parts of the island?
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Mr Gough: Our view is that the recommendation on corporation tax is a non-starter - a red herring. I cannot envisage the UK Government allowing a region to have a differential rate of corporation tax. You asked where assistance should be focused. Obviously, going by our priorities, Selective Financial Assistance should move away from the subsidisation of capital to the subsidisation of softer inputs and capabilities: education; skills; marketing; quality; and the introduction into organisations of high-performance working systems. There should also be a focus on developing linkages between the inward-investment sector and indigenous companies and between the former and the wider economy, taking in universities. We recommended some form of regional linkage programme in a report on that topic. Enough studies of inward investment have shown that, while tax incentives are important, inward investors are attracted by the level of skills in a region. These rank higher than corporation tax.
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Mrs Trewsdale: We did not expect to have to comment on the recent report on the IDB. The council itself has neither done work on the matter nor formed an opinion. We are here to give the agreed opinion of the council. Our views as individuals are all very well, but we are not here to speak as such. However, I should like to say that the council's views on the IDB have been well documented over many years. As Mr Gough has said, we have continually recommended the idea of moving away from financial assistance and block grants for building factories towards investing in education and skills and the development of the workforce. There should be a movement away from bricks and mortar into human capital, as it is known in economics, or more simply, people and the development of the workforce. To be honest, that is as far as we are prepared to go at this stage. The council itself has not discussed the matter or formed an opinion, so I cannot speak on its behalf.
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Dr O'Hagan: How could the IDB be made more effective in the future?
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Mrs Trewsdale: The answer is that the movement I described should take place. The IDB itself claims that the movement away from bricks and mortar and into people is already happening. Are you talking about the running of the IDB and how it works?
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Dr O'Hagan: There are problems in running the IDB, but primarily I meant what it should do.
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Mrs Trewsdale: The council's view on policy is that a movement away from building factories should take place. I do not seek to suggest that the IDB should not do this at all, but the emphasis should be moved away from bricks and mortar and onto developing people.
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Mr Gough: We can refer you to a report in which we looked at the implementation of industrial development strategy last year. We said in it that the agencies most successful in delivering the last economic development policy - 'Northern Ireland Competing in the 1990s: The Key to Growth' - were mission-driven agencies like the Industrial Research Technology Unit and the Training and Employment Agency. There may be some lessons to be learned. You also asked what we learned from 'Enterprise 2010'. We learned that there is what might be called 'the missing chapter' in 'Strategy 2010', the one that relates your targets to the key drivers of economic growth and relates your recommendations to those targets. That is the main thing we could learn from 'Enterprise 2010'.
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Dr Wylie: The difference between 'Strategy 2010' and 'Enterprise 2010' seems to be that 'Enterprise 2010' is informed by economic evidence and by what economists argue are the key drivers of growth - it builds down from them. There are some very good economic chapters in the first part of 'Strategy 2010', which set out what the key drivers are, but then there is a jump to recommendations, and that framework is not used in the subsequent report. 'Enterprise 2010' does a better job at saying that productivity is the key e.g. we need to have a 3% growth, which translates into 7% growth in manufacturing, as it accounts for 20% of the economy, and 2% growth in the rest of the economy. We need to encourage high-tech, high productivity businesses to bring this about, and have to look for productivity gains across the economy, not just in manufacturing and high-tech. We need growth in services, indeed growth across the board.
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We also need to have a redirection of financial assistance for companies. In 'Enterprise2010', there is a recommendation that increases from 40% to 65% the resources spent in softer areas such as research and development training and skill support. Quantitative targets have been set to redirect money from capacity building into capabilities building. The Northern Ireland strategy must set quantitative targets on the redirection of Government funding.
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'Enterprise 2010' also builds on the public knowledge base to generate economic growth in the South where the public knowledge base is underdeveloped. While our public knowledge base is slightly better developed through university research there is a need to focus on the public research base to support the economy and the public innovation base. It has been said that over the next five years £2billion will be put into public research and innovation infrastructure in the South of Ireland to set the framework for companies. That is what will attract companies in the end - the good quality of public infrastructure. There should be quantitative targets set, and we should learn from this holistic approach to economic development. 'Strategy 2010' is not built around such a framework.
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Dr McDonnell: I am pleased to hear a lot what I am hearing this morning. In your submission you said that there are three elements. We have touched on this in different ways already: how to provide the knowledge- based economy through research and development, innovation, education and training, promotion of enterprise and entrepreneurship.
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There are a couple of points that I would like to try and to tease out. I have only heard a fleeting mention of IRTU's being a "mission-driven" organisation. In that context, what needs to be done to achieve the target for privately funded research and development, and is it a realistic target? What targets are needed for public research and development? This is a hobbyhorse of mine: it is my view that if the public research and development is lagging behind, private research and development will follow. How do we ensure both?
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Mr Gough: IRTU's basic role and rationale is to increase the level of research and development as a percentage of GDP.
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Dr McDonnell: Does it do that?
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Mr Gough: It is doing that. Research and development in the private sector, as a percentage of GDP, has increased substantially since IRTU came into existence. DrWylie will give you the exact figures, but it has gone up by over 0·5%, and is close to 1%. Whether IRTU has been responsible for that is another matter, but since IRTU came into existence research and development as a percentage of GDP has increased substantially. The council's paper on looking at the performance of the DED's agencies on implementing the 'Competing in the 1990s' strategy found that IRTU had quite successfully implemented that strategy.
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Dr McDonnell: This is where many of us drift towards the single-agency argument. You made the point that separate agencies working cohesively could work very well, and just as effectively, but we perceive big gaps, and most of those gaps could be called research and development, in between the various existing structures. The drive to a single agency would mean that the buck would have to stop somewhere.
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Mr Gough: The council has not entirely ruled out a single agency. All we have said is that you need to get your targets and key drivers sorted out before you jump to a single agency - you should take this sequentially. Dr Wylie can elaborate on the more efficient use of public research and development resources in particular.
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Dr Wylie: When IRTU was set up in 1992 the perceived lack was in private research and development in Northern Ireland. There was research and development, but it was mainly done in the universities, and there was a perceived lack of company spending. IRTU has focused on that over the last eight years, with some success. Presently, about 50% of all research and development is done by companies and 50% is public. IRTU's sole focus has been to drive company research and development, and I agree there needs to be a more holistic view. IRTU now has to look towards bringing in the public side. For the research and development target set in 'Strategy 2010' to be attainable, there would need to be a 10 to 15% per annum increase in research and development. That is more than it has been over the last few years from a small base. Research and development in the South of Ireland has gone up at this rate recently, so it is attainable, but it is quite a staggering increase. It is a very demanding target to reach. We agree with demanding targets, and if the resources are put in, it could be achieved.
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It is true that IRTU is focused on companies, although the European Union and the International Fund for Ireland have, through IRTU, made some investment in the universities. The universities and the research that goes on in the public sector need to be brought into the economic development strategy, because if there is to be a knowledge-driven economy, the creators of that knowledge must be the key players in any economic development strategy. We do not see that the creators of knowledge are the key players at the moment - the IDB seems to be the key player, and in this new single agency, the IDB might remain the key player.
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Scotland's knowledge economy task force sees the commercialisation of knowledge from the universities as one of the keys to economic growth in the future. Instead of throwing grants at companies, you should commercialise research from the public research base. That needs to be introduced.
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Dr McDonnell: How do we do that?
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Dr Wylie: The universities have to be brought into economic development strategy. Their representatives should sit on the Economic Development Forum; universities and the people who are involved in innovation should be much more prominent in there. It could be done by setting up an agency with a mission like that. If the single agency had a mission to raise innovation and knowledge throughout the economy it would be useful, but not if its mission were to keep the existing grant structure, to follow existing practices and not focus on raising public research and development. Public research and development has been falling over the last 10 years and has been ignored by the economic development agencies. If there were a single agency with a mission to drive the knowledge- based economy it could work, but if this were not thought out first, there could be a problem.
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Dr McDonnell: What policies are needed to encourage enterprise? This goes back to the situation you were talking about in the universities. One of my frustrations is the difficulty in getting spin out ideas working, some of these things seem to happen in spite of us rather than because of the structures that are there. How do we get that flow that is second nature to those in universities in the United States and Canada? We do not seem to be able to achieve this.
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Mr Gough: What policies are needed to encourage entrepreneurship? The Government should send out the signal that if we want to encourage entrepreneurship we must first reduce the level of capital assistance to firms. A key focus of the council's work is on developing and defining entrepreneurship and entrepreneurial firms. We have a report coming out in the autumn looking at what entrepreneurship means. What are entrepreneurial firms? These are the types of firms you mentioned. They are the bedrock of the high growth performance in places such as Silicon Valley in North America. They are companies that operate in the knowledge-driven economy, with high performance work systems and high levels of skills. These are the types of companies that assistance must be focused on.
288.
Dr McDonnell: You referred to 'Enterprise 2010' being a good example of economic research forming strategy. What can we learn from 'Enterprise 2010'?
289.
Mr Gough: We have already answered a similar question about what can we learn from 'Enterprise 2010'. The main thing is relating your key drivers and your recommendations to your targets and quantifying your strategy. Dr Wylie mentioned other issues.
290.
Dr Wylie: I think it is setting the targets first and then finding out what has to be done to reach them, knowing how the economy works and where the growth sectors are going to be. There are other examples of strategies that we could learn from, especially on the concept of the commercialisation of ideas. I pointed out the recent Denmark Strategy, and I can provide a copy for you. It builds on economic research, indicating that productivity and innovation are the key issues, and focuses on building networks of co-operation between business and the universities. To raise enterprise and entrepreneurship it focuses on management training, business skills training and technologists and takes the idea that the flow of people between the public and private sectors in the knowledge sector is what is going to drive growth. Links must be built up to make that flow easy. It sees the need to build the economy around the knowledge producing sector. Neither 'Strategy 2010' nor 'Enterprise 2010' discusses those matters very much. The latter is involved in trying to build up the public research base first before work on linkages starts. In countries like Northern Ireland and Denmark, which already have the public research base in place, the focus has to be on building the linkages. We would like to see emphasis on venture capital here too.
291.
The Chairperson: I am very much aware of the time constraints. Mr Gough mentioned earlier the concept of local development. Can you elaborate on that in the brief time that we have left?
292.
Mr Gough: We will be publishing a statement on local development, probably by mid-August. We decided to take a conceptual look at local development activity. It is an activity which has grown rapidly in the last 10 years, largely driven by public funding. This public funding will decline over the next five years, and we decided to go back to basics and look at the role and rationale for local development. Where does it fit into an overall regional development strategy? We define local development in terms of mobilising resources which central and regional Government policies have failed to access. There is also an informational role for local development. But the basic role for local development is mobilising resources which generate social cohesiveness and social inclusiveness. This role is not developed at all in 'Strategy 2010'. We have had problems with the process of local development over the last 10years, and we allude to these problems in the report. This is not surprising, given the extent that local development has grown during this time from a zero base to a fairly major economic development programme. We see its key role in generating social cohesiveness and social inclusion.
293.
The Chairperson: Thank you very much for your very detailed reports. I am sure that as we make further progress, here we may be in dialogue with you again by way of supplementaries, but your submissions were well-appreciated and well received.
294.
Mrs Trewsdale: Thank you, Mr Chairman. I thank the Committee for the invitation and if you require any further assistance or follow-ups on any of the points, please do not hesitate to contact us, and we will be pleased to oblige. Thank you very much for your time.
295.
The Chairperson: We may second you to this Committee when we are writing the final report.
296.
Mrs Trewsdale: We have to protect our independence.
TOP
MINUTES OF EVIDENCE
WEDNESDAY 21 JUNE 2000
Members Present:
Mr Doherty (Chairperson)
Mr Neeson (Deputy Chairperson)
Mr Attwood
Ms Lewsley
Mr McClarty
Dr McDonnell
Ms Morrice
Dr O'Hagan
Witnesses:
Dr Bradley
297.
The Chairperson: We are running slightly late: I apologise. It is the Committee's fault. We ran ten minutes over time earlier. Welcome to the Committee. Your submission was very stimulating.
298.
Dr Bradley: I have no opening statement to make. I have sent submissions. I am a research professor at the Economic and Social Research Institute in Dublin, but I am speaking to you as a private individual. I would not like anything I say here to be put forward as the view of the Institute. That would be very embarrassing.
299.
I work mainly on the international economy. From the point of view of the Republic, Northern Ireland is part of that. Most of my work is in Spain, Portugal, Greece and the Eastern European countries. The context in which I wrote about 'Strategy 2010' was a research analysis of an important element of the Republic's external economic environment. I am flattered to be asked here and I will be delighted to answer any questions.
300.
Dr McDonnell: I have a couple of questions. Do you feel that a single development agency would provide a clearer structure for all concerned, or could the present structure be made to work better?
301.
Dr Bradley: I was a little surprised to see that recommendation in 'Strategy 2010'. I am not privy to the full details of the institutional rearrangements within the former Department of Economic Development. Our experience in the South has been that the agencies should be aligned in two different ways, one targeting inward investment and the other promoting the growth of indigenous industry. Today, that is our situation. Enterprise Ireland combines all the disparate activities - from marketing and promotion to industrial research and development - that aid the indigenous sector. The Industrial Development Agency, which once combined both activities, is now tasked only with encouraging inward investment.
302.
This is a very logical division, one that was painfully arrived at as a result of reviews of the IDA's performance, which were - I have to say - much more critical of the IDA's performance than anything produced by the Department of Economic Development.
303.
Dr McDonnell: I like the way the southern structure works. My dilemma with the present structure in Northern Ireland is that there are gaps opening up, particularly on the research and development side, on the innovation side and for new technologies. Sometimes there is no basket into which these fit. How do you see us handling, developing and promoting new technologies?
304.
Dr Bradley: Referring to your original question: there are generally two alternatives, which are either to have one master agency that straddles inward investment or; to encourage small indigenous, either traditional or high-tech industries. To reiterate: in the South's experience multinational firms, of any size, tend not to require financial assistance from places like the Republic of Ireland, Northern Ireland, Wales or Scotland to carry out research and development. They are basically big enough to fund their own research and development. Small indigenous start-up firms in the software area, or in spin-off activities in micro-electronics, do need assistance, but the focus of the agency tasked with assisting them is largely on the promotion of indigenous industry and not on the promotion of inward investment. We regard these activities in the South now, after painfully discovering the inefficiencies of other systems, as being entirely different activities.
305.
Dr McDonnell: Do you have any views on the future of our old sunset industries such as agri-foods, textiles, and heavy engineering industries? Has 'Strategy 2010' addressed the potential for conserving these, and do you see any way in which they could continue to survive without subsidisation?
306.
Dr Bradley: I make a distinction here between 'Strategy 2010' the document - the glossy- and the sectoral reports, which were the background documents for 'Strategy 2010'. The latter were not made available to the public until nine or 10 months after the publication of the original document. They were put out on a web site and they could be downloaded. The core strength of the 2010 process was that the experts in the individual sectors could deliberate about their own sectors. The most interesting reports deal with exactly the sectors you are talking about; clothing and textiles, and engineering. In these cases there is a clear realisation that elements of these industries are doomed. They can be propped up and, indeed, have been propped up. The only reason why this has continued is that the rate of grant aid here is astronomically higher than the rest of the United Kingdom. It is 10 times higher than the rate in England and five times higher than in Scotland. At some stage it will no longer be possible to support these industries.
307.
Policy must focus on making a transformation and identifying cores within the traditional industries which can be transformed. In the South, for example, textile industry employment is now about 6% of manufacturing employment, while in Northern Ireland it is still about 23%. That core has its weak firms, but it also has its high fashion firms where high wages can be paid and where high profits can be earned. This is a result of 20 or 30 years of attrition since we signed the free trade agreement with the United Kingdom in 1965 and since we joined the EU in 1973. These trends are continuing now as a result of the Single Market economy.
308.
We recognise, pragmatically, that many of these firms have no future. My impression of 'Strategy 2010' is that a certain amount of rhetoric recognises that some firms have no future. However, it does not grasp the nettle. You see this particularly in its dealings with the grant mentality and the subsidy mentality. On one hand it says that it wants a free-standing, entrepreneurial, self-help type economy, but then you turn the page and discover paragraphs that say that the present grant regime should remain until something more appropriate can be devised.
309.
These are contradictory. To engineer a transformation of the traditional sector, which must be done, requires more direct action. Much of the material in the sectoral reports did not find its way into 'Strategy 2010', and that is understandable. The reports were not published with 'Strategy 2010', so when Douglas Hamilton and myself wrote our critique in April 1999, we did not have access to the sectoral reports. Much of what we said about 2010, I would now say in a more muted way. In fact, I would know exactly where to focus - on the areas of the sectoral reports that were largely ignored in 'Strategy 2010'.
310.
Dr O'Hagan: You referred to areas of the sectoral reports that were largely ignored. Could you give us some examples?
311.
Dr Bradley: That would take us into great detail. The Committee will have access to these sectoral reports, but the textiles and clothing report ran to about 130 pages, and it was a very detailed, well-informed analysis of the different niche markets in this sector. It would have given more credibility to the glossy, aggregate publication 'Strategy 2010' if the thinking of the strategy support group about this crucial sector had been made more clear. It makes up a quarter of manufacturing employment, yet there was a sense in which the issue was fudged.
312.
I am not saying that 'Strategy 2010' deliberately deleted damning evidence from the sectoral reports, or misled you. It told a story that glossed over the true difficulty. In my written submission I quoted some figures for labour costs in the alternative countries for these sectors, and for the difference between Northern Ireland wage costs and wage costs in Romania, which also has a large textiles and clothing sector. The figures were astronomically lower. I do work on the Romanian economy, and I know that it faced the dilemma of having a large clothing and a large textiles sector, but it could not compete on textiles. It could only compete on clothing, so it largely let its textile sector decline. It went to practically nothing. Subcontracting work is done for German textiles' firms because in these labour intensive sectors it is glad of the work because Romanian GDP per capita is only about 25% of the EU average. Northern Ireland is at the EU average.
313.
Dr O'Hagan: I know that you and Douglas Hamilton have done much work on 'Strategy 2010' and that you were very critical of it. Those criticisms and concerns were shared by a very broad range of people. One of the concerns was the make-up of the Steering Group and the fact that many people across the sectors felt excluded from the process. Part of the reason for doing this is to try to open the debate that possibly was closed before 'Strategy 2010' came into place. You said in 'Parliamentary Brief' that the analysis on which the report is based is at best partial and at worst flawed. The diagnosis is unreliable and is not likely to form the basis for sound policy recommendations. I quote
"The policy recommendations that are made lack focus and involve no radical rethink about the policy framework that would be appropriate for a region like Northern Ireland, in the context of devolving governance within the UK and the growth and evolution of the economy of the island of Ireland."
That is fairly damning criticism and I would like to hear you elaborate on these views. I know that you said that you might be more moderate in your criticisms as you have now seen the sectoral reports.
314.
Dr Bradley: It is important to understand the context in which Douglas Hamilton and I work. We are not politicians, and we are not members of agencies responsible for selling Northern Ireland plc to foreigners. We are research economists. We view 'Strategy 2010' from an economic research point of view, which is a very partial point of view, but it is the one that we use.
315.
There are two aspects to 'Strategy 2010' - analysis and prescription. The analysis side is dreadfully weak. I work for the European Commission doing economic analyses of the national development plans for Objective 1 regions. When the proposals go forward to the Commission they are vetted by outside experts. I also work for the Commission on national development plans for pre-accession funding in Eastern Europe, and I have seen the Commission comments on these plans. On the one hand, 'Strategy 2010' is an industrial development document, but it has pretensions to being something much more important. It is, in fact, an economic development plan for Northern Ireland. It includes spatial planning, education, wage policy - it brings in many extra policies. It is an unusual situation to have a national or a regional economic plan written by a line ministry with responsibility for industrial development.
316.
Speaking as an economist, and I think Douglas Hamilton would share my views, it is necessary to write an encouraging, optimistic account of what Northern Ireland has to offer to foreign investors. I do not deny that that is important. We have an agency in the South of Ireland that does exactly the same, but it is best if that type of document is written against a background of a very honest, full and frank analysis of your weaknesses. That type of work lies under the surface - it is the seven eighths of the iceberg underneath the one eighth that the public sees. I dare say that even the politicians are busy people, and that they perhaps only see the one eighth as well. There is no seven eighths lying under 'Strategy 2010'.
317.
I do not know to what extent there was a detailed economic analysis of how previous policies performed, because they are not mentioned in 'Strategy 2010'. Why is that important? People say that you are looking into the past; this is a bright new future and everything has changed - no it has not. New economic plans are designed by looking at what would happen on the basis of existing policies, and then saying that we will change those policies - or not, as the case may be - and this is what will happen with the new policies. It is a process that economists do in a highly formal way using such things as economic models, but even ordinary analysts and consultants do it. This framework is missing from 'Strategy 2010'.
318.
You can reach into 'Strategy 2010' and find many good bits and many bits I disagree with, but there is no coherence in it. For instance, there is no facing up to the fact that in many ways Northern Ireland is a very uncompetitive region. Why do I say that? It is not my view, it is the Department of Trade and Industry's view. They regularly publish regional competitiveness indicators, although for some reason that escapes me Northern Ireland often drops off the scale - maybe these indicators are only gathered for Britain as distinct for the United Kingdom - but there are enough of those indicators to show that Northern Ireland scores very badly on competitiveness.
319.
That being the case, the Department of Economic Development will say - as they did in 'Strategy 2010' - that our manufacturing sector is the fastest growing amongst the United Kingdom regions, and that although we have 2% of United Kingdom population, we get 5% of all direct foreign investment in the United Kingdom. The missing analytic framework is the way that type of comment is addressed. Inward investment is not attracted by having 2% of the United Kingdom population. It is attracted by having very good subsidies and incentives. The correct economic comparison therefore, is how much is being spent in Northern Ireland to attract inward investment or to support indigenous industry compared to other United Kingdom regions. You will probably find that inward investment is less than it should be because the level of grants and subsidies is compensating for an underlying loss of, or lack of competitiveness. The reasons why Northern Ireland became uncompetitive go back to direct rule, and the fact that prices and wages tended to converge largely with United Kingdom levels. It is quite an interesting story, but those aspects are missing.
320.
I used those issues, not to make a case, but to illustrate how an economist thinks about this document. When I say that it is flawed and partial, I mean that this type of analysis is missing. Consider the Republic of Ireland's economy, where that type of analyses is done. The 1980s were littered with excoriating reports about the poor performance of the Irish economy and the abysmal performance of development agencies, which are always blamed for poor performance, whether they are responsible or not.
321.
I do not see the same kind of culture emerging from 'Strategy 2010'. If this document is designed to encourage the presidents of American multinationals to come to Northern Ireland, it will not fool them. They will hand it over to their economic analysts to study in detail and to evaluate, and those analysts will come up with the same answers that Mr Hamilton and I did.
322.
Dr O'Hagan: You criticised the lack of innovation and radical thinking, in particular the fact that the Northern economy was still tied to Great Britain's framework. How do we break this dependency? How do you see a better all-Ireland economic context developing? How do you see the North fitting into the European Union?
323.
Dr Bradley: Northern Ireland's external world is fascinating; it is very multidimensional. It is mainly the United Kingdom. It is also the Republic of Ireland. We take almost a quarter of your pure exports - not your external sales - your pure exports. You are in the EU, and you also have a bigger exposure to Asia than the Republic of Ireland. There was no sense in 'Strategy 2010' that these links had been traced. For example, much of Northern manufacturing provides sub-supply to British firms. These links were not traced through. If we had been writing that document in the Republic of Ireland, we would have paid much closer attention to our relationship to the United Kingdom, because it involves the weaker, traditional firms that are vulnerable to a weak sterling.
324.
Yesterday I spoke at an Institute of Welsh Affairs conference in Wales. Rodhri Morgan spoke about the Welsh attempts to answer your questions: how can you, as a region of the UK, grow faster than the UK average in order to converge? That is the economic problem. You are at just below 80% of the UK average, the target in 2010 is 90% in 10 years' time. The Welsh are more pragmatic, they are at about 82% and their forecast predicts that they will fall to 75%. They are facing that dilemma by asking what they will do with their new Objective 1 status.
325.
It is probably not for me to tell you how policy should be made in Northern Ireland. This is a fascinating issue. The Irish historical experience gives us some insight into how the Republic of Ireland was constrained by its close links with the UK economy until it moved towards foreign direct investment. Once we were able to diversify the markets away from the UK, as well as having the policy freedom to have a lower rate of corporate taxation, we accelerated our growth.
326.
You in Northern Ireland do not have that freedom, yet 'Strategy 2010' naïvely puts forward a low rate of corporation tax as a key policy instrument. As if doing that was not bad enough - how it plans to do that within a fiscal union boggles the mind - it is doing it temporarily. It does not even understand that foreign firms tend to plan on the life cycle of a product of perhaps 10 to 15 years for a modern firm. If you are lucky, those firms will roll over; if you are unlucky, they will pull out after 10 or 15 years.
327.
A five-year tax break means nothing to them. I cannot understand that 'Strategy 2010' has not addressed this issue correctly. I am sorry if I am coming across as negative, but I am not a Government Department, I am one person. Douglas Hamilton and myself received no finance to do this critique. We did this critique of 'Strategy 2010' because we have had an ongoing interest in research on North/South economics, and we felt that this document was so bad that we needed to write something about it to encourage a public debate. I am being very frank with you; I am being negative. If somebody wishes to commission my research institute to work either in isolation or with other teams, I would be only too delighted to work on strategic planning for Northern Ireland. We are already doing this for Latvia, Lithuania, Slovenia and East Germany - this is what we do. We work on international contracts.
328.
Dr O'Hagan: Thank you very much for that. I will pass it on. It has been really interesting I would love to go further with all of that.
329.
Mr Neeson: DrBradley, I want to follow up on the corporation tax issue. If you think that what is being proposed is unrealistic - and there are all sorts of reasons why it is - what sort of financial packages would you suggest to attract inward investment?
330.
Dr Bradley: I am going to have to say something that might come across as shocking, but it is a fact. If you look at Northern Ireland as an economic unit, you can attempt to identify the public-sector income inflows. The latest Department of Finance and Personnel figures show that the subvention is more than 30% of your GDP. That is higher than East Germany, where it is 28% and falling.
331.
The problem is that much of that is ring-fenced and goes to either security expenditure or social welfare expenditure, which, for reasons we all understand, is higher in Northern Ireland due to the young population and the higher unemployment rates here - although that is not quite such a big problem now. What I never really understand is what, as a region, you are doing with the core in the public investment side of that expenditure. You have a wonderful opportunity in being able to effectively run a public-sector borrowing requirement of 30% of your GDP. The highest we ever went was 13%, and the IMF was practically coming in in the early 1980s to shut down the Irish economy.
332.
I do not understand what is being done with the public capital element of that, targeting it as a type of Objective 1 funding. In other words it is Objective1 funding coming from the UK, and it dwarfs the actual Single Programme document funding, which, by the Minister's own admission, is not additional and was wasted, according to the evidence I read in the Irish Times. Sir Reg Empey was reported in the Irish Times as saying that the structural funds were wasted.
333.
The larger element of the public expenditure in Northern Ireland needs to be targeted much more coherently on education, on infrastructure and on much more efficient targeting of aid to the indigenous sector. That is happening, but it is not producing the necessary result, because the Northern Ireland Civil Service has not gone through the cold bath that our Civil Service went through when we had to deal with the European Commission regarding planning, monitoring and evaluating the use of structural funds in the Irish economy. As I have written in other contexts, Irish civil servants now have Brussels's civil servants looking over their shoulder. If they are not spending the money wisely or the ex-ante evaluations show that there was not a good return on it, something will have to change. I do not see that culture operating in Northern Ireland. Consequently it is very difficult to know why, with access to such massive external funding, you have not modernised the economy and overcome in public expenditure the disadvantage you suffer on corporation tax.
334.
That is one answer. I really do not think that in the foreseeable future you will have access to region specific lower tax rates. Even the Scottish Assembly, which constitutionally has this right, I doubt will ever exercise it.
335.
The other side of the coin is addressed by an element of Dr O'Hagan's question. What is it about the island context that could help to overcome the competitive disadvantage vis-à-vis the South? Traces of this competitive disadvantage are mentioned in many of the sectoral studies - there is a frank admission, particularly on targeting the electronic sector, that you are not at the starting post. You do not get the profitable massive electronic investment that comes to the South seeking the low corporation tax rate. However, if you were able to conceptualise the island economy as a unit and were able to look for synergies between the type of high-tech industry that is attracted by a low corporation tax and the type that is attracted by a better infrastructure and targeted grants, you might have a package that would work very well. Douglas Hamilton and myself have been thinking along these lines.
336.
One of the groups at the centre of the 'Strategy 2010' process is the Northern Ireland Growth Challenge. In my experience, it is immensely hostile towards the notion of synergies across the border. Perhaps this is overstating it, but I have made systematic efforts to try to find out what it is doing but to no avail. All I have seen is the first two documents that it issued in 1995. They were excellent documents based on Michael Porter's analysis of clusters, and in them it made a frank admission that it needed to start looking at clusters across the border. After that everything changed.
337.
I was disappointed to see that not only was the Northern Ireland Growth Challenge at the centre of the 'Strategy 2010' process but it is also being written into the recommendations as having a permanent role in ongoing reporting through the Minister to the Assembly. I am shocked at this. This is a body that has not, to my knowledge, produced any account of how successful its activities are. It may be doing good work, but it is doing it by stealth. I can only deal with what is in the public domain.
338.
Mr Neeson: I get the distinct impression from what you have said that there is a lack of strategic planning in Northern Ireland and that policies are more often Department-led rather than being strategically-led. Am I correct?
339.
Dr Bradley: Yes. I have nothing to add to what you have said.
340.
Mr Neeson: Finally, I am impressed by your experience. As someone who is strongly pro-European and pro-enlargement, I want to ask if, within the new scenario emerging in Europe, you foresee any opportunities from which Northern Ireland's economy and structures might benefit.
341.
Dr Bradley: That is a difficult question to answer. I am conscious of the fact that if we had had this session 15 years ago then the situation would be reversed - the Republic would be the economy suffering all the disadvantages. The reason for my involvement now in Eastern Europe is that Eastern European states are looking for role models. East Germany is economically very like Northern Ireland. It is a region of a larger state - a very prosperous nation state in both cases - and I believe that poor regions in Europe, particularly in the Eastern European countries, will have much to learn from the Northern Ireland experience. They will have much to learn from the failure of past policies, but Northern Ireland could be in the vanguard of designing policies that accelerate the growth of a region in a nation state, while working within the fiscal and monetary constraints that exist in such a situation.
342.
It is interesting that the Republic of Ireland is converging towards the situation of Northern Ireland. You do not have an exchange rate and we do not either. Also, we have fiscal freedom, but I would not bet that we will have it for much longer.
343.
Strategic planning in the South is based on the fact that within 10 years we will have to harmonise our corporation tax rates. We have closed the gap in terms of income, but we have not closed it in terms of wealth. If that gap is not closed in the next 10 years, we will have to look at doing it with the same limited set of policy instruments as you.
344.
Public expenditure is on the other side of the coin, and our experience with the European Commission and with the better European States is that the more honest and transparent you are about how you use external funding, the more likely you are to continue to get it. Our analysis showed that the Republic of Ireland would not have lost out in the Single Market, even if we had received no Structural Funds. We would just not have grown as fast as we have done. We published our analysis but this did not mean that the Commission said that we were not getting structural funds or that such funds were designed to protect us against losses brought about by the single market.
345.
In Northern Ireland there is a cult of secrecy. I was surprised that the Department of Economic Development did not respond to the criticisms I sent to the Permanent Secretary and everyone else I could think of - and the version sent was the unexpurgated one. I have written the published versions in a more polite style. There was no debate at all, and I could not understand that.
346.
There are wonderful opportunities in Northern Ireland. Following my experience yesterday with Wales, I would say that Northern Ireland has much greater growth potential. Wales has an ageing population. Wales has a much more horrendous legacy due to the fall-out from traditional industries. It is not close to the fastest growing economy in the EU. The Welsh are only at the beginning of modernising their industry.
347.
Northern Ireland, as an example of a region accelerating its growth, and the Republic of Ireland, as an example of a small micro-nation state accelerating its growth, could be quite impressive on the European scene.
348.
You are quite right; strategic thinking and policy integration has to start. The recommendation in 'Strategy 2010' to cut the education budget so as to fund the IDB budget is crazy. That is a recommendation. The Minister repeated it a fortnight ago, according to the Irish Times. What kind of strategic thinking is that? If the Republic of Ireland taught you anything, it is that small, vulnerable, peripheral countries and regions must go down the human capital route.
349.
Ms Lewsley: Thank you very much. I welcome you here this morning. You said that you believe the targets listed would be easily achievable. How ambitious would you want those targets to be? Are there any other targets, such as an equality target, that should have been included?
350.
My second question is with regard to the proposal for the nine key locations for further development outlined in the DOE report 'Shaping the Future'. What policies would you propose to ensure that there is a fair distribution, particularly in terms of equality?
351.
Dr Bradley: The equality agenda is a very difficult one for an economist to grapple with. In ESRI, the E stands for economic and the S for social. Sociologists tend to work on the inequality issues. I was asked the same question at the Select Committee on Northern Ireland Affairs in Westminster and I gave a slightly provocative answer: that the Department of Economic Development has an equality side tagged on. However, you will recognise from any of the public hearings that it has largely failed. I do not think industrial policy is the only way to address regional inequalities. You must tackle those through social policies, education policies, and the type of policies that are in the Peace Programme, and the LEADER II and INTERREG III programmes. In that respect, you need to be synergistic in your policy making. That is better than tagging on a reference to try and get foreign firms to visit deprived areas, which could be largely self-defeating, because the qualities that would attract high technology firms may be absent in those regions, and you would lose out. You would not have the social policies, which will remove these inequalities, nor the high tech industry. It would be a double whammy.
352.
The interesting thing about NorthernIreland is that inequality tends to be conflated with regionalisation. The most deprived areas, in terms of the highest unemployment rates are on the periphery of NorthernIreland. They happen to be the border counties, and that brings us back to DrO'Hagan's remark about how one gets Donegal developed if its economic hinterland lies in Derry? How does one develop the Newry/Mourne area if the economic hinterland is largely focused on Dundalk? The Republic of Ireland tries to target regions, but not in a politically divisive way. It uses the concept of gateways where in recognition of the fact that economic development of a modern kind has to be focused on towns of at least a certain size. Building new towns fails, and we know where that leads to. Modern economic development cannot be based on tourism or green fields. One has to target key towns with hinterlands which are deprived.
353.
I was impressed by the 'Shaping Our Future' document and the public debate that took place. I pointed out to the Permanent Secretary that there was a curious mirror image between North and South on this. In NorthernIreland you have the privilege of planning your spatial strategy almost apart from your economic strategy because the funding for it is largely external. In the Republic of Ireland we have to do the economic planning first and take the consequences in terms of misallocation, congestion, and housing crises downstream, because the finance to deal with it has to be self-generated. I admitted to the Permanent Secretary that spatial planning is done in a much superior way in NorthernIreland. Economic planning, however, is done in a superior way in the South. We have, therefore, a lot to learn from 'Shaping Our Future', - it is a fine document. I was amused that the spatial planning document was published before the economic planning one and although there are cross-references, they are tangential. Spatial planning in the Republic of Ireland is totally integrated with the economic planning because it is downstream from it.
354.
The inequalities issues, to a certain extent, are being handled by the reduced Objective 1 status, coined as the BMW regions - border, midland and western counties. These are largely the rural regions and they are depending on Galway, Sligo, Castlebar, Westport and Letterkenny to be the focal point of high technology firms and a catchment employment area that will encourage highly qualified people to locate in, something that is already happening in tandem with tourist renewal. We have a very active policy of very good tax breaks for selected towns to try to build them above a critical mass. For example, in Westport the population has increased from about 3,000 to 6,000 in five years.
355.
Mr Attwood: You are very welcome. Your contributions here, elsewhere and in the form of Peace and Reconciliation, when that was ongoing, have always been challenging and refreshing. I am going to ask you what is probably an impossible question. It is one that previous contributors to the Committee have been able to answer, for example, the vice chancellor of the University of Ulster. What are the key factors you think are the critical economic development issues that we need to address that are not addressed in 'Strategy 2010'? Arising from that, if we were to develop economic planning on the basis of 'Strategy 2010' where would we be in 2010?
356.
Dr Bradley: You are right to say that these questions are impossible. I do not wish to duck them, but I am not good at oral presentations. I work better in a dark room with a computer where I have time to think my answers out. I have not sat down and designed a development strategy for Northern Ireland. The vice-chancellor would be much better at this, and I sincerely hope that the new Department of Enterprise, Trade and Investment is good at it. I should not be able to do it, and I have nothing to say on the topic.
357.
Mr Attwood: Earlier you said that 'Strategy 2010' envisaged one Department's lending money to another. However, you saw that as being inconsistent with investing in human capital, since, in a small economy, investing in education and raising skill levels is one of the factors which will help integration. What are the others?
358.
Dr Bradley: I hate giving trite answers, and this one may be quite depressing. But people attribute Irish economic growth over the last decade to the crucial issue of openness. From the 1960s, the economy was thrown open, initially taking in free trade with the rest of the UK, then immediate adherence to every EU initiative after our joining in 1973. We joined the European Monetary System in 1979, which had the consequence of immediately bringing about the break in the link with sterling in March of that year. We were enthusiastic about the Single European Market and EMU, the social chapter of the Maastricht Treaty, and, in a guarded way, about enlargement. How does one bring about a spirit of openness to the world? That is sadly lacking in Northern Ireland.
359.
Openness is not everything, however, for one can throw one's economy open to the world while lacking the resources to hook on to the global economy in a profitable way. One needs to improve one's infrastructure and the skill and training levels in one's economy and target firms very selectively, usually local ones which are weak in marketing or unwilling to grow. These are trite comments, but they form the backbone of the structural funds.
360.
When one analyses the Structural Funds, which were a central element from the late 1980s permitting and facilitating openness to generate high growth, one finds that the expenditure categories lie here: the infrastructure; the human capital; and the 14 or 15 technical universities around the country. The latter were small and insignificant in the beginning, but now they are integrated and function as a national network. They feed skilled people into exactly the industries where they are needed, retaining them locally. They also compete among each other.
361.
There is a sense of complacency in Northern Ireland. One could characterise a great deal of the work done by the previous Department of Economic Development as claiming that Northern Ireland was more competitive than it really was. That being necessary in the public rhetoric on Northern Ireland for reasons I fully understand, the focus on these building blocks of growth was lost. For instance, 'Planning our Future: Towards a Strategy for the Development of the Region' was brought in almost as an appendage although it was a crucial input into economic growth, systemically linked to the whole process.
362.
The education and training element is bizarre. In the evidence given by the IDB to the Northern Ireland Affairs Committee at Westminster last July, its verdict on the education and training element in Northern Ireland dealt with A-Levels, where of course Northern Ireland scores very well.
363.
This is a really good sector in Northern Ireland. It omitted other elements in education, such as technical education and access to education for everyone, including people from traditions and social groups who were not previously part of the academic side of education. You still have the 11-plus, a selective system that is not really a part of the modern world. You need to empower everyone through the education system. I can think of nothing better than repeating that trite advice.
364.
What you get in 'Strategy 2010' is the strengths, weaknesses, opportunities and threats - the business blurb. What drives the analysis in 'Strategy 2010' is business-school analysis, but it has to go much deeper than that, and I am afraid it does not. That may be because the research infrastructure in the economic/social area is weaker. I could say something interesting about that if you had the time.
365.
Mr Attwood: This came up earlier when the Northern Ireland Economic Council representatives were asked about their future, as there are some question marks hanging over it. The context was "is there any independent policy input into Government in the North or an economic planning strategic European -" The reality is that it is minimalist and becoming more marginalised rather than developing and being empowered which is one of the strengths of your agency.
366.
Dr Bradley: I have noticed a slightly disturbing aspect to Government-commissioned economic research in Northern Ireland. It often tends to be a close client/consultant relationship that does not go into the public domain. Two and a half years ago, I was asked by the Northern Ireland Economic Council to carry out a study of the impact of EMU on the Northern Ireland economy. Initially I was asked to try to form a consortium with Northern Ireland economists - I could not do it. They looked at the sum of money available, and it was derisory, £14,000 for one year's work. I ended up putting together a consortium of London-based economists - friends in the National Institute for Economic Research in London, whose arms I twisted, people in Strathclyde and a colleague in UCD. That was how we took care of the report. I was surprised that the issue of the impact of EMU on one of the regions of the UK did not animate the research community here, because research in this area falls outside the remit of the research assessment exercise. That is largely what is going on.
367.
The research assessment exercise (RAE) is how the universities judge themselves. They have targeted areas where they can excel, and these are no longer economics. Neither of the two major universities appears to have a separate submission on the RAE under the heading "economics", which is surprising. In Glasgow and in Scotland generally there is a thriving UK regional economic research community. We have gained enormously from working with them, mainly the Fraser of Allander Institute.
368.
The ESRI in the South functions in a different way; we are at arms length from the Ministry of Finance, although we receive about 25% of our funding as a grant. We are commissioned by the Irish Government to carry out studies. It is always a condition of research grants that the institute decides how and when the research will be published, and that included the investment priority report, which was the research input to the national development plan carried out by my colleagues lead by John Fitzgerald in the ESRI. I have benefited in Eastern Europe from my research exposure in Northern Ireland. I have learnt to think in regional terms, which is a valuable exercise, as you do not think in regional terms if you are from a small nation state. I am surprised that the research community here is not equally animated.
369.
It may be that the research input available is too small and too weak. However, it may be that even if it were there, the various Departments would turn their back on it. The Government services have their own economists, and I do not see much of their contribution to 'Strategy 2010'.
370.
The Chairperson: I have one general question, and you have already dealt with some aspects of it. In summary, what lessons could be learned from the Culliton Report and 'Enterprise 2010'?
371.
Dr Bradley: The main lesson for 'Enterprise 2010' is, if you are going to compile a critical report on past economic behaviour and future strategy, do not ask the same agency who carried out the policy to do it. The Culliton committee had one civil servant and he was the Secretary, the amanuensis. I have made the point, and it has been taken in very bad spirit, that Minister Ingram described the construction of the Strategy Steering Group as largely from the private sector. It is no such thing. Anyone who works as I do closely with civil servants, knows exactly how the dynamics of a committee like that pans out. The busy, frustrated, over-committed business people have very limited time to give of their advice - unless it is exceptional in Northern Ireland, and I doubt if it is. The drafting and calling the shots tend to take place in the secretariat. I was not at all surprised that 'Strategy 2010' was less than excoriating about the past performance.
372.
In a democratic society this criticism comes out in other ways. It has come out in the Northern Ireland Auditor's report, the Public Accounts Committee in Westminster and, no doubt, it will come in from the Northern Ireland Affairs Committee investigation into inward investment.
373.
Culliton was a clarion call. In the early 80s there was a previous report, the Telesis Report, which came at a very bad time for the Irish economy. It is not a good idea to restructure your economy when you are taking in water. It is far better to do it when you have a little bit of breathing space, and I would characterise the Northern Ireland economy as having a little bit of breathing space, both political and economic. Culliton was a wake-up call; it was a tough hard-hitting report. It was taken on the chin by the development agencies and the Government implemented its findings. The Moriarty Report followed, which was basically a second try to get it absolutely right. It was implemented and in a very short time. The agencies were reorganised and moved on from there. I am not saying everything is perfect in the agencies, but the whole process was very different and it was perhaps the beginning of the glimmerings of success which led to a greater willingness to be self-critical.
374.
I always have to be very careful when I talk about the southern experience and not to appear smug and self-satisfied. There are people in the IDA worrying about what will happen when we run out of the PC culture; when bio-technology hits us; when we run out of labour; and when we cannot support further inward investment. They are not resting on their laurels. They are constantly retuning their development policy, and this is part of public debate. It takes place in public and, with the social partnership through the ESRI, this process operates very well. The Northern Ireland Economic Council is ideally set up to be such an informed body, representing the social partners and with a tight, expert secretariat. Over the last decade, I have derived a lot of information and knowledge from the Northern Ireland Economic Council reports. That is the lesson of Culliton and there does not appear to be much prospect of the debate on 'Strategy 2010' continuing in the same way. These lessons will be learned in Northern Ireland.
375.
The Chairperson: Thank you very much, Dr Bradley.
TOP
MINUTES OF EVIDENCE
WEDNESDAY 28 JUNE 2000
Members Present:
Mr Doherty (Chairperson)
Mr Neeson (Deputy Chairperson)
Mr Campbell
Mr Clyde
Ms Lewsley
Mr McClarty
Dr McDonnell
Dr O'Hagan
Witnesses:
Mr T Gillen ) Acting Northern Ireland Officer, Northern Ireland Committee, Irish Congress of Trade Unions (NIC/ICTU)
Mr E McGlone ) Vice-Chair of NIC/ICTU
376.
The Chairperson I apologise for the delay, but we had some Committee business to conclude. I welcome you both and thank you for your submission. We look forward to dealing with it over the next hour or so.
377.
Mr Gillen: On behalf of the Irish Congress of Trade Unions, I thank you for the opportunity to talk to the Committee. I am delighted that the institutions are up and working again. As you know, we were willing to come along earlier, so this opportunity is extremely welcome.
378.
I know that the Committee has received our comments on 'Strategy 2010', and I also thought it appropriate to send in our comments on 'Vision in Practice' relating to new TSN. Had the Economic Development Forum (EDF) not been meeting this morning, we would have had a stronger representation. Our members on the Economic Development Forum will be discussing some of these very issues and the equality agenda is also up for discussion this morning. Clearly, no discourtesy to the Committee is intended by the fact that only the two of us are present.
379.
Mr McGlone: It sounds like I am downgraded - [Laughter] - but do not worry about that.
380.
Mr Gillen: We have some problems with 'Strategy 2010'. Although we welcome its publication, we do not regard it as a very joined-up document. It is very difficult to understand how the 10targets directly link in to the 62recommendations, and those views are shared by a number of other partnership bodies including the NorthernIreland Economic Council.
381.
We wish to work very closely with the Government on implementing 'Strategy 2010', or rather on improving 'Strategy 2010' because we think that 'Strategy 2010' has a lot of gaps and holes in it. We were disappointed that the process did not mirror that undertaken by the Department of the Environment in 'Shaping our Future', on which there was extensive public consultation. That would have been a better approach for the Government to have taken when they were consulting on 'Strategy 2010'.
382.
Many aspects of 'Strategy 2010' have already been implemented, some of which we welcome, like the Information Age Initiative. But there are a number of points which we do not welcome, such as the rolling back the state. We hold very strong views on that, and I am sure we will come to it during questions. I will stop there because we would much rather engage in a discussion with you and answer your questions.
383.
Ms Lewsley: I welcome you here this morning. I will not hold the fact that you are two men against you - it is not the quantity but the quality that counts. 'Strategy 2010' has recommended that the existing grant regime for inward investment should be maintained, unless and until new measures become available. How does your organisation propose that we get away from what you have described as a "long-term subsidy creating a soft budget culture"? Given that you are generally against the subsidy culture, what do you make of recent press reports which have highlighted the difficulties faced by the shipyard and textile sector? They compete without subsidies. What are your views on these sectors, and should other sectors be subsidised as well?
384.
Mr Gillen: We realise that there is a role for state support for industry, and we recognise that that should continue in some shape or form. There is sufficient evidence to show that real value for money may not have been achieved from all the public money that has been invested. Some of this money is used to create jobs, although there are not many new jobs being created, and some of it is used to maintain jobs - all very valuable. But the sort of industries we need to attract are those in the new technology sector, and they are not particularly capital intensive. If a company has a successful product, I do not believe that it is particularly interested in getting grants if they can get a skilled workforce to produce its goods. In the past Northern Ireland has attracted industries making end-of-line products. Instead of just producing something, we should be developing things, and we should have a research centre.
385.
If a company is going to get taxpayers' money, it should give a commitment to the community. It is not enough for a company to come in and get massive amounts of public money to produce something. We need a company to bring its corporate headquarters and some kind of commitment through its finance and R&D departments. We should direct our money to that sort of thing.
386.
If we can get companies which are looking for a substance and a skilled workforce rather than grants, we can redirect public money into providing that skilled workforce, as the Republic of Ireland has done. It recognised in the mid 1960s that it had to change its whole education system. We have a well educated workforce, but there is a big gap in what I call technician/engineer level and at sub-degree level. Resources could be utilised more usefully there.
387.
As you are probably aware, the Economic Development Forum is reviewing the incentive package at present. That debate is taking place this morning within the capital levels that are there. We are playing a role and looking at that, and as things evolve - it is a very topical issue - we will be very happy to write to you in more detail about our views on that if you feel that that would be helpful.
388.
Mr McGlone: There is a problem with the use of the term "subsidy" as we discussed earlier. We should be talking about a basic support mechanism rather than a subsidy. Subsidy has connotations of something else. The proper approach is to support local industry or inward investment to ensure that a manufacturing base exists. At the moment it is in a state of semi-existence, heading towards total decline. To address this matter we need recognition that the state must support any attempts to revive that manufacturing base. We do not want to give the impression that we do not wish to see subsidies of any form. We do need to see supports, and they must be in place, but what they cannot do is replace real progress in the long term. We can support a subsidy now that will enable a firm or whatever to stand on its own at a later stage.
389.
Ms Lewsley: You have said that some of the targets, particularly on long-term unemployment, seem to be easily achievable. Which targets do you regard as the most realistic, and which are not achievable? Should other targets have been included? I have said before that there should have been the possibility of an equality target. You have commented on the lack of emphasis on equality in the document and have suggested recommendations for improvements. What further initiatives need to be introduced to encourage women in particular into areas such as construction, engineering and IT? How do you think an economic strategy would look that puts social cohesion and equality at the centre?
390.
Mr Gillen: The phrase we use in our submission is a "genuflection towards equality" in this document. We could have said a nod at it. It is a serious point because we believe that the issue of equality was not taken seriously in 'Strategy 2010'. It is interesting to see in the papers I have from the EDF this morning that there is an update on what it intends to do on equality. We have been pushing that agenda through the EDF and through our membership of the Economic Council. A presentation is being made on that, but we do not know what it is going to say. The issue links into the current round on structural funds. The two cannot be divorced. 'Strategy 2010' is trying to draw massively on structural funds.
391.
We were involved in an initial committee which was trying to give advice to the Department of Finance and Personnel on the submission to Brussels on the structural funds. We worked hard at pushing equality issues into that agenda. We were disappointed that in the final document that went to Brussels many of the things that we argued for were not reflected. Your question was very long. Please come back to me on things that I have missed out.
392.
The question of targeting social needs and improving opportunities for women is crucial and one which we argued fully and will argue again in the interim monitoring committee. When we start getting figures on how the £910 million is going to be spent, we will work hard to ensure that the questions of improving job opportunities and addressing the issue of long-term unemployment are dealt with seriously. I think this issue is linked firmly to your previous question about the incentives package. We will be doing everything we can to ensure that those issues are not ignored.
393.
I referred to the 10 targets and 62 recommendations. These have merits, but we are sticking to the views that we expressed in our submission. I read the Economic Council's submission and found a great deal of commonality. 'Strategy 2010' is a first step; it is not a final document. A lot of work still has to be done on it. We will continue to do that work through our membership of the Economic Development Forum and the Economic Council, and as an independent trade union movement. That is our role and we will pursue it. There is a lack of cohesion between the 10 targets and 62 recommendations, and we will have to work on this. Perhaps you could come back to me with some of the other details.
394.
Dr O'Hagan: You referred to the model of social partnership in the South, and its benefits to economic performance. Does 'Strategy 2010' go far enough on social partnership? I suspect I know the answer. What consultation -if any - was there with the Irish Congress of Trade Unions in preparing 'Strategy 2010'?
395.
Mr Gillen: We have had to fight long and hard to build up a partnership model in Northern Ireland. If I say we laboured under a Tory Government, it is not a play of words; they did not recognise the concept of social partnership. The success of the Republic of Ireland's economy rests in part on the four pillars - the Government, the trade unions, business and farming organisations.
396.
We were against going into the Economic Development Forum unless the voluntary sector and the farmers were involved, because we are genuinely committed to working with all the sectors that operate in our community. The social and rural economy is extremely important, and that is why we do not support the concept of the nine centres, or hubs, that were spoken of.
397.
ICTU managed to get one agreed representative on to the main committee of 2010, which was not sufficient. It was private sector driven. That caused a problem because our private sector is too small, not because our public sector is too large.
398.
The consultation process on 'Strategy 2010' was totally inadequate. The Economic Development Forum does not adequately reflect the views of all those involved. There should be a public consultative process on 'Strategy 2010'. Although there is still a lot of work coming out of it, we do not see 'Strategy 2010' as a template for the future. There is a lot more than 'Strategy 2010'.
399.
We have the 'Shaping Our Future' and 'Strategy 2010' documents - but which is paramount? We know that there are inter-departmental working groups, but we do not know who is in charge. In general terms we support the process outlined in the document 'Shaping our Future', which is a much better process than the mechanism used in 'Strategy 2010'.
400.
Mr McGlone: I wish to comment on the first part of the question relating to the partnership model in the Republic of Ireland. The Northern Ireland Committee of the Irish Congress of Trade Unions is not enviously saying that we want this, because, like most organisations, ours is a composite group, and, for obvious reasons, is not fully committed to the Republic's partnership model.
401.
The economic growth that has been witnessed in the Republic has brought with it serious difficulties. At our recent conference one delegate highlighted one of these difficulties and the impact on his members; the problem is how the Republic of Ireland's young people get themselves into the housing market. The conference was held in Malahide, which is a very expensive place in which to live, and ordinary people cannot afford it. By way of an example, he told of a corporation-type terrace house with three bedrooms and a small garden front and back, which is selling for IR£180,000. He illustrated the problems by pointing out that even if a couple, who wanted to buy into the housing market in that area, were earning IR£30,000 a year each - which would be high salaries - they could not afford such a house, because the maximum mortgage they could receive would be IR£105,000. So one has to consider the good with the bad; we are not fully committed to everything that comes along with the good.
402.
Dr O'Hagan: Did your organisation respond to 'Enterprise 2010', and do you think there are any elements that the Department here could draw on? You said that it was surprising that there were not any targets for cross-border development in 2010. What targets and programmes do you think would facilitate such development?
403.
Mr Gillen: The first part of your question related to the document from the Republic, and I have consulted our Dublin office. Because of the partnership arrangements that we referred to, that has formed part of ongoing discussions at congress level and through the social partnership arrangements, but there has been no formal written response made.
404.
In relation to North/South issues and strand two of the agreement - and we are fully committed to the agreement - we have established, within congress, a director for south programmes, Terry Carlin. We believe that it will be very important to establish a mechanism for working together, and we meet regularly with IBEC and the CBI on that initiative. We have involvement in the EURES project, which deals with the labour market and the flexibility of working on both sides of the border, and we see this as an opportunity.
405.
In relation to targets, we want to improve the linkages and infrastructure between Northern Ireland and the Republic. We want to receive benefit from the energy systems, and we are looking closely at their education system with regard to joint recognition of qualifications - that matter is much more complex than we had ever thought. Through the North/South Ministerial Council we hope to have the opportunity to develop and improve relationships that, in some perverse way, will benefit from the Republic's inability to provide the workforce that it needs. If we can create a stable society in our own community - and we are well down the road towards doing that - and if we can divert some of the public money that we were talking about earlier to building a skills-based education and training system, then I think those are the targets we should set.
406.
We still have very high unemployment. Our long-term unemployment rate is very severe, and we are not really making a massive impact on that at the moment. So much is inter-linked - skills, training and education - that unless we can provide skills for the people that will attract industry, then we will not meet the targets of the bits we feel are necessary.
407.
Dr O'Hagan: Most people agree that 'Strategy 2010' needs a lot of improvement. I cannot ask you to comment on the whole document, but what would you say are the three main areas that you would recommend for immediate improvement?
408.
Mr Gillen: They are summarised on page 13 of our document. We have said the strategy needs to be coherent in its vision and principles right through to the recommendations. Social cohesion is an important principle that should be detectable in the targets and in the recommendations. We do not detect that at the moment. Hopefully, as the Economic Development Forum goes through its work, these things will be teased out, tweaked and developed. We think that the forum is a useful vehicle for achieving this although we do not think it is there just to implement 'Strategy 2010' - because we are not committed to implementing 'Strategy 2010', we are committed to improving the economy and social fabric of our community.
409.
We say that the new strategy has to indicate how it will fit with the new departmental structures, and what division of labour is to be effected amongst these Departments. Frankly we think some of the Departments are a bit dysfunctional. We do not understand why health and safety, for example, is included in health and social services. We regard health and safety as an industrial relations matter. We think it would have been better placed elsewhere. However, those are decisions for the politicians, and politicians have primacy in all of this. Those are the issues that we need to be addressing.
410.
Mr McClarty: You are very welcome. I was going to ask you a question about targeting social need, but I think you have already answered it. You have questioned the recommendation for a single development agency, yet others have commented on seeing a single development agency as a more focused and streamlined way of providing a clearer structure for customers. Do you have any sympathy with that view?
411.
Mr Gillen: If you had asked this question five or six years ago, we would have said "yes, amalgamate LEDU and IDB." But things have moved on significantly. There have been significant developments and, therefore, we think there needs to be more time taken on the issue. There are recommendations coming out for a vibrant research facility. The Economic Development Forum is up and running. We have got IRTU, which has been, in our view, a successful body.
412.
We are now in a developmental stage. We need more time to consider whether or not there should be an amalgamation of the likes of LEDU and IDB. We cannot leave IRTU out of the frame, and we have the Economic Council and the Forum. We have all of those things, and we need to take a strategic approach. I would not want, with respect, to give a knee-jerk reaction to that issue, because there is an ongoing debate, and it is a matter which would be very close to the heart of the Assembly and this Committee because it goes back again to efficiency and effectiveness. It is a matter that will need to be widely discussed with all of the players.
413.
Mr Neeson: Mr Gillenand Mr McGlone, you are both very welcome. I am very pleased that you see the important linkage between 'Strategy 2010' and 'Shaping Our Future', although the two processes are different. You have already spoken about what we can see are your three main priorities in relation to 'Strategy 2010' and as you know it is the list of recommendations. Are there any other recommendations that you feel were not addressed in the 'Strategy 2010' document?
414.
Mr Gillen: That is a hard question, 'Strategy 2010' has a purely economic focus with a nod and a wink to the social economy and improving the community. That is a flaw in 'Strategy 2010'. I think it was driven by people who are essentially business people and also by elements of the Civil Service who felt free to drive their own agenda. I think there really needs to be some kind of bonding with the community itself.
415.
If you go out into the street, and you have heard this yourself, I do not have to tell you, people do not know about 'Strategy 2010'. Mr Adam Ingram said that he is going to promote 'Strategy 2010'. How is he going to do this, we asked him? He could not answer the question. Therefore I think it needs to be promoted and strengthened, and it needs to take a more human face of this, if that is not an old-fashioned or too soft a thing to say. It is not touching the community, and although hard economic facts and employment problems need to be dealt with, I do not think that it is sufficiently structured in a way which will deal with the problems of long-term unemployment.
416.
It will deal with the social economy, which is a very big player in Northern Ireland. It is not really targeting the issues concerning social need. The question of the nine centres is totally divisive, and it is interesting to note that the 'Shaping Our Future' review panel does not support the concept of the ninecentres. As soon as you mention nine towns, some MP, some councillor, some MLA is going to jump up and say, "Where is my town?" and quite rightly. It is therefore a weakening and an erosion of the whole question of the social economy and targeting the issues that MsLewsley was talking about earlier on, in bringing women into the economy, attracting the long-term unemployed - young people.
417.
The New Deal has not really worked that well in relation to the under 25s, for example. The whole question of trying to get people to go back into education is difficult - those are issues which 'Strategy 2010' has ignored. This is why we are so keen to pursue some development through whatever structures are available to us now; 'Strategy 2010' is a draft as far as we are concerned - it is not a final document.
418.
Mr McClarty: Can I just come in and elaborate on that? About the nine hubs. Do you not think we are far, far too parochial in Northern Ireland that unless jobs are created in a specific spot, then it is not regarded that they are jobs for people within that locality? Surely if jobs are created in Limavady, those are jobs which are also available to people in Coleraine, or in Londonderry, provided they are willing to travel?
419.
Mr Gillen: I accept that, but I think the concept of naming ninecentres, and saying these are the only places where we are going to put work into, is problematic. If we look at the Hualon Plant, or as I call it the How Long plant. It was going to be built at a place at Corr'sCorner. It was going to employ mostly female employees. It was not going to be highly paid work - no bus service to it? How were people going to get to it? Those were things that were not thought out. 'Shaping Our Future' is attempting to address those issues, and we are pleased that the review panel has come out against the nine centres. We support that, because we think that networks need to be built up.
420.
If the rural community were here in the shape of the Northern Ireland Agricultural Producers' Association (NIAPA) or the Ulster Farmers' Union (UFU), it would talk to you about market towns, which are an essential part of the community. They will be excluded from this development. Infrastructure and travel are issues, and we are currently talking about the future of our railways. MrMcGlone would go on all day if we started talking about the future of the bus service and development of Translink. It would be wrong to concentrate public money, investment opportunities and work in those nine centres. People are entitled to something more than that.
421.
Naturally I accept that employers will look where the people are. I do not decry the fact that some people and centres will be more attractive to an employer than others, but this should not be to the exclusion of the rest of the Northern Ireland community.
422.
Mr McGlone: The buzzword in this respect is social inclusion. It is a matter of treating Northern Ireland and its community as they are rather than saying, "We are going to shape you to make you the way we feel you should be". That is the danger with the nine-centre plan, which seems to be saying, "This will be a social map of Northern Ireland". If jobs are located in particular centres, people will invariably gravitate towards those, further depopulating other areas of Northern Ireland. If we allowed that to occur, it would be a serious and sad indictment of our society.
423.
I add in that regard that we are a low-wage economy by and large. If people wish to travel to Limavady on an hourly wage of £3.60, that is fine, but I do not know of any volunteers. This is an example of the issue killing off our textile industry. People work for the minimum wage in that industry, but despite this, employers cannot afford to produce in Northern Ireland. We are talking about an area with which 'Strategy 2010' does not deal in any real sense.
424.
I should like to return to MsLewsley's question regarding women's inclusion in work not traditionally done by them, for example construction. It is not simply a matter of including women, but rather of including everyone and ensuring everyone can become involved. We seek an inclusive society, and if 'Strategy 2010' does anything, it must produce that. That inclusive society must be open so that the mere fact that a person lives in Cullybackey rather than Ballymena does not mean there is a decreased chance of his finding a job. That must be able to happen.
425.
How to deal with labour-market issues and industrial realities in a real sense is definitely not addressed in 'Strategy 2010'. It does not deal properly with our diminishing manufacturing base. Essentially it casts it aside, saying that it is gone and that we shall look elsewhere at something new. We do not know what we shall look at, but we shall discard what we have. That is a retrograde step, and we argue that there must be some sort of bolstering exercise in the interim to try to get that back. That will not happen if we reduce everything to nine centres and say that everything will happen out of them with nothing else occurring. As MrGillen said when discussing strategies, our vision is one of networking. It is not about confining, but including and networking outwards.
426.
Mr Neeson: The message from 'Strategy 2010' is clearly that Selective Financial Assistance will be less readily available. Interestingly, a major American corporation, Selectron Inc., decided to establish a factory in Carrickfergus last week without IDB grant assistance. What do you consider to be alternatives to the grant culture that has developed over the years?
427.
Mr Gillen: I touched on that somewhat in my earlier comments, making the point that if a company can get the workforce that it needs, it will not be particularly interested in start-up money for the plant and so on, since such companies usually have their own money. They want resources to train, educate and improve the workforce. That is the way forward.
428.
There is room for Selective Financial Assistance. We do not want it to go away, but it could be targeted into other areas. If companies have a good product and give a commitment, then the resources that we should offer them are people, education and training. That is where the financial assistance should be going, rather than being put into capital grant for equipment, or whatever. That is the kind of company that we want to attract. We do not want a company that is coming here for the money; we want one that will put something into the community as well. A good company will establish linkages with the community and will want to work with people and other firms in Northern Ireland. We do not want a company to parachute in, manufacture their product, export it and do nothing. They must establish some link with other organisations.
429.
The whole question of linkage is important and one that we have reinforced. We made this point to the Northern Ireland Affairs Committee, and made it repeatedly at the Economic Council and in meetings with British Government Ministers. We have not had the opportunity to meet with local Ministers yet, although individual unions have on sectoral issues. Those are some of the things which Congress would want to come and talk to the Minister of Finance, to Sir Reg Empey and to Sean Farren, as those Departments link very closely together. I hope that goes some way towards addressing your question.
430.
Dr McDonnell: You are very welcome, and I thank you for your views. In your response you mentioned that human resource is a central element of competitiveness. Do you think the Dearing Report is enough, or should we be doing more to improve the quality of human resources?
431.
Mr Gillen: We should be doing more to improve the quality of human resources. Dearing has been published, and we are struggling to see how it has impacted on our community. The whole question of student grants is linked. Students are not going away any longer, not in the same numbers as before. A key goal for most regions is to ensure that the quality of their human resources is better than the national average - that is a key. Given our location, we are going to be disadvantaged if all we can do is provide the same as other regions of the UK. We must get that competitive edge. On the human resource issue we need to improve our levels of education. We need to bridge that gap at technician, engineer and IT level - the sub-degree work. Those are key elements for us. This was recognised by many people in comments in respect of 'Strategy 2010', but we are 30 years late in recognising it, in comparison to the Republic of Ireland who recognised it in the 1960s.
432.
We all know the story on the whole question of funding. We were pleased to hear SeanFarren's announcement about the possibility of increased money for research for the two universities. These universities have suffered dramatically from the £8 million cut in research that was introduced some years ago. They got £4 million back, but that is a small amount of money. We need to put more money into the education system. It goes back to the financial assistance levels, and who gets what, and what for. We would be better putting more money into our education system, which will attract investors who have a product to make and to export.
433.
Dr McDonnell: On research, you mentioned IRTU as being a success story. In what context, and could you elaborate on that?
434.
Mr Gillen: This links into the question that MrMcClarty raised earlier about an amalgamation. The reason the Industrial Research Technology Unit (IRTU) was created was because there was no dedicated focus on research and development. We happen to believe, in common with the employers and academics that good research and development is a key to attracting employment. Our concern is that amalgamation into one global organisation would remove the focus from research and development. There is still a very strong argument for a dedicated research and development facility, and we think that IRTU has filled that gap. There is more that we could do, if we had more resources. It is a success story when we look at the other development agencies that exist in Northern Ireland. We would take an awful lot of persuading that the IRTU should collapse into some other structure.
435.
Dr McDonnell: What more, in your opinion, needs to be done?
436.
Mr Gillen: I am not sure yet. As work goes on, resources need to be made available to the IRTU. We need to assist our universities in doing top grade research. That is about as far as I can go at the moment. I know we have more detailed information about that, and I will be happy to write to the clerk if that is satisfactory.
437.
Dr McDonnell: I would like to ask you about your thoughts on the difference between the public/private split in Northern Ireland compared with that in the rest of the UK or indeed Southern Ireland -
438.
Mr Gillen: The phrase "rolling back the state" is one, which grated against us very severely. This notion that the market is good and the public bad is not one which we subscribe to, and you will not be surprised to hear me say that. Our public sector is there to provide services, which any citizen is entitled to receive on an equal level to that of any other in the United Kingdom. The private sector, because of the troubles, has not been an attractive investment proposition. Our private sector is just too small. Our public sector is not too big, and, people might say under-resourced. Take the Health Service: how do you meet need in the Health Service? The need grows all the time. This goes back again to the emphasis on the private sector in 'Strategy 2010'. If we push that too hard, we will undermine even that genuflection towards targeting social need and increase the problems of long-term unemployment. We will, in an abstract sense, worsen the problems of health and not address the issues of education and housing, the latter being a key issue for us. Inequality of unemployment and of poverty will probably be created if we ignore the private sector to that extent.
439.
Dr McDonnell: On that point, would you be content to see the private sector remaining as it is?
440.
Mr Gillen: If it remains as it is, it will die very shortly. It is terminally ill at the moment.
441.
Dr McDonnell: Where do you see it improving?
442.
Mr Gillen: This is one of the problems identified with 'Strategy 2010'. It makes grandiose comments about vibrant economic development, nice soundbite type comments. What it does not do, is indicate how that is going to happen. It also seems to have dripping all the way through it the need to draw back the state. In other words, take out what has been termed the "culture of subsidy". This is done in a disparaging way.
443.
Mr McGlone: There is nothing wrong with NorthernIreland retaining a textile industry. We need a textile industry. We are all wearing clothes which have to be made somewhere, produced, transported and sold - that is how economics work in simple terms. We need to examine how we can protect that industry.
444.
Why should the best dry dock in Western Europe be turned into an amusem*nt park because the imagination is not there to revitalise shipbuilding in Belfast? There was no reason for closing Mackies Foundry - it produced the machinery that equipped textile industries throughout the world. This has not only destroyed our engineering, it is now helping to destroy our textile industry as well.
445.
There is a need to be imaginative about what we want to do, and we have the ability to be imaginative in Northern Ireland. This is the first time my generation has had the opportunity to see any form of localised Government responsible to the people of Northern Ireland. This is vital, and on behalf of the people whom we represent we are saying that you have to start involving us in the decision-making process and in the research. You do not have to be limited by someone else's tired ideas; you can be imaginative. Take 'Strategy 2010' and retain some of the traditional industries. That is how to do it.
446.
We do not want to focus on nine centres in Northern Ireland; we want to bring in all the small towns. Of course, there is the cost factor, but if the people in NorthernIreland are given the opportunity, they will say clearly that they do not mind the cost because it is for their future and their children's future that they are building. We have no book of answers on this but we can use our imagination. It is a sad indictment that we have never been asked this question before.
447.
I know that you have been involved in my union's initiative in respect of the textile industry and have attended a number of the meetings. That is an indication that people in the manufacturing industry in NorthernIreland are taking a real partnership approach to solving problems. That is something we should use as a paradigm.
448.
Mr Gillen: With reference to sub-degree level education, we now have colleges of further and higher education losing out because of the academic drift. Our education colleges are working on an annual cull. Every year they have to budget for staff and course development. The problem of human resources and skills cannot be tackled on an annual basis; there has to be some kind of rollover, some kind of coherence, with our further and higher education. Those of you who have the ear of SeanFarren could, perhaps, talk to him about that. We are meeting with him on 6July on the issue of lifelong learning, and this issue will feature prominently on the agenda for that meeting.
449.
Mr Campbell: I welcome Mr McGlone and Mr Gillen here today in spite of Mr Gillen's statement about the trade union movement's support for the Belfast Agreement. I hope the trade union movement will be open enough to look for ways of including the whole community rather than just the majority of our community, which, as you know, is opposed to the agreement - that is an aside and not a political point.
450.
You mentioned amalgamation, in the sense of IRTU, and I am interested in a possible amalgamation. ICTU is represented on both the Economic Council and the Economic Development Forum. Is there a need for both bodies? What role does the Economic Council have now that the Economic Development Forum appears to be taking a lead role in relations with the Assembly?
451.
Mr Gillen: I am not sure that the Economic Development Forum is going to be taking such a role. In many ways, the Economic Development Forum was originally floated as a notion rather than a concept. It was not intended to be inclusive. As I said earlier, when we were told that the Forum would be established, we were also told that trade unions and employers would be invited on to it. We had a heavy session about that with Bruce Robinson and the Minister at Netherleigh. Bruce Robinson was sympathetic to our argument, but the Minister took more convincing. The Economic Development Forum is not going to be an inclusive body. I have already said that we will not be on it if farmers and the community sector are excluded.
452.
The Economic Development Forum, in its initial terms of reference, was set up to implement 'Strategy 2010'. We are not going to go in on the basis of implementing 2010, though its focus is on 2010. That is the flaw. There is the benefit of the Economic Council, which has been there for over thirty years.
453.
The Economic Council is a genuine social partnership reflecting the views of trade unions, the business community and independent people from academia and elsewhere. It is independent, with an independent chair, and can be critical of Government - not critical for the sake of it, perhaps analytical would be a better word - and therefore it is very valuable. It has public confidence, by which I mean it is respected throughout the business community. Like George Quigley, when I mention the business community I include trade unions.
454.
The EDF is chaired by the Minister. No disrespect to the Minister, but one of the reasons there was a major row many years ago, and the Economic Council was in some trouble, was because it was chaired by a Minister. Civil servants were at its meetings, trying to control it. The EDF does not have independence. With the best will in the world, those around this table will also be at that table. It is chaired by the Minister of Enterprise, Trade and Investment and there will also be a lot of the civil servants from the Department there. Therefore, it does not have the independence that the Economic Council has.
455.
We are against the Economic Council becoming a research body. The Economic Council must be there to do a critical analysis of the major economic and social issues that come up. It has made a major contribution to the ongoing debates. I am a member of it, but I have only been there for a few months. The Economic Council performs a valuable function and should not be lost. There is room for the EDF, but we see it in a different role.
456.
Mr Campbell: That is a very useful contribution. My other question is completely different. Do you think the Growth Challenge is, or is not, an appropriate body for sector networking?
457.
Mr Gillen: I am a bit schizophrenic about the Growth Challenge. We went into Growth Challenge reluctantly. Growth Challenge was formed as a partnership between Government agencies and private business. Then someone thought, "Well hold on a wee minute. We have not got the trade unions here; it would be useful to say that the trade unions are involved, because someone might ask us about it some time." At times we think we are the bridesmaid at the wedding party.
458.
Growth Challenge has a function to perform, but it has not met its targets. It was supposed to create all these jobs over a period of time. It uses massive amounts of public money, particularly peace and reconciliation money. It stung us a wee bit when we heard that they got around £1·5million from peace and reconciliation money. This was not a good use of this money. That could lead me on to the next round of structural funds, but I will resist talking about that today.
459.
Growth Challenge does have a role to play, and we are working in it now. We are on a supervisory board and a management committee. We have two people representing us there. We are trying to play a role, however - this is just a personal view - I think that if we were going to save money and do away with something, maybe it would be Growth Challenge. This is not a formal comment, but it has not achieved its own targets. However, it has a role to play, and we are willing to make it work as best we can.
460.
The Chairperson: There was a recent announcement in the north-west that the Industrial Development Agency and the IDB will be working in co-operation for the Donegal, Derry, Tyrone and Fermanagh areas. Do you have any views on this, or on the practical implications of these two agencies working together?
461.
Mr Gillen: I am not familiar with the details, so my response will be general. We have two competing agencies here. I cannot see the IDA's saying "Here is a multi-million-pound investment. We do not want it. Take it up there." There is a role for co-operation. There has been a lot of talk about an island economy. The economic corridor has been mentioned by SirGeorge Quigley. There is no reason why we cannot co-operate economically with a neighbour state in order to provide job opportunities across all communities. Within our own structures, we have established a North/South organisation which works closely with the employers, IBEC and the CBI on this issue to create employment and to improve the infrastructure. We have heard from the district partnership board in Derry/Londonderry and in other areas that there is room for this development. Do not forget that the peace and reconciliation money covers all 12 border counties. The EURES Project which I referred to earlier is a European initiative which exists in neighbouring states across Europe. We welcome working in co-operation with other states, if this will benefit communities, create employment and relieve disadvantage. This is a very general response, because I do not have the details, but the principle, I think, is one which we all support.
462.
The Chairperson: Thank you very much for your time, your energy, your submission and the way in which you handled the questions. We hope that your responses will be reflected in our final report. We have some way to go yet in this public inquiry, and we are very glad to have had you here today.
463.
Mr Gillen: May I thank you on behalf of Congress for the courtesy extended to us in your invitation and the way that you have dealt with us this morning. I wish members, collectively and individually, every success. Thank you.
TOP
MINUTES OF EVIDENCE
WEDNESDAY 28 JUNE 2000
Members Present:
Mr Doherty (Chairperson)
Mr Neeson (Deputy Chairperson)
Mr Campbell
Mr Clyde
Ms Lewsley
Mr McClarty
Dr McDonnell
Dr O'Hagan
Witnesses:
Mr Bell )
Mr D Rooney ) Institute of Directors
Mr J Crozier )
Ms L Brown )
464.
The Chairperson: You are very welcome, and I apologise for the delay. We overran earlier this morning in our private session, so we are suffering from the knock- on effects.
465.
Mr Bell: The main function of the chairman of the Institute of Directors is to represent the interests of business. The institute is unique in that it represents individual directors and their individual opinions, which may not be the same as companies. It has some 750 members in Northern Ireland drawn from a wide range of businesses. It is, of course, part of the UK-wide organisation that has 51,000 members, and has good relationships with the sister organisation in the Republic. There is a regional committee and a number of sub-committees - one of those is on economic strategy, which is chaired by Denis Rooney, who joins me today, and help is received from Linda Brown and Julian Crozier.
466.
The committees draw on our local membership, and we are very much concerned with what is best for Northern Ireland. We take a close and constructive interest in a large spectrum of matters, including economic development.
467.
We welcome this opportunity to meet the Committee about economic policy and 'Strategy2010', in which we, through our members, have been closely involved. We welcome especially the priority that the Committee has given to those matters. We believe strongly that the creation of the Assembly and the Executive, and the placing in local hands of legislative and executive reponsibility for most matters that affect the well-being of citizens, greatly enhances the prospect and scope for the prosperous development of Northern Ireland.
468.
I appreciate, of course, that the new Administration does not have responsibility for fiscal policy, and that it will have no direct authority over a number of other very important matters that will affect economic well- being here, such as exchange rates, the global trading environment, and the terms of international trade.
469.
However, it does have direct control over a number of vital matters in which Northern Ireland could have important advantages over its international competitors and which, if used well in a purposeful and planned way, could greatly improve our prospects. It is on such matters that 'Strategy 2010' largely focuses.
470.
This Committee and the Assembly can also influence the Treasury and other bodies on fiscal policy, which is vital for NorthernIreland's regeneration. 'Strategy 2010' contains a large number of recommendations and targets, some of which you may wish to discuss with us. However, you already have, as I understand it, copies of our submission to the Minister of Enterprise, Trade and Investment in January 2000. In preparation for that report we surveyed our members, at an open conference. The chairmen of 'Strategy 2010's' sector committees attended and gave us their opinions, and we used them in the preparation of our report. I will now address a number of key points of a general nature, which the Institute of Directors considers important.
471.
First, 'Strategy 2010' calls for a deliberate shift in policy towards the knowledge-based sector embracing the new technologies. That is not to say that we would jettison our traditional industries but it does mean that we should recognise economic reality and the sectors where most future opportunities exist.
472.
Secondly, priority should be given to develop those sectors where opportunity and potential are greatest, such as those which are mentioned in our submission: electronics, health technologies, software, telecommunications and tourism.
473.
Thirdly, this shift of emphasis has major implications for our education system and for training, first, to enable us to compete successfully in new technology areas and, secondly, to help to ensure that the ability of people to benefit is widely spread. Priorities and resources for education and training systems need to be set accordingly.
474.
Fourthly, other matters of an infrastructural nature will be critical, such as transport, energy costs and communications.
475.
Fifthly, it follows that a successful local economic policy requires a coherence in and co-ordination of strategies and policies across a number of Northern Ireland Departments: Enterprise, Trade and Investment; Education; Higher and Further Education, Training and Employment; and Regional Development. In Northern Ireland we should be better placed to achieve this co- ordination than most of our competitors, and therein could lie an important advantage.
476.
We recognise that 'Strategy 2010' is not a perfect document. For example, it would have benefited from more economic research and analysis than was possible in the timescale allowed. There are some detailed recommendations which may require more work and prioritisation. However, from a business perspective, the thrust of what it says and a large part of its overall content are largely common sense and in tune with the way in which the commercial world of the global Internet economy, in which we operate, is plainly and obviously moving.
477.
This is the first occasion that an attempt has been made to produce the kind of broadly based economic development policy that success requires. It is also the first time that the business community, along with many others, has participated on an extensive scale in the development of such an important policy document. It will have its critics, but we believe that it carries a strong degree of consensus. The main benefits of 'Strategy 2010' lie in the sector reports. Many of these were well researched and targets were prepared. These reports were of necessity, not produced in the main document. We hope that the Committee has had the opportunity to look at the detailed sector reports and meet representatives of these sectors. The report took a long time to produce, and it is now 15months old. What is now most required is a decision to adopt an overall policy in favour of the knowledge-based economy. Once this has been accepted and publicly announced speedy action is required on the big issues. Our competitors will not wait for us and are already moving on. I hope, therefore, that your Committee will endorse 'Strategy 2010' in principle and call for urgent action plans for its implementation.
478.
Dr McDonnell: The question keeps coming up about the merging of the various bodies and boards. How would you feel about that? What gains would be made from it? There is the suggestion coming through all the time that research might suffer if a strong IRTU or research-type body were standing there on its own.
479.
Mr Rooney: We have covered this point fairly strongly in one of our own recommendations in the report. We feel that addressing this issue is the critical first step. There is a degree of confusion arising at the moment because of the uncertainty of the issue. It is not an easy judgement to call, but we are in favour, on balance, of having a single agency. There is also an extra benefit in that that will signal the beginning of a new cultural look at the whole process of assisting industry and stimulating commerce.
480.
There is an obvious fiscal advantage from the rationalisation which should take place, given that the cost of the transition has to be taken into account. We feel strongly that the legal status of that body should be closer to that of LEDU, closer to the private sector than the current IDB, a government agency. We see that as vital in terms of getting the support of the business sector and beyond. It will also help with general efficiency and its ability to operate successfully.
481.
Finally, we are absolutely committed to the importance of research and R&D particularly as one of the weapons in any Selective Financial Assistance that would be offered. The most important thing is that however it is done it is done well and is efficient and effective. On balance, we would prefer it to be brought in to that single agency. It is such a critical issue it should be upfront on every appraisal of any matter that comes before the development agency. That would be the best way, but that it is done effectively and efficiently is more important.
482.
Dr McDonnell: Thank you for a very frank answer. If I could probe a bit further, how would the monolith function? Would you subdivide it?
483.
Mr Bell: I suspect that you would subdivide it. Outside business is quite confused. There are jealousies between agencies. People say "I am an IDB person and I get this" or "I am a LEDU person. I get that". The truth is that they probably get the same sort of thing, but when you are not in one body that sort of thing is liable to be said. Undoubtedly there will have to be specialisms. IRTU's research and development is quite a unique function, and it may well require its own function. However, we are being disadvantaged by not having a one-stop point to go to. In England you can go to one place and you get your answer. Here, you go to T&EA and probably get more money out of T&EA than you do out of LEDU. You get some more money out of the Department of Education. If it is something to do with agriculture you probably get something out of that Department as well. Unifying it all in one place will release a lot of energies. There will be money as well but money is not the only issue.
484.
Mr Rooney: When you get down to the logistics of creating a single agency that will help to sift out the aspects of the process which are more important than others it will give you a chance to look at it fresh.
485.
Unless the agency is well organised and unless it operates effectively and mirrors the aspirations of the businesses it intends to support, it is not doing its job properly. There will be a lot of sifting out to get a leaner machine. Making it effective and enabling it to address all the issues is only a matter of logistics. It is only a matter of scale.
486.
Dr McDonnell: What is the role of international trade and export in this?
487.
Mr Bell: It should be in that agency. Du Pont has been established in Northern Ireland for longer than many other companies, but it is still an international company and could suddenly uproot and go to another country. International trade is difficult. It is easy to say what inward investment in brand new companies entails, but some of the other large mobile companies are difficult to pigeon-hole. If they were in one agency, a single management body could decide who gets what.
488.
Dr McDonnell: In paragraph 6.3 of your submission you speak of "a compelling argument for relocating any new body outside the Civil Service." How strong is the 'compelling evidence' that this should be placed outside the Civil Service and in the private sector?
489.
Mr Rooney: The use of the words 'compelling evidence' does not mean to suggest that a research paper exists or that major research has been carried out. We meant by them the judgement and experience acquired by our members in dealing with those agencies. One thing that all of our members have is one-to-one experience with the agencies. That gives you a good understanding of the effectiveness and efficiency that we can draw on.
490.
Mr Bell: There are advantages in the IDB's being part of the Civil Service, in that it can get direct access to the Minister and the Civil Service machine. However, that tends to make it more cautious and slower to react. LEDU tends to employ people who have been in business. There are people in the IDB who are first- class, and I have no axe to grind with them. However, others are civil servants whose culture needs to be changed.
491.
We do not know whether the Minister is able or willing to hand over control to the private sector. At least one of our sectors in 'Strategy 2010' wants to do that. It wants to be able to control who is awarded research and development and who is not; who gets the money and who spends it. It feels that talking shops have been around for some time and do not work. It wants to have direct control over a wider spectrum of industry - not to give it a selfish advantage, but to make industry grow. That is not part of what we want to discuss today but it is something that your Committee should explore.
492.
Dr McDonnell: I cannot speak on behalf of the Minister but I know that he intends making a difference and that he intends getting this right. However, we should tread warily because we do not want to throw the baby out with the bath water. It is essential that we gain efficiency and strength from any changes that we make. That is why I am probing this aspect.
493.
Mr Rooney: I do not want to give the impression that we think that the IDB is all bad or that LEDU is all good. That is not the case.
494.
Dr McDonnell: You are not creating that impression.
495.
Mr Rooney: Both bodies have good parts and bad parts. The best way to address that issue is to create a theoretical model of the new agency to see if it works.
496.
Dr McDonnell: In your submission you referred to the imbalance between public and private sectors. What steps would you take to create a better balance?
497.
Mr Crozier: 'Strategy 2010' talks about a review of public administration, and the institute supports that. There are a range of things that one could look at in terms of the interface between central and local Government and the various public agencies, including various statutory boards.
498.
The institute's main interest is not the reduction of the size of the public sector per se, although whatever can be gained by increasing effectiveness and efficiency should be gained. Its main interest is the expansion of the private sector. In the institute's view that can be done by following the recommendations in the 'Strategy 2010' document: tilting our industries towards the industries of the future, largely in the knowledge- based sector; using our education system and our training system as a means of underpinning that; developing our infrastructure in sensible ways; and reducing our energy costs. The institute is not saying anything that is hawkishly anti-public sector. It is pressing for the enlargement of the private sector.
499.
Mr Neeson: In his opening remarks Mr Bell said that the Assembly does not have tax-raising or tax- varying powers, and that is right, although I believe that it should. One of the report's key recommendations is that the Minister of Enterprise, Trade and Investment should engage with the European Union to negotiate a reduction, over a period of 5years, in corporation tax. How realistic a proposal do you think that is? Secondly, is this five-year period long enough?
500.
Mr Bell: Five years is better than nothing, but I do not know how realistic it is. However, if we could get on to a level playing field with the Irish Republic as regards 10% corporation tax, the amount of energy that that would release in to business would be enormous, and that comment comes from every sector that we have talked to.
501.
People look at our economy and say that it is not doing too badly. It has come through 30years of civil strife and unemployment is not as bad as other regions so we have nothing to worry about. However, Northern Ireland has got more low-paid people than average, and we have got to raise the pay for these people. We have got to take the long-term unemployed into employment. We have got to move everything forward. Taxation is the way to do that. It is not a matter of thinking about what grant and incentives we can give, but of empowering the private sector to make its own decisions. The economy can stand fiveyears of that. It is for MrAhern and MrBlair to decide if they are going to do something for the northern nine counties. The political will could well be there. It is politics rather than money that will make that work, because the cost to the British and Irish Exchequers would be very little.
502.
Mr Rooney: In terms of the net economic gain and GDP issues, a strong case can be made. You will be more familiar with political constraints and, if we cannot use the current situation to try to gain some of those things, then we will have missed an opportunity. We will back you all the way and, if necessary, scream from the rooftops that it is important for Northern Ireland.
503.
Ms Lewsley: I welcome you here this morning. What are your views on the future for the textile and heavy engineering industries, especially the shipyard, and those sectors of the economy? Has 'Strategy 2010' adequately addressed the problems in those sectors? Is there any way that those traditional industries can survive without subsidies?
504.
Mr Bell: In principal, we are not in favour of subsidies, but that does not mean to say we cannot selectively help industries. We believe that the heavy and traditional industries, you are talking about, must be helped. The way the textile situation is sometimes portrayed in the media leads you to believe that everything is going to close. That is nonsense. There are some innovative and advanced companies that are world leaders, but they must keep trying to get to the top of the textile trade - and the specialised areas within the textile trade.
505.
The textile trade will not be as big in ten years time as it is today - but there will still be a significant textile trade in Northern Ireland. We believe there has to be help given in retraining the workers in that industry.
506.
I visited the University of Ulster about four or fiveweeks ago. They are researching and developing new products, which they are trying to get the textile trade in Northern Ireland to take up. They are doing this because they know that the skills required for production already exist and those skills may have to be amended, or added to. I would not be as disappointed about the textile trade as others might be.
507.
Shipbuilding is largely down to Government policy. It is about he who pays, and about trying to keep a level playing field with other countries of the world. Parts of the shipyard have enjoyed fantastic experiences, but they will not survive if another country completely low-balls them. It is a matter of supporting them on occasions when things go wrong, such as when currency fluctuates.
508.
Engineering, particularly aeronautical engineering, is doing exceptionally well at the moment. One of the things that 'Strategy 2010' has done is to get together a cluster of aeronautical related industries, and that is really working very well. There are fourteen companies in the cluster, and they are now pitching for work which some of the smaller companies would never have had the opportunity to do.
509.
Mr Rooney: The more important issue for those industries is the nature of the assistance and what it is for. There have been too many mistakes made in the past. Financial assistance was given without any true analysis of its effectiveness and where it lay in the strategy of the industry that was being supported. What that did was to deprive other potential winning industries of necessary funding that could have created even more quality jobs and raised the profile.
510.
'Strategy 2010' addressed that holistic issue very well. In fact, 'Strategy 2010' in many ways, was that issue. Therefore, it is necessary to critically appraise the level of investment you give to industries. However, where there is a clear-cut demonstrable, strategic gain then there is no reason why assistance should not be given. One should not be against them just because they are traditional industries in decline.
511.
Ms Lewsley: There were ten targets set in 'Strategy 2010'. Should any other targets have been added, particularly an equality target? Do you think that the targets are realistic?
512.
Mr Bell: Ten targets are quite a lot. Undoubtedly, you could think of others such as social inclusion, equality or a number of other things. Ten in itself is quite a lot to handle.
513.
I think it is more important that the overall concept is grasped. We are talking about a process of change that will never stop. This is no quick-fix solution - get this right and everything is sorted, because every year it will evolve and change and there will be other things that should be added.
514.
At this stage we would not be dogmatic to say that the ten are right or wrong, but we are comfortable with ten. However, if somebody comes along and says that we should have this or that in it we will not be uncomfortable with those suggestions.
515.
Mr Rooney: On the equality issue, the IOD (Institute of Directors) is a strong supporter of the equality issue but 'Strategy 2010' was an economic document and I think there is already in place plenty of legislation and so forth and also the beginnings of the structures to ensure an equality agenda is met. I think that almost it looks after itself. Our focus would be on ensuring that we keep focusing on the creation of the wealth creating industries.
516.
Dr O'Hagan: To follow on from your last point. Do you not see economic development and equality issues as being inextricably linked, that economic development has a role to play in ensuring that equality is placed at the centre of society and Government?
517.
Mr Rooney: We are very strongly in favour of using economic activity to redress the issues that have been created in equality and we think that the use of economic activity and the directional manipulation of it is a very important strategic weapon for any Government to use. But equally the balance of that is that if a business opportunity comes you cannot over constrain it by placing too many criteria on it, otherwise it might go elsewhere. Equally there is a priority to make sure that we win the business. If the business does not want to go to an area where we would ideally prefer it in order to address some of the equality issues, then I would not be so principled as to say that we do not want your business. Basically, we need the business. We need the business activity and new industries, and if they ultimately want to go, despite all our coaxing, to the best part of Belfast and the nicest industrial estate and that is their wish having considered all the other options, then you have got to support and respect that opinion and not lose the business.
518.
Mr Bell: Equality of opportunity and equality of people in business has been central to most businesses in Northern Ireland for a long time. It is now enshrined in law. A lot of that enshrined in law has now been accepted into the culture of a large part of business. We do not have difficulties on the shop floor, or between different sections of our community. All of those issues have largely been dealt with.
519.
Carreras came to Northern Ireland 35 or 40years ago and they said that their choice was outside Carrickfergus or Scotland. At that time, whoever the Minister was, said OK we will do that. The business lasted for 20 years and then the tobacco industry restructured and went to the Far East - that is what we are talking about. You can, by using money, say that we would prefer it to go to a deserving part of the country but if people do not want to go there, if they perceive that the benefits are at Castle Junction in Belfast and we can accommodate that, that is a choice that we as a country have to make. Is that what we want to do? Wherever it is, in the centre of Belfast, Enniskillen or Strabane.
520.
Mr Rooney: We are primarily talking about inward-investment situations, and we believe it is of at least equal importance to spread the enterprise culture into areas where it has not traditionally existed. Measures taken to direct that will ultimately have a greater impact on the future wealth of this country.
521.
Mr Crozier: It is important to know what is happening. We need to create a strong economy and ensure that its benefits are widely spread. We support the idea of monitoring what is happening to see whether wealth is being properly distributed throughout the community and whether opportunities extend across the genders, and so on. Certain machinery already exists for doing so. Since the middle of the 1990s, the Training and Employment Agency has monitored all its placements in all areas with reference to gender and religion, but a great deal more could be done, and the Institute of Directors would support that. We must develop a strong economy to form a basis for equality of opportunity and social inclusion and so on.
522.
Dr O'Hagan: No one would disagree with the idea that we need a strong economy, but the equality issue is only beginning to be introduced into the language, and we have a long way to go. Economic development has a crucial role to play. TSN is now on a statutory footing and must be factored into everything.
523.
Mr Crozier: I do not think that the Institute of Directors would disagree in principle with that, but we suggest that there is already some substantial machinery in place to do that. We have a new Equality Commission and Human Rights Commission. The business community and the development process taking place will have to fit in, and we support that. We should not take our eye off the economic ball in the process.
524.
Dr O'Hagan: You have stated that a key element of regeneration and investment lies in Public/Private Partnerships (PPPs). What areas would you like to see developed using them? Do you see any advantages over conventional funding?
525.
Mr Rooney: The PPP bandwagon started a few years ago, and it is rolling fairly slowly at the moment. We feel that a directional decision should be made on how far we want to get into the Private Finance Initiative (PFI) schemes. We believe that we should get in to them, but we should do so properly. There is presently a degree of overcaution and playing at the edges, but, since it has been running for a number of years in Great Britain, it would be easy to make an assessment about any potential problems now.
526.
The whole concept of Public/Private Partnership in a broader sense should be encouraged for the benefit of the whole community. For example, if anybody comes up with a bright idea underpinned by a sensible financial appraisal to redevelop an area, getting it delivered when faced with bodies such as Government Departments or Laganside Development Corporation is such a complicated process that it is almost impossible to get a central decision made. We are missing out on various benefits, including regeneration and economic activity, by our inability to harness Public/Private Partnership properly.
527.
The private sector will always be straining at the leash to come up with ideas. It will be profit motivated to do that, which is a very strong force. There is nothing wrong with that, as long as it is harnessed in the public interest. Basically, that whole culture should be given a real kick forward. There are more opportunities to create a community benefit from doing so.
528.
Dr O'Hagan: Was there a lack of comment in 'Strategy2010' on North/South economic relationships? How do you see this area being more developed and supported, particularly with regard to IDB/IDA co- operation and better cross-border interest?
529.
Mr Bell: I have been involved in cases where companies have had factories in the North and South. At times they would be trying to play off the Northern agency against the Southern agency, and vice versa. I have seen that that works extremely well. Both agencies acted in a responsible manner, so there is a fair bit of co-operation at that level.
530.
IDA and IDB are competitors; they are chasing the same sort of projects. There is nothing desperately wrong with that provided both have the same sort of tools. That comes back to tax. There are benefits at the moment. The "Celtic tiger" in the Irish Republic is real. There are benefits for our economy too, whether it is scraps off the table or we have labour and they do not. We co-operate with them, and I think there will be more co-operation. As I said earlier, we co-operate with our sister organisation in the Republic. All business bodies do the same. More and more companies are thinking on an all-Ireland basis for the Irish market, and development agencies will have to think that way too. It is happening. I know that a lot of these cross- border things, like training initiatives in border counties, are working relatively well. But IDB and IDA are competitors.
531.
Dr O'Hagan: Would it not be better if there were more co-operation instead of less competition, considering it is a small island economy?
532.
Mr Bell: I am more interested in Northern Ireland than in the Republic of Ireland. We may have more to gain. The tourist authorities have decided to have a joint body. The money that the Irish tourist authority put in is vast in comparison with what our economy is putting into it. The number one tourist destination in the whole of Ireland is still the Giant's Causeway, and that is being promoted, in effect, by the Irish Tourist Board. Perhaps I am being slightly over cautious. All I see is evidence that a district council wants the new factory in its area. The IDB is doing that for Northern Ireland. Somebody has to make sure that it comes to Northern Ireland.
533.
Mr Rooney: In business there is a window of only a year or two, but at this point it would not work too well. The NorthernIreland community needs someone competing hard for inward investment. There is no problem with the principle as long as you can prove that we are not worse off because of it. The reality is that the whole North/South thing is happening in the absence of direction. Business cross-fertilisation has increased enormously over the years. People we mix with in our body now have companies, or parts of companies, in both jurisdictions.
534.
That is a natural process, and the administration has not quite caught up. It is not getting enough sensible initiatives to try to harness that. There is too much focus on the territorial border area. The reality is more to do with Dublin and Belfast, than Derry and Limerick or whatever. That is where the focus should be, to try and foster those sorts of cross-fertilisations of business to our common benefit, and there must be a net gain when you do it.
535.
Mr Clyde: There is anxiety that progress from 'Strategy 2010' has been slow. Do you feel that a further review is already necessary and what further steps do you believe should have been taken by now?
536.
Mr Bell: The answer is "No". There is enough information about the high-level things that I mentioned earlier. If the high-level things are decided, the detail can be considered more carefully, possibly resulting in a need for more research and more work. This document is now 15 months old, and you, Ladies and Gentlemen, have been concerned with other pressing matters, and rightly so because unless we have peace and stability in our country, we will not have anything. If a review is carried out again, the business folk will probably not come forward in the same numbers and with the same enthusiasm that they did in the past. I do not think there is any need for any more information on the high-level things. The information is there. It is a question of making choices on what the country can afford, what we would like to do and then getting on with it.
537.
Mr Rooney: There are two specific recommendations in our report. One was that the decisions that were within the domain of the public service should be made quickly, for example, the Employment Agency issue. The second point is that there was not a proper budget for 'Strategy 2010'. It is difficult to make informed decisions on priorities without knowing the budget. Even retrospectively it would be a good idea to get the thing budgeted properly. Once you have budgeted, how do you get it into the spending review? Many ideas have been with the Department for some time. They are known and sensible, but we do not see them in the public spending area, so they will not happen for years.
538.
Mr Rooney: Those in industry who took part in 'Strategy 2010' now regard it with some cynicism. We all put a phenomenal effort in and created a momentum, which has disappeared. A review would be a kiss of death.
539.
The Chairperson: You mean this review?
540.
Mr Rooney: No, I mean a separate, independent detailed review of 'Strategy 2010'.
541.
Mr Bell: What you are doing and what the Minister is doing is fine, I hope. You have been in place for a few weeks, after having had a few weeks previously. We would like to see something happening in the autumn. I stress to you that this is a process. Once you set the top targets you can refine and you can hold that over a period of time. We must have the top targets early.
542.
Mr Crozier: Coming back to your question. We see this as part of the process of considering views, recommendations, the proper democratic process, which should take place. We interpreted the question as asking if the review undertaken on 'Strategy2010' was now out of date and should another be done. We are saying "No, for goodness sake, get on with it and implement it. We have already lost some momentum, and we will lose an awful lot more." You can look at the 'Strategy2010' in two parts. One is the general drift, which EricBell referred to earlier: the broad direction in which the economy should go, and how we should support it; and the more detailed stuff, which probably does require a bit more working out. We are looking for an endorsem*nt in principle of the thrust of what 'Strategy 2010' is saying and developing a specific action plan through which the principles could be implemented. Identifying those issues requires further investigation.
543.
Dr O'Hagan: This enquiry was instituted because of the major concerns and criticisms that developed around 'Strategy 2010' from the very beginning of the process, and - a lack of consultation, for example. There are serious concerns about 'Strategy 2010' on a broad basis, and there are serious questions that it is not even based on sound economics. I would be interested to hear your views on that.
544.
Mr Bell: We have heard those criticisms. We were not involved in deciding whether local councils should be involved. We did what we were asked to do being industry and commerce - the people who largely wrote 'Strategy 2010'. This document was finalised 15 months ago. It has been around for a long time. Perhaps there should have been a public debate. Some of the things that we are saying should happen appear blindingly obvious to us, but maybe we are being led astray by this. We believe in trying to make the knowledge-based industries part of the future. Once that decision is made, many of those in the world of academia, in the Civil Service and in industry - all parts of our economy - will say "If that is the way forward, that is the way we will go."
545.
The Department of Education has now been split, and higher education and the training centres now come under one Department. Further education is a key element of what is happening now, is trying to follow 'Strategy 2010', even though it is only a draft document. Once the Minister makes the final decision as to the general thrust, everyone else will follow on and develop the process, and some of the criticisms that you have heard and been given evidence on, will lessen.
546.
Mr Crozier: I do not know what particular concerns you are referring to in terms of people having concerns about 'Strategy 2010'. I have heard expressions of concern but I have not heard anyone suggesting that roots and branches should be thrown out, or that its general thrust is wrong.
547.
Dr O'Hagan: I have heard people saying that.
548.
Mr Crozier: I am not aware of that. The Economic Council, in a review, was quite critical of its economic analysis. They also talked about the connection between actions and the achievement of targets. It is not fair to say that it is not based on an economic analysis, because a great deal of economic data referred to in the report is drawn from well-established centres such as the Northern Ireland Economic Research Council, the National Institute of Economics and Social Research, the National Statistics Office, and so on.
549.
It is true that the report was not written by economists. It was written by people who had a heavy involvement in business and who viewed the situation from a commercial, common-sense standpoint. With regard to the Northern Ireland Committee's submission to you, there were concerns about the lack of targets and social inclusion, which is possibly getting quite close to some of your questions. That is a point that could be made. More targets could be embodied. But even the Northern Ireland Committee was not disagreeing with the general thrust of the report in terms of imperative and the realities of the way the global economy is going regarding the importance of the knowledge- based sector and the ability that Northern Ireland has, using its education system, to get into that sector.
550.
Dr O'Hagan: I do not think anybody would disagree with you on the whole issue of the knowledge economy and research and development, but I am saying that there are very serious concerns and criticisms.
551.
Mr Crozier: Do not leave us in another policy vacuum. We have had a policy vacuum for a long time. We have been looking with great hope to the creation of a devolved Executive, through which we would get some policy direction that would impact quickly and beneficially on our economy.
552.
Dr O'Hagan: It is not the intention of this Committee or of the Assembly that there should be a policy vacuum. It is about getting it right.
553.
Dr McDonnell: I do not want to labour this point. Dara covered a lot of this. I do not think any of us is saying that 'Strategy2010' should be thrown out, but there is a view that it has serious shortcomings and gaps in it. If you want, in due course we could provide you with some of the criticisms, and you might want to answer them in detail. How do we take it forward from here? There are concerns that the consultation was too narrow. I welcome the input from the private sector, but there was also major Civil Service input. A lot of people out there see it as almost a self-survey, and as not being radical enough. Some of us are prone to look south of the border at how they have managed to pull a few things together and have a dramatic success in the last 10 or 15years, and ask why the hell can we not do the same?
554.
Mr Bell: We support that. We also look South.
555.
Dr McDonnell: If 'Strategy 2010' is shallow at some levels, with perhaps gaps or holes in it at some levels, how do we repair it, create a bit of depth to it and patch over the holes?
556.
Mr Rooney: There is phenomenal depth. Look at the sector reports. The actual document itself and its recommendations would not have been our perfect wish-list or even our ideal expression of the process. That is not to say that we disagree violently with any of them in particular. The value to us is in each sector, where there is a very detailed analysis - maybe not the most perfect model of economic analysis, but a detailed, instinctive and knowledge-based analysis - of the steps that need to be taken to secure a healthy future. Each of them came up with sensible proposals.
557.
We should just analyse those proposals. Take an overview to see if anything is missing, whether it is an equality issue or whatever, but those proposals need to be got on with. The absolutely unaffordable wishes can easily be sifted out. It does not take much to see which recommendations are the heights of desire, as opposed to reality. You can take those out but get on with the process that these groups and sectors and cross-sectors recommended. The list is there; you can tick them off one by one.
558.
It needs to be co-ordinated by Government, and that is where your role is. How do you set up the mechanisms for co-ordinating it? That is where you come in, to ensure that those mechanisms are efficient and accountable. How do you establish the budget priorities? That is another Department's responsibility. You can add what you want to the document; you can take away what is excessively aspirational and unachievable, but the core is there, and it is matter of taking the steps. We do not know why our society is not taking those steps.
559.
Mr Crozier: Your reference to the Republic is germane. They have done more or less the same thing that 'Strategy 2010' is looking for. They have used their education system, for example, as a means of targeting the knowledge-based sector. Look at what they have done with their regional technical colleges, for example. They have developed advanced institutes of technology and they have targeted specifically those areas that are going to be the industries of the future. These are the kind of things that we are suggesting. We do not think the situation requires further analysis. It just requires the resolve to implement decisions.
560.
Mr Bell: The Republic started a review which was similar to 'Strategy 2010' after we started it. They have now got their plans finished, costed and implemented. It is a question of making decisions and putting them into practice. You cannot prevaricate forever. We are a very democratic society, but you cannot keep putting off decisions. You have got to decide what to do and get on with it. The same thing has happened in various other sectors in the Irish Republic. Somebody sat down in Government and decided to focus on education. Investment was put into further education colleges before the jobs were there. Then they said to a few salesmen "Get on your bikes and go to America, to Silicon Valley. We now have thousands of people being trained as software engineers, so here is an opportunity for you", and they did it. Yes, they identified the trends very early, but they put down the investment and got on with it.
561.
We can analyse the situation for the next 10 years, and 2010 would actually be here. I am being overly simplistic about this, and undoubtedly 'Strategy 2010' was there to give the politicians some ideas about which areas to invest in to get the best return for Northern Ireland. This is the real benefit of 'Strategy 2010'. You as politicians have to make the choices, you are the people with the knowledge. You are saying there are criticisms of 'Strategy 2010'. We do not know what the criticisms are. We have not been informed of them; we have to read these in the press. You are the people who can balance the situation by choosing where to invest the money. The Assembly has to make that call - we cannot do it. If you have not read the sector reports, please look at them, some of them are really good. The reports can be brought into a wider debate and can be used to help implement plans that the Assembly can support.
562.
The Chairperson: What are your views on the recommendation that Selective Financial Assistance should be made less readily available?
563.
Mr Rooney: We do not wish to reduce the funds available for financial assistance, not as a principle. However, we think that these funds should be targeted more effectively towards the industries which we have identified, and targeted towards support for business. Due regard will also be paid to equity- sharing concepts where the Government can go into partnership for a chosen period and have a mechanism for releasing it to move on to other important projects. The question is more a matter of the nature of the financial assistance, rather than reducing the levels of assistance overall.
564.
Mr Bell: Although capital grants of 40% and 50% used to be on offer, the trend now is that only a few selected companies get that type of assistance. That is right, because it created imbalances in the economy. It created false jobs for a time, and perhaps that was needed for a while. We support the view that selective grants will gradually be run down.
565.
If there is a skills shortage, a knowledge shortage or if there is a gap in our economy, perhaps involving the health sector, there will always be a case for us, as an economy, saying that we will put money towards it. However, simply to get more and more money is wrong. Some of our members would not particularly like us to be saying that they should not get cash, but that is our vision and our contribution to you - Government generally - because we know that there is a limited pot of resources and certain things need to be done. We would rather that those issues were targeted and the money spent wisely rather than spread too far.
566.
Mr Crozier: Carrying on from what Eric has said, now would not be a very good time to make a drastic cut in that area, as Northern Ireland industry is suffering from a disadvantageous exchange rate. It is having to compete with discounts of 20% in terms of exchange rate control. That is something which needs to be handled very carefully.
567.
The Chairperson: That brings matters to a conclusion. I thank you again for coming along, for answering the questions, and for giving us a perspective on 'Strategy 2010'. We have a good few more public hearings still to come, but we do not intend to go on for ever. We want to give the Minister and his Department our collective views as quickly as we can. We are trying to apply ourselves to doing that fairly sharply. Thank you.
568.
Mr Bell: Thank you for the opportunity to meet the Committee. It would be good if you could report by the autumn. We would appreciate that.
569.
The Chairperson: We have some 50submissions, and we have to work our way through them. We are trying to speed up our hearings and to allocate more days to them.
TOP
MINUTES OF EVIDENCE
WEDNESDAY 5 JULY 2000
Members Present:
Mr Doherty (Chairperson)
Mr Neeson (Deputy Chairperson)
Ms Morrice
Ms Lewsley
Mr McClarty
Dr McDonnell
Witnesses:
Mrs J Whiteside ) General Consumer
Mr B Osborne ) Council for
Mrs M Bell ) Northern Ireland
570.
The Chairperson: I apologise for the delayed start. We have had a slight problem getting a quorum together. Some other Committees are also meeting, in public session, and we are not permitted to start unless we have a quorum. I extend my apologies, and I would like to thank you for making your submission and for coming here today.
571.
Mrs Whiteside: Thank you very much, Mr Chairman. I would like to thank you for the opportunity to come here today to talk about 'Strategy 2010'. It may be that the General Consumer Council's submission is significantly different from others that you have received, because it ranges over a number of apparently unconnected subjects. However, for us, there is a connection. They are all areas where the council stands up for the customer and which have a direct bearing on the well-being of consumers in Northern Ireland as a whole.
572.
I will start by giving you a very quick background to the council. We are a statutory body, and our job is to promote the consumer interest - to give consumers a voice. It is not easy for individual consumers to combine as a lobby group. In this respect we are very different from the Confederation of British Industry or the Ulster Farmers' Union. They are strong lobby groups on behalf of their members, but consumers as individuals are relatively powerless, and the Government recognised this. They recognised that the consumer voice needed to be heard and their interests defended, so they set up the General Consumer Council. We are a multi-issue organisation. There are a few areas which we do not deal with - for example, the Post Office and telecoms - but otherwise almost anything could come under our remit.
573.
Our particular priorities over the years since we have been set up have been energy, transport and food. We take a particular interest in consumer education. The provision of education in clear, reliable information and the necessary knowledge and skills are what people need to make informed choices. Looking at the picture as a whole, there is a growing realisation that consumers are important stakeholders in the market place. This needs to be recognised to a much greater extent in 'Strategy2010'.
574.
'Strategy 2010' rightly, we think, puts a lot of emphasis on competitiveness. Knowledgeable and discerning consumers encourage competitiveness. They are one of the best and most flexible means of building a growth economy. This is generally recognised now. One of the reasons put forward by international pundits for the success of the United States of America's economy, is that demanding consumers in the home market make for a more competitive, responsive economy. This is sometimes described as a virtuous circle of strong consumers and strong business.
575.
The fact that the strategy team has not sufficiently grasped this fact is demonstrated by the exclusion of the consumer voice from the new Development Forum, despite its being larger than first envisaged.
576.
Mr Chairman, we are happy to take any questions on our submission.
577.
Ms Morrice: My gut reaction to what you have just said is that the consumer has not been properly recognised in 'Strategy 2010'. Is it simply that consumers are not demanding enough and prepared to take second-best? What would you advise that we do to make the consumer's voice louder to ensure that it is properly heard?
578.
Mrs Whiteside: You are right. Consumers in Northern Ireland have not been demanding enough. Our research has shown that to be a fact. Education of consumers is one element. We did a survey recently and produced a document 'Consumers In The Dark'. This showed just how poor consumer reaction is in Northern Ireland. It identified the areas where it is particularly poor and which age group and socio- economic groups needed particular help. We would very much like to be able to progress that work and improve consumer education.
579.
Also, this council was set up, as it is, to give consumers a voice. We do try always to be the voice of reasoned argument, and we work out carefully what is best for the consumer. We often say that we try not to "shoot from the hip". This strong, reasoned consumer voice needs to be heard more when the Government are taking policy decisions, because consumers are the people who buy the goods and make the economy tick. If you do not provide consumers with what they want at the time, you might as well not provide it at all. This comes across more and more in analytical programmes. The 'Today' programme, when I was driving to work yesterday, was talking about banks and about how they had got it wrong. The presenter said: "People will start to listen sometime to what the customer really wants."
580.
Ms Morrice: It seems to have succeeded in America. What have they done that would lead the way for us? There is a tendency to say that we do not want to go as far as the Americans in the consumer demands they make. How can we go far enough without becoming a 'give-back' society?
581.
Mrs Whiteside: Do you mean that we do not want to become a litigious society, where we sue over everything, that we do not want to be so demanding that we demand perfection? From the success of the American economy people are now demanding high standards - their standards are rising. The deferential society is disappearing. People in general are no longer prepared to accept second-best, and that is developing in Northern Ireland too. That is a good thing - people should not have to accept second-best.
582.
Mr Osborne: You asked what you could do in the strategy. Representation of the consumer on the governing group would be useful. Also, in the document, and in any development of the document, recognition of consumer education, consumer choice and putting consumers in an economic context would help people understand and see that as a development, within a largely economic framework, that they have some role to play.
583.
Mrs Whiteside has rightly indicated that good consumers help the economy. Good consumers are also workers and colleagues. If you improve their quality of life they, in turn, will have higher standards, which they will bring to the workplace and produce higher standards and quality goods and services there. Once you start that spiral upwards you have an economy that works at producing quality goods and services for responsible consumers rather than litigious consumers. If you can educate consumers in their role in the economic development of our society through your documents and recognise that good consumer education and support is at the centre of Government, you will help to develop responsible individuals rather than just consumers or customers.
584.
Mrs Bell: You asked what can be done. This week the council is putting a submission to the Council for the Curriculum Examinations and Assessment (CCEA) about the new curriculum in Northern Ireland. We are saying people need, as part of their formal education, to have consumer education to teach them to be knowledgeable and discerning so that they do not go over the top and become litigious.
585.
We are suggesting that they have defined citizenship very narrowly and consumer education as part of citizenship would strengthen it. There are strong connections between issues in 'Strategy2010' and work going on in the Council for the Curriculum, Examinations and Assessment (CCEA). We would like to see a telephone helpline, a one-stop number, where people with problems, whether welfare or consumer, could make contact and be referred to the right organisation. We live in a complex society where it can be difficult for people to reach sources of help. We would like to do much more in terms of formal education and classroom materials. The remit of the council needs to be modified. In the past we have provided classroom materials, but in the past few years we have not been able to do this because of a lack of resources.
586.
We also need to look at lifelong learning and especially at consumer education in the community.
587.
Ms Morrice: I suppose the television programmes like 'Watchdog' help a great deal. Did you know how membership of the Economic Development Forum was decided? Did you make representations to it? If so to whom, and what is your reaction to the outcome?
588.
Mrs Whiteside: A year ago we spoke to the Minister and to the Permanent Secretary when we saw what the eventual makeup was to be. We were, and still are, very disappointed that there is no consumer representative on the forum.
589.
Mr Neeson: I welcome you here today. One of the first things that the 1982 Assembly did was look at consumer protection. Joan Whiteside and Maeve Bell may remember the big debate at that time. Our Committee then, which is the equivalent to this Committee, recommended the central body, so I am delighted that that has come to fruition.
590.
In 'Strategy 2010' it is recommended that an updated energy policy statement be adopted. I know that a paper has come out since then, but how does your council see this being developed? What more needs to be done for consumers in Northern Ireland on energy issues?
591.
Mrs Whiteside: Bill Osborne is the chairman of the energy group in the General Consumer Council.
592.
Mr Osborne: Northern Ireland has one of the highest electricity tariffs. Taking account of the other part of Government strategy, Targeting Social Need (TSN), you find that those in that quartile have to pay more than those who can afford to pay. There are issues of equity of payment, cost comparisons with the rest of the United Kingdom and Europe and choice. We will be looking at the development of the gas network beyond the current legislative control areas. We have been involved with the inter-connector to get a range of other suppliers so that we can have a cheaper, more cost-effective energy system. We are working in partnership with a range of organisations to ensure that electricity and gas comply with their obligations on energy efficiency measures. We monitor complaints about the regulation of the gas industry to ensure that customers are getting the right information.
593.
Recently, we wanted to contest claims from the oil industry about comparisons with its product and that of gas. We do not want to be seen as being biased. We want quality information to be available to allow customers to make an informed choice themselves. We also want to see choice and competition, which reduce costs. We are trying to ensure that costs are minimised, that there is competition and that there is equity across those parts the Province which have not yet got that choice.
594.
Mr Neeson: Why do you believe that the Northern Ireland consumer council for electricity would serve consumers better if it were merged with the General Consumer Council? Coming back to the old argument of 1982/83, would it not be better to have an independent consumer council to look after the interests of the electricity consumers?
595.
Mrs Whiteside: I will answer that question, as I have been chairman of both bodies - the Electricity Consumers Committee and the General Consumer Council. I think the present system of having an electricity consumer committee within the regulator's office is not the correct one. DouglasMcIldoon makes an excellent regulator. He always had, and will continue to have whilst in office, a very strong customer focus, ensuring the customers are well served by the regulator. But, if the regulator were a more business-focused person, having a consumer committee within his office would not be right. An independent consumer committee is needed, one which is strong and outside the regulatory system. A consumer committee needs to be able to stand up against both the company, in this case NIE, and, perhaps, against the regulator which, I must say, at the moment is not necessary. There has to be suitable regulation for every eventuality, and having a strong independent voice outside regulation is what is needed.
596.
Northern Ireland, as has frequently been pointed out, has a population similar in number to that of a medium-sized city. It was recognised in 1982 that the best thing for Northern Ireland would be a strong general consumer council. Any consumer council needs infrastructure. Staff backup, administration, et cetera; have to be in place. A critical mass of customer- focused staff who can discuss, debate, understand, and prepare briefing documents for a full committee is needed for a successful consumer council. As a chairman who comes in for a short time and then moves away again, I see the General Consumer Council as having an excellent group of staff who provide really good briefing documents for the members. These members come in from the outside world and are not full of knowledge. They rely very strongly on the briefing documents they get to make the decisions. Decisions are made by the council and not by the staff.
597.
When I worked in electricity some of my staff were OFREG staff. They were very nice; they did a very good job, and they were most helpful, but they were not independent. I see the need for a strong, independent group to balance a future regulator who, perhaps, would not be as customer-orientated as Douglas McIldoon currently is. He does an excellent job. We, as an independent regulator, work with Douglas McIldoon as the regulator for gas, and we are continually admiring the work he does for the customer behind the scenes. We do not have a problem with him at all, but we think the voice of the customer must be outside regulation, and it must be strong.
598.
If you look, perhaps, five years ahead, you will see gas contracts running out, leaving a free market. The most likely person or group to come into this free market is NIE who would then be selling electricity and gas to the customers of Northern Ireland. In that situation, you need a very strong consumer body to set against what would be a very strong energy supplier. The stronger the consumer council, and the more it can stand up for the consumer, the better.
599.
At present, my members deal with a variety of topics, but we can sub-divide into committees which specialise in certain areas. Looking at a complicated area is no problem whatsoever to us. We already have an energy group, we have a food group and we can set up any specialised groups we need.
600.
Mr Neeson: I share your praise of Douglas McIldoon. He has done an excellent job. MrOsborne said that the national gas pipeline should be extended for social reasons. This Committee has supported the extension of the natural gas pipeline. In particular we have actively sought its extension to the North-West, but obviously we want it extended beyond that as well. You say that it should be extended for social reasons. Does that mean that, if necessary, it should receive a substantial Government subsidy?
601.
Mrs Whiteside: Ideally, business will make it work. I hope that big users at the other end will make it work. Power stations are necessary at the end of the line so that as the power goes out, the domestic consumers fill in on the way and make it viable. I have high hopes that that will work. In the end, we are strongly in favour of as many customers as possible in Northern Ireland having the option of gas. If, in the end, that means Government subsidy, we would like that to happen, but I hope that it works with big users at the end. We are getting hopeful messages about the big users south of the border wanting the gas pipeline to go there. Everybody is very optimistic, but if in the end there needs to be public support, we would like to see that.
602.
Mr Osborne: Returning to the question of the General Consumer Council, its strengths are independence, cost, efficiency, and the ability to cross- fertilise ideas and information, particularly from lay members. They can build on the specialists, but they can also bring in a lay member who may not be in the specialism, but who is a consumer of the product, and who can make a viable contribution. That is why the General Consumer Council would make more of an impact than a separate, small-scale electricity consumer council. The energy market is increasingly complex, with gas, oil and electricity. A generalist body could link the wide range of customers and users, whether they be industrial or commercial, private or public sector, and make a valuable contribution.
603.
Mr Neeson: Look at the bigger picture: the various linkages that are being made, such as the oil interconnector, and the way we seem to be thinking now about energy on an island basis. Is that going to benefit consumers?
604.
Mrs Whiteside: The bigger the market, the cheaper the price and the more that can be sold. If customers in Northern Ireland can benefit from a larger, all-Ireland market in what seems to be a natural geographical area to supply, we are in favour of the cost benefit of that, and also the security of supply. Northern Ireland has always had to have extra high protection. We have had to keep too much in reserve because we are such a small area with such a fluctuating demand. If we join an all-Ireland market, and if the demand down South comes at slightly different times - I believe that people south of the border eat later than we do - some such technicality would spread the load and mean that we would not need such a high reserve. That in turn would bring the costs down for everybody. That sort of manipulation of markets to the benefit of the consumer is very important.
605.
Ms Lewsley: Welcome to the Committee. I would like to ask a couple of questions on public transport. You commented that 'Strategy2010'
"offers no plan for how public transport will be turned into the frequent, affordable and attractive service needed."
So, leaving aside a rise in investment, what measures would you like to see introduced to improve these services?
606.
Mrs Bell: Quite a number. The lack of attention to public transport is a considerable omission. There seems to be very little realisation that with economic growth and, hopefully, more jobs, people need to travel to the jobs. I will give some examples. Levels of car ownership in NorthernIreland are still significantly below those in Great Britain. They are currently about 14% below. There are many people in NorthernIreland who hardly travel at all - they are almost disenfranchised. We were quite concerned that they were going to be excluded in terms of economic development.
607.
The figures for what people spend on public transport, buses and trains, show that family expenditure in households that do not have a car is only £1·80 a week on bus and rail fares. One would definitely have expected more to be spent. We look also at what economists call "the lowest quartile." Taking the non-car owning households and the lowest quarter in earnings, they are only spending something like 50p per week on bus and train fares. That would not even get you on a Citybus for one journey. So there is a big section of people who either walk or do not travel, and it means that they are not going to have job opportunities.
608.
There is no doubt that the recent safety report on the railways has concentrated minds very considerably on what people want public transport to do in Northern Ireland. For several years the council has been pointing out the serious problems of falling passenger numbers, falling passenger satisfaction, and poor perceptions of public transport. There have been serious falls in passenger numbers - around 19% down in Citybus in the last four to five years and 9% in Ulsterbus.
609.
The independent measure of passenger perceptions, twice a year since 1993, was introduced to help ratchet up the level of service. However, we have seen a steady fall over that period. We pointed out that it was simply because the money was not being spent. We did not have anything particular to go on regarding safety. We could not have made the judgement about safety without a specialist report on it. However, we pointed out that the trains were old, were not being well maintained, and were not giving the level of service the passenger wanted. It was the same for the buses, but I am afraid that no money was ever found. Therefore, we are now in the very serious position of having to climb back up if we are to do something. It must be seen in terms of a very integrated strategic approach. It will have serious repercussions for people's access to jobs. One cannot get to somewhere like the harbour estate on the north side of Belfast Lough by public transport. Many people are not having an equal chance of going for jobs.
610.
Ms Lewsley: You are talking about the issue of access, and the areas where people could work but cannot get access by public transport. There is also the issue of people with disabilities who cannot even get access onto trains or buses. They can get into many bus and train stations, but that is about as far as they get. The issue of access, in particular, needs to be looked at from a wider perspective. This week we have seen the increase in the railways' budget, and I assume that you welcome that. Where would you like to see moneys directed to in order to help the whole region and the regional economy?
611.
Mrs Bell: We need to take a very strategic look at what we want our public transport to do, because transport has major social implications. How does Northern Ireland shape up compared to other places? Even in Britain where virtually all transport is run by private, profit making companies, the level of public subsidy is on average two to three times more than it is here. In European countries it is much higher again. Great Britain does not represent a pinnacle.
612.
Northern Ireland Railways receives 5·3pof public money per passenger mile. The figure in Scotland, which also has a dispersed population, is over 22p per passenger mile. What about Cardiff? The Cardiff area is not very different from ourselves, and Cardiff Railway receives 38·5p per passenger mile. Northern Ireland Railways currently gets £7·4million - if it had the same level of support as they do in Cardiff it would receive over £50million. We need to decide what our objectives are as a society. There are very real dangers if public transport becomes a sort of Cinderella service - a choice of last resort when people only get the bus or the train if they really cannot do anything else.
613.
'Strategy 2010' and 'Shaping Our Future', raised the idea of strategic corridors in NorthernIreland - we need to marry these up. We cannot do that if public transport is a Cinderella service.
614.
Mr Osborne: Whilst we welcome investment into difficult situations which have been under-subsidised, it still does not bring us up to a level playing field with our counterparts in the rest of the United Kingdom, the rest of Ireland and the rest of Europe. Although there must be some movement to reach that level of investment, difficult situations also require creative and radical solutions. We do not purport to be transport experts, but the customer is getting a raw deal, and someone in the Government needs to think radically about that.
615.
That might mean free subsidy to buses to encourage passenger usage, or rural transport schemes which would be part of a rural development project and a rural regeneration strategy. These are the cross- Department links that must exist if Government wants to talk about joined-up government and put it into action. It is no longer a case of saying that the rural economy is nothing to do with transport, therefore, and if we are a transport group we are not interested in the rural economy. Linkages have to be made and investments need to be re-examined. For example, can school buses in rural areas be used in a subsidised, low-cost fashion by other users?
616.
There is a whole range of ideas, but they require creative thinking. You may laugh some of the ideas out of court for being too costly, but they should be put down on paper and scrutinised anyway. I know of one leading architect who believes public transport in Belfast should be made free for a number of years; improve the quality; ease the congestion and see what the passenger uptake is - very radical. He would say that it is a cost-effective proposal if it was measured in comparison to some of the other expenditure which is going on at the moment. Those are the sort of ideas that need to be explored.
617.
Ms Lewsley: Can I ask a question on the issue of education which we sort of tapped into earlier? 'Strategy 2010' recommends the strengthening of school/business links. In your submission you advocate the use of your own guidelines for a form of business sponsorship. Can you tell us what the guidelines are, and why you think that they are important?
618.
Mrs Whiteside: Business sponsorship of young people can be difficult if they are of an age when differentiating between hype and reality is difficult.
619.
It is good that Tesco, Sainsbury's, Mars and Kellogg's or whoever, do sponsor material in the sense of saving government funding and helping to free the public purse. However, we have to be very careful that that sponsorship is not used to direct children along particular lines and the advertising hype becomes more important than the sponsorship itself. That is where we worry. Some of the material published is so related to the product that young people do not see it as promoting the product, rather they see it as a way of life because it is educational, it is through school. It can be very directional.
620.
Mrs Bell: These are the guidelines. I have brought some supporting material for different elements in our submission, and if it was of interest I could certainly leave those copies with you, Mr Chairman. These were done on a UK level. The lead was taken by the National Consumer Council, but we were a part of it. It seemed very much that these links in materials should have educational value, and that they should be relevant to the curriculum. They should avoid very explicit sales messages, particularly where these would not be appropriate to the age group, and they should have balance and objectivity. Those are examples of the guidelines. This way one can really get a lot of added value from those sort of linkages. However, we do believe that it was important for us as a council to add this sort of caveat to protect pupils from exposure to ill-advised or high-pressure selling in what is a classroom and educational environment. We hope that this is a constructive way of going about it.
621.
Mrs Whiteside: On the same general topic, there has been pressure put on us as a General Consumer Council, to accept sponsorship for projects that we have done over the years, and we always have put our voice very strongly against it. People tended to say educational materials sponsored by Tesco's and Sainsbury's - for example, would still be good educational materials. Recently, in relation to low- incidence status for BSE, we were pointing out that some goods on Tesco's and Sainsbury's shelves might be removed. However, sometimes our arguments on behalf of the consumer can, through no fault of our own, land us in the same camp as Tesco's and Sainsbury's and what they want. Therefore, if we were ever to accept money from them for promotional material, we would be in a very difficult position in standing up for the consumer whilst appearing to be on the same side as Tesco's and Sainsbury's.
622.
We ought to be very careful not to take money from business organisations because we do not know where our next policy is going to take us - we may well have to speak out on behalf of the customer. Money from other Government Departments or from local government to do projects we are very happy with, but certainly not business sponsorship. We like to feel that we have not got any powers, that our only powers are those of persuasion and lobbying. If that is the case you have got to keep your integrity, and we feel very strongly that we have to do that.
623.
Mr McClarty: In your submission you refer to a General Consumer Council survey stating that the banning of out-of-town shopping may not have the effect that perhaps we would desire. What evidence are you referring to, and if you have a hard copy of that evidence would it be possible to make a copy of it available to ourselves?
624.
Mrs Whiteside: Yes, we did produce this document last year called 'What's In Store'. We have seen the advent of the development of what we call edge-of-town shopping, and perhaps we could and we would like to draw a distinction between what would be edge-of-town shopping in a large grocery store and what would be a complex of shops.
625.
They are developing in Northern Ireland, and the customers like them: they have been voting with their feet. Our research showed that consumers welcomed them and were very satisfied with them. The General Consumer Council's policy has always been to have a healthy balance between town centre and edge-of-town shopping. In Northern Ireland we have more edge of town than out of town.
626.
A healthy balance for the consumer is to have both town centre and edge-of-town shopping. That is why we did not like the five-year blanket ban. The view of the customer and of business must be considered in every situation. A blanket "no" did not seem logical to us.
627.
Mrs Bell: We did a survey in 1996 when the planning service was looking at retail planning, and we asked people a number of questions about it. Last year we revisited it after a major change in grocery retailing. We found that 67%, almost two-thirds of those questioned, think that they are better off since the new supermarkets opened, and 12% thought they were worse off. This is a dynamic, innovative, constantly changing sector.
628.
We also have figures on the number of people using cars. Our research showed that convenience was a major factor in why people shopped where they did. There was no particular evidence that people were travelling long distances to do most of their shopping.
629.
We expressed reservations about the recommendations in 2010, as there did not seem to be any supporting evidence for them. Banning a particular style of retail development does not necessarily guarantee that the centre of Belfast and the centres of other towns will succeed. Restricting new development might force people to drive further out of town, putting up mileage and causing more pollution, rather than use existing developments.
630.
We also set out five principles for judging new developments. We are certainly not gung-ho to let everything happen without any planning whatsoever.
631.
Mrs Whiteside: The way people shop is changing. More and more women are working and no longer have the time to walk into town every afternoon to do the odd bit of shopping. They drive to the shops when they have time; they do their shopping quickly, bung it in the boot, and drive home. That is how life is developing, and it is a trend which cannot be stopped. However, we want to preserve our town centres and not let them become graveyards. We want to get the balance right. A step in the right direction would be to make town centres more attractive places to visit - not just once a week to buy groceries. Make them attractive; make them interesting. Make them places where people want to go, not with the attitude "we cannot get to the out-of-town shopping centres so we will have to go into the city centre." That will not work. They have to be encouraged to go back to the city centres.
632.
Mr McClarty: You are quite right. I have experience of North America where they are very fond of the car and of travelling to their big malls. I have seen small towns there, which have died completely because of these out-of-town shopping centres. How would you encourage people to go into the town centres? I agree that we have to make them more attractive; we have to make them an experience.
633.
Mrs Whiteside: We should make a niche market with small, interesting shops so that people will want to go there because it is fun. At the moment people are choosing to go to Forestside on a Sunday afternoon as a leisure activity. They must be encouraged to go to shop in the town centre; it is a pleasant place to be.
634.
Mrs Bell: We need to examine more than the opening hours of shops. For instance, Marks and Spencer at Forestside on the Ormeau Road opens on a Sunday, whereas Marks and Spencer in Donegall Place closes - I cite Belfast as an example, because we all use it - but, even if it were to open, ordinary bus services do not run on Sundays, and the buses do magical mystery tours in a loop, and many car parks are closed. People say that Sainsbury's is the attraction at Forestside, and because it is over-shopped we must get permission to have a Sainsbury's store at D5. I do not necessarily buy into that notion, because Forestside offers a shopping complex that includes various stores.
635.
In East Belfast and Knocknagoney there is a different dynamic. It is not necessarily the existence of Forestside that is the problem for Belfast city centre, but all of the other services which make up a vibrant place that people will want to use. The issues of transport and parking need to be in place.
636.
Ms Lewsley: I agree with you. Using Belfast as an example, there has been a trend towards restaurants and pubs moving out towards the Dublin Road and Great Victoria Street, so that there is no integration any longer. You go to one area for one facility, and a different area for another. That has to be redressed. You are right, there is little but Castle Court in Belfast on a Sunday; the remainder of the town is closed, whereas at Forestside everything is in the one place; that is what attracts people. Town centres must be made more presentable.
637.
Mrs Whiteside: The whole package requires examination, but a blanket ban is not the answer; it would not solve the problem. The problem must be looked at alongside land-use planning and the trend for people to move out of the city centre and into more rural living. People are not going to travel miles into town or city centres. Strategic examination is required if we are going to save the town and city centres. There is no one simple answer.
638.
Mr Osborne: Taking the growth around D5 near Holywood as an example, Holywood town might suffer, and so the traders need to look at what strategy they are going to employ in order to deal with the competition. If the customer chooses to go elsewhere, then the business falls as a result of that. Traders in the town have a responsibility to look at how they can gather part of the market, or a niche market, and what they are going to do in order to bring people in.
639.
The same is true of Belfast, but on a bigger scale. What integration is there between the city council's plan and the departmental plan to make it a vibrant centre? Likewise with Derry - what niches can we offer to attract people into the city, and how are we doing it? And are we doing enough? That is something that we need to look at. It is not a question of imposing a blanket ban to solve a problem; it requires the study of a number of policies.
640.
The Chairperson: What are your views on the location of tourism destination retail outlets?
641.
Mrs Bell: Our remit focuses on consumers. When it comes to something as specific as tourism, others are better placed to comment. We are a very small council with limited resources, and we have to be rigorous about prioritising. So if another organisation is better placed to make the contribution, then we look to them to take the lead.
642.
If something contains an element of tourism, we would not usually take it into our work programme at all.
643.
Mrs Whiteside: Returning to my first point, I would say that Northern Ireland consumers who improve standards in restaurants, shops, and life in general make Northern Ireland a more attractive place for tourists. Tourists are looking for good food, good restaurants, reasonable prices, good standards in B&B's, hotels and caravan sites. Tourists expect high standards because they are used to having them in their own countries. Demanding home consumers make life better for tourists.
644.
The Chairperson: Thank you for coming and answering our questions. We will take note of all of your views. We have some work to do going through all of the other submissions but everything will be considered when we come to make our final report. We may have to write to you to clarify or elaborate a point, but it will be very much a two-way involvement. Hopefully, the Committee will have a very focused report that deals with all of the concerns in the submissions we receive.
645.
Mrs Whiteside: Thank you very much for giving us such a fair hearing today. We will be happy to respond to any questions. We would also welcome the opportunity - if another issue arises relating to our work - to talk to you about that specific subject.
646.
The Chairperson: Thank you.
647.
Mrs Bell: Mr Chairman, would you like me to leave a copy of our documents for each member of the Committee?
648.
The Chairperson: Yes, please.
TOP
MINUTES OF EVIDENCE
WEDNESDAY 5 JULY 2000
Members Present:
Mr Doherty (Chairperson)
Mr Neeson (Deputy Chairperson)
Ms Lewsley
Mr McClarty
Dr A McDonnell
Witnesses:
Ms A Heany ) National Energy Action
649.
The Chairperson: Good Morning. You are very welcome. Apologies for calling you in late. We have had some problems this morning. Perhaps you will introduce yourselves.
650.
Ms Heaney: I am Andrea Heaney, Information Administration Officer and currently acting Director for National Energy Action (NEA) in Northern Ireland.
651.
NEA is a charity which develops policies and practices to tackle fuel poverty. Fuel poverty is the inability to afford adequate warmth, and is caused in Northern Ireland by a combination of factors, such as low incomes, high unemployment and a higher dependency on social security benefits, than elsewhere, and these factors are coupled with higher fuel prices, fewer fuel choices, and the inability to afford energy efficiency measures, which all make for fuel poverty. Around one third of households in Northern Ireland are believed to suffer some degree of fuel poverty. NEA's interest in 'Strategy 2010' is concerned with energy and with the impact of energy policy on fuel poverty. While our response does take account of industrial and commercial factors, NEA considers it more important to explore the links between energy policy and the wider economy.
652.
Mr Neeson: You are very welcome. May I ask you to detail what effect fuel poverty has on the economy of Northern Ireland?
653.
Ms Heaney: Fuel poverty sucks money out of the local economy. People are paying a higher proportion of their incomes for fuel, so they have less to spend on other things, which, in turn, affects the whole of the economy.
654.
It also causes cold-related illness. Our estimation is that around £30million annually is spent on treating cold-related illness in Northern Ireland, so there is an impact on the health budget.
655.
To go into more detail, there is an indirect link between economic problems and fuel poverty. Fuel poverty causes industrial uncompetitiveness in certain areas - I am thinking specifically of the North-West. If there is no natural gas pipeline, industrial competitiveness in that area will be affected and, therefore, employment and incomes are affected as well.
656.
Mr Neeson: What would you like to have seen in 'Strategy 2010' to tackle fuel poverty and energy efficiency.
657.
Ms Heaney: In the energy section of the document there is no mention of fuel poverty. In the rest of the UK documents such as this have taken account of fuel poverty and incorporated it into certain strategies, whether sustainability, climate change or whatever. There is no such recognition in this document. There was also very little mention of the domestic sector, which is quite a big user of energy in Northern Ireland, as it is elsewhere. There is no recognition of the impact that this can have on domestic customers. We would like to see a more integrated policy, a more co-ordinated approach.
658.
Ms Lewsley: On Public/Private Partnerships (PPPs), do you envisage looking at PPPs for energy efficiency projects?
659.
Ms Heaney: We would like to see that. Public money is, to some degree, put into energy efficiency under the domestic energy efficiency scheme. Energy efficiency could be of great benefit to the Northern Ireland economy, and not just to the people living in fuel poverty. Environmental problems could be tackled by tackling fuel poverty. We would like to see more investment in energy efficiency, and if that means private money, yes, we would like to see that too.
660.
Dr McDonnell: You mentioned in your written submission your concern about the lack of focus on energy efficiency in 'Strategy 2010'. Can you give us some detail on the benefits there would be to the economy if we were energy efficient?
661.
Ms Heaney: I referred before to health costs recovery. If money were invested in energy efficiency, there could be a saving on the health bill. Job creation is another result of investing in energy efficiency, which means a higher revenue in taxes and a lower spend on social security benefits.
662.
Dr McDonnell: Job creation, in what context?
663.
Ms Heaney: People have to do this work. We train people in energy awareness, through NVQs, to be able to carry this out to the required standard. There is a training offshoot there as well. The fuel poor would have more money in their pockets to spend in the economy.
664.
Mr McClarty: You are very welcome. Have you any thoughts on what we can do to help overcome the problems with the affordability of fuel switching.
665.
Ms Heaney: My first instinct is to give everyone a grant, but that is not entirely realistic. The Home Energy Efficiency Scheme (HEES) in England has been reviewed and changed in the last year. It offers a grant to pensioners of up to £2,000 to install heating in their homes. We could afford to give that to some, but others can afford to do the work themselves. We need to encourage the latter and show them the benefits. There are various organisations doing that, such as the Energy Saving Trust and Bryson House. We need to encourage people to invest.
666.
We need to support those who cannot afford it with public money. A family living on benefit, trying to save money, is not going to be able to afford to put in a heating system or to change from solid fuel to gas or oil or whatever. It is just not possible. People like that will need some public support.
667.
Ms Lewsley: Even if they did switch from solid fuel, which is coal, to oil or to gas, could they still afford it? They are not going to be much better off, are they?
668.
Ms Heaney: Someone with a solid-fuel fire could be paying up to £20, or more, a week, for coal. Figures from Housing Executive homes in Belfast, that have converted to natural gas, for heating and hot water average out at £3 or £4 a week over the year. In the winter quarter they are between £5 and £7 a week. There is a big saving to be made by fuel switching.
669.
Mr McClarty: Do you have any influence with the NorthernIreland Housing Executive? It seems that consumers, certainly in the area from which I come, do not really have a choice. Oil is relatively cheap compared to solid fuel. For the more elderly tenants oil is fairly easy to switch on and off. They do not have to clean fires or go out in cold weather to get coal.
670.
Ms Heaney: We have some influence. However, it is limited. In saying that, it is in the middle of changing its heating policy, and gas is its preferred fuel. However various communities want a choice between oil and gas. For the fuel poor we advocate gas because it is cheaper than oil, easier to pay for and a regulated industry. People have to pay out a lump sum for oil, the prices of which shoot up and down, and for people living on a fixed income that is sometimes quite difficult.
671.
Mr McClarty: But it is not available to everybody in Northern Ireland.
672.
Ms Heaney: Not at present. But if the change in heating policy goes through, people will be offered either gas or oil. They will still have a choice of solid fuel, and there are still people choosing that. Most people, though, would choose between gas or oil because of the ease of use.
673.
The Chairperson: You state that you welcome the new duty on the regulator to have regard to low-income customers. Would you expand and develop on that?
674.
Ms Heaney: In the licences held by NIE and Pheonix, there is a clause which says that they must work with low-income customers, but all they did was install prepayment meters. This causes problems for people because of the extra surcharge of around £18 a year. They are actually paying more to have this method of payment. We would like to see the regulator show more interest in low-income consumers, thereby influencing utilities to do the same. They could come up with some creative ideas such as energy efficiency and how to help people who are in financial difficulties.
675.
The Chairperson: As a Committee, how can we help with fuel poverty?
676.
Ms Heaney: We had envisaged a cross-party fuel poverty task force to look at the problem and the implications for the wider economy, community, health bill, social security, et cetera. It could be something similar to that set up by the Department of Trade and Industry in England in 1997 where they have a working group on fuel poverty.
677.
The Chairperson: Are you advocating a task force?
678.
Ms Heaney: Certainly, we would advocate a task force.
679.
The Chairperson: Would it comprise representatives of all parties?
680.
Ms Heaney: Yes, and representation from other organisations which have expertise in the area.
681.
The Chairperson: Is there anything else you would like to say to the Committee, or any other point you would like us to comment on?
682.
Ms Heaney: Not at the present time. We wanted to show the links between energy and social policy, and that is what the document is about.
683.
The Chairperson: Thank you very much for your contribution, for your time and for the submission you made. There may be follow-up questions we may think of later and in this respect, may write to you before we produce our final report.
684.
Ms Heaney: Feel free; we are willing to help in any way we can.
TOP
MINUTES OF EVIDENCE
WEDNESDAY 5 JULY 2000
Members Present:
Mr Doherty (Chairperson)
Mr Neeson (Deputy Chairperson)
Ms Morrice
Ms Lewsley
Mr McClarty
Dr A McDonnell
Witnesses:
Mr D McIldoon )
Mrs M McWilliams ) OFREG
Mr M Archer )
685.
The Chairperson: Thank you. I welcome you all here this morning and thank you for your submission. We have a number of questions to ask, to try and flush out some of the issues.
686.
Mr McIldoon: Thank you. With me are Mary McWilliams, who heads the gas division of OFREG, and Mike Archer, who is our chief electricity economist.
687.
I was last here on 9 February and I should update you on what has happened since. My views on the current Northern Ireland energy situation may be summarised as follows. Energy costs, particularly for electricity, remain unnecessarily high. The energy problem is not primarily technical and is not primarily economic: it is primarily structural, and it requires political solutions. Market structures appropriate to Northern Ireland's needs must be formulated by policymakers. Regulation is only as effective as the policy framework it operates in and the political will which drives the energy industry to produce solutions and not, as in the past, excuses.
688.
In 1997, electricity was 3·23% of Northern Ireland's GDP. In the UK it was 2·45%. Paradoxically, electricity being a low percentage of GDP is a good thing rather than a bad thing. We consume much less electricity in Northern Ireland than in other parts of the European Union. The EU average electricity generated this year is going to be 6,799 kilowatt-hours per person. The UK average is 6,400 and the Irish Republic average is 6,675. The Northern Ireland figure is 4,828. We use much less electricity per capita than most parts of northern Europe.
689.
We are in the middle of an investment revolution. Some £2billion is being spent over 10 years and a lot of projects are ripe for development, including new power station investments, gas to the North-West and gas to the South, but getting these things delivered requires a clear expression of political determination to guarantee that they will happen.
690.
Since I met the Committee in February, there have been a number of positive developments. A new supply price control has been agreed with NIE, including the phasing out of excess charges for prepayment customers. We have opened the electricity market further. We have established cross-border trading in renewable electricity. There have been reductions in electricity tariffs. We have secured some relief on climate change levy and we have begun the process of consultation on NIE's transmission and distribution price control.
691.
There are also threats. Rising fuel prices threaten electricity prices. Over the next year we may face higher prices because rising fuel prices offset other price reductions. We had delays in filling the policy vacuum. During the period of direct rule I assumed that I should follow the guidelines of the Government of the United Kingdom, but regulation is a devolved matter and I urgently need policy guidelines from the current Administration. We face the continuous threat of diverging regimes on both sides of the border, fiscal regimes in particular, which make it difficult for us to optimise our position in Northern Ireland.
692.
The existing legal framework is damaging both to customers and to commercial interests, and amending legislation is urgently needed.
693.
Northern Ireland's energy interests need to be better formulated and articulated, in particular with regard to energy taxation, capturing the economic benefits of CO² trading, financing our infrastructure deficit and dealing with our geographical position on the periphery of the European energy market.
694.
Policy decisions must be taken in an open and transparent way, with full public accountability. Strategic decisions must not be subordinated to the protection of commercial interests, as, I believe, has happened in the past and is still happening. Finally, if the public interest is unambiguously restored to the paramount position in energy decision making, and defended with vigour, then our energy future could be much brighter than our recent energy past.
695.
Mr McClarty: You are welcome this afternoon. What views do you have on the direction that should be taken by the updated energy policy?
696.
Mr McIldoon: As I outlined in my paper, the paramount requirement is that the public interest be put first. The structure that we inherited from privatisation, which was devised with the best of intentions, places the commercial interests - particularly of NIE, but of other companies to an extent - in a position where they can veto change, frustrate change, or delay change that may be in the public interest.
697.
The need to restructure the industry is paramount. Everyone acknowledges that. It could have happened by now had it been given the right kind of push. The difficulty that I have, for example, in renegotiating the generator contracts, is that NIE can perceive that certain changes will expose it commercially. It is unacceptable that a private company that should not be damaged by change can, nevertheless, frustrate change. If Government made it clear that a commercial interest could not frustrate a public interest, that single change of philosophy would drive through all the necessary changes.
698.
Mr McClarty: Under the Government's Utilities Regulation Review, you refer to implementing those recommendations, but say that they should be adapted for Northern Ireland consumers. What differences would you propose, and which recommendations would you implement?
699.
Mr McIldoon: The primary change is to say that the interests of customers come first. That gives the regulators a new primary duty, and everything else flows from that. Many of the changes being implemented in England are to cope with the fact there is a fully competitive market in electricity and gas in England, which means that one can buy and sell to anybody. Every household can choose its own electricity and gas supplier. That does not happen in Northern Ireland at the moment. We still have a largely regulated market.
700.
In a totally competitive market the pressure is on prices. These are pushed downwards as suppliers fight for customers and offer lower prices. That creates problems as suppliers tend to offer the best deals to the most affluent members of society.
701.
It raises the issue of how to meet other Government objectives; there are other Government objectives besides price. There is the objective relating to the environment. How does one reduce the amount of pollution that goes into the environment as a result of producing and consuming energy? There is also the question of social inclusion. How does one ensure that the least affluent members of society are protected, or able to get the same benefits from the market as the more affluent?
702.
For example, some changes have involved the Government saying to the industry "you must take 10% of your electricity from renewable sources" or "you have got to take measures to protect lower income households". We have not had to face those issues yet in quite the same form, because we do not have a fully competitive market. Therefore, we need to devise alternative methods to achieve the same result of ensuring that we produce a cleaner industry and deliver at least equal benefits to lower income households. We are doing that by other methods and so do not need to have the same concern about having those aspects of the Utilities Bill introduced into Northern Ireland.
703.
There are other things that we desperately need to do. In Northern Ireland we have an infrastructure deficit. For example, we are building a Scottish interconnector. We have no gas pipelines to the North, to the South, or to district towns in Northern Ireland. We have an industry which is not quite as mature as the industry in the rest of the United Kingdom. We have to build up our industry - the £2billion I referred to - at a time when it is in the private sector, and the private sector requires higher rates of return on its investment than the public sector traditionally did. One of our main concerns is that we should have a mechanism by which we can finance our infrastructure deficit on better terms than the private sector currently looks for. We need new financing instruments, and it is something that I urge Ministers in Northern Ireland to consider as they formulate legislation.
704.
Secondly, we have the problem of being on the periphery of Europe. The market will lead to falling energy prices across Europe, and we will be excluded from securing all of that benefit - we need special measures for that.
705.
Finally, we have a disproportionately large opportunity in Northern Ireland to make CO² savings which will contribute to not just the Irish, the British, the European but the planetary environment. Those benefits have an economic value, but, as things stand at the moment, there is no mechanism by which that value can be captured by customers in Northern Ireland. The legislation should at least look at how we could set about doing that. I am sorry if that was a rather long- winded answer, but I hope it highlighted some of the issues which I feel need to be addressed in more detail at a later stage.
706.
Mr McClarty: Can you foresee any energy problems if the energy market is developed on an all-island basis? Is it feasible, and what does electricity cost in the Republic of Ireland compared to say Northern Ireland?
707.
Mr McIldoon: The energy market is being developed on a European basis, and that is the driver for everything that we are doing. How it develops in a particular part of Europe is a function of the geography of that part of Europe. We are on an island and therefore, like Great Britain, we are not fully integrated into the European electricity market, though we will increasingly be linked to the European gas market. We have different forms of interconnection with the Continent from that which takes place between other countries in mainland Europe.
708.
Electricity markets were developed within national boundaries, and at the moment they are still legislated and regulated for on a national basis. Logically, electrons do not flow within that national boundary; they flow from where sources of power exist to where there are demands for power, and physically, the most logical form of market is not necessarily one that is properly aligned with existing national borders. For that reason I believe that an energy market will emerge over time on the island of Ireland. By reason, that should lead to price convergence for customers in both parts of the island, and insofar as it is linked with Scotland, a degree of convergence across the British Isles. There are obstacles to that, such as the different fiscal regimes - corporation tax, for example, is lower in the Republic than it is here. Problems can arise from that, and you can get slightly perverse outcomes. It is probably more logical to invest in a power station in the Republic than in NorthernIreland.
709.
On the other hand, the Irish Republic is right up against its CO² limit. The limit it has to reach by 2010 is already in danger of being burst. It makes sense for the Irish Republic to import electricity from us. Both regimes in Ireland need to discuss these problems and see if they can find optimum solutions to them. Otherwise decisions based upon different factors in different places will be made, and the result will not be the optimum solution.
710.
The other issue for a developing all Ireland market is how to regulate it because there will be two legislative bodies. It is easy enough for two regulators to agree - I work quite closely with my opposite number in the Republic. We opened up the interconnector for trading much faster than interconnectors in other parts of Europe. That bit of it is easy. The more difficult bit is to prepare legislation that works on an equal basis to facilitate a cross-border market. I suppose that is ultimately a problem for you rather than me.
711.
Mr McClarty: You mentioned discussions between ourselves and the Republic of Ireland. Are those discussions ongoing at present?
712.
Mr McIldoon: I talk to my opposite number, the regulator in the Republic, and the Department of Enterprise, Trade and Investment talks to the Department of Public Enterprise in the Republic. Currently they were discussing the possibility of doing some joint studies on how the market could operate and develop. Such studies are absolutely essential.
713.
Ms Lewsley: My first question is a follow-on from MrMcClarty's. If we are talking about this on an all-Ireland basis, do you feel that this would provide a reduction in fuel prices, particularly for the industry? Would it happen immediately, or would it be something more for the future?
714.
Mr McIldoon: In theory, at the moment, any large industrialist in either the Irish Republic or in Northern Ireland can buy from a generator in the other part of Ireland so in theory there is a competitive market for the largest industrialists. It is taking time to develop because there are always difficulties about that, and there are constraints on supply in the Republic - they desperately need more power stations. There is also going to be from next year the climate-change levy applied to industry in Northern Ireland, which is going to be a tax on the user.
715.
While I think the prices that industries pay in both parts of Ireland should converge to being very close to each other, customers in Northern Ireland are going to have to pay this extra tax, and it will not matter whether their power comes from Northern Ireland, the Republic or Scotland for that matter.
716.
Ms Lewsley: How would you like to see the energy market develop in order to benefit industry with a price reduction?
717.
Mr McIldoon: The market is open at the moment, and those large customers who face international competition, and for whom electricity prices are critical, are now able to source electricity from wherever they want. Clearly they are physically limited to this island at the moment but from 2002 they will be able to buy it from Scotland as well. If there is sufficient competition between generators they will be competing for customers and the price will fall. For that to happen it also requires new generation that is technically efficient. We do not have that in Northern Ireland. As a result of contract changes I would expect lower cost electricity generation to come into Northern Ireland. I do not think there is much point having an inter connector with Scotland if we have high priced electricity here and Scottish generators do not have to compete very hard and force their price down to get customers. The important thing is to drive costs out of the industry and that is what the contract changes are about. Driving costs down through contract changes, more inter connection and further competition are the ways in which we will finally crack the problem for the industrialists.
718.
For the rest of the population, for us as domestic customers, the problem remains that we have inherited the costs of the past. Basically the industry was sold for too much in 1992. The Treasury made money out of it, and until the costs are taken out we will probably continue to pay more than people in other parts of either the Republic or Great Britain.
719.
Ms Lewsley: You suggested in your submission that there may be an adverse price change if a policy for developing renewable energy is pursued. Is there no way of keeping the cost of renewable energy low?
720.
Mr McIldoon: Renewable energy costs are falling, and it is given a price advantage by the climate-change levy, which effectively gives it almost a halfpenny of benefit, but it still costs more than new efficient generation. I do not think anybody expects renewable energy to cost less than new efficient generation so society as a whole will, for the foreseeable future, have to pay some premium for renewable electricity.
721.
The economists among us would say that that is because those using fossil-fuel energy do not pay the full economic costs. They do not pay the costs of cleaning it up. Environmental damage is not paid for by electricity customers and there is less environmental damage caused by renewables. If you captured the costs of the environmental damage, and taxed the fossil-fuel power stations on that basis, then you might equalise prices. However, that would require the introduction of a carbon tax on fossil-fuel power stations. It is not a way of making renewable electricity cheaper. It is a way of equalising it by making the other dearer and whether that is acceptable is not for me to say.
722.
Mr Neeson: Mr McIldoon, when you were here in February you heard of the Committee's interest in extending the natural gas pipeline to the North-West. Is that scheme any closer? I know that various companies made submissions to you.
723.
Mr McIldoon: We are in the endgame, although I cannot predict success or failure. The technical feasibility of doing it is not in doubt. It makes good economic sense from a societal point of view, and the three interested parties have confirmed their interest in persevering.
724.
The key question is how to secure a gas load through such a pipeline to justify bringing it all the way to Derry. The answer is by putting a power station on it somewhere along the line, not necessarily in Derry, in Ballymena, perhaps. Is a power station on the pipeline a viable proposition? The system operator who operates our electricity system, which is now an independent, Viridian-owned business largely separate from NIE, agrees with me that a power station in the North-West would be of benefit to electricity customers. It would avoid the need for reinforcement, while providing system support. It would be the best way of supplying Donegal, and it would also provide cover.
725.
Several hundred megawatts will fall off the system in the next two or three years, but we will still need a certain amount of surplus in Northern Ireland to cope with outages, emergencies, storms and peak use times. We need the power station. The private sector does not seem keen to invest at risk. The question is: can the transmission system operator offer enough reassurance to a power station investor to enable him to proceed? I believe that he can. The risk is minimal, because a modern power station built there will be the most efficient in Northern Ireland. It will actually be able to sell its output, so it will not need money from the system operator.
726.
That is the proposition. I asked the three companies to submit details of their proposals to the system operator by 21 July 2000. He will decide by the end of July which of them offers the best value to the electricity system. When the operator has made his decision, the winning company will be able to negotiate a pipeline licence with me. That is the way forward.
727.
There is only one possible drawback in this, and that is a possible conflict of interests. The transmission system operator is still owned by Viridian. If, for example, the TSO were to sign a contract to supply money to a power station in the North-West, and the power station were unsuccessful, Viridian could decide that that is exposing them to a commercial risk, and they could stop the TSO signing such a contract. Viridian's managing director told me that his company certainly does not want to be seen as spoiling the party for everybody else. It does not want to block a gas pipeline to the North-West, but it may feel commercially obliged to deny the TSO the ability to sign a particular contract.
728.
This exemplifies the problem that we have with this industry. It is unreasonable to ask a commercial organisation to take risks on behalf of the whole community. Equally, it is unreasonable that a commercial organisation can veto something that would benefit the community economically and environmentally. That is the dilemma. That is where policy makers can force a resolution.
729.
Mr Neeson: Can you tell us more about the urgent need for a policy framework?
730.
Mr McIldoon: My policy framework since the change of Government has been an assumption that I should do here what regulators in England are told to do by Ministers. There has not been a policy framework in Northern Ireland. There has been 'Strategy 2010', which I have commented on and which I broadly agree to be the right way forward.
731.
However, it has not dealt with some of these political imperatives; it is aspirational. It is not about how we deliver the changes. There is no argument about the sort of changes that we want - we want an environmentally cleaner, lower cost, competitive industry. But how do you deliver them? How do you deal with the conflicting interests of different commercial organisations?
732.
It requires the policy makers to say that they either accept the status quo and admit that they can not deliver these things because the commercial interests get in the way and that they will accept a high cost, undeveloped energy sector or that it is not acceptable and that they will make changes that enable them to raise money at a low financial cost to customers and make it clear to commercial interests that while they are not going to expropriate their shareholder value, they are not going to allow them to get in the way of change. Frankly, that attitude has been lacking over the last three years.
733.
Mr Neeson: That is useful. Can I presume that the legislation required to bring that about needs to be looked at urgently too?
734.
Mr McIldoon: For the last two years it has been known that legislation will be required for Northern Ireland - whether it needs to be an Order in Council or an Act of the Assembly is not clear. As with many other issues, resolution can be brought about by Ministers talking about what they want to achieve. This would send signals to those in the market place that that is not only what they want to achieve but can achieve because they can introduce legislation. And while I can understand that there are resource difficulties with finding draftsmen to produce the legislation, and that there will be a queue of legislation through the Assembly, that would be a clear indication. Under direct rule the Ministers were unclear of the outcome. Such an indication would transform behaviour.
735.
I can give you a good example. In England there has been a concern by the present Government that generators were making excess profits in the competitive market by the way in which they were gaming the electricity pool so Ministers said "We will change the rules and introduce legislation", but before the legislation was on the statute book their behaviour had changed. Commercial interests will change their behaviour when they know that the policy framework is going to change. Therefore, to get the right outcome all that is required is to have a clear view of what you want to do, even before you can physically do it.
736.
I have struggled with the business of getting gas to other parts of Northern Ireland for the last two years. I have a statutory duty to promote a gas industry so I am only doing what I am paid to do - the Department of Enterprise, Trade and Investment also has a duty to promote gas - and I believe that we could have got there if only there had been a clear determination to do so. I am concerned that the window of opportunity is a short one and that it could be closed before the policy imperatives of this Administration are made clear to all of the commercial interests and that we could lose it. That is not because it is difficult to do or because it does not make economic sense, but because we do not actually want to do it or because we get our timing wrong.
737.
Mr Neeson: With regard to the Public/Private Partnerships, are there any other reasons to have used these in developing energy markets, and, if so, are there advantages for us in developing our resources along the same lines?
738.
Mr McIldoon: This comes back to the point that I made earlier. I believe that legislation ought to provide for the Government, or the regulator under ministerial direction, to authorise the industry to raise levies to pay for long-term projects and to do so in a way that leads to lower-term financing because it is securitised over a substantial period. We are exploring these sort of things at present, and there is a new institution, established by the Treasury, called Partnerships UK that is interested in developing those kind of initiatives.
739.
Most of Europe has its gas supply in place, but there are emerging gas regions. One of the policy initiatives that I would like to see Northern Ireland taking is to try to form partnerships with other emergent regions in Europe where there is the possibility of making significant CO² savings at the same time as making economic advances. Portugal is one such region, Greece is another. Parts of the Irish Republic still fit into that category, and there are probably other areas. Those regions are almost certainly going to develop gas industries by some mixture of public and private finance, probably assisted, in many cases, by the EuropeanUnion. We need to look for allies.
740.
I have talked to the European Commission about this matter and Commission officials sympathise with the concept of emerging regions with special problems, but which also have special contributions to make. It simply requires us in NorthernIreland to have imagination, to take initiatives, to work out policies, and to find allies who have the same concerns.
741.
The difficulty is that our concerns are not necessarily the same as those in Great Britain. Policy is always made in London, and while, on most occasions, our interests may totally converge with those of the policy makers in London, there are circ*mstances - and this is one - where they do not. We should be prepared to work out what we want to achieve and see if we can achieve it.
742.
Mr Neeson: Finally, in your opening statement you mentioned the very low consumption of electricity in NorthernIreland compared to the Republic, the United Kingdom and Europe. Is that because of price alone, or are there other factors? I am looking at that matter from a domestic and an industrial point of view.
743.
Mr McIldoon: We can only speculate on the reasons for that. Perhaps Mr Archer, as an economist with a wider view of these things, could do a little speculating?
744.
Mr Archer: I cannot speculate on that. However, there are a number of legitimate factors to explain why costs are dearer in Northern Ireland. Cost is embedded in price control, which is made up of a number of components. It comprises operating expenditure, capital expenditure, asset value, and the rate of return on assets. There are some legitimate reasons why transmission, for example, is more expensive here than the rest of the UnitedKingdom per capita. The main reason is that we are in a rural area. Also, as houses are a lot more dispersed there are a lot more kilometres of network per capita here than the rest of the UnitedKingdom. So, there is more to service. We also do not benefit from the same economies of scale that might be recouped in the rest of the UnitedKingdom.
745.
Mr McIldoon: One of the biggest issues, when it comes to reasons why we consume less electricity, is that our manufacturing industry is not on the same scale as that in other parts of the UnitedKingdom. I grew up believing that Northern Ireland was industrial, and that the other part of Ireland was agricultural. Clearly, that is no longer true.
746.
It could be argued that our interests have not been properly defended. However, the fact that we have such a low energy consumption per capita is not a measure of our success in using energy well. We are probably now doing more to use energy efficiently than the rest of the UnitedKingdom. However, this is something that has grown up over the years and it is seen as a sign of our backward economic state that we have such low per capita electricity consumption.
747.
Mr Neeson: You made the point very well. However, we are reaping the costs of direct rule in other areas, such as public transport. Hopefully the situation will be rectified.
748.
Mr McIldoon: Obviously, I am not in a position to speak about a broad range of issues. I can only talk about the things I work on and know about. But, it seems that, in the areas for which I have responsibility, NorthernIreland's interests have not been well defended.
749.
Dr McDonnell: Thank you very much.. You are very welcome. As regards renewable energy, what is the potential, if any, for hydro-electricity here? Would it be too costly? Is it too inefficient?
750.
Mr McIldoon: At various times the Department has carried out studies into the potential for renewable electricity in Northern Ireland. Hydro-electricity does not appear to have a very strong future potential. In Northern Ireland we have something in the region of 2000megawatts of installed electricity generation. Of that about twomegawatts is accounted for by hydro- electricity. There are various schemes in operation but all tend to be small and they incur the wrath of the angling lobby.
751.
The Department along with NIE (Northern Ireland Electricity) has recently undertaken a very substantial study to examine how fish can be protected from small hydros. I would be surprised if anyone suggested that the potential for hydro-electricity in Northern Ireland is more than 10 to 20megawatts. In the past people have talked about the use of a tidal barrier on Strangford Lough to generate electricity. Clearly there would be environmental difficulties with that, however, these difficulties could be overcome as a result of technological changes.
752.
Large-scale investment would be required to provide a long-term low-cost supply of electricity, but this could happen only after the initial investment is recouped. Estimates of a few years ago suggested that somewhere in the region of one quarter to one third of Northern Ireland's electricity needs could be met from that particular source of hydro-electricity. However, there are currently no plans for its development. It could go ahead in 20years from now in response to climate change.
753.
Dr McDonnell: To expand on your previous points - and this may be far fetched - but is there surplus hydro-electricity in Scandinavia?
754.
Mr McIldoon: There is a lot of hydro-electricity generated in Scandinavia, particularly in Norway. That is one of the reasons why these countries have very low-cost electricity. They built the dams 40 or 50years ago. The cost has, over the years, been written off, and the fuel is obviously free- it falls out of the sky. Even in places like Norway they are now beginning to build combined cycle-gas turbines.
755.
Dr McDonnell: Are they? Is that to move away from hydro-electricity?
756.
Mr McIldoon: They are not moving away from hydro-electricity. The demand for electricity keeps growing everywhere. Northern Ireland's electricity consumption is 4,800 units per capita per annum, while in Sweden it is somewhere in the region of 17,000 units per capita/per annum. This illustrates that people from other countries use more electricity than we do.
757.
Dr McDonnell: This is all fascinating to some of us who are relatively new to this. It certainly leaves us with a lot of work to do. In your submission, you mentioned that Northern Ireland faces disadvantages arising from the way in which electricity and gas were developed, and this will require a new approach. Could you talk about this for a few minutes, as it has been touched on already?
758.
Mr McIldoon: Is this with regard to the submission that we sent you? Which bit?
759.
Dr McDonnell: I am looking at the structural disadvantages arising from where we have come from. How do we move on politically? How do we eliminate some of those things? You have touched on various aspects already, but I am looking for a little more detail as to how we push it on.
760.
Mr McIldoon: The deficiency in gas is dealt with by installing gas transmission pipelines which cross the border into the Bord Gáis system, and extending the pipeline to the district towns in the North-West. Approximately two thirds of the population of Northern Ireland will then potentially have access to gas.
761.
Whether it will be possible to develop a gas distribution business in every town will depend on what happens with the climate change levy. We have got a five-year exemption from this levy. In my view, we need a 10-year exemption. Why do we not have a 10-year exemption? If Northern Ireland's case were properly explained to the Commission they might see a good reason for a 10-year exemption. The 10-year exemption is being sought for large industrial users in England on the basis of quid pro quo. Those industrial users who make energy efficiency gains and cut emissions of CO² are entitled to a lower rate of taxation.
762.
People who change from using oil and coal to gas will reduce their emission of CO², which would, in turn, generate savings. They should be entitled to the rewards currently enjoyed by others. They should be seeking a 10-year derogation. If there were a 10-year derogation I would be confident that district towns could benefit from gas. This deals with the gas issue.
763.
The electricity issue requires a number of measures which feed together to reduce prices, the first being that we must change the generation contracts. Everyone acknowledges they were overpriced, and there are proposals which would reduce them. In the fullness of time, domestic customers would certainly see low-cost electricity.
764.
Dr McDonnell: That is the main point I was trying to get at. How do we change those contracts? You are probably struggling with the issue on a daily basis. In simple terms, how do we support you in changing them?
765.
Mr McIldoon: We have proposals from both big power stations which would lead to changes. Since NIE is the counter party to the contracts, those changes require its consent, or must be imposed upon it. NIE has no interest either in resisting or supporting the changes, since it passes through the cost. It does not make money from the contracts. To that extent, NIE is disinterested, but it would argue that contract changes expose it to commercial risks. Some of the contracts would run for a longer period. They would say to me that I might allow them to collect these costs from customers, but that someone else might have a different view in fiveyears.
766.
That is why we need to change one of the businesses holding the contracts. It is called the Power Procurement Business, and I recently published a consultation paper on it. If that company, which is the counter party to the contracts, were no longer part of NIE, the latter would have no exposure to any of the risks of contract changes and no grounds for getting in their way. NIE is in favour of having its responsibility for the contracts removed. It is not an argument between me and NIE. I cannot make the changes - only the Government can do that, by introducing legislation. It is obvious that, laws cannot be passed tomorrow, but if NIE received an indication that legislation would be developed and put in place within a reasonable time span, there would be no grounds for it to resist the change.
767.
If that undertaking is not given, I have two choices, the first being to say I cannot do anything since I am not prepared to expose NIE to its perception of commercial risk. I do not believe there is a real risk, but the private sector's perception of risk can be very different to that of the public sector. We would be stuck with high prices. On the other hand, I could try to force NIE to make the changes. We have designed the Ballylumford one so that they will accept the changes. It would be very difficult to design the Kilroot one so that they will do so. I could try and force the changes on NIE. If I did that, they might well resist, and we would be back in the courts. Quite who would be successful at the end of the day I do not know. However, it would not be a productive process, rather it would be a battle delivering no benefit to customers, which would not do NIE shareholders any good either. It is an acrimonious way of resolving problems, and I should prefer to avoid it.
768.
Dr McDonnell: I should like to move on to the industrial or enterprise aspect. 'Strategy 2010' advocates a move away from the grant-dependency culture generally and from incentives for inward investment. Do you think there is any potential for allowing industry, in particular small businesses, cheaper tariffs for their fuel costs, or is there some other way in which a fuel incentive could be given to small industry to create investor tractability?
769.
Mr McIldoon: If we had lower energy costs, we should almost certainly attract industries using a great deal of energy, and as we develop the competitive market I should expect energy prices to fall to the level required to cover the costs of the industry itself. You would not be allowed under EU rules to subsidise the cost of electricity going to anyone in the commercial sector.
770.
You might be allowed to do it for households on social grounds, but you could not do it for industry. The question is how do we drive the costs down, and that takes us to getting new generation, competition and inter-connection. Those things are all happening but not fast enough. Industry needs to be persuaded to use its energy more efficiently; there are currently some measures in place promoting that. The Enterprise, Trade and Investment Department will, I expect, develop other measures for dealing with that.
771.
Dr McDonnell: I would be very keen to see some form of recycling of aluminium cans. That is a large electricity consumer and has associated high costs. This is one example of how to generate jobs and revenue whilst being environmentally friendly.
772.
I want to touch briefly on combined heat and power (CHP) as an energy source for industrial complexes and housing estates. Are there advantages in CHP and what has been done to highlight these advantages?
773.
Mr McIldoon: It is one of the paradoxes that the cost of combined heat and power in Northern Ireland should be much the same as anywhere else. The kit is the same which you purchase in the world markets, installation costs of a 5-megawatt plant here should be similar to, for example, Birmingham. Electricity here is dearer, so the benefit from a combined heat and power plant should be greater; one would expect it to be very successful in Northern Ireland. Penetration of the market here is much lower than in Great Britain or the Irish Republic and very much lower than in most parts of the continent. Why is that? We have changed the rules and have had some success in developing the market for it, but it is an uphill struggle. The Department of Enterprise, Trade and Investment (DETI) is actively promoting it, and is conducting a seminar in the autumn to try and persuade industry to develop CHP.
774.
I think it will grow slowly, but I do not think it is going to revolutionise energy usage in Northern Ireland. The answer to why do we not have it in housing estates is that there is an unhappy history of district heating in Northern Ireland. There are only two or three schemes left which the Housing Executive run. They have explored putting combined heat and power into some of those estates. In areas that are not going to be connected to gas - rural areas - there is scope for having district heating schemes which would produce electricity and heat using biomass grown in rural areas as it is in Scandinavia. That is an opportunity the Department might want to encourage.
775.
The difficulty has been that people in Northern Ireland appear to like to control, the source of heat within their own curtilage. They will accept electricity coming in through the wires and gas coming in through the pipes, but what happens inside the house they wish to control. I consider people in Northern Ireland to be not all that keen on having their heat coming in through pipes; it may be a cultural thing. It might be that a village or community association will develop it successfully and lead the way.
776.
The Chairperson: Does NIE purchase electricity at a dearer price than it sells it?
777.
Mr McIldoon: No, NIE buys it from the generators at a cost which is fixed in the contract. They have to pay the fuel cost which they pass on to customers. They have a small incentive to beat indexes, but profits are not significant. It is a pass-through cost, from which they are not profiteering when purchasing the electricity from the generators and selling it on to the public.
778.
NIE makes most of their money from the difference between what it charges for using its wires and what it costs for the wires.
779.
The Chairperson: Has the climate change levy issue been resolved, or is Europe still reviewing it? Is the five-year opt-out settled?
780.
Mr McIldoon: As far as I know, formal clearance by the European Commission has not been given, but I have no reason to believe that it will not be. The more interesting question on climate change is can it be more than five years? I would argue that it should be. What is it going to do to our manufacturing industry? We come back to this business of the very low per capita consumption of electricity in Northern Ireland and the high price. The climate-change levy is meant to be a signal to customers that they are going to pay more and, therefore, should use less - a very normal market signal. We have had that market signal, and it results in a very low consumption. We could even argue that it has helped to destroy our manufacturing base. I would still maintain that Northern Ireland should not have the climate change levy applied to our electricity sector either. That argument is still worth pursuing with the Treasury. I do not know whether it would be successful, but we are not going to get any further concessions unless we ask for them.
781.
The Chairperson: Finally, you state in your submission that the energy efficiency projects which were developed in co-operation with energy groups were very successful. Could you elaborate on that, or give a bit of detail?
782.
Mr McIldoon: NIE is incentivised in many ways now to promote energy efficiency, particularly since I have agreed a new supply price control with them. It is now the only company in the British Isles that makes more money this way. NIE's supply is that small part of NIE's business, worth about £25million a year, which interfaces with customers. It takes the electricity from the street, as it were, and puts it into your house, reads your meter, sends you your bill, soothes you if you are cross and that sort of thing. It is a small business, but a very good business, and it makes good profits. It was formerly incentivised to sell more electricity and is now incentivised to sell less electricity. It is probably the only company selling electricity in the British Isles that makes more money from selling less of its product.
783.
It has agreed to introduce a lot of energy efficiency measures in exchange for being allowed to make more money. Up to now, the main way it has promoted energy efficiency is through a levy which works out, on average, at £2per customer this year, which it then spends on energy efficiency measures in individual households. These can vary from low-energy light bulbs to heating controls, from promoting cavity wall insulation to promoting gas central heating in households. It does it through a lot of partners. It does it through NEA, which the previous witness represented. It does it through an organisation called Energy Action Grants Agency (EAGA Partnership), which does cavity wall insulation and roof insulation and through organisations like Help the Aged. It has got a lot of schemes where it takes, particularly, the more vulnerable sections of society and enables them to reduce their electricity consumption by putting energy efficient measures into their houses. These sort of measures result in much more significant reductions in the bill than simply knocking a few pounds off the price, and to that extent they are very much to be welcomed. If you can introduce energy efficiency measures into a household you may knock £60a year off the bill. It is not realistic to expect to knock £60off the bill by changing NIE's price control. NIE is increasingly developing the capability of doing this. It is an aspect of the business that has been very successful and which I thoroughly support. They require a degree of commendation for what they have been doing.
784.
The Chairperson: Thank you very much for the submission and the way you dealt with the questions. There may be supplementaries or follow-up that we will think of when we are dealing with our report, and we may write to you to clarify any point. Again, I thank you for attending and the way you dealt with the questions.
785.
Mr McIldoon: I thank you for the hearing. As I emphasised throughout, it is mainly up to you and the Minister to provide the capability to resolve the problems that we face. All the problems we face are capable of resolution, and our future could be an awful lot better than our past. I would be very happy to answer any further questions or to provide additional evidence, should you require it.
TOP
MINUTES OF EVIDENCE
MONDAY 17 JULY 2000
Members Present: Mr P Doherty (Chairperson)
Mr Neeson (Deputy Chairperson)
Mr Attwood
Mr Clyde
Ms Lewsley
Mr McClarty
Dr McDonnell
Witnesses:
Professor E Shannon )
Mr D Gibson ) NI Science Park Foundation Dr N Apsley )
786.
The Chairperson: I welcome you to the Committee. We have received your submission and have some questions for you. We are on a tight timescale so I would ask you to give a short introduction, and the Committee members will then ask questions.
787.
Prof Shannon: I have a few remarks that I feel are worth making. The foundation strongly supports the central thrust of 'Strategy 2010', although we were not in existence when it was being created. David Gibson, other board members and myself were involved and were able to influence it in a fragmented way. The core thrust of it is correct and certainly fits in with our vision of the science park being part of that overall economic development.
788.
Our concerns are on two fronts. The first relates to our seeing ourselves as being at the core of the knowledge-based revolution, helping other agencies bring such businesses to Northern Ireland and also using a good deal of the intellectual property in higher-education establishments to form businesses in the science park. We are concerned about whether we have the right type of people who are able to do that and whom we wish to use. Have Northern Ireland's education and training structures been looked at in detail so that they can satisfy the needs of the knowledge- based revolution when it takes off?
789.
Our second concern is the timescale. If we are serious about building a knowledge-based economy, we must know that technological change is occurring extremely rapidly. We are all well aware that every 18 months computers become twice as powerful, while their cost is halved. We cannot control this. The longer we delay starting a knowledge-based economy, the harder it becomes, since we enter a sphere into which more and more people are coming every day. I am concerned that, if it takes time for us to consider things and decide what to do; by the time we start taking action, we shall have created more difficulties for ourselves.
790.
There is a very good research base in the two universities, but less so in some of the companies. If one looks at the statistics, one sees that, traditionally, private industry has not invested quite as much in research as the public sector. A great deal of very good work has been done to improve that, and the statistics are most impressive, but one must realise that they started from a low base five or 10 years ago. Much has been achieved, but it still does not bring us up to anywhere near European, let alone world class. Knowledge- based industries will want to see that.
When they come to look at Northern Ireland as a place in which to invest, they will be looking at the people, at the intellectual property and at how best to develop and exploit them.
791.
One final comment - although not mentioned directly, the word "foresight" might have been identified in one instance in 'Strategy 2010'. All the countries that I am familiar with which have entered the knowledge- based revolution all have used "foresight" as part of the planning process. There is activity in Northern Ireland which is attempting to use "foresight" as a mechanism to leapfrog ahead. It was not overtly mentioned in 'Strategy 2010', but it is implied in a number of places. If you are knowledgeable, you can see that it was evident in some people's thinking. It has not been drawn out as an issue in 'Strategy 2010' as it is in other economies which have examined this change.
792.
Dr McDonnell: What do you mean by "foresight"? Are you using the word in layman's terms or are you referring to some organisation?
793.
Prof Shannon: Foresight as in layman's terms. It is an attempt to chart where the future lies and it has been used by a number of countries. Industrialists together with academics are locked in a room somewhere to generate thoughts and ideas to guide us in the future. It is business people saying where they think our future markets lie and technologists saying that it is possible to do such and such because they know that we can develop the technologies necessary. "Foresight" has been used very effectively in a range of European countries, and especially in the economies that have gone from having run-down industries to new knowledge-based industries, for example Finland, Sweden and, to a lesser extent, Norway. More importantly, it is happening in the southern part of this island.
794.
Mr Neeson: Since your last visit to the Committee I am delighted that we have seen further progress on the development of the science park - we look forward to the bricks and mortar appearing. You have outlined some of your concerns about the document. Are there any other criticisms that you would like to make to the Committee?
795.
Prof Shannon: No. To an extent those concerns are issues which we, in the science park are selfish about. It is part of our process to work with a variety of agencies to promote Northern Ireland. We want to make the science park a world-class-entity to act as a beacon to attract people to Northern Ireland rather then to other parts of Europe. We must recognise that in the island of Ireland and in England, Scotland and Wales there are around 60 science parks. In Europe there are hundreds, possibly one thousand, so we are operating in a very competitive environment. We need to differentiate Northern Ireland. We need to take its core strengths and exploit them.
796.
Currently it is difficult to produce clear evidence to show that education, training and technology here are world-class. That is not to say that it is not very good, but our goal is to achieve world-class, and these are all part of that.
797.
Mr Neeson: In your introduction you mentioned that the Science Park Foundation was created shortly after the publication of 'Strategy 2010'. What impact do you think 'Strategy 2010' will have on current and future development of the science park?
798.
Prof Shannon: In some ways it is helping to make our job easy. We are not the only people wanting to convince society, in general, that the science park is a good thing, something that will help to improve the economy. It is not about scientists doing things because they are interested in science. It is about creating real jobs, companies and infrastructure. We see that as a core thrust of what this document is setting out to achieve. We think in the same way as the agencies that are attempting to bring this strategy into reality. We have found it very easy to work with a wide range of organisations - the universities, the education sector and other bodies. They are all very keen to see what we do, and to see it happen sooner rather than later as, in some ways, it will lay some foundations for their activities as well.
799.
Mr Neeson: I would like to turn to something totally different. Within the document it is proposed that there should be a single development agency for Northern Ireland. Do you have any views on that?
800.
Prof Shannon: Not really. At this point we find that there are open doors in all the organisations that we have sought discussion with. In developing our mission statement, strategy and objectives we have tried to make it an inclusive process, talking to everyone who would give us time. We do not have any views. We see it as the job of someone else to decide what the agencies are. Whether there are a lot or fewer of them, we can still work with them. What we are trying to do is in line with what other people are also trying to do.
801.
Mr Neeson: I thought that you might have some views, bearing in mind that the Industrial Development Board, the Local Economic Development Unit and the Industrial Research Technology Unit would also be part of that proposed development agency. Do you see any advantages or disadvantages in that?
802.
Prof Shannon: I will declare an interest here as I am a board member of the Industrial Research Technology Unit. I am one of the outside people; I have a business background and have an honorary academic post. My life has been spent in major corporations, and I have used that experience to cajole the Industrial Research Technology Unit and other agencies by saying what the world is really like and what we should be aiming for. I find it very receptive - it takes notice of the external members. I have no difficulty if the agencies end up as one entity or a smaller group of entities than at present. What we are doing is central to the objectives that they have, and I do not see any conflict.
803.
Mr D Gibson: Whatever the future organisation is, we hope that there will still be an emphasis, in the area of enterprise, trade and investment, on research and development. The Industrial Research Technology Unit, to my understanding, was set up to give that emphasis. We have no strong views on that but in any future organisation, whatever it may be, there has to be that very necessary emphasis on promoting research and development in industry. This is an absolute key to the future.
804.
Mr Attwood: In your opening remarks you said that you have some concerns, especially in the business sector rather than the education sector, about the level of development, investment and product development, that we are certainly not up to world-class, and maybe not up to European-class. Will you elaborate on that and indicate, in respect of the business sector alone, where the gaps are and where the Government and other agencies should target assistance to ensure that that deficit is made up?
805.
Prof Shannon: Part of the problem stems from the type of infrastructure that exists in Northern Ireland. A large number of small companies, small technology- based companies, find it difficult to get to grips with advanced technology because it tends to be a risky investment. Because they find their marketplace so competitive, a lot of them are wary about investing in case somebody else does the same thing, just two minutes ahead of them, and they do not get into the marketplace quickly enough.
806.
When you look at the metrics that have been made - and there have been a number of economic studies - you find that the average company is investing too small a part of its turnover in sustaining the quality of its products. Instead of taking a lead in respect of breaking into markets, it is following, and because of that, it tends to serve local and national markets rather than national and international ones.
807.
The key to Northern Ireland's development is for more companies to be able to sell their products on a world-wide basis. If they do not start doing that their home markets are going to disappear. Home markets underpin too many different sectors that are currently major employers. People with the right enthusiasm to do things, and the correct infrastructure to help them, are going to be needed to prevent outside agencies coming in and overwhelming them. There are some indications that this is happening already. Big multi-nationals have seen the market potential of Northern Ireland for their products and they have the power to change the economics of the market place. Local companies and businesses cannot compete unless they have novelty in their product.
808.
We must be concerned about companies which I label "screwdriver plants" - all they do is assemble - they can be placed anywhere in the world. Big multi- nationals can decide to close plant A today and open a clone of it in another country because it happens to be slightly more attractive to do so. On the radio this morning there was talk of this happening to the Diageo plant in Dundalk. It is a perfectly good plant producing things at a profit, but the profit was not high enough; they could get that elsewhere. What we need in Northern Ireland is not just "screwdriver plants" but the product development that goes with them. That comes from having more capability in research and the creation of intellectual property.
809.
Mr Attwood: Does the acquisition of BCO Technologies by an American Company fall into that latter category? To be more specific, you spoke about the responsibility of business, but what is the responsibility of Government in targeting financial assistance at companies like BCO Technologies that are at the cutting edge of their particular sector of operations? What is the Government's financial responsibility, independent of the wider environment? What is their specific financial responsibility in promoting innovation or technological development generally?
810.
Prof Shannon: I am not familiar with BCO, but I shall try to answer the main points of your question. I see the Government's role as one of facilitating, making it attractive to people to help themselves create businesses. The Government should be helping those organisations that want to carry out new product development and assist them with guidance and advice. Useful advice would be how a small local company in Northern Ireland gets to grips with what the international market in its product area is. This is information that could be costly for one small company to get, but if a sector of companies can be networked together, then collectively that information will be useful to them.
811.
It is about finding ways of getting the technology which is being developed in the higher education establishments, largely in the two universities, but also in other sectors of higher education, incorporated into the creation of businesses.
812.
Today there are people who are literally working out of garages and bedrooms creating companies which, in six months' time, will be significant. One such example in Northern Ireland is a software company in Londonderry which did not exist a few years ago. This company now employs around 100 people and is moving to bigger premises. The proprietors started with a core piece of technology which has gained credibility, and now people come to them instead of their having to seek customers. Once you have got the right type of intellectual property you can exploit it. People will not survive in the market place if everything is handed to them. They must go through one or two failed business ventures, have their fingers burnt or have to worry about their mortgages. There is a great deal tied up in the company they are creating, and they want to make it succeed. However, the rest of the people in the market place do not want them to succeed; they will do everything, legal or not, to try to stop them getting there. It is a difficult question.
813.
Dr McDonnell: There are a number of points I want to go back to, supplementary to what MrNeeson referred to on the single agency, but, first I would like your views on the promotion of funding of research in the universities by local industry and how we can work on that.
814.
Prof Shannon: I have to declare another interest. A few years ago IRTU and the growth challenge organisation came together to promote a Northern Ireland foresight exercise. I was asked to chair the steering committee for two meetings, but, four years later, I now seem to chair two meetings a week, and I feel passionately about it. We have had some success in getting groups of companies in Northern Ireland who are traditionally vigorous competitors here, to understand that there are significant world markets for the right product and that they need not worry about getting enough business. We have been getting these people together, first of all to share their knowledge of what happens overseas, and, secondly, we have been trying to stimulate them to come together by asking what would give them a competitive advantage, and what type of product is needed. We can then look to the universities or elsewhere for the technology which could be adapted to suit that need. I feel that this process facilitated in a more vigorous way would be helpful to many organisations. It would help them to understand that as their companies develop, the risks of investing in technology are not too high for the rewards that might come.
815.
Dr McDonnell: You are telling me that it can happen, but is it happening, and, will it happen?
816.
Prof Shannon: No, from my knowledge of being involved in this elsewhere it will not happen. I lived in the north-east of England when all the major heavy industries disappeared and the local communities had to find ways of changing the industrial mix. It started by self-help groups getting together and companies realising that they had a common enemy, which was bankruptcy. If they could help each other in the short- term, they could survive. By sharing information you become more competitive, and that allows you to have more flexibility and create the resources required to invest in developing the technologies you want. Not every country has a textile industry disappearing the way it is disappearing in Northern Ireland.
817.
Look at what the Italians and Americans have done. They have invested in new technologies and changed their industries radically. There are one or two examples in Northern Ireland, where companies have achieved survival and sustainability. The rest say "it is fine for them to do it, but it would never work for us," yet to me, as an outsider, they look just the same.
818.
Dr McDonnell: I want to look at this from the university point of view; the other side of the equation, if you like. In your submission you said that a couple of points were less than fully addressed. How can universities be assisted to exploit intellectual property? Part of the problem is the amount of frustration, particularly at Queen's - less so at Jordanstown or Coleraine. There is still no conveyor belt to allow this to go out.
819.
Prof Shannon: There is a chicken-and-egg situation. Many people develop technology but do not have the resources to exploit it. When they go to other people to get access to resources, usually money, people will not invest if they do not have a track record. Each time one of these investments fails, it is seen as a major sin, something that should not be allowed to happen again. People are almost hung, drawn and quartered.
820.
Compare that to the culture elsewhere, particularly in America, where people who invest in start-up companies actually consider you a better bet if you have already failed once, because you will not repeat your mistakes. You are considered to have a better chance of succeeding the second time around.
821.
If people in the research departments of major corporations like Hewlett Packard and Intel create technology which is not core to their business and which they are not going to use, the corporation encourages them to go off and set up new businesses. If those businesses do not succeed, the individuals are seen as more valuable to the company because they have learned lessons that few employees are exposed to.
822.
We need to change the culture so that trying is rewarded rather than failure punished. We need to create a culture that takes some of our intellectual property and creates businesses.
823.
Dr McDonnell: How hard is that going to be?
824.
Prof Shannon: Extremely hard. Public money is part of the equation, and the public does not like their money being risked unless there is only "one horse in the race." That is the difficulty. If we want rapid economic growth, we need society to understand that a lot of mistakes will be made on the way.
825.
People need to understand that it will all work out in the end. We have to start the process. It is another chicken-and-egg situation. People are always waiting for sure-fire winners, but if we could do that we would all be sunning ourselves in the Bahamas. We would be very wealthy. It is very difficult.
826.
Dr McDonnell: I agree. We are not taking enough risks, and have not done so for a long time.
827.
Your earlier submission referred to bringing in international companies to promote and stimulate university research groups. How do we make that happen? Is it down to money?
828.
Prof Shannon: No, it is about packaging our people. In the two universities there are a number of departments working on the technologies embodied in the knowledge-based industries. The biotechnology department at the University of Ulster is the best in the United Kingdom. That is the verdict of the research assessment exercise. It came top in both research quality and teaching quality. That is a real jewel. It needs to be fully exploited.
829.
The same applies to electronics at Queen's University in the Information and Communication Technology (ICT) sector. Those are just two examples.
830.
Others are the Northern Ireland Centre for Advanced Materials (NICAM), the health physics section at Jordanstown, and the IT section at Magee in Derry. There are many nuggets, and the two universities are getting there as far as putting them into the market place is concerned. However, speed is important. A way of thinning the treacle that slows down university researchers in gaining the confidence to go out into the market place with their technology needs to be found.
831.
Dr McDonnell: Is it ironic that the medical school and medical establishment were based at Queen's University, yet this appeared at Coleraine, where there is no such tradition? The biotechnology aspect seems to have been somewhat smothered.
832.
Prof Shannon: There are two ways of coming at that. Biotechnology is about putting things together from the basic building blocks - atoms and molecules - and building up to the top. The clinical side tends to come at it from the top down. It makes things smaller to make them more effective.
833.
These two fields have now come into the middle ground of nanotechnology. Nanotechnology has been created in the electronics industry, and it is going to be the generic technology that will drive many of the knowledge-based industries. We should be looking at a centre of excellence in that area for Northern Ireland as a whole, because it would underpin many other issues.
834.
Dr McDonnell: I want to return to Mr Neeson's point about a single agency. All that you have said indicates to me, although I am not an expert, that there is a need for IRTU, the Science Park and the universities to be rolled into an innovation board or corporation. I find that some of the fledgling technology companies that are emerging seem to be orphans. They have no one to turn to for help, and the existing structures of LEDU and IDB are totally at sea in dealing with them. I like what you are saying, but how do we bring it all together?
835.
Prof Shannon: I have sympathy with what you are saying. However, we thought long and hard about our Science Park mission statement, and we deliberately put "commercial" ahead of "science and research". We did that because we believe that if the Science Park is to be at the core of economic promotion, then it needs to have a strong commercial thrust to it. I would not like it to be smothered by bureaucracy because it would always be trying to throw the rest of the fledglings out of the nest and get on with what it wants to do. I hope that we have created something in Northern Ireland in the Science Park Foundation within a short time - and it is going to have multiple sites - that will make people say "Hey, there must be something going on here". Companies will hear about us before we have to shout to them about us. We should be working with other agencies as part of the process, but I would not be comfortable with us forming part of an agency.
836.
Dr McDonnell: My point is that the whole thing should be commercial. I am not talking about smothering commercial aspects. They should be yoked to a commercial locomotive to bring them into the real world. However, we will park that and return to it another day.
837.
Prof Shannon: OK, fine.
838.
Ms Lewsley: One of the issues for me in 'Strategy 2010' is the new knowledge-based economy which is mentioned in its mission statement. Do you see yourself having a future role in the consultation process which will create new knowledge-based education programmes? For example, will you be responding to the Northern Ireland Council for the Curriculum, Examinations and Assessment (CCEA), who have now put their curriculum out for consultation?
839.
Prof Shannon: I would like an opportunity to do something like that because I have, in public and private, made my concerns known about the level of IT literacy which is present in the education system. I meet too many people in Northern Ireland who believe that it starts from university up; in my view it does not. Modern children want access to it much lower down the education chain, and starting at primary school would be ideal. I have personal experience of how the learning experience for young children is changed when they are given access to IT. However, that is a tale for another time.
840.
I feel passionately that we need to sell the education system and the training system which goes alongside it. Northern Ireland will need academically minded individuals for these new companies, but it will also need the people who actually turn the academics' ideas into real products. A thrust is required in both the education and the training side so that we produce what the knowledge-based industries want. Companies will come to Northern Ireland, but they will be turned off if they believe that they will be unable to grow as an organisation because they cannot recruit appropriately skilled people. We have a good education system, but it could be improved, and if it is improved it will be something akin to world class. That will differentiate Northern Ireland from other economic areas that companies will be assessing.
841.
Ms Lewsley: You spoke earlier about the issue of businesses following rather than leading, and about the type of finances which they are pumping back into their businesses. You also highlighted the point that for many people in Northern Ireland, particularly those in small businesses, the problem is that they are afraid to take a chance because they have so much to lose if it fails. What measures could be taken to target the types of venture capital needed to assist in the development of the new knowledge-based industries?
842.
Prof Shannon: It is a topic which the foundation's board has discussed on a number of occasions. I have been working on it with my colleagues in the foundation, in particular with our new chief executive because we recognise that access to additional funding will be important in some cases. We can get companies who will pay for everything and do their own thing to come in, but we want to be in a position to support individuals who have ideas that we think are worth pursuing. We have looked at how we can access venture capital because the proper climate has not yet been created for them. It is one of these chicken-and-egg scenarios. Venture capitalists want to see some credibility before they decide that a risk is acceptable.
843.
We believe that we can probably get enough people in Northern Ireland together to help us create a starter venture capital fund and that we will not have to wait too long to get credibility. We will then be in a position for the foundation to have a system of picking the initial exemplars so that we can get the ball rolling. After that we can start taking more and more risks which will make it easier for individuals to start businesses.
844.
The science park is there to provide a very attractive environment for starter companies. We are not there to exploit them. We only exploit the ones that become successful. It is interesting that when you ask other science parks, they say that once companies have been in a science park for a few years, they are prepared to pay a premium to remain because they like the infrastructure and the atmosphere. Getting viable companies off a science park is quite difficult, and you can generally charge them a 20% to 30% premium.
845.
That is where you make a science park self- sustaining. You subsidise it at the beginning, but once it is going, you exploit it commercially and feed that revenue back in to make it self-sustaining. There are a lot of economic models to follow for that.
846.
Mr McClarty: Do you see the development of science parks in Northern Ireland as necessary to create an environment in which new knowledge-based businesses can be nurtured and to which research-orientated inward investors can be attracted?
847.
Prof Shannon: The only place where you can recruit is Belfast because that is where the critical mass of people are, but that is no good: we need to be able to spread it out. Knowledge-based industries can operate almost anywhere because of their infrastructure as long as they have access to people, so where there is a group of people who are prepared to work with a science park to create the infrastructure, we will help them. If we start something and it outgrows the main site, we will work to push it in the direction of one of our outreach facilities. The answer to a lot of the economic problems of Northern Ireland is to have multiple sites, and we have accepted the challenge of finding a way to cope with that.
848.
The Chairperson: Thank you for your submission and for the way in which you dealt with the questions. I wish you well with your venture.
849.
Prof Shannon: Thank you, Mr Chairman and members. It is always interesting to be here, and you always leave us with some thoughts which are useful. Thank you.
TOP
MINUTES OF EVIDENCE
MONDAY 17 JULY 2000
Members Present:
Mr Doherty (Chairperson)
Mr Attwood
Mr Clyde
Ms Lewsley
Mr McClarty
Dr McDonnell
Witnesses:
Mr Taylor )
Mr A MacLaughlin ) Ulster Farmers' Union
850.
The Chairperson: Do you wish to say something before we ask questions?
851.
Mr Taylor: First, we would like to record our thanks for this opportunity to give evidence to the Committee. Secondly, we would like to introduce ourselves. I am Will Taylor, immediate past president of the Ulster Farmers' Union. It may be of some significance that I was a member of Strategy 2010's agri- food working group. I am also a member of the steering committee of the Department of Agriculture's vision group which is taking forward some of the agri-food working group's proposals and objectives.
852.
Mr MacLaughlin: I am director general of the Ulster Farmers' Union - the full-time help. I head the staff of the union and am Mr Taylor's alternate on the Economic Forum. I am also involved with Concordia Social Partners, who are engaged in the current discussions on the structural funds on behalf the agriculture industry and the farmers' union, and indeed, for the benefit of rural development as a whole.
853.
Mr McClarty: Section nine of Strategy 2010 proposes that
"the establishment of new, technology-driven businesses should be promoted in rural areas."
How would the UFU like to see this proposal being developed? Do you think that it has the potential to remove workers from farms?
854.
Mr Taylor: We support diversification and new technology in rural areas along with putting resources into the whole economy. We have a briefing paper on the state of the industry which we would like to circulate. The agriculture industry is probably in its deepest recession since the 1930s.
855.
There are many, and they are complex, but we shall highlight three or four of the main points for the benefit of this Committee.
856.
First, the BSE crisis of 1996 precipitated a course of events that brought about a mammoth downturn in the fortunes of our industry and, in particular, the beef industry. We must remember that agri-foods accounts for around 20% of the Province's total exports, and beef products accounted for about 80% of that amount.
857.
The second factor that contributed to the downturn was the unprecedented rise in the value of sterling, or, as some prefer, the fall in the value of the Euro over the past 18 to 24 months. This has had a decimating effect for a number of reasons: it has made our exports uncompetitive vis-à-vis other member states; it has drawn in imports at unprecedented levels; and, because we are in a common market with other member states, it has devalued the support that we had enjoyed.
858.
Thirdly, the emergence of the major supermarkets and multiples into the Northern Ireland trading scene has brought about central distribution and has led to an influx of product from mainland UK in particular, but also from other parts of the world to the detriment of home produce.
859.
That is a fair summary of the reasons and the background for the present state of the industry, and we are now in a position - as Mr McClarty rightly highlighted - of not only trying to rebuild the industry but of looking for alternatives. Whilst the main priority in farming is to produce high-quality raw material for an efficient processing industry, equally it also has a multi-functional role. As a farmer I am aware, as are my colleagues, that we are custodians of the countryside. This is the people of Northern Ireland's heritage, and we have some responsibility for maintaining it in the way in which both urban and rural dwellers would wish it to be kept.
860.
In addition, when we reach the stage where incomes are so low then there is a need for diversification. Technology is part of the process along the path of progress in developing viable incomes for farmers and workers in rural areas. E-commerce and e-business is one of the ways forward, and I could provide a number of examples where it would be beneficial to producers of raw and higher processed materials in remote locations.
861.
I understand that, at present, 1,000 of Northern Ireland's 28,000 farmers have the facilities for e-commerce or e-business. Clearly one of the priorities must be that that number should be increased dramatically, not only from a commercial point of view but in order that they can use that technology as part of their business for benchmarking purposes, business practices and VAT, et cetera.
862.
Increasing the amount of resources and providing training for e-business and e-commerce would contribute to these priority areas.
863.
Ms Lewsley: I welcome you here this morning. The report has set out 10 targets. However, previous witnesses who have come before the Committee feel that 10 targets are not enough. Do you feel there should be any targets set for the three recommendations made in the Rural Economy section of the report?
864.
Mr MacLaughlin: This is an issue that can be dealt with at a detailed or an overall level. 'Strategy 2010' is something that should be a challenge to people. As you mentioned, the document covered all the sectors. There were targets agreed for each sector, which were general as opposed to numerical targets. Is 'Strategy 2010' something that goes from the top and then everyone follows, or is 'Strategy 2010' about creating a framework document within which everyone has a part to play? We believe that 'Strategy 2010' is about creating a framework and a process whereby people can have an input in reaching the targets they feel are achievable.
865.
'Strategy 2010' is not a blueprint for action but a set of guidelines - I would not go so far as to say aspirations, but I suppose, in a sense, that is what they are. People must then put flesh and blood, hardware and resources into achieving the targets. That is what we want to see happen. We have conveyed the message elsewhere and in our submission to the Committee we said - "Let us not sit and analyse this thing until we are blue in the face. Let us go out and do something about it. Let us use 'Strategy 2010' as a way of putting a shooting star up so that we can follow that." We want the different sectors in Northern Ireland to develop their own areas of enterprise and expertise in achieving the targets of 'Strategy 2010', and in doing so, be challenged to have their own targets. One could say that there are not enough targets. However, we have got to get a process in place that is going to make this thing live in which people feel they have made their contribution towards the final outcome.
866.
Has that happened yet? If you went out and talked to the average farmer you would find the same answer as you find elsewhere. They would not know what you were talking about. This is the fault, not just of the Ulster Farmers' Union, but of all of us. We have got to find a way of getting our message across. Is 'Strategy 2010' a coherent document that is worth working towards, or is it something that must be a perfect piece of economic analysis? - only when it is absolutely perfect and right can we proceed. In the latter case it would be an idle way to go. We would be much better to say "OK, where are the challenges? How can we make this work?" From both the agri-food and the rural development point of view there were a number of areas highlighted, but by no means are they all of the key areas. However, they may very well be the most important ones, and we have now got to put shape around that and try to make things happen.
867.
In a paper which we will give to the Committee, we have briefly commented on the progress of three or four of the main areas of the agri-food sector. The Department of Agriculture and Rural Development has a strategy group of which Mr Taylor is a serving member. It is an important group and it should be linked to 'Strategy 2010'. It should be challenged to produce targets for the agri-food sector.
868.
Ms Lewsley: May I ask one more question? The report refers to the problems of the rural economy in particular. You touched on it a short time ago when you discussed diversification, particularly technology, and how only 1000 out of 28,000 farms use e-commerce in their business. Among the other examples talked about were holiday accommodation and the land's being used for some kind of recreational or leisure activity. How realistic do you think these proposals are? How much employment can be brought to the rural economy by leisure activities, and would it be sustainable in the long term?
869.
Mr Taylor: I should like to answer that first. I am certain my colleague will wish to expand on it. You asked us directly how many new jobs might arise from diversification. I should first mention the downturn in the industry's fortunes.
870.
There are now around 28,000 farms. For a number of years, about half of those were considered "sub-viable". In other words, there had to be some off- farm activity to supplement income. That has been a reality for the past decade or more. The downturn over the last three or four years has meant that a significant number of the 14,000 viable farms now find themselves in the position where they require some sort of off-farm income distinct from mainstream raw-material production. To address your question properly, I must first deal with how one maintains people in rural areas and the infrastructure which supports the heritage to which I initially referred. This can be done through an objective rural development programme that highlights what Commissioner Fischler has said on numerous occasions - the second pillar of the Common Agricultural Policy (CAP).
871.
It is very important that, this time round, rural development policy, rather than emphasising socio- economic parameters and objectives, is targeted at the agriculture sector, for this is where the real problem lies. Last week's auditor's report highlighted very many of the deficiencies and problems in the last round of rural development support. Irrespective of what sort of game plan is envisaged for rural development and diversification, Northern Ireland's core indigenous industry will remain the production of food and high-quality raw materials for a very sophisticated agri-food processing industry.
872.
Putting things into context, 'Strategy 2010' and the Economic Development Forum (EDF) have highlighted nine major service centres - seven major towns in the Province plus the two cities - where they envisage developing the infrastructure to attract more industry and facilitate existing activity. Additionally, nine key service centres, in other words, another nine major towns in the Province, will also be facilitated from resources. Representing the agriculture and agri-food industries, we say that it is vitally important to remember that there are compelling reasons why the resources should not go in their entirety to these 18 key towns.
873.
First, in the case of much of the raw material that we produce, in particular the horticultural products, freshness and food quality is a vital parameter for the very discerning multiple buyers. Therefore the minimum amount of time those materials spend in their raw state out of the field, the better. That means that processing and packaging must take place as near to the point of production as possible so that will almost certainly mean a rural environment. It is essential that planning controls allow this to happen. I would suggest that in those specific cases, and, indeed, in diversification, planning criteria have not been very sympathetic to businesses that have not been totally agriculturally orientated.
874.
Secondly, these rural businesses bring equality of opportunity - opportunity for the working wife, the person with family or social constraints who needs a part-time job but cannot travel 20 or 30 miles twice a day to work in some of these 18 key areas. They should have, and expect to have an equality of opportunity equivalent to those with the same constraints living in an urban environment. For myself and others who have brought prospective buyers from either the mainland or overseas to look at this clean, green image to attempt to sell them our produce, it is very important that first impressions are good. When you have a facility set in a pleasant location it is much easier than going into an industrial park with 40ft articulated lorries and packaging lying around. There are a number of reasons why rural development, particularly in diversification and processing, should still be allowed to happen, and why resources should be put into it, and why planning controls should be sufficiently flexible to allow such development to take place.
875.
Mr MacLaughlin: May I make one additional comment, Mr Chairman? We are not for one moment pedalling a policy that says that rural development is solely about agriculture and agriculture production. However, it is quite evident for two reasons. First, with regard to the Audit Office report into rural development it is simply not sensible, if you are trying to produce rural development, to exclude those who are capable of raising and developing incomes and creating businesses. That is a daft policy with hindsight. We felt that it was a daft policy with foresight, but unfortunately our views were not heard.
876.
Secondly, incomes from farming have gone down since publication of the 2010 agri-food sector report. I think the income from farming then quoted was £225 million. It is now down to £71 million. The local chambers of commerce and local councils are describing a situation where market-town economies are hurting like mad because farmers are not spending money. What we are saying is that if we are going to have any degree of social response it must be in line with an economic response and that, therefore, those who are capable of providing part of that economic response, which in our view is the farming community and the agri-food sector - and the facts support that - should have their views reflected in the policy.
877.
If you are a teacher, a painter and decorator, or whatever, trying to get into a different business, there are all sorts of schemes - referred to as "making widgets" - you are able to get support of one sort or another, not necessarily grants but mentoring or training. A farmer cannot get that just because he is a farmer. We must open those doors and ensure that those people who are capable of generating that kind of income can get the same degree of help that anybody else can in an urban or any other setting.
878.
Mr Clyde: One of the 'Strategy 2010' recommendations is for a well-resourced, high-profile Northern Ireland regional office in Brussels. Does the Ulster Farmers' Union support this initiative? If so, how do you propose to work with this office for the benefit of farmers?
879.
Mr Taylor: That is an important question. The Ulster Farmers' Union, in conjunction with our sister unions throughout the United Kingdom, finances and supports an office in Brussels, working on our behalf. It is a very highly focused lobby group that works with both the Government and the EU Commission and has the dual role of reporting back to the home unions the decision-making processes and the proposals that come from the Commission. As chairman of the Livestock Advisory Committee to the Commission I was in Brussels last Wednesday and Thursday. I noted with regret that the Northern Ireland Centre in Brussels has now closed. Over the past three years, in my role as president, I have been in that office on a number of occasions, liaising with the staff. I took the time to visit the new Scottish office and I say to the Committee that it is essential that a high-profile site be located in Brussels and a new Northern Ireland office opened as soon as possible. It should have an agricultural portfolio and be staffed by people with agricultural competencies. We should consider an agrifood website, allowing our agrifood processing industry to be on-line in Europe and act as a facilitator. In terms of commerce, the Welsh, the Scots and our competitors throughout the European Union are replicating this. It is imperative that this happen quickly.
880.
Mr Clyde: Would it also be a help to our three MEPs with agriculture?
881.
Mr Taylor: Absolutely. I do not want to speak for Messrs Hume, Paisley and Nicholson. I have worked very productively with them on numerous occasions over the past two to three years. One of their important roles is to act as a facilitator for all sectors, not just agriculture. They clearly need a high-profile, well-centred office or facility within Brussels to host potential customers, the movers and shakers within the European Union and the Commission. That, as you rightly suggest, is another reason for having a centre in Brussels.
882.
Mr Attwood: Paragraphs 12 and 13 of your submission indicate a number of reasons why there is a crisis in the agriculture industry in the North. We are familiar with some of those outlined that we cannot influence or are influencing, namely the strength of sterling and the effects of the BSE crisis. I was not familiar with some of the other issues identified as being causes of concern, namely the insistence of the British Government to legislate on certain matters which levies additional costs in the sector more quickly than might otherwise have been the case, and the failure of the Government to operate EU compensation schemes in full. I was aware, to a degree, of the effect of the major multiples coming into the North and having a depressing effect on agriculture there. Will you comment on those three issues: the additional costs the Government are imposing on the sector, the failure to operate compensation schemes fully and the major multiples and their impact. Is there anything the Minister or his Committee can do about those matters just as the Minister and others are doing on the BSE issue. There is of course not much we can do on the strength of sterling issue until the British Government decide otherwise.
883.
Mr MacLaughlin: Let me give you some examples of legislating for additional costs. This is a well-meaning policy, and you will see why in the examples I will use. In pig production, for example, there are various ways of raising pigs, and some are regarded as being more welfare-friendly to the pig than others. For instance, stalls and tethers is a mechanism for controlling the sow while she is breeding, but the alternative is to let a number of sows loose and run around in a pen together. It was decided at macro policy level that it would be a good idea to ban these methods of raising pigs throughout Europe. The British Government agreed and said they would implement the plan by 1999, or whatever the date was. The other member states also agreed but have not yet set a date, but the British Government went ahead and put that legislation in place.
884.
The immediate response by pig producers was that they had to modify their practices, and to do so, they had to reinvest to alter the nature of their sties. That was done, but no other member state required the cost to be borne by the pig farmers. From an animal- welfare point of view, you could argue that that may have been the right thing to do, but weighed against that was the fact that a great many jobs would be lost by pig producers. Pig production is much more specific; it is not just about having a bit of land, it is about having a structure of concrete and metal which is akin to a factory-type environment; there is a flow of production going through.
885.
Another example is the size of battery cages. None of us likes these, but they are a fact of life. If you are going to have legislation to increase the size of battery cages, then it should fit into a European timetable that ensures one country does not lose its competitiveness over another.
886.
At the agricultural summit in Downing Street on 30March, for the first time the Government said that it would not seek to gold-plate. They would seek to have these things done on a European basis, but they would not seek to gold-plate their own legislation to the detriment of their own producers. You can see that it is a difficult, tricky and sensitive argument for farmers to take on, but you can also see the effect of moving ahead too quickly.
887.
It is not fashionable to crow about compensation schemes these days because the reform of the CAP is an attempt to move towards a purely market-driven situation. Since the war there has been a controlled mechanism in Europe to ensure that there is no massive fluctuation and that, in terms of food production, we have a more stable situation. If the currencies get out of line additional money can be drawn from Europe, and this is open to any member state.
888.
Nine European states have been in a position to claim this compensation, and they have done so. The one that consistently has not done so is the United Kingdom. In agriculture, over the last three years, this has resulted in a loss of £1billion for the United Kingdom as a whole and for Northern Ireland a loss of approximately £150million.
889.
The Treasury takes the view that, because of the Fontainbleu Agreement of 1982, agreed by MrsThatcher, the Treasury would have had to pay for that claim because it would have resulted in its losing its rebate. This did not happen with any other member state, and one can understand that that argument does not help the farmers.
890.
Mr Attwood: What is the situation with the major multiples?
891.
Mr Taylor: The BSE situation, I think everyone is agreed, was the start of our woes. It was accepted by the UK Minister of Agriculture, Nick Brown, and by the Prime Minister, Tony Blair, at the agriculture summit on 30 March that Northern Ireland has a unique case in terms of its BSE low-incidence BSE status - that is fact. May I take the opportunity to implore you, Mr Chairman and the Committee, to influence the progress of this submission in whatever way you can. It would be worth somewhere in the region of £100million per year to the Northern Ireland economy to have a relaxation of the draconian export controls that presently apply to all of the United Kingdom. If this were relaxed for Northern Ireland, it would have a dramatic effect, not only on the agriculture sector, but on the whole economy.
892.
On the influx of the major multiples and this central distribution we as Northern Ireland food producers, and part of the UK food chain group, have been treated fairly harshly by the major multiples. They make a very valid point but also one which, perhaps, they hide behind, about providing consumer choice. That choice is camouflaging the fact that it also increases their profitability. In a number of cases they source products which are of a lesser standard in terms of production and processing than what can be obtained here in Northern Ireland.
893.
One of the specific ones I want to highlight here relates to the BSE low-incidence status.
894.
That raises particular problems. If all the criteria were implemented, processed beef products from the mainland United Kingdom would be cut off, because it would continue to be a region of high incidence. Their produce could not be imported in any shape or form. How do the major multiples react when asked to source processed beef products in Northern Ireland? They cry foul. They say, "We wish to give the consumer choice. We want to continue supplying processed beef products from our existing distribution centres and suppliers." Why do they wish to do that when they have the opportunity of sourcing from Northern Ireland? Off the record, the answer is that it is more profitable. It has very little to do with consumer choice.
895.
Mr Attwood: That is very helpful.
896.
Dr McDonnell: Your submission argues that there is no vehicle to drive the 2010 process forward, that the Economic Development Forum may not be the most appropriate vehicle. I agree with you. What sort of vehicle do you see doing that?
897.
Mr MacLaughlin: This goes back to some of the comments we made earlier. It is not that we want a single vehicle to propel the thing forward. Rather we want a number of coherent vehicles calling upon the challenge. This is not an argument for getting rid of the Economic Development Forum, which is a superb institution where ideas can emerge and where all the players can be brought together and policy can interplay with what is happening on the ground. It could be seen as a monitoring and ideas place. Maybe that is the meaning of "forum". We are not being critical of it.
898.
Equally, we do not want to con ourselves that we can leave it all to them and forget about it. We cannot do that. We are hinting at a more coherent approach with challenge at its heart. Some body - the sensible body to do this is the highest body in Northern Ireland: the Assembly, the Executive, and this Committee - has to ensure that the challenges are laid down. There must be some way of making sure that those challenges are translated into targets, approaches and energy which is going to make this happen, sector by sector.
899.
I have been involved with the interim monitoring committees on the various EUprogrammes. We have seen an enormous range of involvement at all sorts of levels, which has created an excitement, an understanding and an awareness that this is a programme to be used to best benefit. The criteria laid down by the EU must be followed. By the same token, the Economic Development Forum can do no more than be part of the paraphernalia providing the challenge.
900.
The Minister can provide the challenge. This Committee can provide the challenge, investigate and ask what is going on and why it is not going on if it isn't. The challenge is to find a way and a structure within which we can all begin to play our part. We welcome the bringing together of the vision group in the Department of Agriculture and Rural Development. Providing it is linked to 'Strategy 2010', it is moving in the right direction. In no way do we want to be critical of the Economic Development Forum, but equally we do not wish to kid ourselves that it is able to do things that it is not.
901.
Dr McDonnell: I think that you will appreciate that this is exactly what we are also trying to do - to work from the bottom up. The submissions and hearings should help to generate a momentum. We are probably at one on that.
902.
Someone mentioned holiday accommodation and recreational issues earlier. The report recommends the deregulation of the bed and breakfast sector to maintain farm incomes and the long-term sustainability of the rural economy. Do you agree with that? How will it work? I am not sure that we can make a living taking in each other's washing. I am trying to figure out how people would go to sunny Saintfield for their holidays rather than sunny Spain. Can we promote Glenavy as a holiday destination?
903.
It seems to be difficult to have meaningful accommodation facilities unless they are somehow attached to a major leisure development. I know people who have found this to be the case. There need to be other attractions. It is therefore probably wrong to suggest that farm incomes can be supplemented from bed and breakfast type accommodation, unless it is attached to some major leisure facility.
904.
Mr Taylor: I have some sympathy with that analysis. Bed and breakfast facilities and holiday/leisure diversification will not be the panacea for the ills of the industry or for every farmer in the Province. However, on the detail of the proposals, we find that when there is a glaring opportunity for a particular farm holding to diversify along these lines, there are many obstacles to be faced. We feel that the obstacles to development are unjustified or very stringent in relation to planning controls and obtaining resources. Some sort of recognition should be given to that in practical terms. We can cite some examples of members who have had tremendous problems in developing diversification projects, if that would be helpful.
905.
On the issue of classification - and I speak personally on this - an interim report to the development forum would suggest that it is important that the classification system should remain. It highlights standards, and you will know from travelling that it is vital that standards be maintained at a very high level. For the tourist, first sights and first experiences are important. In many cases, tourists do not record their disappointment; they simply leave. The maintenance of standards through some sort of classification or overseeing is vitally important. How that is delivered and the costs of delivery are questions for another day.
906.
Dr McDonnell: Thank you.
907.
The Chairperson: At the start of the submission you highlighted BSE as being a crucial undermining factor, yet there is a low incidence status here. Can you equate that in percentage terms with other regions in Britain and with the South?
908.
Mr Taylor: Yes, if it would be helpful we can provide yourself and the Committee with official, up-to-date figures, but to do it verbally, Northern Ireland has enjoyed low-incidence status for the last three years. That is an internationally recognised criterion awarded by the official body Office International des Epizooties. The level is benchmarked per million of cattle within a region or a member state, and our current figures, from memory, are eight per million. That compares to 400 or thereabouts per million for mainland UK, and 23 to 24 per million for the Republic. Interestingly, the French figure is 2.8 per million for 1999. You can see that NorthernIreland has, and always has had, a very low-incidence of BSE. In fact, going by official estimates, I predict that BSE will be history in Northern Ireland within the next 18 months to two years.
909.
The Chairperson: Can that be exploited in specific terms, or do you get lumped in with the rest of Ireland or the rest of the UK?
910.
Mr Taylor: At the moment the submission to the UK Government is going through a consultation period of approximately two months. Interested bodies and partners throughout the United Kingdom can make submissions to support or object to Northern Ireland's case. At the same time the EU Commission in Brussels - headed by Commissioner Byrne - is actively progressing the detail of the submission, because, as I said earlier, it is based on science and on fact, and Commissioner Byrne only deals in science and fact. Any support that this Committee can give to the submission through their influence and authority would be very much appreciated and be vitally important for the whole economy of Northern Ireland.
911.
The Chairperson: Finally, did the report miss any potential employment areas when considering the rural economy?
912.
Mr MacLaughlin: That is a very good question, and one is tempted to say "Have you got five weeks to answer it". The real question is can we unlock the enterprise of people at local level? That is the big challenge for us in Northern Ireland, because if you can do that, people will be inventive and come up with the craziest, daftest ideas; some will be so daft that nobody has thought of them before, but also so elegant that when they see the light of day they will become successful businesses. In Northern Ireland we have seen this happen quite dramatically in the manufacturing sector time and time again. If possible, we need to try to create those conditions in rural areas where people can produce bright ideas and make them work. The union, in partnership with others has been involved with people and schemes which have allowed young farmers to come up with daft ideas - actually, I will not call them daft, because clearly some are not. Everyone has heard of livery stables for horses, but who has heard of livery stables for greyhounds? You need that kind of facility if you are going to have a good racing track - like the one in Dungannon - which is going to attract the top dogs. If you have the top dogs, you will have the top crowds and all the ancillary activities. I do not want to call it daft, because it is not, but it seems so daft, and yet somebody has had that idea and is working on it.
913.
We have young people who are setting up things like travelling farms. Who would want a travelling farm? The schools may want travelling farms. We are hearing in the press about school-children going to farms and picking up diseases and the likes. Regulatory requirements are needed if you are going to allow the public on your land, so why not have an educational travelling farm? There is a young woman in Fermanagh who is getting support from the Prince's Trust to set up a travelling farm to go around the schools to demonstrate what happens on a farm. This is an educational item which fits in with the curriculum. These are the sorts of ideas we need to try to create an environment for. We should let such ideas be put forward, and the world would be our oyster in terms of the number of jobs that we could produce. That may be a very idealistic response to your question, but I do not think it is necessarily an impractical one.
914.
Mr Taylor: Mr MacLaughlin has highlighted the specific areas with potential for increased employment. May I quote some figures for the agri-food working group of 'Strategy 2010', particularly in relation to research and development and innovation spend within the sector. The Industrial Development Board recognise, through analysis, a direct relationship between R&D spend and innovation spend, a direct link with growth and profitability prospects, with employment potential and investment potential where that spend on both those areas increases.
915.
The spend on R&D in Northern Ireland is £308 per holding, in the United Kingdom it is £1,044 per holding and in mainland Great Britain it is £1,139 per holding - a vast difference. If you want to benchmark this it is £3 per hectare in Northern Ireland against £8 per hectare in the United Kingdom. That immediately raises a whole plethora of questions. Are the resources going into R&D and innovation and technology sufficient in Northern Ireland? Quite clearly, from that example, it is not sufficient. It is one of our priorities if we are going to unlock this investment and employment potential within the sector.
916.
The second area I want to highlight is Prime Minister Blair's announcement at the Balmoral Show in 1998 which included a four-year period of first year 100% capital allowances for Northern Ireland for small to medium-sized enterprises, particularly in the primary production of agricultural products. That runs out in 2002, and I suggest it is essential that if we are to pump prime this sector out of the crisis we are presently in and increase the employment potential then we ought to be signalling now that this concession on investment has to continue beyond 2002.
917.
The Chairperson: Thank you for your submission and the time you have given us today. We are analysing the report, and the members may have follow-up questions. Thank you all for your input today.
TOP
MINUTES OF EVIDENCE
Wednesday 19 July 2000
Members Present:
Mr Doherty (Chairperson)
Mr Neeson (Deputy Chairperson)
Mr Attwood
Mr Clyde
Ms Lewsley
Mr McClarty
Dr McDonnell
Witnesses:
Mr A Anderson ) NI Food and
Mr M Bell ) Drink Association
918.
The Chairperson: You are all very welcome. You are the first set of witnesses with whom we have started almost on time. You must have injected some urgency into today's proceedings.
919.
Mr Anderson: We appreciate this opportunity to talk to the Committee. We have been looking forward to engaging with a devolved Assembly for some time. I have just come from chairing a meeting - to which I have to return - in Dundonald House with the Department of Agriculture and Rural Development. I believe it is vital that our organisation is able to represent its views to you - not just on this occasion but also, I hope, in the future.
920.
Northern Ireland Food and Drink Association Ltd (NIFDA) was set up around four and a half years ago through the Northern Ireland Growth Challenge and has three strands to it. It is essentially a clustering organisation, built on the theory that when companies work together they become more profitable. I ordinarily do not like talking shops but NIFDA did catch my interest as it seemed to be more than just an association of old boys.
921.
There are three areas that we have concentrated on in the last few years. One is liaising with the retailers - the likes of Tesco, Sainsbury's, and Safeway. It is vital to have an organisation such as NIFDA to co-ordinate representation of the food processing industry to those retailers. Recently a director of one of the largest food processors in Northern Ireland stated that he dreaded to think where the Northern Ireland food industry would be had there not been the strong liaison and representation with retailers.
922.
Dr McDonnell: What companies do you represent?
923.
Mr Anderson: There are about 200 food processors in Northern Ireland, ranging from relatively small companies to large ones such as Moy Park which employs roughly 5,000 people.
924.
Mr Bell: I will elaborate: we assumed that the Committee was familiar with who we are, our backgrounds, etcetera. The number of food companies that exist in Northern Ireland depends on where you draw the line. There are 250 companies with a turnover in excess of £250,000, and 170 with a turnover in excess of £1million. Those are Department of Agriculture and Rural Development statistics. NIFDA represents 150 of those 170, and we represent all those of critical mass bar two - namely Guinness and Bushmills Distillery.
925.
Mr Anderson: We were liaising with retailers to promote the concept of stocking local food products on the shelves and achieved a lot by working in co-operation and partnership with the retailers rather than taking a more aggressive finger-pointing stance. Also, we have developed some group buying schemes, partly to give the smaller members the economies of scale that the larger members can have when buying. Obviously, Northern Ireland is made up of a lot of small companies. Tayto, the company that I work for, achieved savings of nearly £100,000 in the first year through being part of these buying schemes. NIFDA was able to obtain income from those schemes to help to fund its expenses.
926.
Our third strand was to liaise with Government agencies and Departments. We have had regular meetings, not just with the retailers and suppliers but also with the Industrial Development Board, the Local Economic Development Unit, and the Industrial Research Technology Unit. We have worked with Loughry College and Queen's University on various projects and with the Foresight Group. Obviously, with clustering, one of the main themes is to bring people together so that the sum of the parts is greater than any individual part. Our current involvement is with the Department of Agriculture's vision group, set up by Bríd Rogers, to look at a vision for the agrifood industry over the next six to ten years.
927.
I did mention that we were pleased to be here. There is a very high level of support for what you are doing at the Assembly among the NIFDA board members, and it is important that you know that. There is also a very high level of expectation. Indeed, there may be things that we can learn from what you are doing to bring together people who are naturally disparate. I did suggest to the First Minister recently that he could give us some tips from his political experience on how to bring peace and harmony to the food industry, and his reply was that, in his view, harmony was overrated. I know he was jesting.
928.
We are at an interesting time in our Province's history. We do talk about windows of opportunity, but we are in a new day, with a new agenda. This is not just about peace in the country, which I want to come to shortly and devolved Government. It is also about e-commerce and globalisation, about the retail world's coming to our doorstep in the form of Sainsburys and Safeway, et cetera. We have a lot of changing to do within our industry. We have to become world-class and adopt best practices. If you pardon me for making a personal comment, one could argue that in Northern Ireland, with regard to both religion and politics, we have not been the best in the world at that. We have opportunities to improve in that area.
929.
Our members are being faced with two major issues regarding the future of their companies. One is currency, which we are trying to deal with through the Department of Agriculture's vision group. I have been meeting with Bank of England officials and others to get a better steer on what informed opinion says is going to happen in the next few years. The other major issue is political unrest in our country, particularly in July. My company has become accustomed to forecasting losses in July, the main reason for which is that so many leave the Province. You will have noticed how quiet the roads are. We have estimated that possibly as many as 40% of our population prefer not to be in Northern Ireland in July, and that makes trading very difficult. That, coupled with the problems of freedom of movement in the greater Craigavon area and elsewhere, means that we are writing off entire weeks of sales, but still incurring the weeks of overheads.
930.
We believe that the work you are doing to promote peace in the Province and to get back to a degree of normality is extremely important. It is also important for the image of Northern Ireland foods abroad. A marketeer, who has done research on this matter, told us that it is very hard to add value to foodstuffs by associating it with a Northern Ireland image in an international context. We need to have a more positive image of what this country stands for. We cannot do a lot about that, but we can support you in your efforts.
931.
Finally, I feel that more questions could be asked of the religious leaders in our country. What are they doing proactively to promote tolerance, respect, forgiveness, peace and reconciliation? They have a part to play, and are playing it, but it may not be the most positive part. I am not referring to any particular church; I am talking about church leaders in general. They are often left out of the equation, despite their influence on the environment we all work and live in.
932.
Mr Clyde: What policies would you like to see developed to improve competitiveness - partnerships, benchmarking or clustering?
933.
Mr Bell: How familiar is the Committee with the idea of clustering? It would be fair to say that NIFDA is one of the most successful practitioners of it in Northern Ireland. Northern Ireland people in general tend to be parochial; cohesiveness does not seem to be natural here. That is evidenced in the food sector in the business community by the fact that the dairy sector did not talk to the meat sector, which did not talk to the fish sector, which did not talk to the bakery sector. What we have achieved in the last four and a half years is the bringing together of those sectors on a common platform and on a common set of issues. Commercial benefits of that have been the sharing of best practice and skills. We have set up affinity purchasing schemes, which are voluntary, and these are very helpful.
934.
'Strategy 2010' mentions clustering as a useful methodology to assisting competitiveness development. It needs to be extended to academia and the Government. There needs to be much closer co-operation and communication in those communities, and that in turn needs to cluster more with the business community. The principle of clustering could be usefully accepted across the Government interface because some sections of government work on the principle of clustering and others do not.
935.
We would like to develop benchmarking further, but we are hamstrung by not having the resources to put energy and people at that. We would like to do more work with our colleagues in the South, comparing notes to see if we can learn from each other on best practice. In addition we would like to do more work internationally, benchmarking our industry to see how we operate against our competitors. However, that is a resource issue for us, and a lot of time and effort is needed to build that information up. That would be useful in understanding what we are good at and not so good at on the international stage. There is an enormous raft of issues in 'Strategy 2010'.
936.
We have a business plan and are in negotiations with Department of Enterprise, Trade and Investment. There are some 35 pages of action points that we as an organisation want to do in conjunction with the Government to develop 'Strategy 2010'. I could talk at length on that issue, but it would only take up your questioning time. We would welcome the opportunity to discuss this further.
937.
Mr Anderson: You talked about competitiveness. One of the issues we have been involved with is 'Strategy 2010', obviously, and getting an overall agri-food view of that. Livestock chain management is another successful initiative in terms of bringing together the different members of the supply chain with a view to getting a common accreditation for quality on farms. Whether you are farming cereals, sheep or beef or all three, you do not need three people to accredit your quality - that can be done by one person.
938.
There are enormous savings to be made through working together. This is something that has become known as supply chain management, and retailers are insisting that their suppliers work together more. It is our competitors who are the enemy and not the suppliers or our customers. We must work together to drive the waste out of the system - waste such as bad handling or poor pricing - so that we can provide for the retailers prices that are competitive to those in New Zealand, or elsewhere.
939.
Ms Lewsley: You talked about the competitiveness here. I know from previous meetings with some of the small businesses, in particular the bakeries, that they had many problems as a result of the fact that other companies were coming in and undercutting their prices, because they were not using local goods and services. Some of the big chain stores have made a verbal contract to try to use 60% of these services, but it is only verbal. Is this an issue for your forum, particularly with regard to local suppliers, or is it something you would not deal with?
940.
Mr Anderson: You have made a very important point. We had a meeting recently with the Irish director of Lidl to discuss the question of sourcing from Northern Ireland. Indeed, we are quite pleased with our role in respect of the Northern Ireland Bakery Council. There was a disparity in the bakery industry, with each baker feeling that the other was at fault for pulling prices down, et cetera. NIFDA is beginning to help bring about a degree of cohesiveness in the bakery council. We meet with each of the major retailers approximately every two months and discuss issues such as value bread or value flour. The retailers have done a number of things, if only on a temporary basis, to give producers and processors here time to change, but we cannot hold the tide back forever; we need some change.
941.
On a positive note we have also been working on how we can engender more innovation amongst our producers and processors and how we can bring about a greater understanding of the new ways of trading, Category Management and Efficient Customer Response - issues which are common language to retailers. Five years ago these issues did not exist in Northern Ireland. It is a matter of bringing the parties together and getting them to have a common vision of growing the amount of local produce that is being sold through the multiples in Northern Ireland, Great Britain and further afield.
942.
We are also addressing the issue as to how we can add value to local speciality foods. Unfortunately, some of our speciality foods are not that attractive internationally or to dieticians. These are issues that are being dealt with.
943.
Mr McClarty: You say in your submission that you agree with the recommendations of the 2010 report. Are there any other recommendations that you feel should have been included in that report and have you any particular criticisms of the report?
944.
Mr Bell: This is not a criticism of the report, but we produced a document in November 1998 called 'Economic Strategy Review', which was 28 pages long. In 'Strategy 2010', it was summarised in one page. We have quite a lot more behind what has actually appeared in print. Some people have criticised 'Strategy 2010' for being a wish-list rather than a business plan. Some of that criticism may be fair. We have moved on and are now writing a business plan to get us to that wish-list. 'Strategy 2010' is where we would like to get to.
945.
We are a self-funded industry group. We started out four years ago with a blank piece of paper. We would appreciate more assistance in developing the 'Strategy 2010' competitiveness agenda. There is an issue on page 123 that I would like to highlight. To use an analogy, rather than spreading the fertilizer all over the field, we should use the same amount of fertilizer but apply it all to the plants and none to the weeds. That would be a much more effective use of resources. This is a quote from paragraph 7.49 on page 123:
946.
"An example of the 'overcrowded market' can be found in the food sector. In 1998, the Northern Ireland Food and Drink Association (NIFDA) and LEDU carried out a mapping study of support for food companies. Six council areas were selected . These areas contained some 151 LEDU and IDB supported companies. Some 105 providers were offering support services to these companies."
947.
From the work that we did, I can tell you that there were approximately 350 economic initiatives of one shape or another targeted through the 105 providers to those 151 companies. If a managing director has 10 or 20 initiatives crossing his desk, how can he assess them? He does not have time. Some worthy initiatives will go in the bin, while some not-so-worthy ones will be taken up. That is a huge issue. It is a resource issue; it is a Government issue.
948.
Mr Anderson: Hindsight is a wonderful thing. We contributed substantially to this report, and we are happy with most of it, but in hindsight, perhaps it does not sufficiently address the extreme sensitivity of Northern Ireland companies to exchange rates. We export a lot. Because of our size, one order worth £1 million can have a major effect. In Great Britain that order might not have the same effect. We are very sensitive to exchange rates. A lot of people are still exporting, in the hope that things will get better, but they are not making any money. To say that the exchange rate has not killed our exports is not the whole story by any means. There is a major problem for most of our companies, particularly if they are trading with the Republic of Ireland. Most, if not all, of their profits are taken up by exchange rate provisions.
949.
Another issue that 'Strategy 2010' does not adequately address is how our voice can be heard and how influence can be exerted on the major issues that affect our community, whether the decisions are taken at Westminster or in Brussels. That is one of the reasons we particularly welcome the establishment of the Assembly. It gives us real accountability and real conduits for making things happen.
950.
There are some anomalies in the report. On the one hand it says that the benefits of profit in the food chain should be shared more equally. Presumably that reflects the farmers' feeling that the processors are making too much money. On the other hand it talks about encouraging self-reliance and exposure to the discipline of the market. Those two aspirations are in conflict. In reality, when all the partners in the supply chain work together towards a common vision, fair distribution of profits can be achieved by the correct means, rather than by imposition.
951.
Finally, I believe that the emphasis on Northern Ireland's clean and green image, in terms of food, is important and that we should differentiate ourselves positively along those lines. Unfortunately many other European countries, such as Sweden, have already been promoting a similar image. We need to examine the best ways of marketing our products and our image. The Department of Agriculture and Rural Development (DARD) vision group has begun working on this, but further analysis is needed.
952.
In terms of marketing our products, emphasising our Northern Irish identity is not suitable. Other strategies have been considered. Our smallness, for example, may be a major advantage in terms of flexibility, of closeness to the market, and of access by the consumer who may wish to know the origin of the product and whether it is safe. We are actively working to promote the various people involved in the supply chain, including the feed producers, the farmers, the processors, the retailers, the consumers and the Government. By bringing all of these groups together we can create a common vision for agriculture in Northern Ireland. This is to provide an image not just for outside, but to work towards a common vision and build a belief in ourselves that we have something unique to offer and that we have a way of making sustainable profits.
953.
Mr McClarty: One of your own recommendations was that a cross-border body for food and agriculture should provide European representation on an all- Ireland basis. What advantages would this offer?
954.
Mr Anderson: Clearly the European Community would like to see peace and reconciliation in this part of the world, and it expects us to contribute to this. The reality is that we have two identities, but we also have much more in common than is usually recognised. The media tend to highlight our points of difference.
955.
I am involved in cross-community work in my local community and it is incredibly uplifting to discover how much you have in common with people that you did not speak to before. This is one of the reasons why we need to be involved with an Bord Bia and with various other people. I believe that IDB has recently done a joint stand in New York with an Bord Bia. I believe that we can learn from each other. We have ideas to bring to them and vice versa. The combined lobbying of Britain and Ireland - particularly in certain agricultural matters, including CAP reform and world trade issues - is better than standing alone on these issues. The Province is very small. The population is one quarter the size of Paris. We do not have many allies, and we need to develop more friendships. Our company is 25 miles away from the border, and we do a lot of trade with them. We have a lot of associations, and we have people employed there. There are many other companies doing the same. From a commercial standpoint I cannot think of a reason why we should not work in partnership with Ireland.
956.
Mr Bell: My understanding is that our colleagues in the South of Ireland have some 20 representatives permanently in Brussels, while Northern Ireland has only two. Quite a number of the representatives from the South are specialists in the agri-food industry. There are many complex issues in agri-food and specialists are required. It would therefore benefit us to work with the South because they have a good resource base.
957.
Ms Lewsley: You mentioned clusters and small companies, and we have touched on the issue of goods and services. The issue for many of those people is that over the years they have tried to compete but sometimes finances restricted them from expanding their companies.
958.
What measures do you suggest are necessary to target venture capital, and to encourage inward investment while ensuring that Government support, as you mentioned earlier, is at a level similar to that in other competing European countries?
959.
Mr Bell: When one asks a venture capitalist, or anyone, to invest in a company they immediately ask what the return would be. The typical business return on capital employed (ROCE) is 25%, and this would be the target for a venture capitalist. The food industry in Northern Ireland is currently averaging 9% - a figure that has been falling. Therefore, it is extremely difficult for us to attract venture capital. Indeed, in 'Strategy 2010' there is a view that our sector has, and I quote,
"less favourable prospects".
960.
The industry will go through quite a lot of change, and possibly venture capital, with Government assistance, could be used to facilitate that change. A degree of risk sharing is required to facilitate the venture capital because the numbers do not quite add up. This raises the question of why this should be done. Why not put the money into IT or another sector that appears to be giving a better return?
961.
The agri-food sector, comprising farming, food and dependent services, accounts for, depending on how the statistics are arrived at, 60,000 to 80,000 jobs in the Province. Many of those jobs are relatively unskilled and are in rural areas scattered across the Province. While there are economic implications for this sector, there is a huge social issue relating to the whole fabric of society. That is particularly so for the jobs' element, where relatively uneducated people are still being employed in very large numbers by our sector. Very few other sectors are continuing to do that.
962.
Mr Anderson: There is much in 'Strategy 2010' about a grant-dependent culture. I find that somewhat patronising, particularly in a European context. Both Government and industry were willing partners as far as grants were concerned. There was a reason for that, because grants provided more jobs. In relation to the concepts of venture capital and Selective Financial Assistance, we need to be as competitive in Europe in those regards as anywhere else. We need to be competitive whether it be in price, product or grant assistance.
963.
The reality is that there are still many financial aids being given to the food industry throughout Europe. It would therefore be wrong to consider the gradual demise of Government support for the food industry here. This is particularly so, given that several years ago our peripherality was considered worthy of some support in that we were far from the point of power and far from the markets. Now that issue is forgotten about. As far as our trade association is concerned, there is perhaps a need to look at how support for organisations such as NIFDA can help the industry in a way that grants to individual companies cannot do. We can bring people together and see things happening.
964.
My personal view is that venture capital is not the limiting factor. Perhaps we need to concentrate more on coming up with good ideas requiring finance. That will, in turn, require a more outward-looking approach to the market. We do not have enough visitors, and we do not travel sufficiently to have a great enough awareness of what is happening in the outside world. If food processors in Northern Ireland were to be asked to produce a sample of a ready-made curry of a particular type, all would be struggling and reaching for the textbooks. The United Kingdom is not famous, in places like France, for its cooking, but it is famous for its ability to make ready-made meals. More and more of our business ought to be going to that area, even if it only means supplying the ingredients for such meals. However, we should explore whether it is possible to go the whole way up the supply chain to produce ready-made meals.
965.
Mr Bell: This year there are major new factories being built in Fermanagh and Belfast. Therefore, although some factories are closing, new ones are opening, and the industry is beginning to reshape, restructure and change. A facet of that which ties up with Selective Financial Assistance and venture capital is inward investment. There are a number of yawning gaps in Northern Ireland's food industry, and even though there is not much mobile food investment available the IDB is fishing for it. We strongly support that because it helps the whole industry.
966.
Mr Anderson: The question of how Government can help provide financial support - be that through venture capital or other ways - has to be economic. There is a current feeling is that it is not worth suffering the delays incurred following a grant application because the percentage level of grant is so low and the cost of producing the paperwork is so high. We are not asking for more money; we are suggesting that the money be spent better. It is like a charity which spends everything on administration and does not feed the poor.
967.
Ms Lewsley: You mentioned the 62,000 unskilled people who work in the sector, however, 'Strategy 2010's mission statement is partly concerned about the new knowledge-based economy. In order to maintain a standard of excellence in the food and drink industry, does the Northern Ireland Food and Drink Association need a consultative role to aid the creation of relevant education programmes?
968.
Mr Anderson: This is a topic we discussed this morning. A Northern Ireland e-commerce centre opened yesterday in Coleraine with the assistance of some Government funding, and our educated, young people, particularly in IT, are a major, unique strength of the Province. That is something the food industry can utilise, and we know of ways in which that can be done. IT can help with the question of traceability and the creation of an emotional link between the consumer and the primary producer. For example, in the future cans of beans will not have labels with 5,000 words on them that the consumer cannot read because he has forgotten his glasses. There will be an address for a website which will have dietary details, and it will be possible to hot-link to pages that explain why it is important to have less sodium, or outline what you should know about fats. In addition, it might be possible to see a photograph of the farmer that produced the product, or the plant that it came from. FergalQuinn's supermarkets in the South of Ireland have a photograph of the farmer who supplied the meat that day above the meat counter - they went to a lot of trouble to do that; they even had to use DNA tracing.
969.
As we are a small community it will be easier to apply IT. The farming community has a good international reputation for traceability, and the Department of Agriculture and Rural Development has many computer programmes which can enhance food safety and animal health. We can excel in this area and be better, or at least be quicker, than many of our European competitors.
970.
Mr Bell: We would love to take a greater role in consultation and input into those courses. There are many projects that we would have liked to do, but we simply cannot. We do not have the resources. That is good in one sense in that it has made us very focused as an organisation, but it is bad in another sense in that many things that would be good to do have not been done. For instance, in quality specifically, ISO 9000 has been the major quality standard which has been touted and pushed. One of our major food manufacturers has just dropped it. The industry as a whole is beginning to come away from ISO 9000. It is not appropriate for the food industry; it does not work well, and we are moving in a different direction. That needs to be helped and moved.
971.
Mr Anderson: I have one final comment on that. Many of our food processors are family-owned businesses. It is not true of all of them by any means - and this could be said of farmers as well - but some tend to think "What do the academics know about our business?" Therefore there is a linkage problem between the very excellent resources that we already have at Queen's, Loughry and Portrush and actually making it work for industry. I feel that one of the thrusts of the NIFDA must be to make things happen. Many of the resources and money are there and many of the good ideas are there, but we need to find ways of making it happen. I will be working with a few people specifically on that problem over the next six weeks. It is an awful shame not to have the Food Centre at Loughry fully utilised. There must be ways of making it happen. It is the linkage. It could be in a consultative role although I feel that maybe that is not enough. We must be there trying to get a correct focus and a sense of making things happen.
972.
Mr Neeson: You spoke about North/South co-operation. How significant is the decision by Guinness to close its facility in Dundalk and relocate in Belfast? It seems that one of the major factors that led to this decision was that the cost per job in Northern Ireland was much less than in Dundalk. Do you see any benefit in promoting Northern Ireland as a low-wage economy?
973.
Mr Anderson: I think it would be quite short term. So far as the situation in Dundalk is concerned it is probably typical of the many other situations of a similar nature that have already occurred and will continue to occur. What is happening, as I understand it, is that competitiveness in the market is forcing everyone to re-examine their cost base. In Dundalk there probably has been a change in the labour market with the arrival of Xerox, a massive plant. Availability of labour there is a problem.
974.
It is interesting, and I am not sure if you are aware of this, that in Northern Ireland we also have labour availability problems in the Craigavon and Ballymena areas. There are people who are now offering Portuguese labour on a casual basis in Northern Ireland because we cannot get enough people to man our factories. We have looked at it, and I know that other people in Craigavon have actually employed some. That is because our unemployment levels have come down from approximately 15% ten years ago to approximately 6·5% overall. Within certain pockets it really is a problem.
975.
If peace continues in the Province and we can get ourselves organised to be more outward looking, we could find ourselves in a fairly similar situation to the Republic of Ireland with regard to wage rates and availability of labour. Having said that, we also need to be aware of the fact that most of Northern Ireland's industry is not owned by Northern Ireland anymore. A lot of it is owned by Southern Irish companies. The decisions to relocate and close plants become even more possible because it is being done within a group or within a co-operative. A large group such as Guinness can do it more easily than a sole trader who only has one plant. We are probably going to see more of that. We need to be looking at five and 10 years ahead and not just at what is happening now because of the temporary difficulties that exist within the eastern corridor of Ireland with regard to the labour market.
976.
Mr Bell: I have two comments to add. Are we as an industry interested in simply providing relatively low-level jobs? Obviously not. However, there is a requirement for employment of people at the bottom end of the educational scale in Northern Ireland. Thousands and thousands of long-term jobs are needed. The food industry provides these jobs. The shelf-life of long-term manufacturing jobs is often disregarded. Our education system is often praised for producing a superb standard at the top, which is entirely right; however, it also produces a very poor standard at the bottom. Some factories in Northern Ireland have to run remedial classes in numeracy and literacy, because they cannot find employees who can count and read. There is a role for this sector.
977.
Mr Neeson: I appreciate your support for the Assembly. One of our challenges is to provide joined-up government. You say in your submission that there should be a one-stop shop to avoid uncertainty and overlap in Government Departments. What do you mean by that?
978.
Mr Anderson: We are well and truly into the political arena now. We understand the current position of Government agencies. We found in our mapping exercise that there were more initiatives than companies to take advantage of them. A lot of that has been driven by the source of the funding. If a European programme provides funding for a particular type of support for marketing or for meet-the-buyer events, we will find a plethora of poorly structured meet-the-buyer events which end up doing more harm than good.
979.
Resources are being wasted. In our mapping exercise for the Department of Enterprise, Trade and Investment we highlighted the need for more focus on how best to use the money. It is not for us to decide whether IDB or LEDU should combine, or what should be done with IRTU or the Training and Employment Agency. We ask people to consider the question of funding through local government initiatives and the various moneys from the International Fund for Ireland, the European Union, the peace and reconciliation money, money from Westminster or the Assembly. There seems to be a great deal of unfocused activity.
980.
Through our livestock chain management initiative we are working to find the best ways to reduce the costs of quality assurance on farms. Retailers demand to have fewer suppliers to deal with, because they want to cut their costs. They make savings if they have 10 people to pay instead of 20. Everyone, including government, will have to consider consolidation, avoiding waste and duplication and increasing accessibility.
981.
Mr Bell: The Committee should read the mapping exercise produced by LEDU in March 1998. A plethora of organisations - all very well-intentioned - funded from a hundred different sources are all trying to do the same thing: help development. However, through ineptitude and lack of information they end up counteracting one another. We meet five Government agencies every eight months and during the meetings we often find that the left hand does not know what the right hand is doing. We usually leave the room gracefully and let them sort it out among themselves before we can join them again. We are not suggesting what should happen, but there must be more cohesiveness.
982.
Mr Anderson: There must be cost saving as well: not having a surfeit of photocopiers, for example.
983.
Mr Bell: We wrote to all the local council development officers and offered to work with them to help in their initiatives. We had replies from a few. I visited two of them, and my impression was that they were solely interested in matters relating to their jurisdictions; they would not look at the bigger picture. However, they need to focus on the bigger picture, and that drive needs to be redirected.
984.
Mr Anderson: A lack of expertise is not the problem; the expertise is too fragmented. For example, a company may be an IDB client, but LEDU may have products that are suitable for it and it may not get to hear about them. If there was a one-stop shop, there would be more accessibility; the costs would be lower for everyone. There are advantages in having a one-stop shop.
985.
Mr Neeson: There was a discussion earlier on the grant dependency culture. In 'Strategy 2010' there is a proposal that the availability of Selective Financial Assistance should be lessened. Are there any further points you want to add to what was said earlier?
986.
Mr Anderson: The purpose of any assistance is to accelerate processes that make economic sense in the first instance. Our company got financial assistance with buying some of the best machinery. That meant that we were one of the best equipped snack manufacturers in the world. We still have some unique characteristics in terms of flexibility for multi-packing because of the money that was given to us eight years ago. We are not holding out a begging bowl. This is an issue that is important in terms of supporting the people who are worth supporting.
987.
I accept that there are people in the farming community and the processing sector, who will not do anything to improve the situation no matter how much money you throw at them. They just want the money. Therefore, we have to be careful about how we target that money. There are companies in the food industry that are highly innovative and excellent in every area. I know of one particular meat plant that is the primary supplier to one of the multiple retailers in the United Kingdom. It has no brand; it is local; and all it has is its reputation for excellence and its plant capacity. The Government have put some funding into that company, and it has been of enormous help not just to the company, but to the whole agri-food sector west of the Bann. That company, through its excellence, has enabled the whole supply chain to come together in a very powerful way that is perhaps an example to others. We do not want to see massive reductions in assistance to the agrifood industry, but we do need to see assistance more wisely given and better targeted with fewer overheads.
988.
Mr Attwood: On a couple of occasions you have been inclined to enter into more overtly political matters. Consistent with that, you mentioned in reply to one of Mr McClarty's questions the possibility of European representation on an all-Ireland basis. Are there further opportunities for all-Ireland developments in your sector? Do you think that the idea of an all- Ireland tourist company is something that might be developed and applicable in this case? If not, what are the opportunities for joint-promotion, joint-marketing and joint-development, given the joint stand at an American exhibition recently that you mentioned?
989.
Mr Bell: There are two identities in this country. Therefore, we use both Irish and British brands to market. Each of those has strengths in particular markets. For example, in the United Kingdom market the Irish brand is generally worth less than the British brand; in the American market the converse is true. We see a great deal of opportunity for using the Irish brand where appropriate, and that is why we wish to develop the links. In truly reflecting our constituency, however, we obviously also wish to maintain our ability to use the British brand where appropriate - we are businessmen after all.
990.
Mr Anderson: The concept of the border is not as strong in business as in politics. Indeed, in many boardrooms, the border with the Republic of Ireland disappeared years ago. I have already mentioned the fact that many Northern Ireland companies are in any case owned by companies in the South, in America and in England, and foreign owners do not fully understand the nuances of the division of the island. Taking globalisation into account, and particularly e-commerce, which will break down barriers of nationality in the world of commerce, our working closer together with the Republic of Ireland in every way possible is an inevitable process which has already started and cannot now be stopped. We must make a start, though we may not do it perfectly first time.
991.
Tesco is a good example. We recently met Tesco directors and discussed Internet trading and home shopping. They said that, simply by being first to make a start and get to grips with the issue - though they made a great many mistakes - they are now well ahead of the competition. Though we may not do it right, we must generate the momentum and get on with it. When we talk about commercial issues that we have in common, some of our other problems and misconceptions will decline in significance.
992.
Mr Bell: I should like to add another area. We have discussed the market place and how we present and sell ourselves. That is the tip of the iceberg. The nine tenths below the water are made up of a whole raft of issues, and not least among them are integrity and safety. There is great opportunity to deal with questions of food for both animals and humans on an all-island basis.
993.
Mr Attwood: I have one brief question. I will stand corrected, but I believe that someone here on Monday said that one multiple was not purchasing local products to any significant degree. You mentioned the issue in your opening comments. What is the situation with the multiples that have come in purchasing local products? I appreciate that is a very broad question.
994.
Mr Anderson: Targets were set by the IDB for the three major multiples who came in. We are still holding them to those targets and monitoring matters on a regular basis. The quantity of produce being bought by Tesco, Sainsburys and Safeway from Northern Ireland producers is rising every year. We must accept that some of our producers were not up to the mark. In other cases they were, but there was overcapacity. There was a great deal of unfairness whereby English manufacturers were granted an open door to Northern Ireland while manufacturers like us had to struggle for a reciprocal arrangement for free entry to the English market. We had to prove that we were dynamic, innovative, price-effective and so on. There were real issues for us to deal with at the time.
995.
What concerns me most is not the situation with Tesco, Safeway or Marks & Spencer, or even with the independent retail trade, but with the German discounter market. We must understand that Lidl, Netto, Aldi and such companies are procurement-driven rather than consumer-led. They work on the basis that if they can buy reasonable quality cheaply enough, people will buy it. I am not sure that Northern Ireland will be best equipped to supply that area. Perhaps the person you mentioned said that Aldi did not source much from Northern Ireland. We know of one or possibly two people supplying it at the moment. However, I am not sure how many of our members would be particularly keen to do business with that sort of profit level. Having said that, when we issued a bulletin to our members about how they could trade with Aldi it provoked an enormous response, and I feel that that may demonstrate that some suppliers out there are desperate to get more business and would be prepared to consider anything.
996.
Mr Bell: This is a very complex and political area. Lidl are opening seven stores in the South of Ireland simultaneously tomorrow, which shows how aggressive an organisation they are.
997.
Ms Lewsley: Does the South of Ireland not have what they call a "Grocery Bill" which allows multiples to sell at a specific rate only? The South had this problem many years ago whereby multiples were undercutting local suppliers. That is the point that I was trying to make earlier. What does your organisation do to counteract that? Would something like that be more appropriate for the North?
998.
Mr Anderson: We would very much like to have legislation that stops people selling at below cost. However, we have to accept the reality that as part of the United Kingdom we come under European legislation, and I think that the possibility of getting that sort of legislation through in the United Kingdom is pretty remote. In fact, the Grocery Order in the Republic of Ireland is currently under a considerable amount of pressure. There has been speculation as to how it came to be introduced in the first place.
999.
Mr Bell: As an organisation we have focused on raising our standard of game play. We have not focused on defensiveness, although I have to say that our colleagues in the South have probably done it the other way around. We have to earn our right to be on the shelf long term, otherwise the consumer will not take us off the shelf and take us home. For us that is the issue.
1000.
As an industry, we get a lot of rocks thrown at us, but you have to consider the fact that 70% of our market place changed hands in the space of six months. We had to, in effect, make up 10 years to close the gap between practice in our own market and the standards required by the Great Britain market. Our turnover has gone up, which is quite an achievement for a big industrial sector in Northern Ireland. There has been an enormous amount of change, and we have been trying to catalyse and accelerate it.
1001.
Mr Anderson: I want to highlight the change that has taken place. When Tesco first announced that it was coming to Northern Ireland there was an enormous fear factor, and Ulster Television wanted to do a programme with manufacturers about this. Hardly anybody would appear on television, because they were worried that they might say the wrong thing. We and Ormo Bakery Ltd did make a contribution and talked about working in partnership.
1002.
In reality, Northern Ireland companies have been extremely flexible and reactive and have employed the right people for the new methods of selling and for the new technical standards that are required. Companies have developed the computer systems required to trade electronically with the major multiples. This bodes well for the future. It highlights the fact that we have an industrious industry here that is capable of change. We need now to capitalise and act upon this in a way that demonstrates that we are proud of our uniqueness, our smallness and our natural identity of foodstuffs.
1003.
For example, we could do more in respect of organic farming, free-range farming and GM-free food - such issues are currently being looked at. The fact that Northern Ireland is a small, discrete area is a help, but I have to pay tribute to the industry for the way it has adapted and has done more business. More companies in our sector are now trading in England than ever did in the days of Stewarts and Wellworths.
1004.
Mr Bell: We would appreciate the issue's being kept live. There is no doubt that political pressure applied to the multiples and retailers has helped. In the days when Stewarts was here, we had about 5,000 product lines on the shelf, whereas a typical Tesco or Sainsbury's count is 20,000 lines. The additional 15,000 lines, by and large, have come from GB or Europe, so we have suffered market share loss by dilution. Nevertheless, our turnover is back to where it was; in fact, it has grown slightly. We have increased it by going into GB and other markets. That is critical for our future development.
1005.
Dr McDonnell: I would like to thank you for the fascinating discussion that we have had. I could spend the rest of the afternoon probing a number of the issues that are, indeed, not directly related to 'Strategy 2010'. There are a couple of general points on which I want to expand. Mr Bell mentioned yawning gaps. Where are those gaps?
1006.
Secondly, I like your suggestion about being joined up and there being linkages with government and academia - the clustering. I am interested in your relationship with the farming community. Is it a superficial one? How closely are you working with them? Your organisation does not fully make sense to me unless there is a strong farmer representation within it - beyond formal representation from the Ulster Farmers Union and the Northern Ireland Agricultural Producers' Association. From what you have said to me - and I found it fascinating - I cannot see you succeeding, unless in a brutal and forcible sense, unless you are reaching the farmer at the farm gate. Communication going out to the coalface and filling the gaps are the two things that hit me as you talked.
1007.
Mr Anderson: I will deal with the last point, and Mr Bell will deal with the first. The Northern Ireland Food and Drink Association was originally set up primarily as a food and drink processor organisation. I totally agree with you that we need to be much more involved in the whole food chain. That is why I have been happy to spend a lot of time on the Department of Agriculture and Rural Development's vision initiative, in which we are working directly with the Ulster Farmers Union and the Northern Ireland Agricultural Producers' Association. One of my goals is to promote greater involvement throughout the whole supply chain. You are absolutely right. If we were to look at this in isolation from the processors' perspective and did not consider the farmers, we would be on the road to nowhere.
1008.
We need to recognise the fact that real emotions exist there. We have just established a small group to look at relationships within the supply chain. Interestingly, we have a representative of the farmers and the meat plants involved in that. We are getting the people who are in the conflict involved in the solution. I must, however, add the caveat that we cannot solve all of the farmers' problems. Ultimately - and this may sound pessimistic - there will be some farmers who will be just the recipients of social support, because their units are no longer economic. Neither their ability nor their willingness levels will be sufficient for anybody to do anything with them, no matter how much money you put their way.
1009.
Dr McDonnell: The farmers that are willing and capable, are sitting out there broke, penniless and bewildered, and they do not know what is going on. They see the meat plants and the others - the cluster that you represent - doing very well, thank you. You need to carry your message to the coalface. It may be a start to do it through the Department of Agriculture but even that is seen by farmers as semi-imposed. There must be some sort of education exercise whether it is through magazines, brochures or a communication system. You mentioned that there are 60,000-80,000 people in the industry as a whole, including farming and those in the food processing industries. The message has to be got out and there has to be some sort of a steer given to those farmers that want to move and are able to move with you because they do not know what to do at the moment.
1010.
Mr Anderson: There are complex issues where a lot of farming has been motivated by subsidy and not by profit or quality that need to be changed. I spoke to the Minister of Agriculture, Nick Brown, recently, and I was interested to hear that he went on a number of food-chain walks with all the component members of the food chain including the farmers, the feed merchants, the processors, the retailers, and the Consumer Council. That gives people a different view of the world, and they start to think together about how to excite the consumer, about the issues they can solve together and about what each one needs to bring uniquely to the table. That is a new process and a new way of doing business, and that is where we want to concentrate our efforts.
1011.
Mr Bell: I will deal with the first part of the question. Why continue to support this sector? One of the things that came out quite clearly in 'Strategy 2010' is that we appear to be a less favoured sector. If the million tourists a year that we can potentially get, come here, that is three million meals per day. Who is going to provide those three million meals? We must get that food from somewhere, and we would very much like to do that, thank you very much.
1012.
You asked about gaps. There is a surplus of sugar and dairy products on this island, but there is no confectionery industry - one gap. There is one small brewery, Real Ales. The brewing sector does not exist here. Farmhouse cheeses are woefully underdeveloped, there are about 20 in the South and approximately four in the North, which you have probably never heard of. There are many gaps in the whole of the industry, and we think there is room for a lot more development. Some sectors will naturally contract a bit and consolidate, but there is room for growth in others. Overall we think employment in the industry should stay around the same size through that turnover process.
1013.
Dr McDonnell: You have recommended the development of a centre of excellence to improve co-ordination of research and development. What would the functions of that centre be? Specifically, how would it function mechanically, and what benefits would it bring? It struck me when you were talking that you were jumping from the general to the specific. It is a question of how you bring standards to a widespread and disorganised industry.
1014.
Mr Bell: Let me illustrate the problem. We know we need a solution, but we are not quite sure what that solution should be. Loughry College is aimed at food processing and is run by the Department of Agriculture whose remit stops at the farm gate. Portrush Catering College is aimed at the food industry and is maintained by the Department of Education. Newforge Lane, Queen's University, is jointly maintained by the Department of Agriculture, civil servants and Queen's University, Belfast. The nutrition facility at the University of Ulster is run by the University of Ulster. We have other centres of excellence such as Teagasc in the South and the National Food Centre in Dublin. There are many resources like that and the connection between them, as far as we can see, is a fair degree of competition. They are running the same courses. Some of them do it very well and some very poorly. Some of the industry go to the poorly run courses, and some go to the well-run courses. We need some sort of joined up government and a point of reference which we as an industry can interface with and give guidance to. It does not have to come under one department, but we need better communication than we have.
1015.
Dr McDonnell: We are all aware of exchange rate difficulties and you referred to currency compensation schemes and the uncertainty over the exchange rate. What aspect of the currency compensation schemes would you like to see changed and how would you see us moving in terms of the euro?
1016.
Mr Anderson: This is an issue which is close to my heart. Most people are looking for a more attractive level of exchange rate stability. Whether that is to be achieved through joining the euro or in other ways is an interesting point for debate. I understand from a person I met yesterday from the Bank of England that the one criterion still to be met by the United Kingdom Government for joining the euro is exchange rate stability. It is highly probable that, as we approach the referendum on the euro, moves will be made to reduce the strength of the pound against the euro while, all being well, maintaining its strength against the dollar and thus provide a stable platform. The Government must be able to show that they can join the euro if that is what they want to do.
1017.
I am not sure that we know if we want to join the euro or not, but I do believe that we need to have stable exchange rates at a level that is affordable. Informed speculation says that it is highly possible that towards the end of this year or next year the pound /punt will fall to £1.15 and the Deutschmark/ sterling to £2.95. That could be a level at which entry into the Euro could be achieved. I am not sure that this would suit a lot of people in the agri-food world because there would be a big write off. Having said that, we need to accept the reality that parity is not likely either.
1018.
In our company it is enormously freeing at the moment to think of the possibility of £1.15 against the Irish pound in our planning processes for the year 2001 as opposed to £1.25. That is why I raised the point initially about our voice being heard. I have been a little bit depressed by the fact that when I have raised this currency matter with some Government Departments the response has been "You have to take it as a given. It is not something over which you have any control." That is a very sad response when it is a matter which affects the whole agri-food industry more than anything else. It is arguable that BSE alone did not kill a lot of beef exports - they would have been killed anyway by the strength of sterling. Therefore we need to have an informed voice, and we need to know more about what is going on in terms of the whole fiscal side of government.
1019.
As I understand it, the way in which exchange rate stability can be achieved is through control of Government spending, taxation levels and interest levels. Those people who are paying the price - those in industry and exporters - of the current exchange rate policies need to have a voice, a very loud, clear voice, and our European representatives need to be well informed in that regard.
1020.
Dr McDonnell: We may see a drift in the right direction on this side of an election.
1021.
Mr Anderson: You may be right.
1022.
Dr McDonnell: One other point is the question of family firms. How are you going to organise succession, planning and bringing in expertise in "siloed" family firms? This is not just an issue for the food sector; it is probably the issue which brought the textile sector to its knees, and it can seriously damage the food sector as well.
1023.
Mr Anderson: LEDU clients are growing more successfully than IDB clients at the moment, at least in the agri-food world. A lot of growth is being achieved by smaller companies. Small firms have some real advantages. An owner-manager can drill a passion and a belief in the company down through the whole organisation. Unfortunately there are others that are not so aggressive in doing business - perhaps they have become a little more lifestyle-oriented - and I am worried about how we are going to change that. There are ways of doing it. It has been achieved elsewhere, and we have some proposals in that regard, but if the horse does not want to drink there is no point providing water.
1024.
Some private firms will excel and take advantage of what is offered, but some will never do so. That is the reality that we have to cope with. Time is short and resources are limited. We have to focus on those people who are willing and able to do the job. Let us not try to equip everyone. Let us go for the people who are willing to address the change. The last two or three years have shown that there are an increasing number of people who will address change, even within family businesses, but I am not underestimating the size of the problem.
1025.
Mr Bell: I would answer the question in two words. What we want to do is pot-stirring. How do you change? Family firms tend to be small and insular with a tendency to nepotism. Those are issues that make family firms difficult. How do you overcome that? We would like to see bidirectional secondments introduced, where you take the son or the daughter, stick them in Denmark, Germany or France for a year, and bring somebody else in. In other words, you skill the people. Often the weakness is that by the second or third generation the skill level has dropped. We have a number of other proposals, but again they need resourced.
1026.
Mr Anderson: Let me give you an example. Two of the multiples complained that one particular family business in our association was a little parochial in approach. We organised a moratorium period in which the multiples agreed not to de-list that particular company while Government agencies went in to help develop the expertise and the people that were needed to make the change. The company has since grown substantially. There is a way, but if companies are not willing to participate, there is not a lot that can be done.
1027.
Mr Bell: I have circulated a document which describes an initiative which we hope will encourage change. These awards have a budget of £50,000. That is all private sector money, bar the prize sponsored by IDB. Marks and Spencer are sponsoring a "young entrepreneur of the year" award to encourage excellence in the sector. Initiatives like this have a remarkable effect on people.
1028.
Mr Anderson: Another initiative of ours is to have a keynote speaker at our annual dinner. We have had the directors of Tesco, J Sainsbury and Iceland. This year we are going to have Allan Leighton of ASDA. By bringing those change-makers to our marketplace, we show people the size of the mountain that we have to climb. That will help to engender a culture of change. That is what we are really talking about. Change management is a long-term process.
1029.
The Chairperson: Thank you for those frank and challenging views on 'Strategy 2010' and beyond. This is the longest public session we have had, which is a reflection of what has been an interesting exchange of views.
TOP
MINUTES OF EVIDENCE
MONDAY 31 JULY 2000
Members Present:
Mr Doherty (Chairperson)
Mr Attwood
Mr Dalton
Ms Lewsley
Dr McDonnell
Ms Morrice
Mr Clyde
Witness:
Mr J Simpson
1030.
The Chairperson: You are very welcome. We have a number of questions that we would like to ask you.
1031.
Mr Simpson: Thank you for the invitation. About ten years ago I worked as a senior lecturer and assistant dean in the faculty of economics at Queen's University. However, I had the pleasure of changing my career and, because of my continuing membership of the European Economic and Social Committee, where issues of regional policy across a wider geographical area became our concern, I continue to take an interest in economic policy and a number of other issues in Northern Ireland.
1032.
You asked me to respond to your inquiry into 'Strategy 2010', and I have given you a short statement in writing. The question now is how do we move on from 'Strategy 2010', which was published a year ago and has a number of features to the important issue of what we should be doing in terms of a programme for economic development in the foreseeable future. We should now be talking about the recasting and reformulating of the ideas in 'Strategy 2010' in a more coherent and comprehensive way and about identifying more clearly the priorities and how they fit into the Programme for Government. It would be a waste of time to continue debating 'Strategy 2010' and the way it is being handled. We need to have a strategic view of economic development for the Programme for Government.
1033.
We need to bring together - I think this is one of the things that Strategy 2010 tries to do - the twin pillars of the public sector and the private sector and what each of them can be asked to do. The pillars are not really symmetrical, because you cannot order the priorities of the private sector and individual firms in the way in which you can set priorities for different parts of the Government programme.
1034.
For example, when you talk about the priorities for transport or energy or education, the Government machine can deliver the outcome. On the other hand, if we talk about likely outcomes in terms of knowledge- based industries and the Information Age Initiative and possible changes, some of them adverse, in other sectors of the economy, there we can frequently only observe and marginally influence. One of the important things is for the Assembly, for this Committee and for Ministers now to develop a coherent programme. The major formed, obvious and deliverable bit of that is the Programme for Government, but alongside that are statements of expectations of how the private sector will relate.
1035.
Let me illustrate that further. What sort of population numbers will we have over the next 10years? Where will that population create pressures in our physical infrastructure? How much of that increase in population represents people likely to be looking for jobs? What sort of pattern of employment can we influence in that period? There is evidence from the 'Shaping Our Future' public inquiry that we are likely to be in a period of unusually fast population growth unlike any we have lived through. The birth rate will not necessarily be higher, but population growth will be higher because there will be fewer people leaving Northern Ireland and more coming back. The scale of that change has not begun to be appreciated yet. It is coming through in 'Shaping Our Future'. The very scale of that increase in population and the likely pattern of employment have implications that can be fed into the sort of things you are thinking about.
1036.
The Chairperson: That was a very thought provoking introduction.
1037.
Ms Lewsley: 'Strategy 2010' contains about 62proposals. How would you identify and prioritise those that you think should be implemented with the greatest urgency? Which of the easier proposals do you think need to be refined or developed?
1038.
Mr Simpson: One could go through all 62 recommendations and end up, by and large, saying "Yes, that is in the right direction," but the critical element is prioritisation. Are there issues that have not been developed that need to be developed further? Whether they are easily developed or quite difficult to develop, they still have to be taken on.
1039.
I will volunteer my twoareas of priority. The first is the more realistic integration of education and training issues into the likely employment patterns over the next 10, 15, or 20years. The second one is to reconsider the way in which we offer incentives to business either to come in to Northern Ireland or to expand once they are here. Those two would be at the top of my list. Whether there would be others close, I do not have a ready answer at the moment. Those two seem to me to be critical in terms of where we are now, and the message we need to be sending out.
1040.
Ms Lewsley: You say that the most critical goal in the strategy is to raise GDP per head from 80% of the UK average to 90%. 'Strategy 2010' contains 10 targets. Should others be added? I have asked if there should be an equality target. How realistic are the targets and how achievable are they? How do they relate to the objectives of the strategy, and should any of them be changed?
1041.
Mr Simpson: You referred to the objective of ensuring that we have a society in which issues of equality are more formally considered. That issue has to be implicit in each of the 62 recommendations, or whatever number of actions we decide upon. In fact, it becomes critical in terms of how you get the conception of equality throughout the Programme for Government.
1042.
As I prepared for this Committee, the idea which came through strongly in my original statement, and in the notes I made yesterday, is that the phrase, 'Programme for Government' is much more than a statement of a legislative programme or of financial allocations. It is a series of steps which I have not seen implemented in a coherent way in Northern Ireland in my lifetime. Some of you can vouch for that also in your own lives. I cannot sufficiently stress that my ambition is to see a Programme for Government, with a capital "P" and a capital "G", meaning all of the things that should lie behind that phrase - and equality is one of those things. If you suspect that it is not mentioned and is therefore out of sight, then obviously we would want to correct that. It has to be included in everything we do.
1043.
In Northern Ireland, we have faced the equality issue for a long time, and it is now being tackled more vigorously. I do not think that any of us envisage a situation where there will not be differences between rural and urban life, and where there will not be differences between living close to industrial areas and living further to the west - to use both the literal and the metaphorical phrase.
1044.
However, those are issues which now must come into the Programme for Government, and they allow me to introduce the following phrase; The Programme for Government has to have economic objectives with the cross-cutting theme that is the social and environmental dimension of what it is doing. You have asked the Ministers to deliver a horrendously complex concept over the next three months. What was the other part of your question?
1045.
Ms Lewsley: Are the targets achievable?
1046.
Mr Simpson: In many respects, the targets are simply statements of aspiration. No Government can guarantee to deliver them. However, that is understating their importance. The targets are achievable if a series of interactions take place, and those include hundreds of decisions made by people outside the direct influence of Government. However, Government is the big player who can cause a bottleneck if the actions are not delivered properly. It is conceivable that if Government policies and priorities are not liberating, in terms of the economic change, then the faster rate of growth will not be achieved. For example, the suggestion that GDP per head of population should grow from 80% to about 90% of the UK average is modest enough. But what lies behind that needs to become clearer. About half of that increase would come about because we would have jobs for people who at the moment are not in the labour force - they are economically inactive. The other half - and the halves are approximate - would come about because we would actually want to have a society in which productivity improves relative to the neighbouring areas.
1047.
Over the last 30 to 40 years we have not managed to secure higher rates of productivity increase, other than what has been the average for developed western European countries - we need to challenge that. Therefore, the targets are not unrealistic, but none of us can guarantee that they will be delivered. Are there targets that I would add? Yes, but in this way: to have a target for GDP per head, we need targets for employment, and it follows mathematically that those targets can be in terms of output per head. Can that be broken down further? What is the anticipated contribution from the agricultural sector to the total? What is the anticipated contribution from the manufacturing industry and from the public sector? An interesting feature of the next three years is going to be that the public sector is back on an expansion path after some years of contraction. I would like these subsidiary targets to be clearer.
1048.
I find it difficult to rate 'Strategy 2010' because, although it reaches a conclusion on earnings and GDP per head, I am not sure what the route map is to get from here to there. I read with interest, as members of the Committee may have, PricewaterhouseCooper's review of the way in which the economy is changing. My interpretation is that it is asking the same questions and trying to offer some answers.
1049.
Ms Morrice: What are your views on the recommendation that Selective Financial Assistance should be less readily available - do you think that there would be any problems with this and what type of incentives do you believe are necessary?
1050.
Mr Simpson: The Committee has heard and read evidence from the Northern Ireland Economic Council and Dr John Bradley on wider issues which included your question's subject. My assessment does not significantly differ from the views expressed by both the Economic Council and DrBradley. The only thing - and I am sure they would make the same point - is that once we have assessed where we are, we need to move on and answer questions about incentives. The present incentive structure needs to be reconsidered within the constraints imposed by the European Union and the Treasury. It is logical to have financial assistance rules which prevent beggar my neighbour tactics, so I do not object to the fact that we cannot do what we want immediately without prior approval of the Treasury and the European Commission. You may have noticed last week that the European Commission challenged the DETI's Viridian venture capital fund because it does not satisfy Commission rules.
1051.
I understand that they have challenged it because they are trying to act consistently with European obligations. On the generic issue of incentives, Alan Gillespie, the Chairman of the Industrial Development Board, recently postulated some thoughts on the way in which Selective Financial Assistance might be changed. He seems to have come round to the view that the scale of assistance and the grant relationship, could be reconsidered and that the scale might be reduced and the emphasis switched in part from grants to taking equity. There are obviously possibilities in that direction.
1052.
The other piece of evidence I offer to people who feel that we cannot do anything because we cannot get past the Treasury or the European Commission is that the European Commission has in the last twomonths approved a change in the tax treatment of investment in Madeira in a way in which areas like Northern Ireland should take an interest. There are issues in terms of the tax incentives for investment, and there are issues to do with the balance of incentives, which call for a thorough review of what we have been doing and its effectiveness. The Economic Council has made its points very forcibly. It believes that we are spending much more than we need to in order to encourage inward investment and that those funds could well be released for other purposes.
1053.
Ms Morrice: The strategy talks about the possibility of reducing corporation tax in line with what happens in the Republic of Ireland.
1054.
Mr Simpson: I avoided that, but yes, go on.
1055.
Ms Morrice: Is that what has been done in Madeira, and are you recommending that we harmonise the corporation tax rate on this island?
1056.
Mr Simpson: The issue of corporation taxation across the European Union is not going to go away. There is a difficulty. Even if you take this island out of the debate, there are other countries which are saying that there are beggar my neighbour elements of fiscal policy from one country to another. Whereas there is no obligation in the treaty to alter national taxation, which is what the Irish Government have relied on, there is an obligation now for all members to co-operate in the development of economic policy across the European Union, and I am not just talking about the Euro countries. You will all have read the arguments coming from the Germans and other countries which say that whereas the treaty does not demand tax harmonisation, it is going to be necessary. I too foresee that this will be so.
1057.
The second level to that debate is that there might be a challenge to individual countries if their tax treatment were regarded as distorting competition under what used to be article130 of the treaty. Certainly it is an issue which is creating an uncomfortable set of relationships. Clearly the British Government have taken the view that they do not want Northern Ireland to have a corporation tax policy which is out of step with that in the rest of the UK. This is a political decision on the part of the Government. If they did move to allow it, the European Commission would be the first people to stop it, because it would be an act of regional policy which would not get the approval of CommissionerMonti or CommissionerBarnier. Therefore it is not a question of when do we challenge in order to make a change in the corporation tax system. We can begin to examine alternatives. I have been attracted to the notion that is part of the Spanish thinking: instead of thinking about differences in taxation, if companies in a particular region reinvest profits to expand their business, they should not pay any tax on those reinvested profits. That is just a different idea, but it might be the key to making a difference.
1058.
Ms Morrice: On the IDB itself, what are your views on the recommendation that industrial development bodies should be merged? Do you think that the resulting body would be more efficient?
1059.
Mr Simpson: The various industrial development bodies pursue their own agenda. It is only logical that they merge, and the sooner the better. This would not be an exercise in moving the furniture around for the sake of appearances, but about assembling expertise in the right places for the right tasks. The changes in the industrial development agencies are coming, and we are pushing at an open door.
1060.
Ms Morrice: Therefore it would be better, more efficient and -
1061.
Mr Simpson: The intellectual objection seems to have disappeared; we are dealing with the administrative implications. If I understand Mr Gillespie of the IDB correctly, he does not oppose it; neither is Prof McKie of the IRTU likely to oppose it, as he was the author of the report which suggested that they should merge.
1062.
Dr McDonnell: Surely our problem is one of communication. At the moment the IDB is not even communicating with itself internally on some points. Lumping all the bodies together would create a bigger tower of babel.
1063.
Mr Simpson: If the change entailed such risks, it would not gain much support. Businesses expect the IDB to perform professionally. They believe that we have too many points of call in the areas of research and development and of marketing. You and I may differ on where the bigger tower of babel is situated, but in organisational terms Northern Ireland is a small place. These ought to be co-ordinated more effectively. I do not think that Dr McDonnell and I differ on what the objectives should be, but we are expressing different fears about what would happen if man-made management did not work.
1064.
Dr McDonnell: I would like to tease Mr Simpson out on this as I think that we agree on many things. How far do we go? Perhaps more important than lumping them all together is the context in which they are lumped together. Are they to be put in a semi-detached, semi-privatised agency like LEDU, or are they to be put in a Civil Service bureaucracy like the IDB? I am astounded that the IDB is merely an advisory board, and that any decision it might take could be overturned or ignored. Could that happen?
1065.
Mr Simpson: Dr McDonnell raises an important issue about management and policy making. If we are going to have a development agency which has bite, it must be more than an operational unit delivering policy which has been decided in another place: in other words, the difference between the IDB and the Department of Enterprise Trade and Investment.
1066.
Some of the members of the IDB will share your frustration that they have no role in determining policy. For example, the IDB recently looked to appoint new members. The job specification asked for people who had hands-on experience of running businesses or who had had contact with business through trade unions. However, what was conspicuously absent was a requirement from the IDB that the applicants should have thought about how to deliver development policy.
1067.
Some of our best industrialists never had to think about the use of incentives, grants, equity, or training, because they ran organisations in which their main challenge was to go from raw materials to output. This is what they might term 'the academic.' I think that it is very much applied economics rather than theoretical. That dimension of their work is not to be found there - it is in Netherleigh. That is one area in which North/South comparisons are useful, for the way in which the IDA has shaped itself in recent years, together with the government department to which it relates, has been a role model which we should at least examine in detail.
1068.
Ms Morrice: You talked about how we should move forward, and you mentioned recasting and reformulating ideas. How do you think this would happen, in terms of how a new review would take shape? How comprehensive should the review be; what specific problems should it address, and who should be involved in a working group for the recasting and reformulation?
1069.
Mr Simpson: 'Strategy2010' needs to be moved on. We need a new model, which is more focused on action related policies in which the coherence is obvious. There would be little merit in saying that that is the equivalent of going back to the beginning and doing it again because the exercise in completing 'Strategy2010' had a number of positive features. It involved the business community in a way in which it had not been involved before although many business people were disappointed in the way in which they were involved. However, we now need to have the priorities.
1070.
We should go through the objectives, as MsLewsley mentioned, and decide where we want to be by 2010. We should determine the critical issues needed to secure change - and the issue of Selective Financial Assistance is only one of them. From a very small group of people we could devise an agenda and send it out - to the constituent parts of the machinery.
1071.
You could argue that it is the Minister's job. He has got all the advice from professionals and together they should paint the broad picture and put it firstly to other Ministers' where there are cross-cutting elements, and to units in circ*mstances where development agencies need to refine their activities.
1072.
For example, one of the outcomes of 'Strategy 2010' is the creation of the Economic Development Forum. My assessment is that that forum will not take us very far. Who is it accountable to? How critical are its discussions? If it is simply a small advisory group to the Minister, that is fine. The Minister is allowed to have an advisory group. However, it will then lose its role in communicating with the wider community.
1073.
We have the Economic Development Forum, the Northern Ireland Economic Council and we will have the element of the Civic Forum which will want to talk about these issues. We clearly need a better means of communicating what is happening to the wider society. So, when you ask how it will happen, I do not think it will be one grandiose exercise where we fill the Ulster Hall or the Waterfront Hall with 1,000 businessmen and say nobody is going home tonight until we have thought this out. You have to do it in specific sections.
1074.
We have talked about Selective Financial Assistance. However, another priority about development, which I identified, was the issue of vocational training. That agenda very quickly goes to the Minister for Higher and Further Education, Training and Employment. Conceivably, his role and that of his Department are the most significant, potential bottleneck to the expansion of NorthernIreland's economy.
1075.
Mr Attwood: I will begin with your last point. You said earlier that integrating education and training into an overall strategy is one of two key elements. In your reply to Ms Morrice you said that the single, greatest potential bottleneck in the overall development strategy might be in the educational sector. Could you elaborate on why it is such a priority - which is a theme advanced in previous submissions from John Bradley, the vice-chancellor of the University of Ulster, and others - and what that means; and why is there a potential bottleneck and what that means?
1076.
Mr Simpson: Economic development strategy relies on a community having people who are equipped to engage in whatever the activities are, and we will be looking for skilled people in the next 10 to 20 years. The relative recovery of the Northern Ireland economy in the last 10 years has disproportionately relied on semi-skilled people being available at wage rates, which compete very successfully with those in the rest of western Europe. Those are two elements, one of which is disappearing and the other which we would wish to see disappear. I do not believe that as part of the campaign to improve the economy we want to rely on low wage and low value added activity. It is easy to say that. However, to increase the value added activity, people must have higher skills.
1077.
At the moment, Northern Ireland has a good reputation in respect of the number of people going on to university education. It would not be a bad thing if the numbers were greater especially in the professional areas, where there are likely to be shortages across western Europe in the next decade or so. More particularly, our reputation, in terms of education and training, is weakest as regards the group of people who do not go on to university education. At the lowest level of achievement the proportion of our school leavers who are very modest in terms of numeracy and literacy is higher than in almost every other west European country - my emphasis is on western Europe.
1078.
The proportion of our people between 16 and 18 years of age gaining vocational qualifications is simply very modest indeed. If I were to prioritise where we should put our effort in training and education within the educational sectors, I would allow the three universities to develop further and I would ask them to have regard to the way in which professional needs and skill needs are changing. In particular, and I have said this to the Committee on Higher and Further Education, Training and Employment, I would like to see a very major, focussed programme for the further education colleges which incorporates the thinking of the training element of the Training and Employment Agency. I am involved with one of the committees on further education and so I declare that interest. But I do not think that any of us would regard what is happening there as either large or forceful enough.
1079.
Mr Attwood: On the subject of attracting inward investment and developing the industrial base that exists here, you say that the strategy appears to be based upon what Dr Alan Gillespie says about moving from grants to equity. Were there alternative ways of attracting business and dealing satisfactorily with the issue of profit? The Madeira model of corporation tax has been mentioned. Is there anything else which could deal with that issue other than the corporation tax of Madeira?
1080.
Mr Simpson: The fundamental factor when attracting investment for expansion, be it external or internal, is that those who decide to expand their business must be able to do it profitably. Alterations to corporation tax or investment allowances are useful - and those of you who have been in the United States will know its importance in the agenda one presents - but nothing takes precedence over having people with the highest skill levels to do the necessary work. Some would say that part of the dynamic of developments in the Republic of Ireland was the change in emphasis when the regional technical colleges became institutes of technology. That contribution to the Republic's inward investment cannot be measured as cause and effect in one straight equation, but it has certainly been a major factor. Quite frankly, we have not even begun to think about how to do it.
1081.
Dr McDonnell: You mentioned the Economic Development Forum, in which I am quite interested. I am concerned about the issue of accountability you raised. What reasonable steps could be taken to create a more accountable forum for debate at this level? We must include people, and 'Strategy 2010' was a useful exercise, since it included some, although not as many as we should like. However, I should like to see the Economic Development Forum taking that approach all the time.
1082.
Mr Simpson: At the moment, the Economic Development Forum increasingly resembles a small advisory group for the Minister. I believe Dr McDonnell would like to see - and if I have correctly interpreted him I support him - a forum, though not necessarily with the same capital F, where the whole spectrum of the business community is reflected. It must have convincing leadership, for one difficulty with the present Economic Development Forum is that it's being chaired by the Department's permanent secretary, not the person best able to relate to business, trade unions and social partners in the way that is now needed. Of course, before the Assembly arrived things were different, but now there is a ministerial role.
1083.
We must re-examine why we created the Northern Ireland Economic Council in the late 1960s and set it slightly apart from the Government so that it might express independent views. That is still a useful model, but the apparent net effect of recent arrangements has been to sideline it. To secure the best talents available, should we bring the twin pillars of the business community and the programme of Government together in a body which will speak publicly about the developing ideas? There is a potential vacuum, and the business community will very quickly adopt the view that it should concentrate on running its businesses while the Government do everything else. I would hate to see the momentum created by 'Strategy 2010' lost.
1084.
Dr McDonnell: How confident are you that 'Strategy2010' will deliver the vision of a fast growing, competitive, innovative, knowledge-based economy? What do the Government departments have to do to make that happen? I am concerned about the high-tech issues of the knowledge-based economy. We all talk about it, yet we are a little frightened of it. Annually around 10% of jobs disappear and 11% or 12% of new jobs need to be created to compensate for that. How do you feel we can engage the new economy?
1085.
Mr Simpson: There is enormous potential for growth in spite of some of the problems identified in the information technology sector. 'Strategy 2010' acknowledges that but does nothing more. The Software Industry Federation has tried to establish what the likely developments and skill needs will be and how to respond. This is an illustration of how a sector working group can bring expertise together which needs to be linked to the delivery of wider Government policies - that is through the Department of Enterprise, Trade and Investment and the Department of Higher and Further Education, Training and Employment. There is a need to have a better understanding of, and co-ordination between, the business sector and the agencies of Government which deliver the support mechanisms. For example, the number of graduates coming out of the two universities with IT skills, has been increased, but not increased enough. The number of places for technician training for IT jobs has not increased enough.
1086.
Dr McDonnell points to potential labour turnover in the semi-skilled and unskilled jobs. If we can get on higher, value-added jobs in the information technology firms, they will be less vulnerable. A call centre, where the human voice is simply a mechanism for looking up an index, is not a stable form of employment, but a call centre where the person answering has a deeper knowledge of the process which can be developed, renders that call centre stable. Stream International is an excellent example of such a call centre - it provides specialised services to computer companies. Opportunities at Stream link into Magee and the North/West College, and challenge the whole community.
1087.
We cannot put too many people into technician or university IT related training. There is a need for those skills that will not disappear, though they will have to be adapted over the next 10 and 20years.
1088.
Dr McDonnell: How do you see us accommodating the innovation concept? Should we have a semi-detached body such as an innovation board under the IDB or the IRTU? I am concerned that the amalgamation of our industrial or economic development agencies may smother innovation.
1089.
Mr Simpson: Innovation does not come in neat packages and cannot be programmed. It comes from individuals. When we try to look for an administrative structure to facilitate it, we cannot guarantee the results. However, the work of the two universities, the Science Park Foundation, the extra funding available and the work of the Teaching Company Scheme are all components which contribute to what Dr McDonnell is looking for. He is right in saying that many of them will happen if left to themselves. Northern Ireland has to encourage people by showing them what is happening elsewhere. Leadership needs to be given or it could be subsumed and lost. The emphasis of the new development agency has to be on innovation and research and development. It needs to pick up on those thoughts presently in IRTU and the universities and heading for the science foundation. It will not come in a neat package tied up with ribbon saying "Innovation to be opened on New Year's Day", but as a series of events which will gradually contribute to the economy.
1090.
Mr Dalton: The strategy identifies a number of weaknesses in the Northern Ireland economy including low productivity, high levels of long-term unemployment, over-reliance on traditional industrial sectors and a very large public sector. Do you think the main recommendations in 'Strategy 2010' specifically address these shortcomings and how do you think they should be developed?
1091.
Mr Simpson: Those weaknesses can only be addressed by a broader programme of getting the people with the skills to improve productivity. Together with the organisations we have to encourage businesses to expand. The reverse side is that some low-skilled activities are not going to remain in Northern Ireland. We have seen this most dramatically in the textile industry. The loss of jobs in that area is a difficult political question for the Minister. His answer has to be that the industry needs to reshape. These are some of the costs of globalisation with consumers being able to buy their clothing, made elsewhere in the world, at a cheaper price than clothing made at home. Many of those issues are linked with the development policies within individual businesses. As far as the total economy is concerned, the role of the Government is to ensure that people have the opportunity to get the skills they need and that businesses are challenged in order to manage and take up new produce ideas.
1092.
Implicit in 'Strategy 2010' is that the quality of management in Northern Ireland is not as strong as we would like it to be. It is interesting to ask what we would have if we improved the quality of management. We have an aggressive and attractive management or business school but no major investment at present. We do have some contribution from the University of Ulster, but no major management institute such as IMI or its equivalent.
1093.
Mr Dalton: The key to getting business and expanding profit and growth is providing people with the necessary skills. Should we concentrate on the school leaver or those in higher education or should there be an overall programme to encourage the training and retraining of people throughout their entire working life? How could a strategy be developed to retrain people in the necessary skills?
1094.
Mr Simpson: I do not think it is necessary to make the distinction between young people and those already in their careers. Facilities should be available for lifelong learning and retraining. The immediate priority is to change the emphasis on what is happening between the ages of 14 and 18.
1095.
We have not begun adequately to solve the problem of people who are leaving full-time education with modest expectations, even more modest achievements and the self-fulfilling prophecy of "Getting a job would be difficult so there is no point in putting the effort in". It would stand us all in good stead if everybody could leave full-time education with vocational training. Obviously, as humans differ in their abilities, not all will achieve this. But we cannot be content until we have encouraged and provided for young people to develop their skills fully and to the point where their careers and lifestyles have better potential.
1096.
The comeback to that argument tends to be "But if industry needs these people to be trained further, let industry do it." I regard that as an unsatisfactory answer. One of the best ways to assess the position in Northern Ireland is by the number of people who already have the skills that business and industry need to expand. Rather than saying "Come to Northern Ireland; we have people who learn skills quickly", I would prefer to sell Northern Ireland on the basis of "Come to Northern Ireland; we have people whose skill base is already prepared."
1097.
Mr Dalton: In your statement to the Committee you said that the document has much to offer but that the context, timescale and economic ambitions need to be expressed in a more coherent fashion. Do you think that incentives and Government spending priorities are critical components and, if so, can you explain that further?
1098.
Mr Simpson: 'Strategy 2010' was published last February/March, and nearly all of the recommendations end with a short statement of timescale, many of which are unrealistic. Many revealed by those statements that they were not able to provide a better answer. That deals with the first part of your question.
1099.
The second part of your question mentioned incentives and Government action. Yes. If we are to have a coherent Programme for Government, this must be one of the components. I am sure that the Committee realises that developing the economy is not something that simply happens because there is a Programme for Government.
1100.
A programme of government alone might create changes, but you really need the wider business community and trade union community saying, "This is the campaign, this is the strategy to which we can contribute." If that happens, then there is no reason why we should not be talking about a much faster rate of growth than was implied by your original question.
1101.
Mr Clyde: Have you any views on how some of the aspirational recommendations in the strategy could be made more operational?
1102.
Mr Simpson: Many of the recommendations can be made more operational. Half of the 62 recommendations are statements that could be described as advisory, exhorting agencies to do this, that and the other thing. Others get down to the level of saying, "We should think of this, this and this." Take for example the issue of further education. 'Strategy 2010' contains a statement of ambition. What needs to be delivered is a coherent statement of the numbers who will go through further education and what specialisms they will develop and at what levels.
1103.
Some of you will have direct experience of further education colleges, and you will have a high regard for what they do. Further education colleges are asked to deliver two different, almost competing programmes. One programme is remedial: what do we do to help the people to whom the formal secondary education system has not given enough achievements? I have seen examples of this which are nothing but commendable.
1104.
Alongside the remedial work they are asked to develop vocational training in areas relating to the changing industrial base. They have in the past been given very modest resources, and have been making difficult choices. They are now given their own development initiative because they have been given incorporated status. That does not take away from the fact that we need to have an operational programme linking all 17 in the way that they relate to information technology, to the tourism and leisure industries and to social care. We used to speak of the further education colleges producing bricklayers, engineers and car mechanics. Now they are going to merge with the Government's training centres, so some of that will come within their remit. I do not feel that we have grasped the operational implications firmly enough. That is the one that occurs to me because we have been talking about it already.
1105.
The Chairperson: Thank you for answering all those questions. We appreciate your coming here before us.
1106.
Mr Simpson: Thank you.
TOP
MINUTES OF EVIDENCE
MONDAY 31 JULY 2000
Members Present:
Mr Doherty (Chairperson)
Mr Attwood
Mr Clyde
Mr Dalton
Ms Lewsley
Dr McDonnell
Ms Morrice
Witnesses:
Mr B Jeffrey )
Mr D Shaw ) Federation of Small Businesses
Ms M Lestas )
1107.
The Chairperson: You are very welcome.
1108.
Mr Jeffrey: We are delighted to be here and we thank you and the members of the Committee for this opportunity.
1109.
The Chairperson: Perhaps you would like to make a quick introduction. Following that we have a series of questions that we would like to ask you.
1110.
Mr Jeffrey: The Federation of Small Businesses is regarded as the premier small business organisation in Northern Ireland. We have almost 2000 members but we are part of a national organisation with over 150,000 members. Last month we had 100 new members in Northern Ireland so we are experiencing remarkable growth at the moment.
1111.
We are obviously a business lobby group and we provide certain benefits for our members. However, we see our role as advising Government, and the Committees, on the policies that will help small businesses to grow. We want to ensure that there is a brighter and better economic future in Northern Ireland.
1112.
I am vice-chairman of the Federation of Small Businesses both for policy and the region. I sit on a number of bodies. The biggest one is the National Small Business Council, which was recently formed by TonyBlair - I represent Northern Ireland on that. I am also on the Northern Ireland Management Council and on the board of Castlereagh Further Education College. I do a number of other voluntary jobs; I sit on victim support, I am a vice-patron of NICVA, and I have a wide range of interests as well as business ones.
1113.
Mr Shaw: I am secretary of the Federation of Small Businesses in Northern Ireland and a director of Apex Contract and Training Services. I will leave it at that.
1114.
Ms Lestas: I am a member of the Federation's Northern Ireland Committee. I am an owner/manager of an economic development consultancy, Lestas Consulting, and I have been involved, over a number of years, in partnerships and committees across Northern Ireland - particularly in the North-West where I am based.
1115.
Mr Dalton: How do you think small businesses can compete with large multi-nationals?
1116.
Ms Lestas: Competition is an important issue for small businesses in Northern Ireland, particularly for the members whom we represent. A key issue in supporting their competitive stance is the clustering of companies in Northern Ireland, perhaps on a sectoral basis, perhaps on a vertical or horizontal integration basis. We need to look at how companies can support each other to compete with multi-nationals in the global market.
1117.
Another important issue is local sourcing. We need to evaluate how we support our SMEs to source and to make themselves ready for local sourcing opportunities and how we encourage our multi-nationals to source from our local companies. A further option is to consider how business angels can support our small business sector. In developing this strategy we need to bear in mind that many of our members are very skilled with expertise in their own areas. However, they may not be overall business managers and therefore the development of additional skills is important.
1118.
Last but not least, we think that another avenue of support would be an overall policy to reduce short- termism in the small business sector and to encourage financial institutions to take a longer-term approach to investment, particularly for companies with longer lead times, such as software firms and those in ICT.
1119.
Mr Shaw: Marketing is another important area. Our attempts to support Northern Ireland produce are not always successful because, although the supermarkets and multi-nationals labels items as produce of Northern Ireland, we have evidence that such items are not always from here. We want shoppers to be confident that items labelled as produce of Northern Ireland really are from Northern Ireland. Being able to be sure about that, people can then make their choices.
1120.
Mr Dalton: Ms Lestas, can you expand on your original comment about clustering?
1121.
Ms Lestas: Primarily, it is bringing companies together to network and support each other, and it is something that I have been involved with. We look at how we bring companies together, either on a sectoral basis, or in terms of integration. For instance, a tile manufacturer and a kitchen manufacturer may form together in their approach to the multi-nationals, therefore benefiting from economies of scale and greater influence.
1122.
Mr Dalton: The strategy suggests that there should be a greater co-ordination and rationalisation of local economic development and that too many initiatives are being offered by too many different bodies. Would things be assisted by having one body to do this?
1123.
Ms Lestas: The federation views this as a major issue. Although courses of action have been documented in 'Strategy 2010', further consultation is probably required, and we would like to have an input into that. It has been suggested that we move from having a number of bodies to having one body, but is that the right answer? There must be further consultation, but regardless of whether we have one body or a number of bodies, there are important points that should be highlighted.
1124.
Whatever happens, there needs to be early and effective consultation with the small business community about the relevance of the work of any new agency or bodies. There needs to be some democratic representation on the boards of any new agencies or bodies to provide a bottom-up and representative approach, and there needs to be local involvement across Northern Ireland to ensure that both rural and urban needs are represented on them. There should be opportunities for those working for the bodies to get a feel for what the business sector is truly about, and although this is more of an operational issue, we did make the point that staff secondment opportunities are important. However, overall this is a major issue, and we do need further consultation.
1125.
Dr McDonnell: Have you any views on how we can expand the role of small businesses in the economic development of Northern Ireland? How can we give small businesses a greater strategic say in things?
1126.
Mr Shaw: We believe that the bottom-up approach is a better approach. Many small businessmen have grown and developed their businesses over a period of years. Those people are burdened by red tape and legislative commitment, and they do not have time to expand or help others.
1127.
We would like to see a minimising of the red tape on small businesses so that businesses can grow to begin with. Secondly, the employment legislation hampers people from bringing people into business. If we did something about that, small business owners would be able to develop their business and create jobs. Those people with skills are so busy defending their markets that they do not have time to sit back and ask how they got there and how they are going to develop their businesses or expand. We would like to see some mechanism being brought to enable people who have brought their business to a point where they feel that they can hand over to someone else to go back into developing another aspect of the business. People who may be good at developing the seeds of business ideas, may not be as good at developing the markets for them. They could leave that to someone else and bring another seed idea to fruition. A mechanism is needed to help people do that.
1128.
Dr McDonnell: Do you feel that anything could be done to improve linkages between smaller and larger firms instead of just having a cluster of small firms around a larger firm?
1129.
Mr Shaw: All large firms started small. We would be unwilling to support a strategy whereby larger firms stayed in businesses generated by ideas developed by small businesses. We would like to link small businesses with larger business so that they could capitalise on marketing strategies - in other words, develop the small businesses, rather than just having a pitch on which they come up with an idea which is then shunted on to a larger organisation that capitalises on it.
1130.
Mr Attwood: I want to make some observations on what you have submitted to the Committee. It is important to state something that JohnHume has often stated in the past: if all our small businesses were to employ one extra person or create one extra job, there would be a great impact on the North. I want to put my question in that context of having acknowledged what your organisation does. You indicate that you would like to get involved in future in the Economic Development Forum. Some people would say that that misses the point. Our last speaker said that 'Strategy 2010' apparently deliberately ignored the role of the Economic Council and suggested the setting up of an Economic Development Forum. This has been done. However the forum has not released any of its papers to enable a wider audience to participate, so it looks like an internal advisory body to the DETI and needs to be more open and accountable. He also said that it needs to be reconciled to the role and functions of the Economic Council and the Civic Forum. That was a pretty withering criticism of the forum as opposed to the council. Should your observations not be more about what the Government and 'Strategy 2010' suggest in respect of the council than merely remarks about the requirements of the forum?
1131.
You say in point two of your briefing notes that 'Strategy 2010' provided a comprehensive review of the Northern Ireland economy and outlined the many challenges facing us over the next ten years. The last speaker would have said otherwise. I am not necessarily saying that I agree with him, but a lot of his comments appear quite consistent with a lot of the other submissions made to the Committee over the last number of weeks. He says that it is not a comprehensive strategy and that the goals in 'Strategy2010' are aspirational; that some proposals are unfinished; that the timetables are impractical; that there is an absence of a public sector expenditure framework to fit the context and so on. Given that many other witnesses have made similar observations, what is your view on these aspects of 'Strategy2010'?
1132.
Ms Lestas: The federation welcomes the work that has gone into this consultation. We recognise that there are a number of issues which need to be developed to ensure that the process, as well as the content, is inclusive. Developing those is part of this process. On the representation of the business sector, I am not sure that we are working on different sides of the coin. The federation often represents businesses that do not qualify for government support and whose voice is not heard in central government or in a document such as 'Strategy 2010'. We want to ensure that that voice is heard, hence our willingness to be involved in consultation, for there is a niche market in the business community that may not be properly represented.
1133.
You mention adding one more employee to each company. We deal with solo traders and very small businesses, so that is very pertinent. However, that represents 50% of employment turnover in a business - that is the other side of the coin. The steering group was not representative of those sorts of businesses or working groups. We were asked to assess the 60 organisations for the consultation, and that is fine, but there needs to be an inner ear in any further consultation.
1134.
Mr Jeffrey: That is a very comprehensive answer.
1135.
Mr Attwood: It was a good rebuttal.
1136.
Ms Morrice: What about the disadvantaged sectors? How could 'Strategy2010' have better targeted disadvantaged sectors, for example, the long-term unemployed?
1137.
Ms Lestas: The federation recognises that the disadvantaged need specific programmes and projects to support their full integration into society. To the long-term unemployed, we could add rural businesses, a sector which we consider to be disadvantaged.
1138.
One of the issues which needs to be addressed when dealing with the long-term unemployed is bridging the gap between coming off benefits and the initial turnover of someone setting up in business, or their salary on starting employment. Bridging the gap in the benefits system would be a strong encouragement for people to move into employment or business.
1139.
There is a limited network of women in business in Northern Ireland, and that needs to be addressed immediately to ensure that there is support for women who are going into business; to create role models for women coming through the education system so that they can see business as an important career option. These role models need to be created.
1140.
Along similar lines, it is important to make sure that the current generation of women in business in Northern Ireland come from an education system that encourages them to go into professions for women. Those professions are predominantly in the service sector and are those sorts of non-traditional roles, which have been traditional roles for women. That creates an issue when you look at government support for business development, because most of that support will go into the manufacturing and non-service sectors. We think that there is also an issue about how government support is targeted to women who want to grow their businesses.
1141.
Childcare is obviously another area that needs to be urgently addressed in order to support women getting into business. Another issue concerns lifelong learning and I know 'Strategy 2010' recognises that. We think that lifelong learning needs to be accessible and affordable to encourage people to get the level of training necessary to get them into employment and business.
1142.
As regards the rural business side and farm diversification, we have put that subject into the disadvantaged category, because we feel, at this time, there is a level of disadvantage, particularly in relation to the support being provided for this sector. It must be recognised that farm diversification quite often means part-time business, and there is very little recognition and support for part-time business at a strategic level. We do think that that needs to be addressed in some way.
1143.
Mr Jeffrey: I will just add to that by saying that we do believe that the target in 'Strategy 2010' of trying to reduce long-term unemployment from 4% to 2% is just about achievable. However, that would be subject to certain other conditions, and those concern the appropriateness of the skill and training put into the workforce allied with the needs of the small business. Those have to be very carefully managed and tackled.
1144.
Targeting social need is something business normally does not have very much of a hand in, and since there is a new proposal about targeting social need in 'Strategy 2010' we feel that since we live and work in the community we are an integral part of that. Too often, only the community and voluntary sectors are involved in targeting social need, and we feel that we can have a real commitment and a real input into that. We can change things, in a sense, and become involved in something we were not essentially involved in before.
1145.
Ms Morrice: I was going to ask about the recommendations on the merging of all the different economic development agencies, but I think that you have answered that in your response to Mr Dalton about spending consultation on it. There was one point that Mr Dalton was looking for in his question, which was about local economic development in particular. There is an awful lot of confusion about all the different agencies and how they work, not only at that grander level of bringing the IDB and LEDU together, but how we link what is happening on the larger scale at the centre with what is happening at local council level, and how we bring that into the overall picture.
1146.
Ms Lestas: We would certainly appreciate that there is quite often total duplication, particularly with the European funding coming on board and the situation that that has created over the last four years. The situation was probably quite bad before that and we think that it probably has not been improved as a result of the European funding in relation to the duplication of programmes and initiatives that are out there. We would ask that over the next four year round of European funding responsibility is taken to ensure communication and support for initiatives at a local level. We would like to see some move to really look at the long-term sustainability of initiatives being developed, and, in particular, if there are opportunities to look at some sort of mainstreaming of those initiatives after the four years are finished. We should bear in mind that a lot of the programmes have been supported because they were additional to government policy.
1147.
There are two sides to that coin. The initiatives have been additional and therefore able to secure EU funds, but on the other side development is needed to ensure that those initiatives are mainstreamed in the longer term. We do not see any right or wrong answer to this, but there is a need to do it. One of the issues that we have discussed is the idea of a gateway of programmes for businesses. There is a need for some sort of streamlining and a gateway approach to the programmes and initiatives that are offered to businesses.
1148.
Ms Morrice: If I understand all of what you have said, it is a bit of a mess at the moment and something desperately needs to be done.
1149.
Mr Jeffrey: We feel strongly about the need for a focus. Some sort of a gateway is needed so that businesses can see at a glance or easily find out the information they need to take full advantage of those programmes.
1150.
Ms Morrice: Would that gateway involve everyone from the IDB, LEDU, and Europe to local economic development and so on?
1151.
Mr Jeffrey: Absolutely.
1152.
Ms Morrice: My last question is on Selective Financial Assistance. I do not understand how you are involved in that at this all-business level. Do you think it should be less readily available?
1153.
Ms Lestas: We are not directly involved in financial support to the business sector. However, we recognise the need for that to be streamlined and perhaps in the longer term, phased out. We see this as an evolutionary process. It should not be something that is revolutionary and happens overnight. There is probably a grant dependant culture in the business sector, and it needs to move from that type of support over a period of time towards more ongoing support that is not just financial. The whole mentoring side, support, training and skills, we see as very important.
1154.
Ms Morrice: I would like to go into that in a little more detail. You would like to see financial support phased out, but nothing revolutionary, in the longer term. What about attracting inward investment? What would replace financial assistance, in terms of attracting inward investment?
1155.
Ms Lestas: Inward investment is probably one of the things that we need to look at, but perhaps we should look at what other incentives can be offered to attract inward investment. Maybe we should look at how policies are developed through taxation and other avenues and at what could be phased in as the grant system is phased out.
1156.
Ms Lewsley: I welcome you here this morning. I would like to go back over many of the questions that have already been asked. We had some discussion about reducing the percentage who are long-term unemployed from 4% to 2%. MrJeffrey said he thought that that was a realistic target which could be met. Do you think that 'Strategy 2010' addresses the problem of long- term unemployment and how do you think the federation could play a role in tackling the issue? You have also talked about the sole trader and said that we need better types of partnership with the Training and Employment Agency. There was also talk about employment legislation and how small businesses could benefit from the New Deal which could create a more sustainable environment in the long term. Looking at the issue of women in learning and education, could small businesses have some type of contact or network?
1157.
Mr Jeffrey: One of the things that we are looking for is more or less immediate action because we see 'Strategy 2010' as being vital to the economy. However, what should happen next is a very early review. This process has taken a long time to evolve. We need it started now and when that review comes up, the Federation of Small Businesses can supply some vital feedback. If you are making or helping to form policy, you must get feedback to know if you are hitting the target, and we are not afraid to tell you that. In fact, we should welcome the opportunity. Yes, we have a role, and we shall work with you at all times to move matters forward.
1158.
Ms Lewsley: Perhaps we might discuss Northern Ireland in particular, where many small businesses are family orientated. People have worked hard at them for many years, and all too often finances are the problem restricting them from expanding, perhaps because they are mortgaged up to the hilt. You have talked about business angels, venture capital, benchmarking, clusters and mentoring. Can you suggest other steps that might be of help?
1159.
Mr Jeffrey: That is the way with Northern Ireland. Many family businesses are like that, and everybody, particularly the Federation of Small Businesses, recognises their crucial role in the economy. The University of Ulster studied family businesses about eight years ago, developing a programme to help them create a roll-on effect so that instead of failing at about the third generation, they were given training, input, support, help and mentoring - whatever was needed -allowing them to continue and move from being a family to a growth business. That programme was good and must be reactivated. I never saw the final results, but a great deal of work went into those businesses, and they appreciated it. Any lessons learnt must change policy so we can go forward.
1160.
Mr Shaw: We see tourism as the obvious future growth industry. If we think back even 10 years, how many people came from America to buy an Aran sweater? How many cottage industries did we have supporting the local economy then? Now visitors have a glass of Guinness and a few other typically Irish things. We must empower women to form co-operatives, enabling them to say they have something typically local that tourists would like to see, whether it be a forest park, Irish dancing or whatever. Those investments must be made now so that Northern Ireland grows into the sustainable economy we are talking about. We shall not have inward investment until we have something for tourists to do, and we must look at that fundamental issue and deal with it now, be it bussing them about, showing them what our culture is, or housing them. 'Strategy 2010' should address the question of sustaining people and empowering them to achieve.
1161.
The Chairperson: Thank you for the way you dealt with the questions. As you know, we are trying as a Committee to prepare an analysis open to all inputs, so there may be follow-up written questions. If not, we shall certainly reflect your views in our final report.
1162.
Mr Jeffrey: We have a very active policy committee, modelled more or less on the structures here, a new experience for us too. We hope we shall be sending you papers that may be of some assistance as well. Our heart is in the right place, and we know we need you - you certainly need small businesses in Northern Ireland to keep the economy growing and take us through.
1163.
The Chairperson: Once again, thank you.
TOP
MINUTES OF EVIDENCE
WEDNESDAY 2 AUGUST 2000
Members Present:
Mr P Doherty (Chairperson)
Mr Attwood
Mr Dalton
Ms Lewsley
Dr McDonnell
Ms Morrice
Witnesses:
Mrs L MacHugh )
Dr I McMorris ) Northern Ireland Textiles
Mr E Barfoot ) and Apparel Association
Ms L Jamison )
1164.
The Chairperson: Good morning, you are very welcome. We appreciate your coming here and giving us time to go over some questions with you. Due to new arrangements we are constrained by time, so we have to complete this session by noon.
1165.
Mrs MacHugh: I am the director of the Northern Ireland Textiles and Apparel Association (NITA). I am also the director of the Irish Linen Guild and I am a board member of the Northern Ireland Textiles and Clothing Training Council.
1166.
We made a detailed presentation to the Committee about six months ago, so you will be aware of some of the things we do for the sector. Our chairman, Mr Bill Walker, cannot join us today as he is away on business. Indeed, a number of other people would have liked to be here, but it is holiday time for quite a lot of people in the sector. However, I am joined by our vice-chairman in NITA, Dr Ian McMorris. He is also chairman of the Northern Ireland Growth Challenge Textiles and Apparel Cluster team, which is important because a lot of our current work is in collaboration with Growth Challenge. He is also the managing director of Ulster Weavers Home Fashions.
1167.
Mr Eric Barfoot is here also. He is a board member of NITA and is also on the board of the Northern Ireland Textiles and Clothing Training Council. He has vast experience in the industry and he has more recently been involved in a lot of work in globalisation and outsourcing. He is currently a director in three companies in the textiles industry.
1168.
The final member of our team is Linda Jamison who manages the Northern Ireland Growth Challenge Textiles and Apparel Cluster team.
1169.
The four associations represented here have been working together to develop strategic thinking within the sector. Since 'Strategy 2010' that has come quite a way. The conditions in which our sector is working have changed rapidly and we felt that we had to work sooner rather than later on a lot of strategic thinking. Indeed, since my written submission to the Committee, we have had one or two very welcome developments. A tranche of funding under the peace and reconciliation programme has been provided for the sector to put some of the recommendations made in the 'Strategy 2010' into action. Secondly, the Kurt Salmon Associates' project is looking at our strategic thinking to validate it and to develop an action plan for the sector. This is being done in collaboration with the IDB. That brings us up to date.
1170.
Ms Lewsley: The sector working group on 'Strategy 2010' recommended that the Government encourage greater communication and co-ordination by establishing a Northern Ireland innovation and design marketing group to build on the work that has already been done by the Design and Marketing Forum. What benefits do you think such a group could provide for the textile industry, and do you know of any movement on this front?
1171.
Mrs MacHugh: Innovation, design and marketing are inextricably linked and are fundamental to the future of our industry. Each of them provides value-added product and the chance to compete at a higher level in the marketplace. That is one of the keystones of our strategy.
1172.
The work of the Design and Marketing Forum continues, and we have looked at developing what we do with it. We are encouraging greater use of design and designers and greater understanding in the industry, from senior management down, of the design process and of design management. We are launching an exciting new programme in the autumn with the design directorate, the IDB and the University of Ulster to examine the whole area of design understanding and management. We have also had a number of study visits under the Design and Marketing Forum, which have provided key information for our future thinking. We have held design conferences which support the use of design and which open up designers to a much broader field of knowledge.
1173.
The Technical Textiles Forum is addressing some of the innovation issues. Northern Ireland has the resources and the know-how; it is merely a question of networking them for collaboration. One of the exciting projects to come out of that is the linen/Lycra programme, which is Du Pont and the linen industry working together in the marriage of a natural and a man-made fibre. That has great potential for the linen sector.
1174.
We have introduced some new programmes on marketing: we have the 'Brand to Win' programme with the IDB, which examines how branding can add value to our products and help sell them at a higher price. We have been doing joint marketing and promotion with the Irish Linen Guild. We have recently launched Fabric Ireland, which brings the Southern Irish wool weavers and the Northern Irish linen weavers together in a joint programme for branding and product design and innovation. A lot is happening. That is a long menu, but it is an important issue.
1175.
Mr Barfoot: I find it encouraging that a lot of this is directed through the success of other Northern Ireland companies which have already done these things. A lot of the companies are small, intimate concerns. I have been involved in the industry for 35 years, and when I started everything was secretive, no company wanted to tell another what it was doing; today the opposite is the case. There is not the same competitiveness between the various companies, as few of them threaten their rivals. They are prepared to share their experiences with other companies. It can be a 'teach yourself' operation. It is very encouraging, and we should make the best use of it.
1176.
Dr McMorris: To pick up a specific point from your question, which we have not fully answered at this point, Ms Lewsley, the formation of a design and marketing group which was in our submission to you, was really post 2010; it is a kind of update on 2010 from our organisation. It is the sort of thing that we are looking towards doing with the peace and reconciliation funding. MrsMacHugh has already outlined the benefits and all of these things are important to give the maximum number of companies the best opportunity for survival and growth. But, to date, no group has been formed. It is something that is on the agenda and we are working towards it. Post KurtSalmon this is the sort of thing that will also get additional momentum. Kurt Salmon is a project which has as its aim to establish a process of transition for the industry from being primarily a manufacturing industry to becoming more supplier-led. We want to become suppliers rather than just manufacturers, and part of that project will be focused on marketing, design and innovation.
1177.
Ms Jamison: We are fortunate that BillWalker, the Chairman of Northern Ireland Textiles and Apparel Association, has agreed to continue with whatever form the design and marketing strategy takes. I would also like to highlight some of the successes. We have several local companies that are very successful such as Sherman Cooper, which BillWalker headed up, Ulster Weavers, Broomhill, and Ferguson's Irish Linen. Several of these companies have increased the number of designers, and their philosophical and strategic approach is towards added value and niche marketing.
1178.
Ms Lewsley: You mentioned the North/South dimension of one of the projects. Do you see that as a benefit which may encourage further, all-Ireland networking rather than just networking in the North of Ireland?
1179.
Mrs MacHugh: Branding and generic branding: we work in a global marketplace, and the outside world sees the island of Ireland. Particularly with Irish linen and Irish fabrics, an image of quality has already been created. We are working to create a more dynamic and cutting-edge image to get away from the rusticity that Ireland may have been associated with in the past. On a practical level, the issues facing the industry in southern Ireland are very similar to those facing our industry in Northern Ireland. I have a very good relationship with my counterparts in Dublin. We have looked at things such as pooling training resources, creating economies of scale and synergies, hosting joint conferences and so forth. We are planning a joint awards event for the industry on the island of Ireland because we feel it is a way of increasing our audience.
1180.
Dr McMorris: Our view of this is entirely pragmatic. When you look from outside, it becomes obvious that our principal origin branding is Ireland - we make Irish linen. We have made it for centuries just off the Sandy Row; it goes out in green boxes, and that is the way life is. Pragmatically, there are opportunities North and South, but there are also opportunities East and West which we are also looking at. Three of us were over at a conference on e-commerce just before we went off on holiday. The Apparel Textile Challenge in the UK run some very good stuff, and we are linking in with that where feasible. Where we can get resources that help our industry, that is what we will do. It is a pragmatic approach.
1181.
Ms Lewsley: You have already talked about the decline of the industry and what is happening, and it is predicted that there will be more than 2% losses by the year 2010. Do you think 'Strategy 2010' in itself has addressed the difficulties facing the textile industry? What immediate Government action would stem the decline in employment?
1182.
Dr McMorris: Our first priority as an industry is to maintain and develop wealth creation within Northern Ireland. Employment sometimes has to be a secondary concern. We understand that as public representatives your focus is probably going to be mainly on the employment arena. Ultimately, it results in some of the same things, but in the short term we on the industrial side have to look at the survival and development of our companies. 'Strategy 2010' and our revision to it were about precisely that.
1183.
We have used the Danish experience, about which we talked to you last time we were here, where, of the 20,000 employed in that country's industry 10 or 15 years ago, 8,500 were stitchers. Today there are about 1,500 stitchers, but employment rates are coming back nearly to where they were at their peak, although with very different types of jobs, for example, design, marketing, logistics and so on. The turnover of that industry has obviously gone up dramatically. For various reasons to do with our natural market - Britain, which is dominated by high-street multiples - I do not believe that we can do exactly that here. The Danes' natural market is Denmark and Germany. The latter has been very much more brand orientated, and things have been much easier. Nevertheless, that is the sort of thing we must do.
1184.
There will be short-term job losses, and our job is to maximise the number of companies surviving before, one hopes, we re-enter a growth phase. The problem is at its most acute where companies are labour intensive and carry out stitching. It is much less acute in capital- intensive industries such as textile manufacture, weaving and so on. Those companies are under nothing like the same stress as those trying to compete on the basis of labour costs, where the product has a high labour content.
1185.
Mr Barfoot: The higher the retail value of the product, whatever it may be, even in the garment industry, the less threat there is and the more opportunities there are. The advantages we have are that we are close to the market, that we can be design led, and that we can respond quickly and build up partnerships with companies with whom we have worked, but those partnerships must be of a slightly different type. The high-street chains have a fear of not being able to sell their products, not just because of their price, but because they hit the shelves at the wrong time, be it a week or a month late, because incorrect quantities are delivered, or they receive the wrong colours, sizes, fabric or whatever. In that case, where significant value is added, they wish to be able to replace what they have very rapidly. They want it there on time, and if it runs out, they want replacements there very quickly. Low-cost countries in the far east cannot provide that service, but we can, and that is where the transformation must take place.
1186.
The bulk commodity low-priced articles will go overseas. The key for us is either to concentrate on a niche market, and many of our companies are already doing that, or to be the people who manage the overseas production. Many of the large retailers in the UK and Europe do not wish to be involved themselves in sourcing products from China or India, and we have the technical and design skills to manage that on their behalf. That still employs a substantial number of people in practice. There are companies here in Northern Ireland employing a good number of people that concentrate on this sort of business. One company, called Douglas & Grahame Ltd, does not stitch a single thing for itself yet employs about 150 people, and there are others.
1187.
Mrs MacHugh: Having said that, if there are job losses at the lower end of the industry's job scale here, there is a role in managing those losses, either by reskilling and retraining, and bringing those people in at a higher level in the industry, or, by finding other jobs for them. There are some areas in Northern Ireland where we cannot find enough people to work in the sector. Inner Belfast is prone to that problem, as are border areas where employees are leeching to large employers such as Xerox. That is a real difficulty, and I spoke to a company recently who said that, over the past three years, it could have doubled in size if it had found the stitchers it wanted. In some areas, there is no loss of jobs, and companies cannot get enough employees. The issue is quite complex, and the unions also have a role to play. If there were some early warning of potential job losses we might be able to ensure that those employees were somehow kept in the sector - if right for the region - or reskilled. That would be very appropriate.
1188.
Ms Jamison: Government also has a role. We have said there will be a transformation and job losses will happen. Unfortunately, that will mean a lot of retraining in the sector and that is paramount in the areas of outsourcing and logistics. Northern Ireland Textiles and Clothing Training Council have already recognised that as a key role, and we hope that Government can help in facilitating the change process and the retraining.
1189.
Ms Morrice: There seems to be a change in atmosphere between the first time we spoke and now. It looks as though things are starting to happen and there is a positive feeling. I am very sympathetic to this area. The sector working group recommended the establishment of a joint industry Government task force. Could you tell me how far you have reached on that, or is the Innovation, Design and Marketing Group replacing it? You criticise certain aspects of 'Strategy 2010' in terms of priorities, how do you measure those and have you any other criticisms of the strategy?
1190.
Dr McMorris: Work on the task force is now well established and that has resulted in the Kurt Salmon initiative, which is a major overarching initiative. A joint industry task force was put together with representatives from the IDB, the Training and Employment Agency, various government agencies and the companies. It looked at the situation post 'Strategy 2010'. In a sense, what emerged was the output of those considerations. We asked ourselves what we needed to do to start and provide momentum. Kurt Salmon Associates were the best international expertise we could find. They had already been involved in this area, and they could work with a selected group of our companies to accelerate the process they had to go through, in similar terms to what happened in Jutland in Denmark and elsewhere. We needed to speed up the process here. Short on investigation and analysis we are relying on their expertise, majoring on making things happen, getting things started and getting a process which is self-sustaining. Kurt Salmon are going to train people in local suppliers to help deliver the programme to other companies after they leave. It is very much about establishing a process that can continue. We do not know how successful it will be. However, at least we are trying to do the right thing. We could see what the objective was, and what we did was the most practical thing we could think of doing to get things underway. That is the joint industry task force. LawsonMcDonald and other senior people from IDB are involved and the industry is represented. I am chairing the task force from the industry point of view.
1191.
Ms Jamison: In relation to the measures and targets - and I am critical of 'Strategy 2010' - we can speak on behalf of the textile and apparel sector. We cannot speak for the other sectors within the strategy. As Mrs MacHugh has said, we knew at the time that we needed to act immediately and continue momentum on some of the actions. When we were working on 'Strategy 2010' we recognised that we had priorities and that is why recommendations were included in the strategy. When doing that we put the joint application into the fund for Peace and Reconciliation. That forced us to look for the specific targets and measures that fed back into the overall 'Strategy 2010' objectives. An economic appraisal was carried out and the Department of Enterprise, Trade and Investment are using balance scorecard as the measurement method. We have used that method in the past for any other previous claims in relation to the Department of Trade and Industry when implementing initiatives across the sector. It has proved to be a very worthwhile tool because no matter what is implemented, under any funding scheme, the bottom line is that companies have to benefit, and we are critical in making sure that happens. We have our own targets and milestones set out.
1192.
Ms Morrice: What do you think the long-term Government policy on the euro should be given the sterling imbalance between it and the pound?
1193.
Dr McMorris: This is a particular hobby horse of mine, Ms Morrice. I am an unreconstructed euro fan.
1194.
Ms Morrice: Our names are not spelt the same. [Laughter]
1195.
Dr McMorris: In very pragmatic terms it would make our lives a lot easier if we knew what the value of our export earnings was going to be for the next few years. Recently, it has been torture for companies such as my own, and as a result, we have lost quite a lot of money or we have had to put prices up, which has limited our sales. If we were to have a stable exchange rate with our principal export market, life would be much better. The same is true for much of the industry.
1196.
The rise in the value of sterling has had two effects. First, a short-term effect, and the second a long-term and much more insidious effect. The short-term effect meant that we were less competitive in our export market - we got less money back from the export market if we priced in local currency. The longer-term effect is much more damaging. We are seeing the effects of that now. Companies, retailers and others in Britain in their home market will eventually find it cheaper to bring goods in from abroad. This will be slow to start but will gradually gain momentum. The converse is also true in that should we return to a more reasonable exchange rate, it could take a long time to rectify the system. People will have brought cover forward and therefore be covered at the current exchange rates for some time. It is quite damaging what has happened and could be very damaging in the long term. It is accelerating the overall process, and we should not get it wrong. This is not about the strength of sterling, it is about global competitiveness.
1197.
We have a long-term process of dismantling the tough tariffs under GATT, and this is a very significant long-term process. Sterling speeded the whole thing up and gave us less time to react in a constructive manner. In a sense it partly answers your question. We were starting to do some of the things that we ought to have been doing, but the rise in the value of sterling has forced us into a crisis situation. Membership of the euro would give us stability and, I hope, lower interest rates, which would create a more healthy environment in which to operate.
1198.
I will not get involved with the global picture but, from a selfish, sectoral point of view, virtually all of us would agree that it would be much better if we were in the euro.
1199.
Ms Morrice: The euro is very interesting.
1200.
Mrs MacHugh: It must be at the right rates.
1201.
Mr Barfoot: There are in effect two separate threats. The first comes from low-cost producers, and the value of the pound has little to do with solving that. The second comes from the pound's strength against the euro in that it undermines the strategy I referred to earlier of producing higher value products and being close to the market place. France and Italy are close to the market place, and they can threaten our survival plan if sterling is too strong.
1202.
Mr Attwood: One of the strong themes coming through all these hearings, whether it is in your sector, the university sector or the high-tech sector, is innovation and design where there is added value and initiation at an early developmental stage. Could you comment further on the comments in 'Strategy2010' for changing the balance within your industry from less manufacturing to more design and innovation and marketing?
1203.
Ms Jamison: We have covered some of that already and have agreed that they are fundamental to our future. We as a group and an industry are doing many different things to encourage and enhance what we do in terms of innovation, design and marketing. In referring specifically to 'Strategy 2010' and how we see the vision of the industry going forward, there are organisations that have resources but are limited within the Government body that helps to raise awareness of design. Much more is needed on practical issues in relation to design. We welcome the fact that design and innovation are seen rather as softer issues and not necessarily related to capital. CAD systems are being purchased increasingly within some of the companies which are more design specific. There is an increase in the number of design consultants and companies going down the branded route. Lifestyle information is a vast wealth of knowledge that companies need to obtain, and that is a support mechanism that could be offered.
1204.
Dr McMorris: Our industry has seen a significant culture shift. Previously, companies had factories, they made things, and they looked for somebody to buy them. The ethos of establishing what people need, then designing and marketing it, has gradually infiltrated the industry. It comes out in all sorts of ways. Progress has been made, but there is a long way to go. In some ways we need to continue to work at the infrastructure to support that attitude in companies. We need to make sure that the right graduates and trained employees and the right resources are available.
1205.
Mrs MacHugh: Linkages with universities and design colleges, both here and in other places, are very important. Without those young people coming through, we are not going to get the creativity that we need.
1206.
Ms Jamison: We recognised on our Italian study visit that we are losing too many designers to the Italian market. That is not to say that we want to keep designers locally, but we want to attract other designers from around the globe to work with our companies.
1207.
Mrs MacHugh: We have already identified the need to inculcate design culture at the top level. Unless chief executives and managing directors understand the importance of design, they are not going to give it the resources that are required. That is one of the cruxes of the new programme that IDB's Design Directorate is currently working on.
1208.
Mr Barfoot: As regards training and education, the industry has looked in the past to the Department of Education and the various education bodies to provide the courses within Northern Ireland so as to train people at various levels. We now recognise that it is no longer practical to expect these facilities to be available to us on the spot. Rather, we are going to have to build relationships with universities in England or Scotland, or even further afield.
1209.
Individuals can be taken to a certain stage in Northern Ireland through the University of Ulster, Queen's, Belfast Institute of Further and Higher Education or similar organisations, but at some point they may have to transfer to Bradford or Glasgow, or even Belgium, so as to be able to concentrate on one particular subject for 12 months. We cannot provide everything within the Province, so we should tap into relationships with other education and training establishments overseas.
1210.
Dr McMorris: We need to understand what world class is about. We pay lip service to it, and we hear people talking about it, but do we really understand what world class is today? As a Province, we need to continuously examine what we do and ask whether we are at the best international standard. We are playing in a global market and we need to play at that level. We have to be in the first division or we will not survive.
1211.
Mr Attwood: Ms Lewsley asked earlier about developing the market within the island, and you also referred to developing the market between the North and Britain. What about the wider European market?
1212.
Dr McMorris: I was actually referring to North/South and East/West co-operation. When we talk about developing the market, we mean the worldwide market. If you buy linen in the United States made by Ulster Weavers, you will see it is sold as Irish linen. That is known as "origin branding." "Made in Italy" is a very powerful label for the Italian clothing industry. If we are going to have a similar origin brand, it is likely to be Irish. That is the way people see it. It has a certain amount of class, and that is what we want to develop.
1213.
There is an opportunity for us to market much more widely. We should be looking at the European market as being our home market. In a sense, we should not be exporting to France or Germany. Our mindset should be that that is part of the greater home market. That is the way the world is going, and that is what we are trying to do. However, getting the penetration of the German market that we have of the English market is easier to talk about than to deliver.
1214.
We have made progress, but that is what we must all be doing. The sector is gradually trying to get out of the mindset where the British high street is our market and get into the world market, particularly the European entity.
1215.
Dr McDonnell: Earlier we mentioned improved technology and the related need for increasing competitiveness and an increase in skilled employment. What specific action would you suggest for the retraining and reskilling of those individuals who either drop out of the industry or come in as new graduates? How can we get a tight focus on these needs to meet the demands of the future? I specifically mentioned both aspects, the new people coming in and the retraining and reskilling of existing staff.
1216.
Mr Barfoot: Looking to the future would be a great help in this area, especially if there was co-operation between the industry and the Government Departments. For example, if we knew that over a period of time a company was likely to cut the number of employees, we could focus on the long-term plans of the company. What skills will it need that are different from the skills of today? There would be people in that company, or in that part of the world, employed to do a specific job, but that does not mean that that is the only job they can do. They may have skills which enable them to move to a job of higher value which would fit into the new plans of the company.
1217.
Let me take an example. Recently, I have been involved in the acquisition of a small company in Derry which services the clothing industry. There is a girl in that company who is a training company associate with the University of Ulster. She will complete her two-year contract in October and normally would then be made redundant from that company. However, because of her skills as a computer systems designer she has been contracted on a permanent basis by the UK parent. She will work from Derry, but she will be helping to design computer systems for the whole group worldwide. We have to be innovative in the way in which people are used. It is difficult to determine our exact priorities until the Kurt Salmon report is completed. It is my belief that a lot of people who are working in the industry today, and who would otherwise become redundant, can be retrained to do jobs of a higher value. I see no reason for not doing that.
1218.
Dr McDonnell: Supplementary to this, the sector working group recommended a strategic plan to identify and address the key skill shortages at every level. How much action has been taken on that so far?
1219.
Ms Jamison: This is part of increasing the competitiveness and improving the skills of the workforce, which was one of the areas within the peace and reconciliation application. The Northern Ireland Textiles and Clothing Training Council has a strategy for moving forward, in particular in the areas of outsourcing and logistics. From the perspective of NITA and NIGC, and in relation to all the existing bodies that we have worked with in the past - including the quality centre and the Industrial Research Technology Unit and IDB - we are investigating how we can bring world-class expertise mentors into the sector. A key factor we have identified is that, although companies have a skills shortage, they also need to bring in best practice and to inspire and create the visionary leaders of the future.
1220.
The Foresight Group, which focuses on IT development, works across all sectors of industry. This group has linked in with the "Leapfrog Initiative" and is intending to develop e-commerce, particularly for the textiles sector. This is another area that the industry will have to move with - as other sectors of industry do as well - to retrain those who, unfortunately, will not be staying in the sector. It would be of benefit if the industry could discuss collectively the problems associated with this and identify incoming growth sectors, whether in IT or retail. It would be ideal if a mechanism were in place that enabled communication between human resources people and other sectors. This would mean that if there were job losses forthcoming, there would be some sort of identification of the training skills needed in any given geographical area.
1221.
Mr Barfoot: The industry council has submitted applications for a number of projects along these lines. One which was mentioned was to do with training and international logistics; it will bring in an overseas expert to train people in that field. We have also applied for an enhancement of NVQs to bring NVQs to a much higher level, and for brand management training. Those are the three most important projects for which we have applied to the Training and Employment Agency (T&EA).
1222.
Dr McDonnell: Your submission stated that you would welcome the early implementation of the recommendations in 2010, particularly that one relating to a single industrial body. In your opinion, what advantages and disadvantages would that have?
1223.
Dr McMorris: From my experience of industry and development work, you can talk to the IDB and then find yourself saying the same things to the T&EA and, if it has an involvement, to IRTU. There are also serious discrepancies between the level of support given by LEDU and the IDB, which has an arbitrary cut-off point for determining what it gives in support. It is silly for one company to talk to several client executives. The arbitrary requirement to have more than 50 employees before being considered an IDB company and eligible for the different range of support is also silly. It should be a much more seamless service. Companies' development projects need to be viewed as a whole rather than in discrete bits that happen to coincide with the Government's supply mechanisms.
1224.
Mr Barfoot: We have also encountered the problem of various Departments, when dealing with the area of industrial development, adopting a different approach and attitude towards our industry. Certain parts of Government believe that the industry is not worth investing in or allocating training funds to. This is very frustrating when two or three Departments give the green light, and you get a big red light from another. There should be much more closer co-ordination of this.
1225.
Dr McDonnell: You are saying that, at present, they are not communicating internally in the IDB, but that they are communicating externally with the various other development agencies. How will joining all the agencies together improve the situation? Is it not an issue of communication between individuals rather than structures?
1226.
Mr Barfoot: There are issues of strategy as well.
1227.
Dr McMorris: There are a number of issues, but from the point of view of the client, that is, the company, it is easier to deal with one representative of Government support rather than with several. You can say that it is not just a matter of communication, although there will inevitably be communication issues. At an individual level everyone is pleasant and supportive, and there are no quarrels, but there is an inefficiency in the process. Companies find themselves having to produce business and development plans of slightly different hues for each of the different agencies, and for a long time industry has felt that this is a waste of its time. To apply for a grant is a bureaucratic process, but if you are unfortunate enough to have to do it three times over in a short space of time, it is particularly frustrating.
1228.
Ms Jamison: In the meantime, industry wants to ensure that the momentum continues, and that we work in collaboration with all the agencies. We cannot sit back and wait for a perceived merger to happen. We want every single Government agency to have, and communicate a strategy for each industrial sector. Everyone would then know what each Government Department's strategy was, and that it was in line with the sector's strategy.
1229.
Mrs MacHugh: Can I clarify one point. We are not suggesting that there is a difficulty with internal communications in the IDB.
1230.
Mr Barfoot: No, far from it.
1231.
Mrs MacHugh: The problem is between Government agencies; it is not within agencies.
1232.
Mr Barfoot: Let me quote an example. A good initiative was recently announced by the IDB to encourage more use of branding. The training council, of which I am a member, applied to the T&EA for a number of training grants. Out of seven applications, one was for training in the management of brands, and it was the only one rejected outright by the T&EA. There is no consistency whatsoever. The IDB is promoting something which we believe is of value and the T&EA are saying that there is no money available for teaching people how to provide it.
1233.
Dr McDonnell: If we get the Government end of things joined up, how long will it take to get the industry to communicate with itself?
1234.
Ms Jamison: The industry is definitely communicating with itself. The momentum has increased tremendously over the past four years at least. A lot of the collaborations taking place are very beneficial to each of the companies.
1235.
Mr Barfoot: I can say this because I am semi- retired, but many of the industry's big players in the Province are giving voluntarily of their time to assist other companies.
1236.
Dr McMorris: It is fair to say that in the past communication has been appalling. There have been petty rivalries, which in the global sense are daft. But things have improved greatly. There are still people who will not participate - that is absolutely obvious. But if you are saying that we who live in glasshouses should not throw stones, you have got a point.
1237.
Ms Morrice: May I ask a supplementary. Could the T&EA be doing more to help you?
1238.
Mr Barfoot: Yes. They seem to be very strapped for funds.
1239.
Mr Dalton: Do you have any views on the recommendation that Selective Financial Assistance should be made less readily available to existing firms and do you see any particular problems with that?
1240.
Dr McMorris: We were unsure where that recommendation came from. Selective Financial Assistance should be just that. We would also like to see it much more targeted on the softer aspects of companies, particularly on design, marketing, things of that ilk, and towards helping companies make that change. There has been a tendency in the past for Selective Finance Assistance to be principally associated with capital investment. By and large, many parts of the industry do not need capital investment at this point, compared with many of our competitors who were actually over capitalised.
1241.
There may be parts of the industry that still need Selective Finance Assistance but we feel that the industry's biggest needs will come out of the Kurt Salmon type of work. Some selective help in helping companies move forward in that direction would be valuable. If there is going to be money forthcoming it should be put towards those kinds of key issues rather than such things as an extra machine.
1242.
The Chairperson: Thank you very much. We seem not only to have begun in time but we have finished almost in time.
1243.
We appreciated your initial submission and we look forward to collating all our views. I am sure that we will reflect the opinions that you have given us here today.
TOP
MINUTES OF EVIDENCE
WEDNESDAY 2 AUGUST 2000
Members Present:
Mr P Doherty (Chairperson)
Mr Dalton
Ms Lewsley
Dr McDonnell
Ms Morrice
Witnesses:
Mr R Bailie )
Mr D McAuley ) Northern Ireland Tourist Board
Mr D Cartmill )
1244.
The Chairperson: Good morning. We are pressed for time, so I will not delay.
1245.
Mr Bailie: Thank you for seeing us. I realise that we stand between you and lunch, so we will try to be as brief as possible. My two colleagues are David McAuley, acting chief executive of the Tourist Board, and David Cartmill, director of corporate policy. We are happy with most of the recommendations in 'Strategy 2010'. However, it would have been much more helpful if it had referred more fully to the Northern Ireland Tourist Board's tourism strategy review. This was a comprehensive review which took place over two years in the industry. We feel that 'Strategy 2010' would have shown more support for tourism if the review had been referred to in more detail.
1246.
The tourism strategy review is the basis of the Northern Ireland Tourist Board's contribution to 'Strategy 2010', and it should be read in that context. Tourism has tremendous potential as we move forward in a peaceful society. Many figures have been bandied about, but our colleagues in Scotland and in the Republic of Ireland are enjoying GDP contributions of seven and eight per cent. We feel that a six per cent contribution from tourism is achievable in the medium term.
1247.
We welcome the increasing recognition of tourism as a major driver of economic development. In the past it has been ignored for various reasons, although there is now recognition at all levels that tourism can be a major player, as long as we remove the impediments in its way.
1248.
Dr McDonnell: The recommendation has been made that there should be an effective cross-border body to market the whole of the island of Ireland as a tourist destination. There is also a fear that such a body would be swamped by a much more organised Southern organisation. What do you think?
1249.
Mr Bailie: I see the creation of an all-Ireland marketing body as evolutionary. Over the past nine years there has been increasing co-operation between Bord Fáilte and ourselves to the extent that at all overseas markets we have one stand. We had under Tourism Brand Ireland a joint marketing campaign. There is clearly an economic reason for co-operation to improve and increase, and I do not think that all-Ireland marketing is institutionalising that co-operation.
1250.
The further one moves away from the British Isles, the more people look at Ireland as one destination. The participation of NorthernIreland with the South of Ireland in all-Ireland marketing is to our benefit. However, the closer you come to home, to the UK, the more the distinction between Northern Ireland and the Republic is clearly understood for a number of reasons - there is no confusion there. We still want to retain the right to have tactical campaigns in the UK.
1251.
To return to a previous point, we have had a lot of experience and respect for each other North and South. The board, being constituted on a 50/50 basis helps, but we also need a strong unified private-sector voice speaking in Northern Ireland. That is starting to happen. All of those things support the view that we would not be swamped in that organisation.
1252.
Mr McAuley: A large part of our work at the moment is to develop an understanding of what we call the Northern Ireland proposition. What does the consumer value highly about a holiday in Northern Ireland, and how do we differentiate a holiday here from one across the border? The chairman said that we must promote ourselves as part of Ireland and in many markets, and the further you go from here, the more the North and South become indistinguishable in the consumer's mind. At the same time there is some evidence to show that Northern Ireland appeals to a slightly more sophisticated, adventurous type of person. We have to try to find what the essence of that is and use that in our promotional activities as well.
1253.
Dr McDonnell: While we cannot tap into lottery funding as such for tourism, lottery funding does find its way to tourism indirectly through arts, heritage and sports funding. Equally the Department of Agriculture and Rural Development indirectly funds some tourist projects under rural development. How do you feel about this type of funding? Do you feel it is adequate or helpful? Or do you feel that it is misguided or misplaced?
1254.
Mr Bailie: Any funding that finds its way into tourism related projects is to be welcomed. We work closely with the Department of Agriculture and Rural Development in the rural areas. We would welcome lottery funding. I would caution however, that there needs to be co-ordination. Things have happened in the past in certain areas that we were not aware of, and that is dangerous. There needs to be some type of umbrella organisation that co-ordinates funding and tourism related funding to ensure that everyone is working to achieve the same objective. In my experience, that has improved a lot over the last few years, but my colleagues might have more on-the-ground experience.
1255.
Mr McAuley: I agree. It can be helpful to have funding for tourist related projects coming from a variety of sources because our money is best used for promotion. That is the one thing which the Tourist Board can do that others do not have a remit to do. We do have capital support budgets, but there may well be something, for example, which stands up well as a rural development project and will aid tourism but to which we might not give a particularly high priority from a purely tourism point of view. So if the rural development folk have funding, they consult us about the tourism merit of what they are planning to do. We are then in a position to get ahead with it, and everybody wins. The same applies, for example, as you have already suggested, to the culture, arts and leisure side, which has an input on the supply side of services for tourists.
1256.
Dr McDonnell: Another point is to do with the low profitability within many segments of tourism, giving only a marginal income, profitability and earnings, a subsistence, if you like, for those involved at that level. It certainly leaves inadequate money for development and expansion.
1257.
How do you feel we might find the money to invest and work our way out of seasonal constraints and the short season we have? How might we improve profitability without necessarily pricing ourselves out of the market?
1258.
Mr McAuley: We view it primarily as a matter of professional marketing. The more we can do to attract people here, the more business there will be for the enterprises you speak of, and the greater the profitability for investment. There has been some capital support lately through the International Fund for Ireland's (IFI) small hotels scheme. It has offered grants for upgrading to some of our smaller hotels which, as you suggest, have got a bit down at heel. That said, the main thing is that the better we market Northern Ireland, the more tourists we get, and the more money there will be for the industry to reinvest itself.
1259.
Dr McDonnell: It is a volume issue.
1260.
Mr Bailie: Largely, yes. The issue of the shoulder season is very interesting. We have the ironic situation where July, the peak season, is actually our worst. I hope we shall see that resolved. We are doing a great deal of work on shoulder seasons. Looking at Northern Ireland, one must be realistic and recognise that people do not come here for the weather. They go to the Costa del Sol for that. The variation in Northern Ireland's temperature is not that great. Given that the visitor is not coming for the weather, it is equally possible to sell Northern Ireland in December, November or January for fishing, golfing, walking and so on. People go to the south of Spain for the sun, and so probably do not go in January or February. We do not have the same constraints as other people in the shoulder season, so we could develop tourism more widely if past impediments were gone and people felt that Northern Ireland was an acceptable and safe place.
1261.
We are increasingly trying to sell short-break weekends. Since people go from here to New York on a Thursday and come back on a Monday, I see no reason for people not leaving New York on a Thursday to be in Royal Portrush and Royal County Down, and other golf courses. It is there to be done. It is a volume- related issue, and when this acceptability level, which is improving all the time, is sufficiently high, or when the question of acceptability disappears, we shall see huge numbers of people coming in, and many of the issues to which you refer will go away, since the income will have been generated.
1262.
Ms Lewsley: You spoke of a unified private sector. Looking at its greater participation through mechanisms such as the Market Advisory Group and the Regional Tourism Organisation you mentioned, what further policies or initiatives might encourage the creation of a marketing culture in NorthernIreland? What incentives might contribute to the private sector's getting involved in the activities of the NITB and the new regional organisation?
1263.
Mr Bailie: If one moves back five or six years to the time when I first became involved in tourism - for my background is not in the field - my first impression was of a terribly fragmented industry. One might almost have an argument over whether it was an industry at all. It only becomes such when one views the various elements through the eyes of the tourist. The ferry, the taxi to the hotel, the hotel, the pub, and the restaurant must all interact. Being composed of a very large number of small units, the industry's ability to market itself was quite limited. It is expensive, and the incremental return to the individual is quite small, so it must be done on a global basis.
1264.
If there is an argument for a tourist board, it is that no individual can do the marketing on his own. It must be done by a larger organisation. Having said that, because of the lack of tourists coming in, there was not what I would call the second phase of marketing, in other words the tourist board does the generic marketing and scene-setting and is followed by the trade. It is not so much consumer marketing, but direct marketing to the travel agents and tour operators. I returned from my first exhibition overseas asking myself why we had attended at all, since no one from the trade was there.
1265.
I was sitting beside Bord Fáilte with their trade representatives coming on and off the stands, doing deals and trading. That was in 1994. It was a long time ago and there is increasing awareness in the industry that people need to be behind it. The argument is really one of profitability. It is about understanding that the tourist board cannot do things on its own. We are now starting to see groups of people putting packages together. Bed and breakfast providers are getting together with golf and fishing clubs to sell packages. We are also seeing cross border co-operation. There is an increasing awareness by the private sector of the need to get together.
1266.
As regards the single advocacy group. I return to my point about this being a fragmented industry. It seems to me that if I were setting out to create a more divisive private sector grouping, I would not have the imagination to create what the private sector has created. There were 52organisations purporting to speak for tourism and if you wanted to be divisive you could show how each would say something different from the others. So, an environment was created in which nothing was being done because everyone was singing from a different hymn sheet.
1267.
For five years I have preached about the necessity to create a single advocacy body. The NorthernIreland Tourism Industry Confederation (NITIC) - which is modelled on what happens in the Republic, in Scotland, England and Wales - is a strong advocacy group, an umbrella group which does not mean that each of the other organisations representing specific areas disappear. The advocacy group can lobby very strongly with the tourist board and with Government and can be the voice of industry.
1268.
We now have NITIC in place, so the concept is right, but the problem is that a number of organisations, particularly the Hotels Federation, still pay lip service to it. There are turf wars being fought. Some organisations are reluctant to hand over what they might see as the sexy part of their organisation - lobbying, meeting government. So there is the reluctance within some organisations to give any authority over to an advocacy group. I am convinced it is the right thing to do and I am not sure what more we can do about it. I have explained to the organisations that it is in order to create a body, which can give me a hard time. However, you can do many things, but if the individuals do not believe in them; do not want to push them forward, or do not see the benefit of them, I am not sure what more one can do or say. I continue to encourage it. It is at a very early stage. I hope the Committee and Ministers could encourage it, as it is essential for the private sector's voice to be heard more fully than it has been in the past.
1269.
Mr McAuley: Our recent approach has been through the "grow your business" process. We have been running events in which the private sector and local authority tourism representatives in all aspects of the industry have been invited to meet us to discuss tourism on a market by market basis. We get people from our New York office to talk about what the New York consumer liked and did not like about coming to Northern Ireland, and what things they found attractive and unattractive. You get interesting feedback by talking to the industry because they would equally tell us about what American consumers want and do not want. We describe this as a professional marketing approach - thinking the issue through from the consumer perspective, because if the industry is not meeting consumer needs it is going nowhere.
1270.
There is also an understanding of the hierarchy of brands. As I said earlier there will be the recognition of an all-Ireland brand which we would support and work with. There will be in certain markets recognition of a Northern Ireland brand which is important to us. It would be helpful if, locally, people could think in brand terms also. For example, I come from Bangor so I can speak safely about Bangor. Internationally, I suspect that people have heard more about the Mountains of Mourne than they have about Bangor. Perhaps County Down has to build itself around a brand that is recognisable to the consumer. It is about understanding that a marketing culture has to be seen from the consumer's perspective rather than from that of administrative boundaries or particular local supply issues.
1271.
Ms Lewsley: The Sector Working Group report actually recommended a code of practice for employees and industry, which should be developed in conjunction with the Government who will deal with such issues as wage levels and training. What issues are of the utmost urgency and what action is necessary to ensure the completion and implementation of a code of practice?
1272.
Mr McAuley: It is difficult to say because that is not a matter for this organisation. We would obviously encourage the industry to become a good employer. That will help in labour retention and in attracting good people into the industry. However, we are not close enough to the issues to have a specific view.
1273.
Ms Lewsley: Following on from that, the report also recommends a review of the current training provision within the tourist industry. What progress, if any, has actually been made? We are talking about the issue of the entry level for training and continuing employee development including senior management level. Could you expand on the working group's view that the provision of college-based tourism-related higher education is necessary to strike an appropriate strategic balance between the industry and employment opportunities? Do you think that the NITB would have a consultative role with regard to education programmes?
1274.
Mr Bailie: The Northern Ireland Tourist Board is not a training organisation. We have a strategic view on training. A training trust has been set up for that purpose; the issues you raised are within their remit, and they would be in a much better position to answer your question. As a tourist board, we are saying that we need a well trained, well motivated workforce used to dealing with people to international standards, tourism is the only industry in which you have to be a world player when you enter. People coming to NorthernIreland have already been to Hong Kong, China and other parts of the world. Their expectations do not reduce because they come to NorthernIreland. Their expectations are at a certain level and they expect to be treated at that level or better. Training is a major issue. The specifics are really for the Tourism Training Trust.
1275.
As someone who is not in the tourism business, I think that a lot of the responsibility lies with the industry. It is very easy for people in the industry to say it is the fault of the tourist board or the training board. I am not making a case for the tourist board. Ultimately, the individual running the business must be convinced that training is the answer. Many people say to me that training is a cost. I totally reject that. Training is not a cost. If you think training is a cost you should not do it. The benefits you get from training actually feed into your bottom line. It is an income generator and a wealth creator-it is not a cost. However, people think that training is a cost, and it is not just in tourism, it is throughout NorthernIreland. Those who do provide training are our most successful companies.
1276.
Ms Lewsley: Do you not think that you have some type of input into training? Perhaps it is with respect to the type of training that is necessary, the areas in which it is lacking, where it is needed and where improved quality is required. Perhaps it is in that a higher standard of training is needed, when we are talking about initiatives for entry level into training and tourism.
1277.
Mr McAuley: We can advise on situations when we think standards fall short of the highest international standard, as the Chairman referred to. For example, we are represented on the Tourism Training Trust and we provide that kind of input. We are not competent to say what kind of delivery module would be best, whether it would be NVQs, higher education or further education. We would not be competent in that area.
1278.
Mr Cartmill: Without wishing to abdicate from that input, ultimately, as with some of the previous topics, market forces will determine the level of provision. We have to consider not only the number of jobs created in the tourism industry by success in attracting visitors, but also the quality of those jobs and the level of wages. We have evidence from the Government's statistical offices showing increases that are obviously and tangibly allied to the mammoth tourism growth we had in 1995 and 1996.
1279.
We have to look at what those market forces will establish. I do not wish to speak for the Training and Employment Agency, but they have informed us that they had an aggregate budget of some £12 million assigned to tourism and hospitality last year. While a lot of that goes into general educational courses allied to hospitality, there is a considerable investment there over and above what the private sector now wishes to invest.
1280.
Mr Dalton: According to the Sector Working Group report, the current VAT system puts Northern Ireland at a disadvantage. In your opinion, what VAT reduction is necessary for Northern Ireland to compete successfully in the international tourist market?
1281.
Mr Bailie: This is a great argument. I am not sure that taxation is à la carte. It is table d'hôte. There is a whole mixture of things in the taxation issue. People will compare our VAT to that of the Republic. I can tell you that their Pay-Related Social Insurance (PRSI) - their social tax - is much greater than ours. There are balances. I am not convinced that VAT reduction would improve our competitiveness to the extent of removing an impediment and bringing more people in. The value-for-money argument is much wider than that.
1282.
There is a lot of evidence that we remain competitive with the Republic, even at 78.9p to the pound. If you price a shopping basket of tourism goods, there is not much difference at the end of the day. There is a perceived difference. I personally do not think there is a lot of merit in pursuing the VAT issue in Northern Ireland. It is a UK issue, and it has been raised by the UK tourist authority. The report fell on deaf ears. If we had the funds, we could use them in a better way. Investment in marketing and training would give a much better return than a reduction in VAT.
1283.
Mr Dalton: Access to Northern Ireland from important overseas markets remains difficult when compared to our competitors. The Sector Working Group recommended that encouragement should be provided to support existing routes and develop additional routes where relevant. What criteria would you use to measure, identify and prioritise investment support options such as air carriers, ferry operators, roads and railways?
1284.
Mr McAuley: I do not think we can give a very structured answer to that. For us, the most important thing is to get people to come here, directly if possible. The tourist who spends a few nights here on a coach tour or driving holiday around Ireland is of benefit, but he is most likely to hire a car at his point of entry. He is likely to buy souvenirs close to his point of departure so that he does not have to lug them around for a fortnight. Those are the practicalities of life, and they are very significant elements of the economic gains from tourism. It follows that if people enter the island in Northern Ireland, as opposed to coming up from Dublin or wherever, much more of the economic benefit of that tourism will come to us. For that reason, while we welcome any transport infrastructure improvements, we would be very keen to see encouragement given to ports and airports.
1285.
Mr Dalton: Within the private sector, there are over 50 bodies representing different parts of the industry. This leads to fragmentation, duplication and waste of valuable resources. It has been said that a single voice is needed to raise the profile of tourism and establish it as an important industry. Do you consider that the recently formed umbrella organisation, the NorthernIreland Tourism Industry Confederation, can effectively address this?
1286.
Mr Bailie: I mentioned this earlier, and the answer is absolutely unequivocally, "Yes". I am amazed that the private sector has been so reluctant to accept what is a truism. Part of the reason is that we have so many separate organisations. For example, we have three bed and breakfast associations in Northern Ireland. I mean, for God's sake come on - why do we need three bed and breakfast associations?
1287.
We have managed, through channelling funds, to convince the organisations involved that they should have one brochure instead of three. Until now, if you came as a tourist to Northern Ireland you would receive three brochures from three different bed and breakfast associations. If we could get over the turf wars, the vested interests within certain organisations, and the reluctance to give up their control for the greater good, the Northern Ireland industry would benefit greatly.
1288.
Conceptually, NITIC is the right organisation for developing the industry. It is early days but it will only succeed if the major organisations - one being the Hotels Federation - support it. Currently, they pay lip service to NITIC, but behind its back they do not support it. We had a situation three weeks ago where, as part of our strategy of having discussions with the industry, we asked NITIC to front it. The idea was to get views, from within the tourism industry, on whether the current tourism strategy was sensible, and how much input individual organisations would want. Apart from local councils the attendance was six. The Hotels Federation virtually boycotted the meeting and did not come in to discuss these issues. With this sort of attitude the situation becomes very difficult. The more support that is given to the concept - whether run by NITIC or another organisation - and the more that is said by people like yourselves and by the Government, the more likely the message is to get through.
1289.
It is quite amazing that the public sector has to tell the private sector that it would be better off if it were organised. It appears to be a message that needs to be constantly sent. One of the abject failures in my chairmanship is that I have failed to convince them that this reorganisation is needed. Some people are convinced but many are not, and they want to run their own shows.
1290.
Ms Morrice: I am in the lucky position of having plenty of time to ask questions. I welcome you all here. You mentioned, Mr Bailie the problems association with VAT. One of the things I want to ask is on my pet subject - the euro. When the euro becomes the normal currency in the South of Ireland, there will be a very different situation. The basket of tourism products will change radically. The potential, as seen from abroad, will change. What is your position on the euro?
1291.
Mr Bailie: I was hoping David McAuley was going to answer that. We should have had a great debate about whether we should be in the euro, but we have not. We are very conscious of the fact that the euro will have an impact. I say this from the perspective of my printing and packaging business, where a lot of my business is in the South of Ireland. I do not see the euro, as a currency, creating any more difficulties than the pound and punt. There is an exchange variation but whether it is the punt that I am paying into, or the euro, the problem is still the same - whether you are outside it or inside it. If you were inside the euro, this would not be an issue.
1292.
One problem that Northern Ireland will face is pricing. Are we going to price our goods in both sterling and the euro? There is no evidence that we are doing it in the pound and punt, but the euro, as it is a much broader constituency, may be a different matter. We will have to move towards pricing our goods. We had two conferences last year on the implications of the euro: one in Derry and one in Belfast. If we are being criticised, that may be justified - perhaps we have not done enough, and perhaps we need to do more to make industry aware of future difficulties.
1293.
Ms Morrice: You made the point that the further away from it you go, the more Ireland is seen as one market. If you sell Americans an Irish tourist package which includes North and South, do you sell it in two exchange rates?
1294.
Mr Bailie: Those are issues that will face the new all-Ireland marketing organisation. In effect, it will be dealing with marketing outside the British Isles. My view is that it would be difficult to dual-price, it will have to price in euros, and people in Northern Ireland will have to do the conversion. I am doing that in my business already. Because we use Irish pounds when invoicing or quoting in the Republic, we are accustomed to that type of conversion.
1295.
The spring campaign which we did in the Republic was a pound for punt campaign. The industry is aware of the differential in the exchange rate, but I am not sure that it has taken it a stage further and tried to think the issue through. It is a point which is well made, and we want to develop the educational aspect of it and highlight the implications that will undoubtedly arise as we move into that area. This is probably a criticism that could be levelled not only at the tourism industry but at most industry in Northern Ireland because no one has really thought it through.
1296.
Ms Morrice: We have just heard from the textiles industry though, and it is going for it. Obviously in the manufacturing sector tourist businesses do not benefit. Do you think that the rates for tourism should be in line with the rates in other industries?
1297.
Mr McAuley: We, of course, support anything that will reduce the industry's cost base, but we are also conscious that the rates contribute to the Northern Ireland block and that there will be an effect if rating on tourism premises is reduced. There is difficulty in defining tourism premises, so that could be very tricky. Clearly a hotel is such, but is a restaurant or a shop? Where do you begin and end? That aside, and assuming that you reached a satisfactory definition, it is conceivable that if de-rating reduces the Northern Ireland block by a certain amount, the conclusion might be drawn that tourism has gained, and so the industry should suffer by reducing the public sector's allocation to it. It could be a zero-sum game, and in that event it would be of no particular benefit to us. We would rather have the money to target on marketing as this helps the industry directly.
1298.
Ms Morrice: I am a great believer in innovation, new branding, new marketing ideas and all of that. I remember 10 years ago how the tourist industry was criticised for suggesting that there could be some potential benefit from our misfortunes. Have you thought of the potential for political tourism? I ask this because of the many knocks on Stormont's door from groups coming here to study our politics, which, I was going to say, are now less contentious - we are certainly taking a different approach than before. What do you think is the potential for political tourism all year round?
1299.
Mr Bailie: There are a number of sectors that come into tourism. We have been trying increasingly to put ourselves in the consumer's shoes; what does the consumer want? That is the most important consideration. There is no doubt that people come here for different reasons. People come here to see this curious place where we have been knocking the hell out of each other for the past 30years - what is it all about? People come for culture, for golf and for a multitude of other reasons.
1300.
Increasingly, one of the sectors we are looking at is religion. People are coming to study comparative religions, and religious tourism is a growing and increasing market. We have a German tour operator who is bringing hundreds, if not thousands, of people over this year as religious tourists. Political tourism is another side. A difficult question and one that I am frequently asked came up the other week about the Maze Prison. Should it be a tourist attraction? We have taken the view that there are still certain sensitivities. There is still hurt on both sides of the community, and to try to trivialise what the prison represents is dangerous. It could be seen as trivialising the pain and hurt of the past 30 years if it were made a tourist attraction. I can understand how people would think that. You have to be extremely sensitive. However, there is no doubt that there is an increasing awareness of political tourism on our part. It is an area that we certainly wonder what groups and conferences are going to do. We do need to retain sensitivity, but we hope that, as time goes by, that sensitivity will become less.
1301.
Ms Morrice: Finally, on the map of Northern Ireland, there should be more co-operation with other Departments, for example Agriculture and Industry. You can visualise a map of Northern Ireland with the apple in Armagh, the sparkling water in Antrim, the shirts in Derry and fish in Fermanagh or potatoes in Comber. Why does tourism not grasp that sort of nettle and start helping across the wider spectrum rather than just itself?
1302.
Mr Bailie: I am not sure I understand the question.
1303.
Ms Morrice: Why do you not help to promote the farming of apples in Armagh or the sparkling water in Antrim? Tourism could promote industries other than itself.
1304.
Mr McAuley: The risk is that you get away from the consumer-led approach. I might certainly think of Armagh as the orchard county, but we are not so sure that other consumers have that image of it.
1305.
Ms Morrice: Could you not push that as a way of promoting it?
1306.
Mr McAuley: We always reckon that it is better to identify through research, as we do, what the consumer recognises and what appeals to him. That is the point I was making earlier: devise your advertising in a way that appeals. We have done a lot of consumer research through surveys and focus groups, and the things that you have mentioned have never come back to us. For example, they will say that they enjoy the landscape and the warmth of welcome - they see icons as being the Mountains of Mourne or the Giants Causeway, and there are niche attractions such as the golf or fishing in the waterways in Fermanagh.
1307.
The kinds of thing you have mentioned have never come back to us, so we keep to things that people as consumers have been seen to be attracted by. Now, having got the people here, there is everything to be said for local initiative. For example, in a local brochure, make sure that all possible suppliers of services and goods to tourists get a plug, so they go to whatever local visitor attraction there is and buy whatever local produce there is. At that level certainly we are all for it.
1308.
Mr Cartmill: In terms of export markets, if we think this through and arrive at an agreement of a regional image of Northern Ireland, when visitors come here, exporters can use common collateral in terms of what is being presented as a tourism attraction for selling their products. That works in practice. Common sense will apply once people begin to appreciate that a brand is becoming recognised - that is a very good marketing ploy.
1309.
The Chairperson: On the concept of the potential for growth, you mentioned previously that in Britain the GDP was between 7% and 8% and that you thought that we could aim for 6% here. Can you tell me what it is in the South? Do you think that 'Strategy 2010' has fully grasped the potential of the growth?
1310.
Mr Bailie: I think it is 8%. I think that it is 7% in Scotland. We heard it said in the past that Northern Ireland is geographically disadvantaged, lying as it does between two important tourist areas. However, we are ideally placed, as people can come up from the Republic of Ireland into the North and from here over to Scotland. There is no reason for Northern Ireland not to reach 6%. After all, that is still less than Scotland and the Republic of Ireland. We could be earning £500 million per annum and be creating 20,000 jobs.
1311.
I cannot think of any other industry with that sort of potential, yet it is potential which is largely untapped. Much depends on political progress, the continued cessation of violence and a resolution of contentious marches - which fall directly in the middle of the July holidays. Last year there was a 12% increase in tourism, although from a very low level. That is an improvement, but there is still a hell of a long way to go.
1312.
We need partnership and close working relationships with the private sector to achieve this goal; to be at odds with them would be a disaster. That is difficult, given the structure of the private sector. It is almost impossible for me to have this discussion with it. Who constitutes the private sector? I cannot bring them in for talks, whereas if I was dealing with NITIC, I could hold debates and discussions with them. That has to be rectified.
1313.
There has been a lack of political support for tourism. The Assembly and its Committees are now in a position to recognise and support - and criticise where necessary - the Northern Ireland Tourist Board. We should make the most of our relationships with our colleagues in Bord Fáilte through all-Ireland marketing. We have very good relationships with the BTA, which has overseas offices. There is a great deal of good will for Northern Ireland.
1314.
Last week the American Society of Travel Agents, an influential body in North America, was in Northern Ireland for a board meeting. They have invested here for the past twenty or thirty years and can see the potential of Northern Ireland, as well as having developed a great affection for the place. We must persuade their customers of the same. Vital to that will be removing the notion that Northern Ireland is not a safe place. It is as simple - or as difficult - as that. The rest is easy. I have often felt that my job should be the easiest job on God's earth. You should be able to fire us all!
1315.
The Chairperson: Did 'Strategy 2010' give enough consideration to this growth potential?
1316.
Mr Bailie: As long as one accepts that 'Strategy 2010' needs to take on board the tourism strategy which was produced. One could say that, as there are only two pages on tourism in 'Strategy2010', tourism has been ignored. However, that happened because we had already produced our own tourism strategy, which had already been largely accepted as the strategy for tourism. If 'Strategy 2010' has endorsed it, then I think that sufficient attention has been paid to tourism; if it has not, then tourism has been ignored. However, I do not think that that is the case.
1317.
Ms Morrice: How many beds do we have now and how many more would be needed if an extra 20,000 jobs were created in tourism?
1318.
Mr Bailie: That is a pretty easy figure to throw out - 6% GDP. If you do a few maths you arrive at 20,000 jobs. This will not happen overnight. It will have to be met by how many beds are going to be made available. To give you a ballpark figure, we would need to double the number of bed spaces that we have available. Putting that into context, in Belfast since 1995 the number of available bed spaces has doubled. It is not impossible. Eighty-five per cent of tourists who come to Northern Ireland do not stay in hotels. When you go on holidays, you do not tend to stay in five-star hotels. You only stay in five-star hotels when you are on business. You tend to stay in bed and breakfast accommodation, guest houses and self-catering accommodation, all of which are relatively easy to bring on stream. I do not think the impediment will be the lack of accommodation. It is a chicken and egg scenario; facilities tend to develop as the number of tourists grow. Yes, we will need additional accommodation. That will need to match growth. People are not going to invest if they do not see the growth. Just look back over the last five years at the external investment that there has been in Northern Ireland - the Hilton's of this world have come in, and Holiday Inns, Great Southern Hotels, Jury's Inns are coming. All of these people see the potential to make a return. There will unquestionably be investment if people start to see the potential and a move forward.
1319.
The Chairperson: Thank you for your document and submission and the way in which you answered the questions.
TOP
MINUTES OF EVIDENCE
FRIDAY 4 AUGUST 2000
Members Present:
Mr P Doherty (Chairperson)
Mr Attwood
Mr Dalton
Ms Lewsley
Dr McDonnell
Ms Morrice
Witnesses:
Ms M McGivern )
Councillor M Jones ) Belfast City Council
Councillor R Stoker )
Dr E Jackson )
1320.
The Chairperson: Good morning. You are very welcome. Sorry for the short delay, but we were engaged in some business. After your statement we will go into the formal question and answer session.
1321.
Ms McGivern: We would like to welcome the opportunity for the Committee to hear our views on the 2010 document, a very important document in the history of economic development in Northern Ireland, and we welcome your interest in what we have to say about it.
1322.
By way of introduction, Belfast City Council is the largest local authority in Northern Ireland, and represents a fifth of the population of Northern Ireland. We believe that we have a significant contribution to make to economic development and to development generally both in Belfast and in Northern Ireland as a whole and that Belfast is the most significant economic driver of the economy. The council has done ground- breaking work on local economic development.
1323.
Ms Lewsley: I welcome you all here this morning. You feel that there was a lack of consultation on the strategy with the local authorities. How could that be improved upon, and where did it fall down in the first place? I am thinking particularly of economic development and the implementation of the strategy for the future?
1324.
Cllr Jones: The criticism from Belfast Council is based on two factors. There was only one representative from local government on the Strategic Steering Group. That person was from the Society of Local Authority Chief Executives (SOLACE). So councillors, elected members, who are responsible for policy formation, had no representation on the steering group.
1325.
Our view is that since councils have had power in the economic development field since 1994 they have established a creditable track record. Councillor participation in the cross-sectoral working groups would have added value to the process, based on the experience of councillors at ground level.
1326.
In Belfast City Council there are many such initiatives. Through the Investment Belfast Board, we are involved in spearheading life and health sciences to the clinical trials and pilot scheme, and at the moment we are working on a major infrastructure and employability project at the former gasworks site.
1327.
Councillor participation in the Economic Development Forum would be of great value, given the role of councillors and the resources available to councils in and for local economic development, yet the forum is made up of social partners with councils, one SOLACE representative and no councillors. That is our main concern in that area.
1328.
Ms Lewsley: Part of this new Programme for Government is the new TSN. You criticised this and suggested that disadvantage and deprivation was not adequately addressed in the strategy and that no sensible solutions were proposed. How do you think this could be rectified?
1329.
Cllr Stoker: I think the strategy did not consider a wider definition of economic development with regard to Targeting Social Need when looking at disadvantage and deprivation.
1330.
The wider needs of economic development involve economic development itself but social cohesion, environmental protection and sustainable development as well. I think it was mentioned in one or two lines in the whole report, but we do not believe that they took a very critical look at Targeting Social Need or at what is meant by deprivation and disadvantage.
1331.
We would argue that they should be consistent in all Departments when they are talking about Targeting Social Need. We have already noticed that different Departments use different criteria for measuring disadvantage, and we would argue that a consistent approach is needed to define what disadvantage is. In city council terms we have already introduced criterion to measure deprivation in which we use a lot of different indicators, such as long-term unemployment, low levels of educational achievement, high levels of benefit dependency, children under 12, long-term illness, lone parents, people over 65, and existing levels of grant-aid. It all comes together in a matrix to target and define social need and when you mix all these together it shows up hot spots right across the city and in areas that would not be classed as disadvantaged. We are able to define and target social need right down to districts, and we do not believe that this report defines what is meant by disadvantage and social need.
1332.
When you have criteria and a matrix to target and define social need, resources can be set aside for where they are needed most, and this includes economic development and local economic development, but it is much wider than that. You also have to target poor housing conditions which have an influence on health factors and look at the educational achievements in an area when talking about economic development and the knowledge sector which is going to become very important. You have to start with the very young when targeting educational underachievement. The Government have not been consistent in how they define it. The basis of Targeting Social Need is being consistent and having a model that reflects the whole of Northern Ireland which can define and pinpoint the hot spots.
1333.
Ms Lewsley: In the past, one of the issues in Targeting Social Need was that it was always geographically based instead of people based. Will it be different this time?
1334.
Cllr Stoker: Yes. It has shown up the hot spots across the city of Belfast. It has shown up areas where there is a defined social need which was not expected, that is in the south and east of the city, areas that are regarded as very affluent. We were able to prove that certain disadvantaged areas had fewer resources because they were in south Belfast. However, using our criteria or matrix, we were able to show the hot spots in those areas. It can be easily adapted to economic development as well by using different percentages on the matrix to show whether local economic development rather than geographic, is needed to show where people need jobs, training and education.
1335.
Ms Lewsley: The strategy lists 10 targets. Do you think those targets are realistic and achievable? Should any other targets have been included? I believe there should have been an equality target.
1336.
Dr Jackson: Our criticism of the targets was, on one level, a theoretical point. There should be a logical flow from the statement of the problem through the diagnosis and the methodology by which that problem should be addressed. From that, methods ought to flow associated with targets for addressing the problem. In our view, that logical connection is not always apparent in this document. The result is likely to be confusion among those who have responsibility for delivering at an operational level.
1337.
Insufficient consideration was given to the cost implications of the targets, to who should be taking a lead, to the timescales involved and to the obstacles that need to be circumvented. A third point which is theoretical, but which has important operational implications, is that the absence of a baseline scenario makes it impossible to conduct any rigorous subsequent monitoring and evaluation of the means employed.
1338.
You asked whether we thought any of the targets were unrealistic. Critical evaluation following the publication of the document has shown that a number of the targets will be difficult to achieve, particularly the increase in GDP per capita, the employment growth, the increase in share of high technology industries and the increase in research and development necessary to give impetus to the knowledge- based approach. Critically, the strategy fails to identify a productivity target. The absence of that logical connection between a model of growth methods through which the problems may be addressed and a clear statement of targets seriously undermines the report. There is much remedial work that could be done to address that.
1339.
Ms Morrice: You say tourism is an important issue. What specific recommendations do you have that would improve the tourist industry in the area?
1340.
Cllr Stoker: People have to recognise the importance of tourism in Northern Ireland. There is more to it than the Giant's Causeway, the glens of Antrim and the mountains of Mourne. Belfast City Council has already developed its tourist product. There are many individual things we could come up with to make a success of tourism. If we were to elaborate on the experience of the Titanic, for instance, that would bring more tourists into Belfast.
1341.
In Belfast and across Northern Ireland we can develop the good practice that has been used in other parts of the world. Our Atlantic rim partners on the east coast of America have a tourist exhibition on the Titanic - we could use similar good practice, not only for the Titanic experience but to develop our tourist product in general.
1342.
Again, in the Atlantic rim area the fishing industry was decimated. However, they turned that around by developing tourism and using the Atlantic for whale watching trips. For three or four months of the year they have literally hundreds of thousands of tourists. They have turned disadvantage to their advantage through tourism.
1343.
There are many different things that we, as individuals, could do in Belfast to promote tourism. This Committee and, more importantly the report, has not studied tourism in enough detail. It only mentioned minimal changes, and suggested that deregulating bed-and-breakfast accommodation would help the industry as a whole. Recommendations on how to increase the GDP of tourism to 5% should be considered. The current GDP from tourism is about 2% in Northern Ireland. You could increase this figure by having a particular tourism product to attract people here. However, you also need increased infrastructure, including direct flights from all parts of Europe. It is hard to ask people to stop off at London and take another flight, or to stop off in Dublin and take another flight or train. The marketing of the island of Ireland as a whole should be used to our advantage. If tourists come to Dublin or Shannon we should be saying "Well you are there, so why not come to Northern Ireland as well" as part of an all-Ireland brand. We need initiatives like that.
1344.
The most important thing to recognise is that tourism will play a major part in the development of Northern Ireland as a whole and that sustainable jobs can be created in this sector. Somewhere in the region of 25,000 jobs are envisaged if the tourism product is developed. Again, the whole infrastructure needs to be developed. We need new hotels throughout Northern Ireland. We have encouraged the development of new hotels in Belfast without grant assistance, but we still hear the cry from rural areas that they cannot attract hotels unless they have grant assistance - we believe that that is a myth. People are prepared to take a chance to develop tourism and they are prepared to build new hotels without grant assistance. If this can be achieved in Belfast, it can certainly be achieved in areas outside the city where there are natural tourist attractions.
1345.
The development of tourism needs to be highlighted and separated from a lot of other issues. However, you cannot have a tourism product without developing the infrastructure - without airports, without good roads and without public transport being available.
1346.
Ms Morrice: We have been hearing about the peace dividend ever since the ceasefire in 1994. People have been talking about 20,000 jobs in tourism and an increase in the GDP. Yet it still seems to be hot air. What is blocking the process; what is stopping us moving on this?
1347.
Cllr Stoker: I do not think that it is hot air. There has been an increase in the number of tourists. Our figures show an increase in tourists using Belfast, not only as a stopover destination but as a gateway to the rest of Northern Ireland. This is where the local authorities can help, especially in Belfast. While Belfast is the hub of economic activity, it should also be the gateway to the rest of NorthernIreland. The figures are going up, although the trends are hard to measure unless you stop everyone coming off a plane, a train or boat. Unless everybody is questioned about why they are here and where they are going, it is very hard to do any sort of analysis about types of people, their reasons for being here and their destinations. Our figures show that there is a definite increase in tourism.
1348.
Ms Morrice: I am not criticising, when I use the phrase "hot air". We are all saying we need to get our teeth into it and do something about it.
1349.
Cllr Jones: As well as an increase in numbers, we have surveyed visitors and there is a very high satisfaction level in respect of accommodation and facilities. People who come here like what they see. I was surprised that there was so little about tourism in the report, because it must be one of the areas with the most potential for economic development and job creation. Yet it was hardly mentioned. There has been an improvement, but much more can be done.
1350.
Cllr Stoker: We need to look at the marketing procedure. Belfast City Council, as far as the Visitor and Convention Bureau is concerned, is marketing Belfast as a destination in order to attract more people, because what they spend has a knock-on effect on the local economy. Thirty per cent of tourists' spend goes into Belfast's retail sector. That is a large amount of money, and it keeps shops open. I am going off-line slightly, but if there are major out-of-town shopping centres people will not shop in the city centre. Therefore, all these things have a knock-on effect. Marketing is very important, not only for Belfast and Northern Ireland, but for the island of Ireland and the United Kingdom as a whole.
1351.
Ms Morrice: I will move on to the geography of out-of-town shopping. Belfast City Council opposed the recommendation that there is scope for spreading development throughout NorthernIreland, through the establishment of other major centres. Can you explain your views, and do you not think that a wider spread would be more advantageous for the common interest?
1352.
Ms McGivern: Belfast City Council does not oppose development in other parts of Northern Ireland; that would be a foolish position to take. We are cautious about the way in which the document deals with the issue, and we felt there was a lack of cross- pollination between it and the 'Regional Strategic Framework'. The 'Regional Strategic Framework' discusses development sectors outside Belfast, but was clear that Belfast should remain the pre-eminent development and the economic driver for the region.
1353.
'Strategy 2010' is very light when it comes to explaining how development outside Belfast would happen. It does not take account of these realities, nor does it acknowledge the fact that the majority of people who work in Belfast do not live there but commute. The economic benefits from those people are not always felt in Belfast but in the places where they live, where they spend their money on housing and shopping.
1354.
When we examined 'Strategy 2010' we felt there was an issue in terms of the depth, consultation, work, and research. The 'Regional Strategic Framework' contained all those things when it made its conclusions about development needs outside Belfast, but giving pre-eminence to development in the Belfast region for the foreseeable future, certainly for the next 10-15 years. The 'Strategy 2010' document missed the point and had not done the same level of analysis or work. That is apparent because it did not tackle the issue of what it would cost, or what needed to be done to actually achieve serious development in the seven centres outside Belfast.
1355.
The DoE is saying that there is no money for trains and that we cannot build roads. Where is the infrastructure to support seven other development nodes outside Belfast? It is not that we are opposed to that; we feel that the document lacks depth when dealing with the issue. It comes back to what DrJackson said about targets. It is all very well having targets, but if you have no conception of how to achieve targets, what obstacles are in the way, or how much it will cost to achieve them, then targets end up being a wish-list.
1356.
Unfortunately wish-lists come into people's heads and they make assumptions about what we are going to do or not going to do. We do not want it thought that Belfast is opposed to other centres in Northern Ireland developing. Even with all the work which the European Union has done - and we can look at American regional development strategies where the city is centre - we feel that a great deal more work is needed before a statement of policy from the Government should emerge saying that we should go for seven centres outside Belfast. A lot more work is needed on this.
1357.
Ms Morrice: Finally, what are your specific recommendations with regard to making Selective Financial Assistance less readily available?
1358.
Ms McGivern: The grant mentality? We all recognise that Northern Ireland suffers from a serious grant mentality. Our general view on the document is that, while it pays some lip-service in a rhetorical way, it does not grapple with the serious issue. The Department of Economic Development commissioned a report on how to reduce grant aid a few years ago. It seems it did not take its own advice on this matter. The former report was much more hard-hitting than the current one is on the grant mentality and how it may be tackled. We need to go back and think again about what we mean by this and that and what are the best ways in which to address the issue.
1359.
The report also recommends an increase in quangos et cetera. Would that seriously tackle the grant mentality, where the public sector pays for everything, the very situation in which we appear to be?
1360.
Ms Morrice: Specific recommendations. How to review and examine?
1361.
Cllr Stoker: There are only three ways of tackling any issue regarding economic development and the creation of jobs: through public money; through private money; or through a combination of both. We in the city council have moved away from throwing money at a problem. You must look deeper to see what a problem is and to find out how best to tackle it and who the best people are to do so, physically and financially.
1362.
Perhaps the answer is to encourage more venture capital into the system or to encourage the private sector to put more of its money into it, rather than looking for grants. If the private sector is involved, the first thing that it will look at is its profit margin. Obviously if there is a grant available, it will take the grant and keep the bigger profit margin. We should be encouraging people to do away with grants. If it means reducing their profit margin, so be it, as long as they are still making a profit at the end of the day.
1363.
I do not think that we can come up with any specific recommendations, but you must be flexible in your approach. It may mean that on some occasions you need to give grants for the pump-priming to get a particular project going, as long as the private sector can sustain it.
1364.
Mr Attwood: I want to refer back to the theme that Ms Morrice raised. You said that Belfast is a prime driver within the North generally. In our recent history the economic bureaucracy in the North marginalised councils in terms of economic development strategy. Now that councils in the North can raise rates to fund economic development and take a more interventionist role, what do you think the role of Belfast Council, which I can speak with some authority about, and other councils, which I can speak with less authority about, should be in terms of being part of the prime driver and in terms of their relationships with other agencies? How do you see the councils, and Belfast Council in particular, developing that role in the lifetime of this Assembly or the next Assembly?
1365.
Ms McGivern: Local authorities' track record has been ignored. Research has shown that local authorities are more efficient at delivering economic development strategies than either the IDB or LEDU. Both council representatives here would like to speak with some passion on the matter.
1366.
Cllr Stoker: What is the role of local authorities in the governance of Northern Ireland? This is the best opportunity we are likely to get to define what local governance and local authority mean. I hope that the Assembly looks at what is meant by 'governance' in Northern Ireland, in local authorities and in partnership boards.
1367.
Local authorities have been one of the driving forces in economic development in the last five years. We in Belfast have proved that we can kick-start programmes, create jobs and attract investment, not only to Belfast, but to the whole of Northern Ireland. Given the opportunity, local authorities can make a big difference on this issue, but everybody must know what their role in the governance of Northern Ireland is. They have to know what their role is in economic development, in reducing unemployment and in promoting education and training. We have to be consistent in our approach.
1368.
Mr Attwood: What does Belfast City Council think its role should be? Rather than leave it up to the Government to define them, how does the council see its role, authority and functions in, say, five years' time?
1369.
Cllr Stoker: I cannot speak for everyone in the council, although I have my own opinions. I know that many of the party groups in the council want to have a proactive role approach on all of the issues, including planning, economic development and education. That is a personal view and perhaps the view of my political party. We have not yet decided on a view on the additional powers that a lot of us in the council are looking for.
1370.
Cllr Jones: We in the council feel that we have been ignored in the past, a feeling which those of you who are councillors may share. That is one of the reasons why I welcome the setting up of this body and hope it survives. We have had various difficulties working with Government bodies, although our relations with LEDU have been reasonably good in recent years.
1371.
We have had major problems with the IDB on occasions. There is a feeling that it does not trust councillors. If there is a major investment opportunity in the offing, it almost tries to keep it hidden from the council until the last minute. I imagine that that applies to other councils, not just to Belfast. We are not involved in trying to encourage people to invest here. They try to ignore us. A couple of years ago the IDB held a major conference in America which the Lord Mayor of Belfast attended. The IDB refused to let him participate in it, saying that it would not be fair unless all 26 mayors or chairmen were present. That was ludicrous.
1372.
I hope that the gap between the IDB and councils narrows or vanishes now that those in charge are more in touch than their predecessors.
1373.
The Local Government Bill puts on local authorities a duty to prepare community strategies for improving the economic, social and environmental well-being of their areas. We see that as a major role for Belfast and the other councils, working in co-operation with bodies such as the IDB or whatever takes its place, if anything. I do not think Belfast City Council feels that co-operation previously existed.
1374.
Ms McGivern: We have not taken a specific position on what role we should play in this, but we are keeping a strong watching brief on developments in England and Wales with the new Local Government Bill. Powers are being extended in the area of local economic development. The Assembly and the Council need to keep a watching brief on what is happening and the directions taken. We do have a difficulty locally because we have 26 district councils, a matter that the Assembly has on its agenda. Government departments discuss with us what might be possible but then say that because Belfast is so different from all the other district councils, we can do things that could not be done by others. That is not good enough. We need to find a way through that.
1375.
But to illustrate what we might do, I go back to the Structural Funds and the work that we did under them. We had a long consultation in Belfast City Council about what might happen with Structural Funds money. From that we could see that the council had a commitment to being a facilitator, a supporter, a lead agency, for bringing together the constituent parts of Belfast to run a European programme which could have had economic development, community development and environmental elements. The council did endorse a bigger profile for itself should that have come off, but we know that in subsequent negotiations our views were rejected. Our councillors and the council as a whole could embrace a much larger role which was more in contact with what is going on on the ground and could factor in the rich and poor parts of the city, identifying needs and trying to marry them. Local councils are in a position to play a significant and leading role in economic development.
1376.
Dr McDonnell: You mentioned that you are opposed to the privatisation of public utilities, the harbour and water and sewerage systems. Would you like to expand?
1377.
Cllr Jones: The council made very detailed submission on the proposed privatisation of the harbour through a Committee of the Assembly. We met several times. We were not of the view that privatisation would be for the benefit of the citizens of Belfast. There is a large amount of land tied up in the harbour. I doubt whether the harbour is best privatised, but the land involved is the best land available for economic development in the city. There is a large amount of land which should be put to use for the city, and under privatisation any benefits would be going to shareholders and not to the citizens. The future of the harbour is vital to the future of Belfast. The people of Belfast need to be assured that the development is done with their thoughts in mind, and we favour some form of trust where profits would not be hived off and any benefits would go back to the people.
1378.
Dr McDonnell: On the issue of water and sewerage, some people - particularly those who live on the Lower Ormeau Road - would have been very glad if someone had privatised water and sewerage last Friday. Are you aware that it would take millions, if not billions, of pounds to put the sewers back in shape? Would you like to make any further comment on that?
1379.
Cllr Stoker: It has already been demonstrated nationally and throughout Europe that of the services already privatised sewerage is the least profitable. There has been no uptake whatsoever on that. As far as privatisation is concerned, the private sector will take the most profitable services and leave what is not wanted.
1380.
Research has shown that, over the last 10 years, investment has not been made in those utilities throughout England, Scotland, Wales and large areas of Europe by privatised companies in keeping with the amount of investment made by government. Evidence shows that there is no benefit to the people or the consumer by privatisation.
1381.
Ms McGivern: Both points illustrate a more fundamental point we are making about the report. There is a lack of serious research supporting 'Strategy 2010'. A reading of the pieces on privatisation - they do not take up a lot of pages - shows that they are almost throwaway remarks in the main body of the report. As we discovered when we did our work on the port of Belfast there is a huge body of research and resources on privatisation, which has now been proven to have been a failed policy in the rest of the UK. When the privatisation debate started, the Department did not do proper research. Later, the Assembly changed the debate, and the ultimate result. We do not know what the final result will be but we know that the Committee's recommendation to the Minister is different from the original one. That was as a result of doing work and making an effort.
1382.
If you look at the report you will see the same knee jerk reaction-privatisation is the way forward. If it sounds like a good idea it may be good for the port. Privatisation is not good for the port. If it were good for ports, America would have privatised all of its ports. It is interesting that the land of enterprise does not have private ports. All its ports are in public ownership. Why would it do that if privatisation were the way forward? What would be the reason for that if it was not a way of maintaining certain economic drivers in their hands, in a particular way? Similarly, I think that water and sewerage are not something that people in the private sector want. The history of privatisation of services is not a particularly happy one.
1383.
Cllr Jones: As you said, Dr McDonnell, quoting the Ormeau Road, the state of the water and sewerage system is in a very bad way, obviously through underfunding in previous years. However, I do not think it is going to be a very attractive proposition for private investors.
1384.
Dr McDonnell: The sewer that burst last week was only built about five years ago. It is not just the old system.
1385.
That leads me on to another particular point. Having taxed ourselves with 'Strategy 2010' over the last three months, some of us will be coming to the conclusion that we will have to start from there and make the best of it. You are suggesting the report should be redrafted. I would like to tease out whether we mean the same thing, whether we can accept 'Strategy 2010' as a starting point and build on that, or whether we should bin it and start again. There are a number of angles I would like to look at. How would you see a review taking place? How comprehensive should it be? Should it cover specific areas where you have identified problems or would it be an entire overhaul? Who would be involved? What particular outcomes would you like to see?
1386.
Mr Jones: Belfast Council called for a review, but our original submission was made about one and a half years ago, and to suggest redrafting the whole strategy now is inappropriate. Our initial analysis is that there are three pillars to economic development needs: economic development; social cohesion; and environment protection. Those are still the key contributors which must be looked at to analyse requirements. The working groups looking into these sectors must be broadened to include local government, something which has not happened before. We should like to see wider inclusion and the widespread communication of what is proposed. Obviously, the whole document cannot be binned at this stage in proceedings. I suppose it must be treated as the base document, but many things must be changed in it, and we hope this will happen. We are not saying you must go back to a blank sheet of paper.
1387.
Ms McGivern: We return to your initial question about targets. We must re-examine them and ask ourselves if they are the ones we want. Is this the way forward for Northern Ireland? Does it make a cohesive plan when set against other policy issues such as the 'Regional Strategic Framework' or our inability to pay for trains or an overhaul of the road service? Policy issues have changed in the last year and a half. We cannot continue to operate with a wish-list of 62 separate items. They must be prioritised. Some serious work will have to be done to justify priorities and their place in the chronology. That work could be done without throwing the whole thing in the bin and saying "It's useless. Let's start again". We do not have the time to start again, but we must back up what we say. There must be prioritisation, with certain issues tackled first. We do not have unlimited resources, though the document sometimes makes it sound like we do. The development of the Assembly allows more accountability, and it will ultimately be for the Assembly to decide its priorities and where it spends its money. That allows you to reshape the document. Our full council hopes you will factor the effort and contribution of local authorities into any new economic plan you may have for the region.
1388.
Dr McDonnell: That leads me to the question of how we should factor them in specifically. Should we factor in people from local government to work on this? Should we factor in public representatives or senior officers? If I might return to the old story we discussed earlier about Belfast versus Moyle - does one involve a councillor and a senior officer from every district council, ending up with 50 people? How do we get that balance right? If we are to pursue this, we need a very specific proposal.
1389.
Cllr Stoker: Many different methods can be used. On the subject of local-authority representation - and I return to the question of what we mean by governance in Northern Ireland -shall we remain with 26 local authorities? Will their number be reduced or increased, or will they be scrapped altogether? No one knows these things. We must be consistent, but everyone must know exactly what he is doing with regard to governance and economic development.
1390.
Unfortunately, it is not our role, but that is the structure we wish to see. We can certainly have an input, but we cannot tell the Assembly what structures there should be. It will be up to us to make recommendations. However, arriving at a method of representation means devolving power. You must go to the grass roots to include all those people in consultation and the process of decision-making.
1391.
Certainly the decision taking still has to be done at a political level with people from all the sectors involved in the decision making process and that includes elected representatives from local authorities. This document and the recommendations have totally excluded any elected representation at all. Local authority representation has to be included in any future consultation. The method of selection still has to be determined.
1392.
Cllr Jones: I do not think anybody is suggesting one from each of the 26 councils but the East and West of the Province should be represented and councillors and officers should be included.
1393.
Mr Dalton: The strategy suggests that the number of players in the local economic development scene needs to be rationalised. There must be a much more co-ordinated approach. Do you agree with that view, and do you have any suggestions about how that rationalisation should take place?
1394.
Ms McGivern: We do believe that it should be rationalised. There are difficulties for us, as local authorities, in producing a cohesive and coherent plan when there are so many different factors operating. But we all hope that the Assembly will turn its attention to the proliferation of quangos and organisations which continue to be developed.
1395.
We need to establish who the key players are and form organisations, partnerships and social partnerships that allow us to achieve the best for this region. That should be the bottom line, and it is Belfast City Council's position. You mentioned the fact that the report seemed to propose an Economic Development Forum which we now have. However, yet more agencies and new organisations are working with economic development - we should be rationalising the situation. It did not pay any attention or undertake an evaluation review of those organisations currently active in the field. If the NorthernIreland Economic Council is passed over, it will be reformed as some kind of new research group? The NorthernIreland Economic Centre is cursorily described. What about the Northern Ireland Centre in Europe, currently in total disarray, a year and a half down the road. What is its role?
1396.
Reading the document it appeared to us that sufficient attention was not paid to reviewing the current situation and looking at how that situation could be improved. It seemed that more organisations were being suggested rather than fewer with a more rational and coherent approach.
1397.
Dr Jackson: In Belfast there are over 140 organisations and institutions involved in the delivery of economic development at an operational level. Given that you would imagine that there was some scope for rationalisation at the point of delivery. However, when we talk about delivery, that raises wider issues. As Mr Attwood mentioned, the role of local government should be that of civic leadership in economic development together with the notion of sustainable development.
1398.
I believe that local government, particularly in a city such as Belfast, is the pre-eminent organisation. It should be responsible for co-ordinating an integrated plan for the city. It should engage with the other players involved in delivery and there should be a clear understanding of the council's unique and distinctive role, which compliments that of others such as the IDB and LEDU. There is considerable scope for the council in this area.
1399.
The re-establishment of the Assembly; the coming on stream of European structural funding and the consideration of the workings of local authorities at UK level provide opportunities for examining roles. When we speak about delivery, we can only talk about that if we understand the concept of roles and responsibilities, and that depends on having an analysis of the problem and a clear understanding of what has to be done to address it. In that sense, 'Strategy 2010' is flawed. It is not supported by high quality applied economic research. It would benefit from the involvement of those institutions, organisations and individuals best placed to inform the debate.
1400.
Mr Dalton: According to your memorandum, you are concerned that there is insufficient evidence to support the establishment of some of the new organisations such as EDF and you highlight the fact that the Economic Council was not given a greater role. Do you have any reasons why a single development agency should not be established?
1401.
Ms McGivern: A single development agency could be a very good thing for Northern Ireland if it was just that. However, in Northern Ireland, we have a habit of bringing in new agencies without getting rid of the ones they replace. Fundamentally, the problem is the continuing reluctance of the DED to deal with the IDB/LEDU split and that continues to be a contentious issue. Most of the evidence suggests that it would be far more effective to have one agency. The council is not opposed to a single agency providing that it reflects the sectors we are referring to. Our feeling is that if you do not review and evaluate your current actors and the contributions they make then why invent another mechanism or forum.
1402.
We need a lot more clarity before we would commit to the idea. Fundamentally - unlike the Department we have to look at and justify how our money is spent - we would have to ask ourselves serious questions about whether we would be getting value for money, and what we would be giving up in order to fund this new work. They are hard questions and they demand hard answers.
1403.
The Chairperson: Thank you for your very precise and sharp critique of the document. You have certainly helped us with our views. We have sought a lot of submissions and this is one of the more focussed ones and we thank you for the way you dealt with the questions. Thank you for your approach to this and we may be in dialogue with you further as we formulate our views.
TOP
MINUTES OF EVIDENCE
FRIDAY 4 AUGUST 2000
Members Present:
Mr P Doherty (Chairperson)
Mr Attwood
Mr Dalton
Ms Lewsley
Dr McDonnell
Ms Morrice
Witnesses:
Councillor P Kelly )
Mr M Lusby ) Derry City Council
Alderman J Guy )
1404.
The Chairman: I would like to welcome you and to apologise for the delay.
1405.
Cllr Kelly: On behalf of Derry City Council, I thank the Committee for this much appreciated opportunity. I will hand you over to Mark Lusby, who is our Economic Development Officer.
1406.
Mr Lusby: I will be very brief. I just want to remind the Committee of the key points in our written submission. Derry City Council is happy with the broad thrust of 'Strategy 2010'. The main focus of the strategy is to create a knowledge-based economy. That is consistent with the approach we are trying to develop in Derry and the North-West. We want to move from traditional industries to a knowledge-based information technology economy. As a broad strategic document, it fits the broad vision of our 'North-West Cross-Border Economic Development Strategy' and our 'City Vision' document.
1407.
However, the council feels that 'Strategy 2010' needs to be augmented in three key areas. It needs to recognise the regional disparities within the Northern Ireland economy. Ours is not a uniform economy, but 'Strategy 2010' appears to talk as if it is. From a council point of view, knowing the challenges that Derry and the North-West face, we would have liked to see more distinctive measures to deal with those disparities.
1408.
Secondly, we feel that 'Strategy 2010' needs to recognise that subregions such as Derry operate within cross-border environments. 'Strategy 2010' mentioned the Irish Republic, but only as a competitor economy. Working in a cross-border economic environment in the North-West, we feel that 'Strategy 2010' needs to have distinctive measures not only to address the challenges of being in a cross-border economy, but also to realise the opportunities for development.
1409.
Thirdly, the council feels that 'Strategy 2010' needs to be more consistent with other key Government policy documents, particularly 'Shaping our Future,' which recognises the distinctive social and economic environment of the North-West as a subregion within Northern Ireland. It also recognises the opportunities and the challenges of the Donegal/Derry economic corridor. 'Strategy 2010' seemed to ignore this and thus was at variance with other key Government policy documents. Furthermore, it was not closely linked with the policy on Targeting Social Need (TSN).
1410.
Overall, we feel that the general thrust of 'Strategy 2010' is a positive one and one that we aspire to. However, we do feel that it needs to be augmented in terms of recognising the problems of subregions that are not actually part of Northern Ireland - the cross-border dimension. This key Government policy document needs to share the same vision, particularly for the North-West, as other key Government policy documents. That is the basic summary of our paper.
1411.
Mr Dalton: Do you agree with the view expressed in 'Strategy 2010' that the number of players in the local economic development scene needs to be rationalised? Do you have any views on how that can be achieved?
1412.
Mr Lusby: In terms of describing the local development environment 'Strategy 2010' was disappointing, particularly since local authorities are key players in this area. It did not have a full understanding of the wealth of expertise or of developments at the local level. Instead of understanding local responses and local needs 'Strategy 2010' seemed to be more a central Government document trying to rationalise the local situation.
1413.
There is a need to rationalise, but that rationalisation is already occurring at local level among local players. An example of this is the inward investment promotional project between Donegal Council, Derry Council, Strabane Council and Limavady Council in co-operation with the IDA and the IDB on a joint marketing initiative. The problem of fragmentation in local development was recognised five years ago, to some extent, by local players and 'Strategy 2010' needs to take account of that.
1414.
Mr Dalton: Do you have any views on the recommendation in 'Strategy 2010' that Northern Ireland should have a special rate of corporation tax for inward investment over a period of five years? Is this realistic in light of the fact that this could cause problems on a European Union level? Do you have any ideas about alternative strategies?
1415.
Mr Lusby: We operate in a cross-border area where, three miles from the city centre in Donegal, there is a different corporation tax for inward investment, and they have Objective1 status for EU funds and grant-aid. We are very conscious of that, but we do not have any specific views on it. The IDB and our local investment organisation need a full range of tools to attract inward investment. Financial assistance is one of those, and other key tools are appropriate property, a land bank and the right workforce. We do not have specific expertise in the area of taxation.
1416.
Mr Dalton: Do you believe that 'Strategy 2010' gave sufficient priority to the tourism sector, and particularly to its potential for growth? Do you have any views on what substantive recommendations could have been made on that?
1417.
Mr Lusby: Tourism is very important for our future prospects in the North-West. We have just commissioned PricewaterhouseCoopers to do an analysis of jobs for the North-West because, if we are going to be in the same league as the rest of NorthernIreland, our basic target should be to reduce the unemployment rate in Derry to the Northern Ireland average within a five-year period - an ambitious target because that has not happened since 1938. I looked at the figures yesterday from PricewaterhouseCoopers, and to reduce the Derry unemployment rate to the Northern Ireland average equates to the creation of 8,500 jobs over the next five years. They examined the potential within the different sectors in the North-West, taking into account our heavy reliance on textiles. Out of the 8,500, a target of 1,500 has been set for tourism. It is recognised, therefore, that if we are going to achieve our key aim of parity with the rest of Northern Ireland, tourism has to generate up to one eighth of those new jobs.
1418.
Generally, we did not believe that 'Strategy 2010' dealt adequately with tourism. We are aware that the Northern Ireland Tourist Board is developing a new development plan for tourism, and we have contributed to that separately from the 'Strategy 2010' process. We have also commissioned with the partner councils in the North-West an integrated tourism plan. In essence, the tourism infrastructure in the North-West is not there. We do not have enough hotel beds and air access is also a barrier to development. Those are the two key issues.
1419.
Dr McDonnell: Your submission mentioned the lack of a North/South dimension. You have discussed that a little bit already, but would you review it and suggest how it might be developed and supported further? Obviously, it is a very important subject as you are only three miles from the border.
1420.
Mr Lusby: We have been working on a cross-border basis for the last 20 years. We have the North-West Region Cross-Border Group, and much of the rationale for developing roads, air access or energy in the North-West is based on the needs of Derry's catchment area which is the North-West. The emphasis put on certain 'Strategy 2010' recommendations did not take account of the fact that a catchment for part of NorthernIreland has changed or erased some of those priorities at a higher level. 'Strategy 2010' needs to take account of the integrated transportation study for the western area, the gas to the North-West study and the air access development plan for the City of Derry Airport as the gateway for the North-West of Ireland. It did not seem to mention those in any great detail. It needs to recognise some of the existing cross-border research work that is already there.
1421.
Dr McDonnell: Realising the excellent work involved in the 'First Plan for Progress', do you not agree that NorthernIreland needs a clear strategy rather than many local initiatives which are all self- promoting in various districts?
1422.
Mr Lusby: In the council's paper we have said that we support having a NorthernIreland economic strategy which has very clear objectives, targets and measures. But that overall strategy must be relevant to local needs. If there are identified local needs, it must show how it will deliver on those, and it did not really do that. In Derry there is concern about the textile industry. In the North-West there is a higher percentage of people employed in manufacturing than in Northern Ireland on average, and about 50% of those people are in the textile industry. With that, and 800 official redundancies over a two-year period in mind, any Northern Ireland strategy which inspires with big visions and targets but does not actually say how it is going to help an area like the North-West has failed in some way. It needs to be augmented and tied into local strategies more clearly.
1423.
Dr McDonnell: In your submission you mentioned that 2010 was at odds with the 'First Plan for Progress'. Could you specifically expand on one or two of those points?
1424.
Mr Lusby: 'First Plan for Progress' is our city vision document but we also have an economic development strategy which ties in with that. Those are the two key local policy documents operating in the Derry area. An interesting point came out when we invited the people responsible for 'Strategy 2010' and the people responsible for 'Shaping our Future' to a meeting to present both strategies at the same time. The 'Shaping our Future' people said there are five key transportation corridors in NorthernIreland, and we asked specifically whether there was any prioritisation of those transportation corridors. The 'Shaping our Future' people said that they were equal and that there would be further work on prioritisation at which point we would have an input. 'Strategy 2010' on the other hand only talks about one transportation corridor, the Belfast-Dublin one.
1425.
So we had two Government documents. One was saying that transportation was being dealt with and that the needs of the North-West and West were key priorities for the development of NorthernIreland. Then we had another document which made no reference to the other four, and said that there was just one priority corridor.
1426.
There is a statement in 'Strategy 2010' which says that to meet the needs of new technology, tourism and the new information age economy, there is sufficient port and air access. Yet in our local plans we are saying that we need further development of air, road and port access to the North-West.
1427.
At the same time, the Southern Government, both Bord Fáilte and the IDA (Industrial Development Authority), are giving support to further development of the City of Derry Airport as part of their developing of the North-West. It was disappointing that the Northern Ireland document was saying that air and port access was of a sufficient standard when the Irish Government were saying that for its purposes in the North-West it was not.
1428.
Mr Attwood: Would you outline how you rationalised the working relationships between the various development agencies in your area? How did the city council go about bringing investment into the city of Derry? The example might be helpful to others.
1429.
Mr Lusby: 'Strategy 2010' recognised that much of the fragmentation in the development effort could be traced to central government agencies. We felt that it was unfair to tar local development agencies with the same brush. Derry City Council has established a number of partnership organisations involving various stakeholders. One of the key partnerships is the Derry Investment Initiative, which brings together Londonderry Chamber of Commerce, the city council and representatives of the IDB and LEDU to focus on inward investment.
1430.
We have also built, along with Strabane and Limavady councils, a cross-border group with Donegal County Council. Ireland North-West is a natural, non- political sub-region, which we can develop for investors. It is an economic and social brand. The Derry Visitor and Convention Bureau is our regional tourism organisation. To focus development in the city and to bring together all the partners, we have the City Centre Initiative, which grew out of our town centre management initiative. We are setting up a small business partnership to bring all the small business organisations together. We have a higher and further education focus group. We have also established a lobby group, Group 22, to deal with the issue of gas, and we are key partners with various councils in lobbying for better railways.
1431.
Mr Attwood: Do you see the various sub-groups in your region becoming more powerful in their legal authority, financial clout and ability to promote the issues which interest them? Will the more centralised bodies, the IDB and LEDU, for example, lose their influence as a result? There is a feeling that, due to recent circ*mstances, both Belfast and Derry have gone it alone in promoting themselves, and that that has led to a lack of co-ordination. We have the 'Friends of Belfast' to promote the city of Belfast in North America, while Derry has a sub-office in Boston to promote the city. Is that feeling justified?
1432.
Mr Lusby: The task before us in the North-West is so great that we need everybody's effort. The unemployment average for Northern Ireland is 5.3%; Derry's is 8.7% - Belfast's is 4.3%. To reduce Derry's unemployment to the Northern Ireland average would require 8,000 jobs over five years. That is a monumental task, given the challenges that the textile industry faces.
1433.
In the best five-year period the maximum number of jobs created in Derry was 5,000. Eight thousand is a large task. I would be concerned if there was any diminution in the role of central Government's agencies in working to achieve those targets.
1434.
The Derry Investment Initiative works with the IDA and the IDB on a partnership basis. A small number of leads come to Derry Investment Initiative which do not go to the IDB. Derry Investment Initiative initially follows up, but then passes the leads to the IDB for further development. There has been an overemphasis on promotion and marketing for inward investment by local areas. What we really need in Derry is the development of infrastructure to attract inward investment companies. Derry Investment Initiative is changing from a marketing emphasis to looking at issues that prevent investment. The IDB has no office in Derry and is unable to champion or manoeuvre at a local level. It focuses on matters such as property sites, encouraging the private sector to invest in speculative build and liaison with the Ministry of Defence and the university with a view to their working together to use MoD land to provide high-spec incubator space.
1435.
There would be criticism if every local authority opened an office in America. I do not think that the mature councils who have been out there for a time are going to continue with that as a means of attracting inward investment. Our inward investment approach is that once a potential investor is in Dublin or Belfast we provide a local handling service for the IDB or IDA client when in the North-West.
1436.
Ms Morrice: You spoke of your target being to raise the level of employment to that of Belfast and of your concerns about the textile manufacturing industry. Your focus is the knowledge-based economy, the 'Strategy 2010' approach which you approve of. Do you think there is scope for textiles using the knowledge-based economy, in other words not closing the door on textiles as it is so important for the area? Is that an appropriate approach?
1437.
Mr Lusby: It is an appropriate approach and one that we are following on our own and in partnership with the IDB. The IDB has a study underway looking at how to re-invent the Northern Ireland textile industry as a knowledge-based, designer-led economy. We also have a local group of textiles manufacturers, academics, business people, and trade unionists carrying out parallel research. That research aims to establish how the North-West can capitalise on our textile heritage.
1438.
The problem with the North-West textile industry is that there is no tradition of design. It is mainly a "cut and manufacture" textile industry so design work for Marks and Spencer plc is done in London and the manufacturing is done in the North-West.
1439.
While we have skills in logistics - how to move textiles or raw materials around the world - and design expertise, we are not going to invent a design textile industry in the North-West overnight. Even if we reinvent the industry, it will employ significantly lower numbers of people and there will be different types of jobs.
1440.
Ms Morrice: What about training for the textile workers who are losing jobs? What about retraining them for work in other areas, or for work in design? What are you doing specifically in terms of retraining and how could the T&EA help you?
1441.
Mr Lusby: There is an initiative, and it is being carried on very sensitively between the T&EA and some of the education institutes. They are going into the larger textile manufacturers and discussing the setting up small IT training suites, not as a pre-redundancy training package but as a multi-skilling continuing professional development service.
1442.
Because of the textile industry's negative public image, existing textile manufacturers with contracts are finding it difficult to retain staff. Those manufacturers are showing that they value staff, and have a long-term commitment to staff, by saying that in-house training is going to be part of that commitment, while at the same time helping build up the range of skills if in the long term there is a redundancy. Obviously, textile manufacturers do not want to set this up in a way that the workers suddenly think that it is in terms of pre-closure and then start to leave because they see it as negative. There are moves afoot, and that is one thing we are looking at.
1443.
Ms Morrice: Of the 8,000 jobs to be created , 1,500 are for tourism. Where does textiles fit in?.
1444.
Mr Lusby: It was a breakdown then between inward investment and indigenous business. The bulk of the rest of the jobs, about 3,000, would come from inward investment. They would not be textile jobs, they would be from tradable services, cost centres, and research.
1445.
Ms Morrice: You have already touched on that matter in terms of infrastructure. What is your priority - rail, road, air or sea?
1446.
Mr Lusby: That is an impossible question to answer. I can only speak for the North-West. Other areas in Northern Ireland face similar difficulties. Given the challenge facing us in the North-West, the local economy needs to fire on all cylinders. We cannot afford not to have the same access to energy, roads, transportation, air and ports as the rest of the island of Ireland. We recognise that pockets are not bottomless and that decisions will have to be made about what needs can be met. That is where the need for an integrated approach to transportation response from central government is required. It is not about looking at the needs of a sub-region such as the North-West and seeing how to maximise the resources to meet total needs. It is not about getting into a situation where you are saying, "well make your choice boys and girls". 'Strategy 2010' has to take responsibility for the problems of the North-West. It is not Derry City Council's sole responsibility. Alongside 'Strategy 2010' there has to be an integrated transportation strategy which is not just part of a general plan for Northern Ireland. It must recognise that there is a particular need in the North-West and set out how that need will be met through rail, air and road.
1447.
Cllr Kelly: I support everything Mr Lusby has said. As in everything else, partnerships are needed, since one thing cannot solve all the problems. Above all else, the job must be done. MrAttwood asked earlier whether the IDB would get stronger. I believe there is still great scope for individual groups. There is still much talking and tightening up of loose ends to do. The one aim in mind is the development of the North-West.
1448.
Ms Morrice: I have thought of a marvellous title for our report: 'The Motor of Economic Development Must Fire on All Cylinders'. We have discussed the key locations outside Belfast and Derry. Do you agree that there should be nine in all? Should there be more or fewer?
1449.
Ald Guy: I believe that there are only two cities in Northern Ireland, one being Belfast and the other being Derry in the North-West. One night at a council meeting I referred to the fact that we are the second city. An English member of the council got up when I had finished speaking and said, "May I remind Mr Guy that this was the first city?" That point struck me then, but I do not hold it against Belfast today.
1450.
I should like to comment on what Ms Morrice said in relation to land, sea and air. I am not a member of the city's marketing committee. Given how quickly Mr Lusby was driving today, perhaps I was brought over merely as ballast to keep the car on the ground. In all our committees, we often think about the land, sea and air situation in the North-West. We are also pushing gas very much indeed, since it will help us if we get a gas supply into the North-West rather than having to burn electricity all the time. We discuss this constantly, which is why I smile when you question me about it. I say to myself, "That is what we talk about at every meeting".
1451.
I am not part of city marketing, but of the Environment Committee, and such matters as the airport, the docks down at Lisahally, the city docks themselves - to which we bring up the odd tourist ship - and the road structure crop up all the time. We always said before that people in the Belfast area could not go any further than Glengormley, whereas now they seem to move out beyond Sandyknowles roundabout and go a bit farther. However, they stopped the motorway at Randalstown, and when they were going to Dungannon, they stopped it there rather than carrying it on.
1452.
We hope and shall keep pressing for a complete restructuring, not only of the North-West, but of all Northern Ireland, so we no longer have a change from a motorway to an ordinary road. Perhaps it is here that our problems arise, since many accidents take place on roads which branch off more major routes. The whole structure of Northern Ireland must be looked at very carefully.
1453.
Thank you for listening to me. As I say, I am only here as ballast today and probably should not be speaking at all. The committee chairman will probably reprimand me on my return. I know Mark Lusby, one of the officers, will say "Never again will you come to Belfast". Thank you very much, Mr Chairman, for letting me indulge myself for a while.
1454.
Ms Lewsley: Everyone has a contribution to make. You mentioned the issue of rationalisation and the lack of consultation, something you say you have already touched upon in Derry City in particular. The issue of tourism was not properly dealt with in the document either. Was there a lack of consultation on the strategy with local authorities? How could local authorities play a better part in the implementation of the strategy in the future?
1455.
Mr Lusby: The consultation on 'Strategy 2010' involved the chief executive of Derry City Council and myself addressing the strategy review group over lunch at the Beech Hill Country House Hotel. Businesses in the North-West participated in the process quite a lot. However, at least two business people told us that as the strategy was Northern Ireland based they did not think that it would shape up to meet the needs of the North-West. They asked us to form a North-West caucus to brief local people involved in the strategy consultation. The consultation process did not take the sub-regional dimension into account.
1456.
When the matter came to council it was at the draft final document stage. That was in marked contrast to the approach for the 'Shaping our Future' document when the council had the chance to examine an initial draft, and was given the opportunity, through the panel of experts, to make a formal presentation before the final draft document was completed. There is a greater sense of ownership of the 'Shaping our Future' in the North-West and you can see that in the way that the needs of the area were dealt with.
1457.
My experience of 'Strategy 2010' is that it was set up with the view of maximising business sector input - which was a very important thing to do. However, it missed an opportunity to identify and develop sub-regional needs because it did not go down to the level of local authorities, or groups of local authorities. All local authorities in Northern Ireland operate within some kind of consortia, so it would not have had to consult individual councils. However, that opportunity has gone.
1458.
Looking at the challenges facing us, it is important that meat is put on the bones of the Northern Ireland economic strategy - even if the essential and acceptable parts of it are taken out in terms of sub- regional documents or sectoral documents such as the tourism or textile studies.
1459.
Ms Lewsley: Would you see the councils having an input?
1460.
Mr Lusby: We are already playing a role in advancingthe issues felt not just by councillors and constituents, but by the business sector and others. If we are not consulted, then a wide range of local players will not being consulted, and complete level of integrated consultation and policy formation which is going on will not interact with the Northern Ireland policy formation process.
1461.
It needs to be recognised that councils across Northern Ireland have got their act together. We are not working in isolation; we are working together with stakeholders in the economy and we do provide a valid channel for consultation with the local community.
1462.
Ms Lewsley: The strategy contained 62 recommendations and 10 targets. Are those targets achievable? Are they realistic, and do you think there were enough? Should there have been an equality target?
1463.
Mr Lusby: When we discussed the strategy in council and with stakeholders we did not look at the targets in detail. We have not analysed whether they are realistic. There are no sub-regional targets, so we cannot say if they are relevant to the North-West, or if they could be met by private sector in the areas of Northern Ireland in which the economy is firing on all cylinders. So we have no criticism of the targets. Our main concern is whether the supply side is ready to meet the targets, particularly in terms of the trained workforce needed to meet the needs of potential investors.
1464.
We are particularly concerned with this in the North-West. I was looking at some statistics before we came up this morning. Eighteen per cent of the workforce in Derry City Council has an NVQLevel4 or above, and the UK Government target is, by 2002, at least 28% of the workforce should have NVQ Level4. So we are not going to meet the UK targets. I do not know how that equates to NorthernIreland targets.
1465.
One of the other issues that came up in further and higher education is that participation rates in the North-West are lower than the NorthernIreland average in higher education, so a lower percentage of people are going forward for higher and further education there. The targets in 'Strategy 2010' may be realistic but the concern is this: can 'Strategy2010' provide the infrastructure, both human and physical, to meet those targets and are they relevant to local people? For example, how does the NI job creation target in 'Strategy 2010' relate to the 8,500 job-creation target we have in the North-West? Will the infrastructure, human, physical and financial, whether by grants or tax incentives, supply the tool kit that we need to achieve those targets? It is woolly. They are good for Northern Ireland, but we cannot see how we relate to them or how they are going to benefit us.
1466.
The Chairperson: I would like to thank you for both your submission and for the way in which you answered the questions. Thank you for coming.
TOP
MINUTES OF EVIDENCE
WEDNESDAY 6 SEPTEMBER 2000
Members Present:
Mr P Doherty (Chairperson)
Mr Neeson (Deputy Chairperson)
Dr O'Hagan
Mr McClarty
Ms Lewsley
Ms Morrice
Mr Clyde
Mr Attwood
Witnesses:
Ms Patricia McKeown )
Mr Thomas Mahaffy ) UNISON
Mr Jim Deery )
Ms Nuala Conlon )
1467.
The Chairperson: I would like to welcome you all here today.
1468.
Ms McKeown: Thank you for the opportunity to talk to you today. I will introduce our team. I am Patricia McKeown, Deputy Regional Secretary of UNISON Northern Ireland. I am also a member of ICTU Northern committee and the Economic Development Forum. Nuala Conlon is a UNISON representative and also co-ordinator of the Northern Ireland Anti-Poverty Network. She has spent the last four years developing anti-poverty strategies. Jim Deery is a UNISON representative and also Chair of the Greater New Lodge Community Forum. He is also a member of the UKCommission on Poverty, Participation and Power. Thomas Mahaffy is our researcher and adviser. His most recent key areas of work have been statutory duty, European structural funding and low pay.
1469.
As you know 'Strategy 2010' has been the subject of discussion in many submissions. UNISON made submissions as did the Irish Congress of Trade Unions, and that was regarded as the overall submission on behalf of the trade union movement with regard to social partners.
1470.
Many groups have been critical of 'Strategy 2010' but not of its vision - everybody signs up to the vision that it aspires to. The constructive criticisms have been on the nature and level of consultation on the strategy. They have also been about whether the analysis of past economic strategies in Northern Ireland, the current situation and the future have been adequate enough upon which to base the targets and the recommendations. We have also been critical of the lack of linkage between the targets and the 62 recommendations which flow from it.
1471.
We have serious reservations about whether many of these recommendations will, in fact, meet the targets, but, primarily, we are uncertain as to whether the targets themselves are wholly achievable. One of the key areas for us has been the theme of equality and social cohesion, which we see as an absolute prerequisite to any growing, forward-looking, developing economy. It has been confined to three or four small recommendations, as opposed to an overall impact analysis that could produce different targets and recommendations.
1472.
One of the things that has struck us is the fact that the targets in the 62 recommendations today remain intact, despite very extensive input from all four pillars of social partnership in Northern Ireland. We may have different views on some of the directions of 'Strategy 2010' from civil society, elected representatives and local government. From the volume of response we are surprised that there has not been any change to date, either in the targets or the 62 recommendations. I would say as a member of the Economic Development Forum that I represent the Irish Congress as one of the four pillars of social partnership, and we are constantly at pains to explain our position on the Forum which is not to implement uncritically 'Strategy 2010'. We understand that our role is to be of assistance in the development of an economic strategy. Currently we are worried about our role within the Forum and whether people have got a clear understanding of what the Forum needs to do.
1473.
That is a very quick pen picture of where we are coming from. We are wholly committed to the development of a sound economic strategy which will make life better for the citizens of Northern Ireland. We are committed to doing that within a context of our indigenous development, promoting inward investment and doing it on a North/South and East/West basis, finding our place in Europe and finding our place inside a global perspective. We are not wholly convinced that 'Strategy 2010' can do that.
1474.
Dr O'Hagan: Certainly there are a lot of us who share these concerns and have shared them for a long time. How do we get past that? We see this inquiry as part of trying to bring in previously marginalised groups and organisations. How do you suggest Government can do this? I would also like you to elaborate on the Economic Development Forum; do you see this as a possible role for the Forum?
1475.
Ms McKeown: If I could do the consultation element firstly, I want to bring my two colleagues in on this, particularly because they are bedded in the voluntary and community sector which was not where it should have been in terms of the consultation. I need to paint a very brief pen picture, because in the appendices to the strategy itself, everybody could be forgiven for thinking there was actually a comprehensive consultation process. I would say from the trade union perspective that Irish Congress was invited to put representatives on the steering group and on a number of the cross-sectoral working groups. We have already made our points in black and white in response to this, but certainly the experience of our representatives on the working groups ranged from those whose cross- sectoral working groups never met, therefore they did not get the chance to make an input, to those who were not wholly sure what their function was in the room, from what I understand they were not alone in that, to those who actually felt that they were making a contribution. On the whole, we did have a problem in that we felt people did not have an overall view of how the strategy was being developed. They had not agreed their role, which is why there was a problem with an outcome.
1476.
Perhaps Ms Conlon would speak about the community voluntary sector.
1477.
Ms Conlon: Some of you will already be aware of the work of my organisation, the Northern Ireland Anti-Poverty Network. We were invited on to a consultation panel, and I attended one event in the Waterfront Hall some time ago, but we were somewhat out of our depth. We have only one member of staff, and I represented the network. We were unclear as to why we were there and were not involved in the compilation of this strategy. At the Waterfront Hall draft recommendations were announced, and it appeared that the report had been finished. I sat there and was being asked to approve a large and complex document, which was not written in ordinary language. It was intimidating, and 90% of those present were businessmen in suits - apologies - and I felt that I was one of the token community sector people brought along so that the organisation's name appeared on the list of those consulted.
1478.
We have previously taken part in consultations with the Government with regard to the promoting social inclusion initiative. Around two years ago we contacted the TSN unit and asked them to consult with our members. We have attended two events in Belfast and Cookstown, where 130organisations were represented, and people were allowed to suggest ideas about the promoting social inclusion initiative, such as what should be in it and what structures it should take. We believe there are weaknesses in the final document, but at least there was an attempt to involve ordinary groups in places less intimidating than the Waterfront Hall.
1479.
I am unaware of the current position of the strategy or whether it is to go out for consultation again, but I know that most of our members have never heard of 'Strategy 2010.' Clearly economic development strategy is 100% linked to addressing poverty in this country.
1480.
Mr Deery: We could debate what constitutes consultation, but part of the UK Commission is looking at the process of consultation. Much consultation takes place, but what is important is whether what has been said is listened to and referred to in the final document, however that is a debate for another day.
1481.
From a community point of view we have made it clear that there are many local community forums made up of groups. I see myself as more of a connector than a representative, and if I could connect up both sides and let people know what is happening, then the consultation process would benefit, as would the concept of the capacity build.
1482.
Often with these documents an advertisem*nt in the paper invites consultation by written submission. That is fine, but we do not have the capacity to analyse it or the resources to train people to do it, and so with a document such as this - and I suppose that the draft is the same - we do not have the expertise to bring it to the people. If we were given adequate resources, then perhaps we could make good submissions that come from the grass roots. That is essential to the concept of capacity building.
1483.
I am not trying to denigrate any consultation process, but it is all very well having a consultation at a place like the Stormont Hotel and inviting the good and worthy; they will bring it back to the larger organisations, but who brings it back to the community? I am not trying to be flippant, but if we had asked people at any bus stop in the Six Counties this morning whether they are familiar with the 'Strategy 2010' document, very few would be. We know that not everyone can be consulted, but perhaps there is a new way of doing it through connectors rather than inviting a list of participants from large organisations to a nice hotel.
1484.
We would be supportive of anything to help the long-term unemployed, for example.
1485.
You have to listen to people who are unemployed. I have been unemployed for a long time, and you must listen to what we are saying. It is going to affect people in north Belfast and isolated rural areas. Until you hear what they are saying, then you only have one half of the story.
1486.
Ms McKeown: There must be a recognition that it has happened. No one is going to be upset about the relevant players saying "Maybe we did not do the consultation, the involvement or the participation the way we should have". The key to the whole thing is participation. We are trying to create a model of active participation from citizens in the decisions that affect our daily lives. That means people taking responsibility for those decisions. There must be resourcing and technical assistance to enable that to happen. If we look at the level of social partnership, for example, we are trying very hard in Northern Ireland to create cohesive social partnership. We are conscious of the fact that we are doing it on a voluntary basis without real resources and without the kind of back-up necessary to progress.
1487.
For at least two decades there have been genuine attempts at local community level to deal with issues linked closely to the vision. How to tackle the gaps in knowledge-based skills and education; how to encourage indigenous development; how to convince investors or companies to locate. We have not tapped into that sufficiently.
1488.
There are many people across Northern Ireland who have already made a big contribution and continue to do so. Had they been linked into this from the beginning, we may have seen a different set of recommendations or an adjustment of the targets, because there is this holistic approach. From our own perspective as a public sector trade union, we have to stop saying that public is bad and private is good. We must stop this kind of strategy and instead start to recognise indicators that should be developed about whether we are going to have a successful, vibrant economy in 10 years' time. We should include things about how people's health has progressed; how their well-being and education base has progressed; how where they live has progressed and whether they have got an opportunity to get a decent job at the end of it.
1489.
We can certainly overlay that with all the sophisticated economic development language around objectives, targets and indicators. That is the bottom line. Will we, in 10 years' time, as a result of the recommendations and the targets in 'Strategy 2010', have a place that is better for everybody? Or will we have a place that will show some development on some of the targets, but, on the whole, no significant or better quality of life? Special attention must be paid not just to those citizens who are marginalised or excluded, but to everybody else. There has to be some imaginative and innovative way of involving local people, constituencies and pressure groups in what is our contribution to developing our economy. The key issue would be to say "Is it written in stone?". We believe it is not. The difficulty is that it is behaving as if it is, and the 10 targets and the 62 recommendations, which have not changed as a result of consultation, stay as they are. It is time to be up-front about how flexible this is.
1490.
Mr Neeson: Some of us were part of the delegation to the United States of America, and we were in Denver whenever TeleTech made its announcement. As that is your area, Mr Deery, how do you view such a project? How do you think it will benefit such areas as Duncairn Gardens, New Lodge and Tiger's Bay?.
1491.
Mr Deery: We were delighted when we heard the news of the announcement. I have been talking to people who are long-term unemployed about the factory and telling them of the importance of having IT skills. Whatever jobs become available will require some level of IT skill. We are addressing that issue, but we need the resources to make sure that everyone is aware of the necessity for it. Some people whom I have spoken to do not realise the importance of having a level of IT skill, but I am telling them that they do need it, and other people should be telling them the same. All application forms will be checked for some sort of basic computer skills. However, before we get people to even look at computers there is a big problem with adult literacy.
1492.
It is a well-documented fact from the Worker's Educational Association that there is a problem with adult literacy, and it has to be addressed. But once again the resources must be made available to work out this problem in that defined area, because it is so close to the factory on both sides of the peace line. In this area there is not only the workforce for the factory, but also a pool of workers to apply for new jobs as they become available.
1493.
While we welcome the announcement, we see that there is a great deal of training to be done. The people who will be running the factory have said that they will need basic IT skills.
1494.
I do not wish to pull at the heartstrings, but I have been long-term unemployed, so I know how it affects you and how it affects your psyche. There is a lot of work to be done to get people to have even the capacity and esteem to apply for these jobs.
1495.
But it is great news and has given a boost to the community. The community feels that it has played a part in it by meeting different people and supporting it. It is indicative of how things can be worked out. It is a partnership - not just economics on its own. You need the social cohesion to make it work.
1496.
Ms Conlon: I live in that area, and I know a lot of people who hope to get jobs in the factory. However, if they do take up employment in the factory or elsewhere, they will automatically lose their housing benefit. Most of these people are in Housing Executive properties, and the rent is £45 or £50 per week, and you have to be earning good money to afford that. I know that the Northern Ireland Assembly cannot deal with this issue, but it is a problem that is facing people in the area - can they afford to take up the employment even if they have the skills?
1497.
Ms McKeown: This is an increasing problem that we have identified. We had thought that we had seen the end of the phantom economy or the black economy as it has been called. But now we see its rebirth, and we are seeing it in places it had not been in before. It is in the public sector where it was not before. We are finding it in some of the contracted-out work and in some of the devolved work. It is to do with the low pay base that we have and the fact that we have still got such a significant block of people in Northern Ireland living on or below the poverty line or within the poverty trap. This is why they are unable to move away from the benefits system and get into the real world of work. It is a serious issue that has to be addressed as part of our economic strategy and vision for the future.
1498.
Dr O'Hagan: Patricia, you spoke earlier about different targets and recommendations in relation to this, and you said that what was in 'Strategy 2010' was inadequate in the light of the new statutory obligations. I just want you to be more specific about that. What policies and targets and recommendations should there be?
1499.
Ms McKeown: I will show you in graphical form. I am privileged, as a member of the Economic Development Forum to have a colour-coded copy of 'Strategy 2010.' These are the key themes, and these are the 62 recommendations. The blue section refers to equality and social cohesion. The four recommendations include the Forum and the Economic Development Forum, in terms of what, in fact, should be an overarching theme. There needs to be a genuine equality impact assessment of where we are in terms of our economic development, or lack of it. If recommendations or action plans are going to be promulgated, then they also need that kind of impact assessment applied to them. At least that would tell us something. I hope we are entering an era of the honest impact assessment - not like those of the past which papered over the cracks and said that things were not as bad as they looked. It is much more important to say that things are bad in a particular area; we are being upfront about it; and what we have really got to do is create a strategy to address it.
1500.
We were extremely concerned that the strategy itself was so inadequate on the very areas that Europe would expect would be included. That was reflected later in the types of frameworks that were drawn up around European funding. Gender impact is not there, and that is an area Europe is saying should be looked at. In Northern Ireland, we know that we have a range of other constituencies and groups to look at, and there is a statutory duty to do that.
1501.
I asked the Minister about this at the last meeting. I was particularly concerned that there had been no impact assessment carried out on the second strategy, 'Shaping Our Future'. That strategy is begging for an impact assessment. If you are going to develop a strategy to earmark key locations, cities, towns and corridors in Northern Ireland as key areas into which you will pump major resources to create economic development, then you have to be very clear before you start that work that you have done a real impact assessment. Statutory duty requires that that issue be impact assessed urgently. The Minister for Enterprise, Trade and Investment confirmed at the last meeting that there would be an impact assessment carried out, but I do not know if work has commenced yet.
1502.
By carrying out an impact assessment we can get back to those people who wanted to be consulted but felt that they were not consulted first time around. Impact assessment cannot be a desk exercise. One element has to be scholarly research and analysis, but a very significant proportion has to include participation so that the gaps in knowledge are filled in by people on the ground.
1503.
Dr O'Hagan: Do you think that the whole debate on equality of opportunity should be moved forward in a sense that we are moving towards equality of outcome?
1504.
Ms McKeown: I think that is where the difficulties with targets come in. If we are thinking about real outcomes in the future, what will we measure them against? We have not really got a baseline in 'Strategy 2010' as it stands, because we have not carried out an analysis of the past. We have not looked at what worked and what did not work. We have not looked at where we would be in ten years if we did not have 'Strategy 2010.' However, some people have done that. One of the disturbing things is that the Northern Ireland Economic Development Council carried out work and did make submissions on the matter. They provided details of the current position in Northern Ireland on wages. 'Strategy 2010' provided the target for 10 years' time, however the analysis by Cambridge economists is that we are going to be in a position where we are lower than we are at the minute.
1505.
All the indicators of the good work that has been done have not been translated into this or amended this in any way. You do need to start thinking about outcomes. The impact analysis must demonstrate where the problems and inequalities are and then come up with some kind of agreed reasonable outcomes. Citizens will be very reasonable; people will wait - just like waiting for hospital operations. If they find out that the reason they are waiting is not an irrational one or that there is somebody worse off, then they can be very reasonable. It is not being told, not included or not knowing why something is happening that causes you to switch off or just be highly critical of it.
1506.
I have been through the various phases of the Economic Development Forum. It started with John McFall, before devolution, and it then transmuted with devolution. There have not been many meetings and only three Ministers have been involved. Obviously the Minister for Enterprise, Trade and Investment is the key Minister, because that is his territory. It has been absolutely right that the Minister for Regional Development and the Minister of Higher and Further Education, Training and Employment have been in the forum for some of these recommendations. However, I cannot envisage this working without all Ministers being involved, because there has to be a holistic approach to our economic and social development. It is not the economy out there in a box with these other things happening around it; it has to be a collective approach. That is one of the things we are going to be saying at the review.
1507.
Mr Deery: May I say something about quality and New TSN? Maybe it is a perception, but it seems that these have been mentioned as afterthoughts and can be treated as sound bites. Investors and funders should have some way of saying, when they do put money into areas, how it addressed New TSN, promoting social inclusion, equality and the human rights issue. It should not be just put in documents. The bottom line is that you put money in there, but how did you actually address these issues and these principles? People have been saying that 'New TSN is old TSN revamped; that was never adhered to, so who is going to make sure that this is adhered to?'
1508.
Ms McKeown: It is another point around outcomes that we would make. This is an issue that has been very important in Ms Conlon's work. If we are going to address the poverty problem and build social cohesion - the pre-requisite for a sound economy - then somebody has got to take real responsibility for that within the current governance of Northern Ireland. At the minute nobody has, and that is disturbing.
1509.
Ms Conlon: During the suspension of the Assembly, our organisation wrote to Mr Mandelson asking for clarification over which of the new ten Government Departments has policy responsibility for poverty, not for social inclusion or all these terms that disguise it. We wrote to him in March and followed it up with phone calls. Over the summer, 80 of our member organisations have written the same letter to the Office of the First and the Deputy First Minister. Nobody has been able to tell us which Department will take policy responsibility for poverty issues. We believe that poverty crosses all Departments; it is rural, education and housing, et cetera. At the end of the day somebody has to tell us to whom we go. They cannot say it is the New TSN unit, because we have been in that battle before. The New TSN unit has no resources. That is where we are at with the Assembly over the issue of poverty.
1510.
Mr McClarty: According to your submission, you do not believe 'Strategy 2010' draws on the work of IBEC and the CBI who are trying to build North/South networks. What gains do you expect from the development of such cross-border networks?
1511.
Ms McKeown: As the Irish Congress of Trade Unions, we are also part of a North/South network with IBEC and the CBI, which we view as an important social partnership. More research must be conducted on what development the links could produce. Some work is being done at the moment, for example, a study is now being completed which assesses consumer needs in new and information technology, something which one hopes may address some of the real deficits in Northern Ireland's use of e-commerce, which is presently very bad.
1512.
The document discusses work on energy policy but not transport. It is a fact of life at the moment that road hauliers are re-registering in the Republic of Ireland, because they find themselves uncompetitive owing to the price of petrol. There should not be this competitive approach, for there is room for collaboration.
1513.
I imagine the networks between IBEC and the CBI and the kind of links being produced between them and Congress as a social partner will lead on to work with the Governments on special measures which might be introduced to deal with the problems we face. A great deal of other work is going on now in places like the public sector, where people are looking at matters such as the recent ambulance review, about most of which we have been fairly critical. However, elements of it make sense, for example, where those running services suggest that they could be shared in border areas. Could we be sensible about public expenditure and share some of the services with better quality all round and a shared bill? Those kinds of things are going on.
1514.
Serious work is being carried out between IBEC and the CBI, for business is not stupid. It must profit and look at the best and most effective ways of doing so. We want them to do it in co-operation with us, for along with making profit and generating wealth, we wish to see citizens emerging from poverty with decent jobs and prospects. That must be developed.
1515.
The document itself does not honestly admit that there are different schools of thought. Some people in Northern Ireland see our economy's future tied to the fact that we are part of the UK and feel that everything must go in that direction. Some people believe it must have a North/South dimension rather than merely East/West. That was not argued out fully enough, but we all know and should be upfront and honest about it. We do not see how we can achieve global, European, or sub-European vibrancy in Northern Ireland if we do not look both east and south.
1516.
Social partners are increasingly identifying particular problems. Let us take the last budget, for example. On each occasion, we suffer from a policy imposed across the board. As it hits Northern Ireland, it is starting to cause very serious problems for economic development and, indeed, for the future of those already here, the price of petrol being but one.
1517.
We should not go in for some of the short-term measures mentioned in the document, such as cutting the rate of corporation tax for five years to attract inward investment and then raising it again. We should not jump in there until there is an analysis of what happened when those things were done before. What actually happened when we had special enterprise zones or tax-free zones for limited periods of time? What happened, not just to inward investment and local growth, but to personal taxation? Has any of that been proved to be effective?
1518.
If some things did work, let us look at those as possible recommendations. If other things did not work, why are we bringing them back again? If there are special things that can be done, they may be outwith the power of the Assembly and the Executive. I do not know if you have the ability to get into special deals with elements of taxation. Perhaps that is something to be explored. I can think of someone who is going to tell you that you do not have that power, but it is worth exploring. It may be that arrangements like that can be struck. Business understands that we have to look in all directions.
1519.
Ms Lewsley: In your opening remarks and some of the answers that you gave to Dara O'Hagan you have answered my question. It was about the recommendations on the targets and the lack of a specific target on equality. Is there any particular target that will never be achievable?
1520.
Ms McKeown: There is a disturbing difference between the targets set and the work done by the Northern Ireland Economic Council. Let us take GDP per capita in Northern Ireland relative to the UK. In 1998/99 the ratio was 80%. The desired target in this strategy is to reach 90% in ten years' time. The work done by the Northern Ireland Economic Council, based on work done at Cambridge, says that in ten years' time we are likely to be at 74.4%. We are going to be worse off, not better.
1521.
Let us take average wages as a percentage of the UK figure. The projections show that we will decline from 86% to 84.3% over the next ten years, yet 'Strategy 2010' predicts that the figure will be 91%. I do not have any problem with 'Strategy 2010' saying that we want to be at 91%. My problem is with the lack of action plans to get us there.
1522.
We have not addressed issues like the state of poverty. What is causing low wages? What actions can be taken to address that? We are not going to get to 91% of the UK average wage unless we say that a very small block of people will be very wealthy in 10 years' time and push the average up. A big block of citizens will, in fact, be in a worse position than they are today.
1523.
The same thing happens on the projections of employment growth and our share of high-technology industries, and, indeed, long-term unemployment. We question why that kind of work has not been translated into a change in the targets. Why was that just set aside? We should always look to the best work. We should spend the money that needs to be spent to get the best analysis in order to work out, in an informed way, where we should be going in the future. Nobody has given a satisfactory explanation as to why none of the 10 targets and 62 recommendations has changed, despite everything that was said. The worrying question is - and it is very important for the Committee to take this on board - is this written in stone, or is it not? I believe it is not, but I cannot get away from the fact that every time I attend a meeting of the Economic Development Forum, I find that nothing has changed.
1524.
Ms Morrice: I would like to nail you down to specific policy proposals relating to how we enter the global market. That is very important and appropriate. You talk about "global", "European", "vibrant", "national" and "local", but I would appreciate your suggestions on how we can improve the competitiveness of the economy in the global context.
1525.
Ms McKeown: We need to decide on what we mean by "competitiveness". If it means a competitive edge derived from a low-pay, low-wage economy, we could certainly be competitive, but we would not sign up to the price of achieving that competitiveness. Worthy work has been done on deciding what "competitiveness" means.
1526.
We mentioned some general points. There is currently a dramatically increased volume in world trade. There is pressure to be price-competitive, and competitiveness is now seen as the cornerstone of economic policies. We know that international production centres are being looked at, and investment is planned where the long-term return is going to be the greatest. For Northern Ireland this could mean entering a new era of the multinationals coming in, raising expectations, and then saying goodbye to us as soon as they decide on a better location with a more acceptable profit margin. They would leave our devastated people and economy in their wake.
1527.
Much work is being done in Europe on competitiveness and on how it can be achieved. People are asking if there is a future in long-term subsidies, and the general view is that there is not. They are also saying that the quality of human resources needs to be looked at - the knowledge and skills bases and how people are being treated. They are considering what achieves economic viability. It is not the low-wage, low-production workforce. We believe that it is the trained, paid, vibrant and involved workforce that can give us the edge.
1528.
There is also the move towards genuine social partnership. Many partnership models exist, and one could be critical of most of them. For example, we do not think that the model of social partnership in the Republic of Ireland is the answer to our economic problems. It is a flawed social partnership, but we cannot move away from the fact that there is a definite correlation between that partnership and some of the economic boom in the Republic.
1529.
However, the people in the Republic would be the first to say "If we knew what it was that we did right, we would market it." They do not really know what they did right. However, that and other models seem to go hand in hand with sounder economic development. Across Europe, and further afield, there is a recognition that equality and social inclusion are prerequisites for a developing economy. That is a new concept for us. We have emerged from 20 years of the Thatcherite view of rolling back the state and trying to achieve a high profit margin without worrying too much about the rights and needs of the people - the units of production. We did not end up in a very good or healthy state after that.
1530.
Extremely detailed work has been done on this in Europe and further afield, and there are developing models.
1531.
These should appear in our own strategy, which should at least acknowledge that they exist, refer to them, do some analysis of them and say "Is that a relevant model that might assist?"
1532.
Ms Morrice: I want to make an additional point. I read in an article recently advice from an economist, whose name I cannot remember, on the issue of public sector pension funds in Northern Ireland. The article discussed where funds are being used and whether this money should be invested only in Northern Ireland. Do you know anything about that? Have you a role to play in that?
1533.
Ms McKeown: Public sector pension funds across the UK, and not just in Northern Ireland, are one of the world's best kept secrets.
1534.
Ms Morrice: Is there a way that you can argue that they should be invested here?
1535.
Ms McKeown: We are engaged in this at the moment. This issue is very important in places like the US, where the future development of a company depends on where the pension scheme stakeholders decide to invest the money. It is something of a mystery where our public sector pension funds are invested. There is work afoot at the moment. Preliminary work has focused on people who deal with issues like debt in the developing world. Organisations like War on Want questioned whether our money was being invested in some of the places and some of the multinationals who are responsible for debt, or who are contributing to torture or breach of human rights. This has not yet resulted in people in the UK saying "Well, hold on a wee minute, is this money actually going to support local community economic development or indigenous industry?"
1536.
Ms Morrice: Has UNISON got a role to play in that?
1537.
Ms McKeown: Very much so, yes.
1538.
Mr Neeson: On a subject related to my last intervention: in your submission you say that capacity building is essential for sustainable progress. What sort of action could the Government take to create the capacity building measures that you are looking for, in particular for the long-term unemployed?
1539.
Ms McKeown: I will outline the fears first, and then Jim will discuss the capacity issues. This is the time when the Government should be very upfront and pivotal in generating the resources to enable capacity development at the range of levels I have talked about - from the local community level through to the social partnership level. That strategy is not in place yet. Our big fear is that the small amount of capacity building that has been available over the last few years has derived mainly from things like the European Peace and Reconciliation Programme. Under the currently constituted programme, it looks as though there will be considerably fewer capacity building resources available - particularly for local communities - in comparison to the past couple of years. This is very disturbing, because at a time that we should be thinking about real participation of the groups and sectors and citizens, resources - which were not terribly adequate anyway - seem to be decreasing. Central Government should not rely exclusively on some European money coming in, but even where this money exists, we cannot afford to make cutbacks at the moment. Ordinary people are already making contributions through the potential economic development of the future, although they do not necessarily know where they are supposed to fit in to the plan. How do we create the innovative kind of structures that enable people to do this? Jim certainly has undertaken a lot of work in this area - he wears many hats, having worked on both European and community issues.
1540.
Mr Deery: Capacity building is a phrase that is bandied about. We have come the full circle and looked at the barriers to people's taking up training, getting involved and participating in the social economy and community development and going for jobs. Through a scheme called the New Start Millennium Fund we looked at people who do not get involved, who left school at 16 - adult education returnees - and we found that a big barrier was childcare. It seems to be mentioned everywhere, but no adequate resources are put into this area.
1541.
People who may be on benefits are expected to attend courses only to find that they need a book costing £30. We have established a scheme in north Belfast for 90 participants, and we have looked at the whole enchilada of possible barriers and have tried to pre-empt them in that we pay for books, lunch, (if needed), transport and fees.
1542.
This has worked for people who had no experience of being involved in such courses but who wanted to study journalism, for example. Difficulties with literacy was a problem for many, so we have initiated a one-to-one program to deal with these cases. We are trying to get the whole picture. Many very good courses are available, but take-up has been low, particularly among the long-term unemployed. We must look at capacity building and the barriers to it, rather than assume that because the courses are not being filled people do not want training, adult education or jobs. We must find out what the barriers are.
1543.
Speaking from my own experience, I was helped by a community association to do a diploma at Queen's University. It paid for the course and helped me with books and practical advice. I was given the chance, and I took it to build my capacity. Without that support I would not have been able to do it. That is looking at the whole picture, rather than talking about capacity building, which is one of those concepts that people find hard to understand. It is a journey, and we want to make sure that we know where people start, because our definition of success might be different from that of someone on the outside. If we can show someone how to fill in an application form, that, for us, is success; others might not see that as success. Perhaps getting involved enables someone to read and write who has never written anything before - that is a big success.
1544.
Ms McKeown: It also makes sense if the journey is both an individual and a collaborative one. There must be capacity building and development around the formation of partnerships from local level onwards. Despite its flaws, the district partnership model in the Peace and Reconciliation Programme has made a difference. At least it has brought together bedfellows who were not used to doing business together, such as politicians, community activists and trade unionists. Whether or not they achieved their goals, the model is still worth considering.
1545.
Not enough attention has been paid in 'Strategy 2010' to developing and equipping all those partnerships with technical assistance, capacity building and resourcing. They need the wherewithal to start to understand. What do we do if we have set someone on the wrong journey? What should I do when Rank Xerox tells me that its factory has been sited somewhere else because our education system did not produce children with two modern languages and IT skills? They considered that a prerequisite for location. That may not be the whole truth, but it is part of it.
1546.
Mr Neeson: Do you think that there is a strong enough partnership between politicians and the social partners, and what could be done to strengthen it?
1547.
Ms McKeown: No, because we are in a period of transition. For a long time our relationship has consisted of asking each other for support. We are now in a completely different situation. Power has been transferred, so we must build a relationship based on the fact that you might be faced with difficulties on things on which we had previously agreed but on which you now have to make difficult decisions.
1548.
Now the buck stops here. We need to develop a new relationship.
1549.
We are certainly taxing our brains at the minute as to the nature of this new relationship. What we do know is that the Good Friday Agreement makes it clear that there is a role for the social partners. We are also very clear that the bodies represented in the Concordia group - Irish Congress, the CBI, the farming interests and the community voluntary sector - are the four pillars of social partnership. At the moment there is a great deal of confusion about what social partnership is - some people think it is just anybody or everybody. We are talking about specific models of social partnership. Some have made a significant contribution to economic and social development in other places, and we have got to start thinking much more clearly about that. It is not just a list of people who want to be in the room. It is the people who represent the various pillars that need to be in the room in order to try to get to a stage of agreement that allows us to co-operatively and collaboratively advance the issue, and that is very important for us. Also, as the social partners, we are not gatekeepers. We need to be resourced, to be sure that we are representing the views of our respective constituencies, that we are involving those constituencies and in a position to report back to them.
1550.
None of us - CBI has the same problem, as has ICTU and the community voluntary sector - could honestly say to you at the minute that we have that sussed. We are still looking for new models of how we cope with that. We have different relationships with each other.
1551.
Ms Conlon: We are a member organisation, a network, and we represent many community groups in rural and urban areas. I know our members really value the relationships we have built up with several MLAs. Last year we held a question-and-answer debate and MsLewsley was one who kindly agreed to sit on the panel. Seven political parties were represented, and our members were given the opportunity to ask MLAs questions about care allowances, and so on. They never had that opportunity before, and they really really valued it. We are working hard at strengthening the relationships.
1552.
Mr Clyde: You claim in your submission that regions need to explore how far third-system organisations can play a full role. Can you please explain this view?
1553.
Ms McKeown: Third-system organisations are either private, not-for-profit organisations or voluntary community-type, not-for-profit organisations who have played a role, and still have a role to play, in economic development. With regard to Northern Ireland, I am not quite sure where we would be today if our community voluntary sector had not been itself of the third-system sector and had it not also been able to call on those elements of the private, not-for-profit sector that have been able to grant-aid it and assist it. You cannot even get a local community economic development group off the ground unless you have got a bit of a resource to do that.
1554.
I do not think there has been enough thought given to where all of that sits in our economic development strategy. It is not good enough just to say that we pull in the community voluntary sector as a social partner. In Northern Ireland that does not incorporate some of the other elements of third systems. The funders are not in there, and these are the kind of organisations that have made a significant contribution to us. I would have thought they would have something to say about us, and should be engaged.
1555.
Has any work been done there with organisations like that? Do you think that the kind of financial contributions over time have actually made a difference and has that been a difference worth having? What might the difference be in the future if your views were sought or you were involved in partnerships too? It is really that kind of work. We are all thinking if we would class RichardBranson in that category if he gets the lottery concession and would we want to invite him over in a hurry? My colleague and his development forum already wrote to him a year ago, so they are ahead of us.
1556.
Have I described Concordia? Concordia is the name of the social partnership grouping which we established some three years ago with the CBI, the farming interests, the community voluntary sector and the trade union movement. We see that as a third- system approach. Our first project was to work on something that we felt we could all sign up to and would not necessarily have immediate conflicts about, so we went for strategies to combat long-term unemployment. We did work which was heralded by Europe as an innovative kind of programme. What we were trying to demonstrate in that project was the clear link between social cohesion and economic development. Here is one key area that we could start to look at and think about how we might collaboratively improve that situation. That kind of system can be expanded to many other areas of economic development.
1557.
So the problem at the minute is the knowledge and experience of the organisations who are in that third system. Do we need the capacity building to be able to engage in this? I find it very difficult to be part of an economic development forum without knowing that there are world-class, independent analysts doing the work behind the scenes. I think there should be, yet there are not.
1558.
Mr Attwood: You mentioned that 80 of your member organisations had written to the Office of the First Minister and the Deputy First Minister in relation to where poverty strategy centred. That is probably going to be part of the programme for government that is currently under negotiation if it is going to be a consultation process. The head of the Equality Unit has just been advertised, and that might be one of the mechanisms to develop a strategy for addressing issues. In any case, I will bring that to the attention of the Deputy First Minister and forward you a reply.
1559.
There is the question concerning poverty and average wages in the North and that there might be some management of figures relating to what could happen in the next eight or nine years. There is some evidence of this from the South, without going into any great analysis of the Celtic Tiger. There is also some evidence of a social partnership model and wage agreements arising within the focus of the partnership model down there. That has created certainty in financial and economic planning on an ongoing basis which ensures that investment and economic planning can be based on a sure footing. Through wage negotiation or perhaps some restraint from it, employees and their representative organisations have uplifted the economy.
1560.
That has brought about the economic advantages that we see in the South at the moment, without going into whether that is transitional or not. Do you have any observations on that in context with the Concordia model?
1561.
Ms McKeown: We would not wholly subscribe to the view, but there are elements of it. There is a definite correlation, as I have said, between the formation of that kind of a partnership and economic stability and economic growth. More taxing on us recently have been questions around whether the form of partnership has been to the social and economic advantage of all. The answer to that is "no", because there has been a growing gulf between the people living in poverty, on or below the line, and those who are economically prospering.
1562.
To be fair to that partnership, including the Government, certainly the UK Government does not view social partnership as a thing which it is a social partner in. We view it as something that the Government is a social partner in. The partnership in the South has at least, though not yet successfully, started to tackle exclusion and look at who has not benefited from economic growth and well-being and what has to be done about that. In any kind of dividing out of the spoils, if there are some people who are losing very badly, and there is a limited pot, then some people have to be asked to wait for a while, whilst others are brought up to a decent standard. That is when conflict and tension arise.
1563.
The model probably works very well at the highest of levels, but it does not really translate into civic life - it is not commonly seen across the towns, villages and cities that social partnership is the way to go. There is probably a more advanced understanding in some of our most disadvantaged communities in Northern Ireland of the need for a kind of partnership model than is yet to be developed in the Republic. When we get into local economic development and what might be innovative, there is a long way to go.
1564.
There is a way of looking at these different models and saying that maybe we could create a hybrid that takes the best of what works and develops that, and then produces a vision that we can sign up to but gives us a different route to get there.
1565.
Ms Conlon: You may be aware that in the South of Ireland they have an official anti-poverty strategy as well as economic development strategies, and, while it is not 100% perfect, I think we should have a look at it and learn from it. We are holding an event in two weeks' time at which someone from Dublin will talk about the strengths and weaknesses in the strategy. Also someone from Glasgow will talk about what they are doing and how they are lobbying the Scottish Parliament for anti-poverty measures. We can learn from what is happening in the South and in Scotland.
1566.
My colleague in Dublin participated in the Partnership 2000 negotiations as a member of the voluntary and community sector pillar, and he really valued the experience. He wrote an article for our newspaper, and he said that they do not have sufficient resources in the community sector. He works in an office with a part-time administration worker, and he spends most of his time in the Dáil standing around waiting for working groups, et cetera. They need more resources to feel a full partner in that. That was his experience.
1567.
Mr Deery: One of the best partnerships we have had in the past year was with a private sector company, the Lottery's Board and ourselves to build a playground on a peaceline. It was good because in the private sector, a firm obviously has to make a profit and men's wages must get paid, so there was no conflict, for we knew that they were in it to get the contract, and they helped us out. The lottery funded it, and we built the playground.
1568.
I do not have a problem with partners, and particularly with the private sector. I had innate prejudices myself, but they were perceptions and misconceptions. The people who own firms have to make a living also; they have to make a profit. If people can go in with that sort of synopsis on the table and work together to regenerate our areas, that is a way forward and a strategy that should be put in place.
1569.
The Chairperson: Thank you for the very full way that you have answered all of our questions. We will take on board what you have said to us.
TOP
MINUTES OF EVIDENCE
WEDNESDAY 6 SEPTEMBER 2000
Members Present:
Mr P Doherty (Chairperson)
Mr Neeson (Deputy Chairperson)
Mr Attwood
Mr Clyde
Ms Lewsley
Mr McClarty
Ms Morrice
Dr O'Hagan
Witnesses:
Mr H Hastings, President ) Northern Ireland
Mr J Mooney, Hotel Group ) Hotels
Mr C Shillington, Director General ) Federation
1570.
The Chairperson: I would like to welcome you all here today.
1571.
Mr Hastings: I am president of the Northern Ireland Hotels Federation. Thank you for the opportunity to talk to this Committee today. This is an area of key importance to ourselves and to the Committee. The Northern Ireland Hotels Federation represents a wide diversity of members across the Province. We have a geographic spread of membership and also a diversity in the size of membership. We represent members in public lobbying and also provide services such as advice and education to our members. We run conferences in the same way as a trade association body.
1572.
While there are some details with which we take issue, we welcome the broad underlying themes of 'Strategy 2010' and, especially, the emphasis on enterprise, self-help, the private sector, opportunities and the identification of tourism as a growth area.
1573.
With regard to tourism specifically, 'Strategy 2010' was a little vague. We were concerned that as a private sector organisation we should be taking the themes underlying 'Strategy2010' and trying to lead the debate on the future of tourism. So during the summer we commissioned a survey of all our members. This was a very widespread survey which was carried out independently by PricewaterhouseCoopers. The aim of the survey was to produce a report. We hope to have preliminary findings in October to present to our annual exhibition and conference to try to influence the shape of the programme for government and the discussions on that.
1574.
This exercise shows the leadership role that we want to play within the industry. It also demonstrates the lack of detailed knowledge about the sector that there has been in the past. From an industry point of view, we hope the responses will help to shape the debate.
1575.
Mr Clyde: What Government initiatives would you like to see taken to give active support to the regional tourism organisations (RTOs)?
1576.
Mr Hastings: Five regional tourism organisations have been set up. Those of you who are local councillors will have been involved in them. They will become more important once the remit of the North/South tourism body is identified and it becomes clearer what will be left with the Northern Ireland Tourist Board. In principle, we welcome the establishment of these organisations. My colleague Mr Mooney sits on one.
1577.
Mr Mooney: The important thing in life is to keep things simple. Always work from a simple base; that way you can get greater growth. First, we must look at the customer. The customer is king. We must break down as many walls as possible so that we can get directly to our customers and give them what they want.
1578.
With that in mind, the RTOs are trying to ensure that the customer is looked after properly. They are going into greater depth. For instance, if a ship is coming in with 3,000 people, the RTOs are doing a survey to see how much money those people are spending in the Belfast area. They are finding out what those people want and need.
1579.
We welcome the RTOs and the focus that is being given to them. We ask only that they be given the chance to get better. They need to clarify their role. There is obvious duplication between the RTOs and the Tourist Board. There is even duplication between the various RTOs themselves. We want to ensure that there is no wastage of money, time and effort. It is a new concept, and it is starting to work well. It works well in other countries. Given the right help, it could progress very well indeed.
1580.
Mr Shillington: I agree with that. We are entering a period of substantial restructuring. As far as this body is concerned, we want to reach solutions that help to sell Northern Ireland as effectively as possible and meet customer needs. That is what it is all about. We must make sure that any organisation, be it an RTO or a local council, adds value, avoids duplication and does the job as well as it can be done. We have no political views. We are strictly neutral, and we just want to see the best possible outcome.
1581.
Mr Attwood: You have already mentioned, on a couple of occasions, the need to avoid duplication. We now have the RTOs, the Northern Ireland Tourist Industry Confederation (NITIC) and the various sectoral bodies representing each branch as well as the Northern Ireland Tourist Board. Is that not self-evident duplication?
1582.
I have a second question. Your observations on the Tourist Board would be helpful. When the Minister was here some months ago, he indicated that he had certain ideas about it. We have not yet quite determined if he meant this to mean merely ideas or a euphemism for concerns. I should like to know if you have reviewed the Northern Ireland Tourist Board or if you have concerns about it, since that is one of the issues about which we are concerned. It would be helpful if you in particular could indicate what you see as its current strengths and weaknesses and how the latter could be rectified.
1583.
Mr Hastings: I should like to answer your point about duplication. It is very hard to define tourism, and hospitality is very widely drawn. Many different sectional interests are involved. People necessarily form small groups and associations. Historically, many players in the tourism industry have been in defensive mode, since they were not sufficiently profitable businesses. That has not led people to have a common cause for economic growth, which is a great difficulty.
1584.
Quite often in the past, the Government have helped support some of these fledgling bodies, perhaps not always for the best. Those that truly speak for their members will be able to derive from them the income they need to survive and make the case that needs to be made. One of my mantras for the Hotel Federation is that we should be both financially and intellectually independent of the Government, a good motto for any trade association. We wish to co-operate with as many others as possible, recognising that there is not always goal congruency between us. For instance, Mr Mooney has told us about the cruise liner coming in. From a tourism point of view, that is wonderful, but it will make little impact on Hotel Federation members.
1585.
Marrying the wider goal congruency of tourism with all the players involved is a challenge. The principle which established the NITIC underlines the need to work together, but that body has not yet achieved enough credibility among its constituent members to act in the role intended for it.
1586.
Moving on to the point you make about the Northern Ireland Tourist Board - obviously the body with which we work most closely - on the one hand, there is a need for our members to sustain profitable businesses. On the other hand, there is the wider economic need to seize the opportunity for growth represented by tourism. There is huge goal congruency, for if we have successful members, that will in itself feed economic growth. The Tourist Board represents the Government end of delivery, while we try to deliver on the private- sector end. We shall only do that in partnership, the essence of which is obviously trust and co-operation.
1587.
We therefore applaud what we can do in conjunction with the Northern Ireland Tourist Board putting us on the same footing. We recognise its role of marketing our industry as paramount. We also appreciate its role in registration, ensuring minimum standards and policing those who should not be part of our industry. We can happily co-operate in that. We have had difficulties in the past over its role as grant providers, since that has brought it into conflict with the industry. In the hands of a recipient, a grant is never half of what he wanted, while in the eyes of all his peers, it is twice as much as he deserved. The Tourist Board stands to win in neither case.
1588.
In the fullness of time, we must ask ourselves how we can create a different set of circ*mstances allowing everything the Tourist Board does to happen with greater goal congruency with the tourism providers. That is the opportunity that exists, perhaps especially in the thoughts now being bandied around about the merging of the family of organisations in the department.
1589.
Mr Shillington: I understand why that question has been asked. I have been brought in recently as a part-time advisory director general, and I have been most impressed by the energy and determination of all hoteliers to make a go of the new opportunities and increased visitor numbers and to provide better standards. We must give leadership and work with others, in particular the Northern Ireland Tourist Board. Not everything is perfect, but the will is there to improve and do the job better for the population as a whole.
1590.
Mr Neeson: Mr Hastings, you strongly support the establishment of a cross-border marketing body to market the island as a tourist destination. However, there is a problem. How do you overcome the fears that some people might have that the tourist industry in Northern Ireland could be overwhelmed by that in the Republic, which is much more developed?
1591.
Mr Hastings: I am not sure what is understood by "overwhelmed". We have to maximise our opportunity, and it has to maximise its. It is evident that there is the opportunity for additional business to emerge from our nearest neighbour in the Republic of Ireland. Any difficulties that we might face will be because of competitive disadvantages - mainly fiscal. We may not be given the same opportunities to re-invest and grow as sustainably and quickly as our nearest neighbours have. We are well aware of the corporation tax advantages that exist for investors in the Republic of Ireland. You are probably less aware of the differential in VAT rates which gives a second competitive advantage to those operating South of the border. We have found, particularly during this summer, in smaller establishments in border areas that there has been the further macro-economic competitive disadvantage of our currency's being so much stronger than the Republic's, and there are a number of structural disadvantages that may mean that operators South of the border will be able to take greater advantage of tourism, visitors and tourism numbers than we can immediately.
1592.
Our members are keen to invest; they see the opportunities that now exist, and they realise that we are likely to have a marked increase in visitor numbers. We wish to market ourselves as a high-quality destination, and if there are more visitors than we can cope with, we would be better served, as an industry and an economy, to take the higher-spending ones if it is in our gift to direct our operations to do so. That is a measure of the opportunity. We are a long way from being overwhelmed, but I think this is a tremendous opportunity.
1593.
We had one million tourists in 1969, but because of the intervening circ*mstances, we did not have one million tourists again until 1985, and last year we had 1·6million. During those intervening years if our economy had grown at the same rate as that in the Republic of Ireland, our 1·6million visitors last year would have been three million, and if it had grown at the same rate as that in Great Britain, our 1·6million would, last year, have been five million. That is a measure of the opportunity that now exists, and with political stability - as evidenced by the fact that we are sitting here - a great deal may happen. The situation is similar to that of waiting for a train to come down the track. We have to be able to maximise the advantage that is coming to the economy.
1594.
Mr Neeson: You have also recommended that a cross-border business development company be established with representatives from the private sector. What incentives would you encourage to establish this initiative and what would be the gains from such a body?
1595.
Mr Mooney: We already work hand in hand with The Irish Hotel Federation, our colleagues in the South, and we have produced a booklet called 'Be Our Guest' in which properties throughout Ireland are marketed. Seventy per cent of our tourist traffic comes up from the South. The true tourists are there, so if we can work together and build up a business to help each other, Northern Ireland would benefit greatly. We need some help in starting that off, such as a seedling grant to try and build up and get moving. For example, 6,000 people recently came from the Shannon region up to Northern Ireland with BrianSummers Travel. Fewer than 100 went down there; it is £49 for the return flight. Surely we can start to work together with our colleagues and encourage that number to come back up here. A group of tourists from Galway said to me last week that they could not understand why they had only seen one Southern registered car over the weekend they were in Northern Ireland. We can benefit by working together and pulling tourists that way. This relates to the issue of marketing.
1596.
There are also the other issues of employment, and, for example, using the Internet. There are so many opportunities there, and if we looked into just a few of them we could do very well.
1597.
Mr Hastings: The nature of the cross-border business development company is akin to the relationship that the CBI has with IBEC in encouraging a private- sector trade association which could promote, if it evolves, a trading company that could sustainably deliver benefits for the private sector/tourism industry on both sides of the border.
1598.
Ms Morrice: I want to thank you for the strawberries. Obviously, the Internet is hugely important in the promotion of tourism worldwide. What do you believe are the measures that the Government should take to promote and use that?
1599.
Mr Hastings: The Government have e-commerce at the heart of their programme at the moment. We would seek to make that a practical reality for operators in the industry. It does not matter how small your bed-and-breakfast accommodation is, if you have access to the Internet, you can market yourself as strongly as any other operator in the world. Earlier this year, we were trying to encourage the Northern Ireland Tourist Board to adopt a very successful scheme taken on board by LEDU last year with the emphasis on "connectivity" - how to get all the operators in the industry on the Web and LEDU had a breathtakingly simple scheme. Participants went out to Dixon's, bought a PC and received training. They produced their receipts and sent LEDU an e-mail as a result of which they were given a grant of approximately £750. Nine hundred LEDU businesses took up that offer within an extraordinarily short time. Perhaps they do not all use this today, but this is an important method of putting the infrastructure in place quickly. As a federation, we need to be able to talk to our members regularly and effectively. If it is difficult for us, how much more difficult must it be for the Government to talk to a much wider and more dispersed group?
1600.
That "connectivity" works not only in helping businesses to bring themselves to market but also by improving the level of co-operation and communication between the Government and the tourist industry. This is vital and we are looking for further initiatives from the Tourist Board and whatever department body could facilitate that.
1601.
Ms Morrice: I understand there is no way any of the hotels in the federation could access that LEDU support.
1602.
Mr Hastings: No. We have to interface because of our arrangements with the Northern Ireland Tourist Board - the LEDU scheme was not available to us. It was a model that we showed to the Tourist Board.
1603.
Ms Morrice: Worth promoting. Thank you.
1604.
The second question is with regard to profitability. Obviously low profitability has been difficult along with the lack of resources. How do you think profitability in the industry could be improved? We have talked about the Web, but what else?
1605.
Mr Hastings: We could talk about it under three headings: weekend occupancy, rates relief and regulation. Most of the property serving businesses are profitable through the week, especially those that have established a corporate market. But the corporate hotels during the week are tourist hotels at weekends. New infrastructure such as the Waterfront Hall has now shown that reasons for people to be in the larger conurbations at weekends as well as through the week can be created.
1606.
The issue is not the profit that can be made from a full bedroom, but rather the cost of having one empty. If we could increase our occupancy rates, we could increase our profitability. The costs run for seven days per week, and too often the rooms are not full for a sufficient number of those days. That is why we applaud the initiatives that deliver things like the Milk Cup, the North West 200, the Millennium Motor Sport Experience and the concerts. That does two things. It improves the profitability which improves an operator's capacity to reinvest. It also does quite a lot for the morale and self-confidence of the wider economy, and especially the tourism economy. There is a double win by encouraging things like that. I know it is not this Department's bailiwick but rather that of the Department of Culture, Arts and Leisure. It is odd that a Province of the size and population of ours does not have a stadium that can deliver big events. Quite often we cannot measure the likes of Belfast to a capital city such as Dublin or London. But we can measure ourselves against Nottingham, Leeds and Bristol, all of which have stadiums delivering events which fill -
1607.
Ms Morrice: Will the Odyssey fill that gap?
1608.
Mr Hastings: We hope that it will go some way to doing that. Whether it will be sufficient or whether there is room for another piece of major infrastructure as well we would like to know. Easter week is normally a very quiet week, but this year we had in the Waterfront Hall the World Irish Dancing Championships. On the day that it moved out, the Irish League of Credit Unions moved in. The estimated spend of those two organisations over that Easter week was £7 million. The Irish League of Credit Unions was booking accommodation for people as far away as Newcastle and Ballymena. That would not have happened without the infrastructure's being in place, and that is a measure of how we can drive profitability by increased occupancy. It is not about room tariffs; it is about creating the demand that will fill the spaces when those spaces exist. That is the first element.
1609.
The second element I want to touch on is rates relief. It was of particular interest to us that tourism fell in the Assembly to the Department of Enterprise, Trade and Investment because in the South or on the mainland we would not come under the DTI; we would come under the Culture/Arts media-type groupings in those jurisdictions. Great play has been made of the industrial importance of tourism, and that is wholly to be welcomed.
1610.
We would like to pinpoint that the rest of manufacturing industry enjoys rates relief, whereas the accommodation-providing sector pays rates of about £5 million per annum into the economy. What we are finding, and this is particularly so this summer with the strength of sterling, is that our members in border areas and small towns and villages are struggling to keep the doors open because the high pound is putting huge cost pressures on them. Rates relief would help them to become financially viable when they are struggling to keep the doors open.
1611.
Secondly, I think for those who are managing to keep the doors open but recognise a better tourist coming round the corner, they will say "I ought to get my premises up to scratch. I can see that I need to refurbish; I need to have repairs carried out; I need to prepare for the future; I do not want to build new bedrooms which would be grant-aidable, I just want to improve and develop what I have." Rates relief would give these people the incentive, the additional profitability to go to the bank manager and say "Can you lend me some money because I have been able to demonstrate a greater profitability as this cost has been removed from my business?". This is another area where increased profitability could be delivered and where further investment could be delivered thereby.
1612.
The third area is regulation and we, like other trade bodies, recognise the need for regulation in our industry in order to protect the consumer. That goes without saying, but the recent report of the Better Regulation Task Force in Great Britain has identified that a new entrant into our industry has to read 1,500 pages of close-typed regulations from about six different Government Departments in order to open premises. That regulation is a disincentive to new entrants into the industry especially with small organisations. It can hold back profitability because the amount of form filling is not matched by the recovery made from customers.
1613.
We may have an opportunity here in Northern Ireland, and this may be something which the Committee may want to recommend, to look at the regulations which exist throughout our industry. Tourism seems to be a small part of each Department. We are part of the Department of the Environment who look after our signage and our rates; we are a part of the Department of Higher and Further Education, Training and Employment; we are a part of the Department of Agriculture and Rural Development who have a large budget for tourism as does this Department; we are a part of the Department of Health, Social Services and Public Safety with the environmental health offices and the food safety legislation. We are a small part of every Department. Joined-up government is a hackneyed clichéd phrase but, as we are a small part of each Department, we struggle to raise the profile of tourism. This is the challenge we have when marketing the opportunities for our industry. The over-regulation, albeit necessary in most cases, does hamper profitability
1614.
Mr Shillington: There is a danger that because Howard Hastings and the Hastings Group and John Mooney and the Mooney Group are involved, this could be seen as the needs of the bigger hoteliers. E-commerce applies much more to the small person - the investment, the need for infrastructure, the need for jobs, the need for training - it is much more about the small independent operator, the risk taker who could be in Ballygawley or Ballykelly, who can create jobs and promote the tourism industry better and thereby improve the opportunities for small hoteliers. This is not about the big people - it is about the whole Province and small groups are even more important than the big groups.
1615.
Ms Lewsley: You have mentioned the potential for an increase in tourism, and we all know the main problem is bed space. We have made some progress in addressing this problem such as rates relief especially for smaller accommodation. You particularly mentioned the urgent need to give some type of short-term support to many of the smaller accommodation providers and the issue here was the low profitability because of the deterioration of building standards due to low investment.
1616.
You talked about a package of assistance - and obviously rates would be part of that package - but what else could you recommend?
1617.
Mr Hastings: We mentioned rates. One of the other things that we welcome - although it does not have a huge budget associated with it at the moment - is that there is an IFI scheme particularly targeted at border areas and at one and two star properties. That scheme is addressing a specific need and I welcome it. I regret that it is in border counties only, because there are others at this table with constituencies where the small one-and two-star operators are equally in need of further investment of that type. That may be something we can look at.
1618.
I would like to see the Government trying to link such investment. They might be able to contribute to standards, both in terms of the star gradings of the properties and also in terms of the delivery of training in those smaller properties where possible. Then there will not only be the physical bricks and mortar return for individuals availing of such assistance, but also a return for the wider economy in terms of a more qualified workforce.
1619.
It is interesting to note that the hotel federation in the South, which already enjoy lower VAT rates than ours - 12.5% as opposed to our 17.5% - is now calling on the Government to lower that rate to 10%. I know it is difficult to foresee that the Chancellor will jump up at the behest of the Northern Ireland Hotels Federation to a similar call to match what is going on in the Republic. However, the Committee should bear in mind that it is something that could create an even greater disparity between ourselves and our nearest neighbour.
1620.
Mr Mooney: Overtime is another issue. Our industry has an image as a poor employer, and that is not the case. What we want - and we have brought it as far as we can, and that is the frustrating part - is a programme for good quality employers. It would include everything, from attracting the right person through every stage to ensuring that a person can get a very good deal. That would benefit the whole industry. If we could get that programme running, we could extend it to the bed and breakfast area, to the catering side and to the whole industry. Very quickly, we would see who is a poor employer and who is a good employer. It would be measurable. Who would win? We would all win. We would dearly love to put that into place.
1621.
Mr McClarty: I have two questions. You say in your submission that one of the major impediments to growth in the industry is the availability of trained staff. What action in your opinion is needed to ensure both adequate entry-level training and also continuing employee development through to senior management level? The second question relates to your recommendation that a review of college-based training is necessary to get the balance between industry needs and employment opportunities. For this to be achieved successfully, what role do you believe the Northern Ireland Hotels Federation could play in aiding the creation of education programmes related to this link?
1622.
Mr Hastings: These questions are vital to everything we need to be concerned with, because it is only through proper recruitment and training of staff that we will be able to raise the standards and profile of the whole industry-and we are coming from a low base. We are coming from a low base not because the good employers are doing it well and get praise for doing it well but because the bad employers continue to attract the bad press, and that continues to get the headlines.
1623.
We are doing a number of things very well but the public and the media perception remains one of 'Fawlty Towers' and the 'Adelphi Hotel', and unfortunately individuals' perceptions are based on their personal experience in the industry when they were students years ago. That definitely is a factor in why children are discouraged from coming in to the industry.
1624.
It is easy for me to say that the Government should solve the problem but we have a huge responsibility for taking charge and taking ownership of it ourselves. We must redress the poor image that bedevils part of our industry. Where we do this we do it well. The national human resource standard is the Investors in People standard. Our sector has more recognitions than many others proportionately under that standard.
1625.
With regard to the education system, we lack communication skills from the applicants. That is mentioned in 'Strategy 2010'.
1626.
That is the key requirement that too often is lacking and we are working progressively with the secondary schools to achieve better awareness for the entry-level entrant. Not only do we have to persuade young people to join our industry but we also have to persuade their parents that this is an industry that they should encourage their children to enter. A lot of organisations are now offering NVQ at levels one to five, modern apprenticeships and terms and conditions of employment that are model terms and conditions of employment.
1627.
There are a number of jobs in our sector which are entry-level jobs and the rate of pay which we can afford is dictated by the profit of the organisations. However, we do provide working environments and opportunities for young people coming into the industry to progress at the fastest possible rate. That is why we offer modern apprenticeship programmes. People who come through and achieve the NVQ levels one to three can be rewarded and recognised for what they have achieved in the company. There are examples of companies taking ownership for delivering that themselves.
1628.
From the Government's point of view, the private sector is not taking sufficient ownership and too many of the college courses and provisions have been supply-sided - so people in government are deciding what the students do and do not need. The information gap is huge in knowing what it is appropriate to supply to the market and the growing market for jobs that will be delivered. We would like to see colleges better able to look to us as their customer than to purely look to the Government as paymaster in order to better interface their output with the people we need. That is not happening at the minute.
1629.
Last year the Department of Education commissioned a survey to find out where all the college leavers go. The reports of that survey have not been released yet but I know that it was extraordinarily difficult to find out where they go. However, I do know that not enough of them come and work in our industry locally. At the same time the Department of Education undertook a study to find out where the college provision was. It took someone from the inspectorate of the Department of Education three months to identify all the courses that reflected on the tourism sector, what levels they were and what they were called. If it took someone from the Department of Education three months to do this what hope does an individual aspiring to a career in the industry have? Equally, it must be very confusing for employers in the industry at the moment. However, the good news is that those surveys have been done and the Department of Education is coming round to identifying that they are in a position to help us to the next stage of what we take ownership of.
1630.
With regards to senior management we also need to have greater ownership in the industry. I very much lament the huge cut in the budget to the Training and Employment Agency its Company Development Programme. This programme remains within the Department of Enterprise, Trade and Investment in Business Support Division.
1631.
This is a scheme that put ownership into companies' hands because they were the budget holders. So the colleges and training providers were ringing the owners and saying "How can I help you?" The cutbacks in funding to colleges means they are not ringing and asking us what we would like and how can they help us and that is regrettable. So the Department and your Committee may wish to consider how best to allow the industry to take ownership for training.
1632.
Ms Morrice: For the record, I believe that waitressing is a superb experience in training and people skills, and it has certainly stood by me.
1633.
Dr O'Hagan: In your submission you recommend the development of a code of practice for employees in the industry. What issues do you think are most important and what action would you like to see implemented?
1634.
Mr Hastings: We have a model employer code of conduct, but for new entrants into the industry there should be a code for how they can expect to be treated. This programme has a model employment contract, and it can be tailored by individual proprietors. It takes you through the induction training and covers all the legal requirements that any individual in the industry should know such as the essential fire safety, health and safety, and environmental health. That code of conduct could then include the existing "Welcome Host" customer care training programme.
1635.
People coming into the industry and taking that training programme would have elements of an NVQ so that they would be already linked to a recognised training qualification system even before they had completed their induction programme. It would also be written on a par, in language terms, with the Investors in People profile. At present this is also being discussed with the Training and Employment Agency and the Tourism Training Trust. It would draw a line in the sand saying that this is the minimum standard and not to go to an employer who is not signed up to offering this sort of package. That would go a long way to taking away the myths and stories of people's poor experiences. It would also show that the greater mass of employers and employment opportunities were coming through at new standards which have to be measurable. They have to be examined, assessed and evaluated, otherwise they are not worth it.
1636.
Our industry is not averse to being examined. We have visits from Tourist Board inspectors and environmental health officers. So we are well used to inviting others into our organisations to see the standards to which we operate.
1637.
Mr Mooney: The customer is vital in all of this. Proper research is vital to our industry because if we get that presented and communicated properly we can react to it. So the customer is very important.
1638.
The Chairperson: We would like to reflect some of your opinions in the report as we move to complete it. Thank you for your submission and for the way you dealt with the questions.
TOP
MINUTES OF EVIDENCE
WEDNESDAY 13 SEPTEMBER 2000
Members present:
Mr P Doherty (Chairperson)
Mr Neeson (Deputy Chairperson)
Mr Attwood
Ms Lewsley
Mr McClarty
Dr McDonnell
Ms Morrice
Dr O'Hagan
Witnesses:
Prof G Bain )
Prof B Cormack )
Prof B Hogg ) Queen's
Mr J O'Kane ) University
Mr T Newsom )
Prof J McCanny )
1639.
The Chairperson: You are all welcome, and we are very happy to be in this fine building for the Committee session.
1640.
Prof Bain: You are very welcome, and we are delighted that you are holding your first public hearing at Queen's University, Belfast.
1641.
It is difficult to speak on behalf of such a pluralistic community as Queen's University, but the university certainly supports the broad thrust of 'Strategy 2010'. As I am sure you are aware, myself and some of my colleagues played a role in the formulation of 'Strategy 2010' - eleven members of staff served on the various sector and cross-sector working parties, and two of us, myself included, chaired one of these groups.
1642.
Before responding to questions from members, I will say a brief word on the knowledge-based economy, the university's part in that, and its role as a regional resource and driver for economic development. The knowledge-based economy is now taken for granted, and its role in fostering economic development has become increasingly apparent. National competitiveness now depends much more on the development of human capital than the development of financial capital. As businesses become increasingly global, a country's most valuable asset is the cumulative learning and the skills that can be acquired by its labour force, and this points to a significant role for universities. As knowledge and information become more central to economic development, universities whose basic function is to produce this knowledge become more central. In short, an investment in knowledge is increasingly an investment in economic development.
1643.
The mission of Queen's University, and we have given some thought to this recently and have reformulated it, is to contribute to educational, economic, social and cultural development in Northern Ireland and elsewhere.
1644.
However, today we are thinking particularly of our contribution in Northern Ireland. We see ourselves doing this is by trying to provide the widest possible access to learning through international excellence in teaching and research. There are two key points that come out of this mission statement. One can be summarised in the phrase "access to quality" and by that we mean access to international excellence. The second key point is balance of excellence - we are keen to be internationally excellent in both teaching and research, indeed our teaching should be underpinned by our research.
1645.
With regard to teaching, and as Vice-Chancellor I would be expected to say this, but I do have supporting data, Queen's University is in the first division. The Quality Assurance Agency compiles statistics on the ratings of all schools, and Queen's University is well up in the top quartile of all the universities in the United Kingdom.
1646.
In research terms, we claim to be the strongest research university on this island, but we certainly do not think we are strong enough. We are currently in the process of investing £25million in a restructuring programme, which has achieved a fair amount of publicity for the last eighteen months or so. We hope the result of this will be in the research assessment exercise for next year. We will return over 90% of our staff, compared with the 74% who took part in the exercise of 1996.
1647.
Let me conclude by saying what I hope will be a major theme here, which is to think global but act local, to use that phrase which has become quite commonplace. The reason why I think it is an important theme, is that the knowledge-based economy is global, and the cliché that knowledge knows no boundaries is, of course, being a cliché, virtually true by definition. To be effective you have to be world-class, and I do not believe that companies will come to Northern Ireland because we have the best research here, or the best research on this island, or even the best research in the United Kingdom. They will come here as they do, in the case of ProfMcCanny's work, for example, because what we do here is the best in the world. It is terribly important, I think, that we do benchmark ourselves on international standards, or we will not have research that underpins the desired economic growth. From that point of view, it is very important to maintain the research and development base, and we are currently worried that the research and development base is being eroded. Today we are just finalising our bid under the SPUR initiative programme for promoting university research, which we welcome greatly, but a great deal more needs to be done. I will leave it at that. We welcome any questions you and your colleagues would like to put to us.
1648.
Mr McClarty: Gentlemen, what processes would you recommend be put in place in order to monitor and review 'Strategy 2010'?
1649.
Prof Bain: Perhaps I could deal with that, Mr McClarty, although my colleagues might want to come in. One of the processes already mentioned is the Economic Development Forum that leads on from what I was just saying about the role of universities in promoting economic development. It is now quite central and we are certainly disappointed in the context that no role seems to be provided for higher education - third-level institutions within that. The first point I want to make is that one of the processes we would welcome in terms of monitoring and reviewing the strategy would be a role for higher education institutions within the Economic Development Forum. Another point which could be made - and this may be partly due to my ignorance on this - but I am not aware of an action plan with very detailed targets and processes that one can actually monitor and review. It seems to me that if you are going to monitor and review, then you need quite specific and explicit quantitative targets in order that we can begin to say "Are we meeting this, or are we falling short, et cetera?" I want to make those two points in that context.
1650.
Mr McClarty: In your opinion, is the development of science park sites in Northern Ireland necessary to create an environment where new knowledge-based businesses can be nurtured and to which research- orientated inward investors can also be attracted?
1651.
Mr O'Kane: Yes, in a sense we can look to an experience elsewhere in the world, of what the essential ingredients are in the creation of a successful science park which underpins and contributes to the development of economic growth in a region. We can look to Silicon Valley in the USA, we can look to Singapore and Taiwan and closer to home, the most successful science park now is probably the one in Cambridge. The key ingredients there are in having a central research-based university, which is an important link, in addition to the public and private sector.
1652.
As there is a research-based university close to that science park, it allows a critical mass to start developing, which involves both indigenous companies, inward investment companies and, obviously, spin-offs from the research taking place in the university and those multinational companies which have large research facilities. We believe, therefore, that the exemplars which have been successful elsewhere can be translated here. However, science parks do make mistakes, and one has to ensure that these pitfalls are avoided. There are, however, numerous examples throughout the world where they have been successful. They can have a dynamic impact on the economy and create a critical mass, but the key to that is a research-based university.
1653.
Ms Lewsley: You mentioned that research and development is being eroded. What incentives do you recommend to encourage the development of centres of research excellence?
1654.
Prof Bain: The largest one, which we are suffering from very much - and I would be surprised if our colleagues at the University of Ulster were not equally affected - is incentives with respect to the human aspect of research, namely research workers. This is a self-serving answer of course, although vice-chancellors are, perhaps, better rewarded than basic research workers, but academic salaries have really reached a point now where it is extremely difficult to recruit and retain people, particularly in some of the areas which are most important to economic development. For example, in the areas of computing and IT, people now graduate - certainly from a masters programme and, perhaps in some cases, even from an undergraduate programme - and command a salary in industry which is probably greater than what we could offer a young lecturer who will have spent several more years acquiring a PhD. That is definitely true for master degrees, let alone PhDs. At the moment there are several areas, including Prof McCanny's, where people are literally draining out of the university.
1655.
Prof McCanny: One of our strengths has been the demonstration of our technical capabilities, and, as Prof Bain said, we were successful in attracting many high-tech companies. However, the commercial reality is that many of the people who were instrumental in attracting those companies have now been headhunted. As far as I understand it, that is happening to individuals and entire teams, to companies both here and internationally. We are in a global market and economy, and, as Prof Bain suggested, we have the absurd situation whereby graduates are being paid more than the staff teaching them and PhD students are being paid more than some professors. That is the level of differential which we face. That is a key issue which we should not lose sight of; it is a critical part of the chain in the whole research economic. These are the geese that lay the golden eggs; if you kill them off, there will be no more golden eggs.
1656.
Prof Bain: May I add a footnote to that to make it less self-serving? It also applies at the beginning of the process with graduate students. Parity with the UK grant for research studentships has been broken, and, frankly, the kind of money that can be offered to a young man or a young woman who wants to do a PhD is so laughable that it is virtually becoming a vocation to choose to go into doctoral work. This is a product of the salaries that are available from companies. Therefore, it is not just for people who are already in the system; it is for the next generation whom we are trying to bring into the system. This is a major problem, and while you may talk about the need for better equipment and all the rest of it, this is the single, most important factor.
1657.
Mr O'Kane: It is useful to illustrate this in relation to the spending review statement. The Chancellor announced an extra £1billion for science and technology. An increase in the stipend for postgraduate research students from the current figure of just over £6,000 to £9,000 by 2003/04 was included in that. Our undergraduates are leaving computer science and electrical engineering and earning salaries of £25,000.
1658.
Ms Lewsley: According to your statement, care has been taken to ensure that there is an appropriate balance and education provision that goes beyond the narrow economic agenda and attempts to cater for all the knowledge needs in society. Can you please elaborate on your active policies to ensure that this happens?
1659.
Prof Bain: There was an employer in Northern Ireland who spoke of the need for oven-ready graduates, as if the only function of university was to produce people who, much like chickens on a conveyor belt, were ready to be popped into the oven of business, neglecting, perhaps, his own role in respect of training people.
1660.
My colleagues and I would reject that view of education. However, a second issue that I am keen to comment on is the distinction between vocational subjects like computing, IT and management in business - the field from which I came - and non-vocational subjects like philosophy, sociology, English literature, Irish, or whatever. I do not accept that distinction, nor, I think, do my colleagues. We think the main purpose of a university should be to try to develop human capital in the sense of giving people basic reasoning skills, literacy, et cetera. Whether you read philosophy, electrical engineering or management, these subjects all contribute to that. In my previous post, when we were running a graduate business school, we were keen to recruit people coming from fields such as philosophy, amongst others, to do a conversion course in management. I think those are two important background points to make.
1661.
Let me come back to Northern Ireland. I said that the mission at Queen's was to contribute to the educational, economic, social and cultural development of Northern Ireland and, indeed, elsewhere. I think that is tremendously important. I believe that the future of Northern Ireland does not depend on economic development. I have been here for three years; you have been here much longer. The future peace and prosperity does not just depend on economic development. It must depend - and, indeed, what has happened in the last three years has clearly demonstrated this - at least as much on social and cultural development. When we made that statement in our evidence I think that is what we had in mind. We want to make sure that we are not just talking about Northern Ireland plc, we are also talking about the social and cultural underpinnings that will need to be put in place to make sure that we have a stable and prosperous society.
1662.
Ms Morrice: I would like to go off-script for a moment and remark on something that I have noticed and that has slightly disappointed me. I was expecting the galleries behind me to be chock-a-block with young people taking the opportunity to glimpse this discussion on economic development - the first we have had outside of Stormont. I am very disappointed. I know that your students are not back yet. However, I am disappointed in the lack of interest among the young and the thinkers in this sort of thing. Today is proof of it. I am particularly disappointed in the lack of female interest. I think that economic development is very male-dominated. Is there anything that you think you could do to generate young and particularly female interest in economic development?
1663.
Prof Bain: I am not sure I would necessarily agree with the premise that females are not interested in economic development. There is now a high proportion of young women entering subjects like economics and management. When I left the University of Warwick in 1989, where I ran a school of industrial business studies, women had reached 50% of the enrolment on the undergraduate programmes. I think it is true that some of these fields were, at one time, regarded as male- dominated. That is changing. At the London Business School almost 40% of the Master of Business Administration programme was made up of women. There may be, as there are in so many fields, changes in occupations which women seem to think that they are destined for, and, quite rightly and fortunately, they are beginning to broaden out. I think that would still be the case.
1664.
Prof Cormack, can you comment on management and economics here?
1665.
Prof Cormack: I think you have covered that point, Vice-Chancellor. I believe the major issue on our agenda at the moment is the underachievement of boys, which, in Northern Ireland, has been substantial for the past ten years and is increasing. We really have to address the issue of the gap at GCSE and A level. Obviously, nationally, this has been recognised this summer, but we have seen it in Northern Ireland for some time. The statistics, if I remember rightly, show that 55 to 56% of undergraduates in the university are women.
1666.
There are two real problems remaining for women. One is trying to get them into certain subject areas, particularly engineering; and secondly, once they have the qualifications, translating that into employment. In terms of the former, a number of programmes, for example, WISE (Women Into Science and Engineering) and GIST (Girls Into Science and Technology) have been established. Those programmes are progressing, and we are focused on that, but I have to say that the increasingly important problem is the underachievement of boys.
1667.
In terms of this forum, and the lack of interest in it, we are not really into the swing of the academic year yet, but I have to say that one of the bids that we are making tomorrow under the Support Programme for University Research (SPUR) initiative, is to set up an Institute of Public Policy in the university to try to become close to the Assembly Committees and the work of the Assembly to provide a basis for evidence- based policy making. As the Vice-Chancellor has already said, 'Strategy 2010' is not a particularly good example of evidence-based policy making. The evidence is not there in strength to develop that policy. The university should be relied on as the resource in this, and we are focused in establishing that. Students will then be studying programmes in public policy within the framework of public policy development in Northern Ireland.
1668.
Ms Morrice: In your submission you talked about information and communication technology, but you say not enough has been done in this area. How do you see that focus being developed?
1669.
Prof Bain: In information technology? Prof McCanny, can you answer that?
1670.
Prof McCanny: It is important to recognise that Queen's University feels strongly that areas such as electronics, telecommunications and software are key areas of growth in the economy. They reflect indigenous strengths, capabilities, and they are well suited to the brainpower-type environment that we are creating. The success of companies that have been attracted, and indeed companies that we have grown ourselves, is evidence of that. We also recognise that not everything should be thrown into one basket, so in developing any economic strategy we need to try to match the indigenous skills and the opportunities. We are keen on information-and communication-based technologies, but we also want to make sure that we do not overlook other important major opportunities such as in the pharmaceutical industry, where there are numerous success stories. There are other areas, such as the environment, and the creative arts, which offer important commercial opportunities.
1671.
I reinforce what the Vice-Chancellor said earlier that while a modern technology-based economy needs scientists and engineers, it also needs business people, managers, financiers, lawyers, language people and those with a wide breadth of social skills. It is important not to lose sight of that in developing such a policy.
1672.
Mr Neeson: I welcome the importance which ProfBain placed on the development of human capital. Interestingly, in a recent visit to the United States and Canada, our message was also that our greatest asset was our people. I want to question you on two incentives. In the forlorn hope that something can be done with regard to 'Strategy 2010', what special rate of corporation tax could be created to attract inward investment over a five-year period?
1673.
Prof Bain: James O'Kane, who was previously finance director at Queen's, will answer that.
1674.
Mr O'Kane: We really should be as original as possible. The Celtic tiger in the Republic is a benchmark. Many would argue that their special corporation tax status has contributed greatly to the growth of the software industry, et cetera. That is a benchmark and a minimum starting point. With regard to the United Kingdom agenda, substantial representation has been made to the Chancellor, Gordon Brown, on the issue of tax breaks for stock options. That applies equally in NorthernIreland, particularly with regard to ICT related knowledge-based companies and young indigenous companies. The Committee may want to look at those two things.
1675.
Mr Neeson: In 'Strategy 2010' there is a recommendation that we go for softer forms of assistance, rather than being dependent on Selective Financial Assistance. What forms of softer assistance do you anticipate?
1676.
Prof McCanny: It is important to recognise that in a knowledge-based economy, where the kind of software is as important as capital, equipment and that the mechanisms are in place to encourage, support and develop that. In the past, finance was available to provide capital assistance and buildings. It is important to look at what other incentives might be available to help to develop and enhance the number of people working in these high-tech areas. Other areas of importance are ensuring the right skills base, not just for training at graduate level, but right through. We are working in a highly sophisticated world and also need the requisite business, financial and legal skills.
1677.
The protection of intellectual property and the recognition of the significance of intellectual capital are also very important. This is something that we have not given over-consideration to in the past. It is vital in being able to develop indigenous companies and also in working closely with multinational companies.
1678.
Mr Neeson: When we were in the United States of America, we had a meeting with the Small Business Administration. Their whole thrust was Government- guaranteed loans for small businesses. This had a substantial impact on attracting women into business. How do you regard that?
1679.
Prof McCanny: I do not know in detail about the small business system in the United States but anyone who talks about it regards it as one of the key contributors to the huge economic growth there over the last 10 to 30 years. So that is very attractive and is something that we should look at very seriously.
1680.
Mr Neeson: Later the Committee will be looking in detail at the recommendation in 'Strategy 2010' for a single development agency. With regard to research, the Industrial Research and Technology Unit will have an important impact on future economic development.
1681.
How do you regard the development of a single development agency?
1682.
Prof Bain: I have been struck by the multiplicity of initiatives in Northern Ireland, and it seems to me that we would have greater leverage and force by having one streamlined unified initiative. This is a personal opinion - my colleagues might not agree. Duplication is best avoided, and it would be better to have more unification.
1683.
Mr Newsom: I have worked with one of the new regional development agencies in the UK and have found that a single agency has tremendous advantages. The English regions have been competing with one another, and with the Welsh and Northern Ireland regions for some time, and they have found that they do not have a proper infrastructure. The single agency is an advantage.
1684.
There is a danger of things being overlooked in an agency, so while the agencies in England are required to have a skills development plan, they are not required to have a technology development plan. That is a weakness of the English arrangement. If we are to have a single agency we must ensure that strategies and action plans are in place for the key areas affecting economic development.
1685.
Prof McCanny: Different kinds of companies, multinationals and start-ups, for example, have different characteristics. I agree with the push towards streamlining, but one solution does not fit all. If there were a unified agency, we would still need the flexibility that the existing agencies have in dealing with different issues and problems.
1686.
Mr Attwood: You said that you supported the broad thrust of 'Strategy 2010' but that there was a need for specific quantitive targets. Has 'Strategy 2010' failed to deliver specific quantitive targets?
1687.
Prof Bain: 'Strategy 2010' needs to be monitored. For example, Queen's is finalising its own plan of key tasks and objectives for the next year. One needs an action plan to decide how to get to X, Y and Z. Without one, monitoring can be very difficult. That was my point - not that I disagree with 2010. To monitor properly, one needs specific targets.
1688.
Mr Attwood: Are they lacking in 2010?
1689.
Prof Bain: Perhaps, understandably, there is not much detail. However, as 'Strategy 2010' evolves it will need to be monitored. Usually one starts off with a vision or strategy for an economy or a university, but as one progresses, one must become more and more detailed about what one hopes to achieve - if one intends to monitor it.
1690.
Mr Attwood: You said that people were dropping out of the university because of the wages. You said that that was a self-serving point. I disagree.
1691.
Prof Bain: It is self-serving in that we are allocating higher salaries to ourselves.
1692.
Mr Attwood: It also serves the interests of the North. We need better pay for our staff and more money for students who are doing PhDs. How will that problem be addressed?
1693.
Prof Bain: Let me talk first about what we think we can do in the university, as distinct from what other people can do. It has become clear to us, especially through the restructuring programme, where, in the last 18 months, we have hired over 100 new academics to come to Queen's, that salaries for professors at Queen's are not competitive. They are not competitive even in relation to other universities in the UnitedKingdom or in the Republic. We are in the midst of developing a new salary scheme for professors that will be more performance-related and should help to remove that gap.
1694.
Having said that, the statement that Prof McCanny and I made about people bailing out of Queen's into commercial activities could probably be made at most universities in the UnitedKingdom. Therefore, to become competitive with other UnitedKingdom universities will be a good first step, but it will still not cure the problem we were talking about.
1695.
Other things need to be done. One of the difficulties - as you will appreciate - in a university is the extent to which there can be variations in salaries between subject areas. Inevitably, philosophers have to accept that they are not going to make as much money as professors of computing, but there is probably a limit to how far one can stretch that for political reasons. One way around that, for example, is through ventures like science parks. In respect of the development of a science park, people in this kind of field can easily attract additional income through their research and development activities. As a science park is geographically and organisationally distinct from a university, the kinds of political pressures that arise are not so compelling.
1696.
When I arrived at Queen's, coming from the background of a business school, I got the impression, rightly or wrongly, that we frowned on people consulting here to public or private organisations. Over the last 18 months or so, my colleagues and I have tried to make it easier for people to consult for a variety of reasons. To mention the noble ones first, it is a very useful way for academics with practical messages and expertise to pass them on. Within reason, in terms of the time taken, academics can supplement their incomes by doing consultancy work. We have just developed a scheme that went through the university committee system last term and which we hope will encourage people, partly as individuals and partly on behalf of the university as a whole, to consult, and the university would share in the rewards.
1697.
There will probably also have to be a look at academic salary scales nationally. A young academic today starts at less than a police constable does. I do not want to do down police constables, but there is a problem.
1698.
Mr Attwood: At the risk of sounding self-serving, the comments made about academics' salaries could also be applied to politicians' salaries.
1699.
Your colleague, the University of Ulster Vice- Chancellor, addressed the Committee some months ago. He was asked about the three things that he thought Government could help the universities on. He replied that these were lifting the cap on student numbers; the protection of intellectual property, an issue ProfMcCanny mentioned; and - the point you made twice in your submission - research funding. On that you correctly said that much more needs to be done on the SPUR initiative. The Minister would certainly acknowledge that.
1700.
Can you, Prof Bain, address those three issues? Please note that there was no female representation. It was a former Vice-Chancellor of Queen's University, Sir Peter Froggett, who said that "The alpha and the omega of university life are students". I note that there are no student representatives on your delegation.
1701.
Prof Bain: We were restricted to three, and we made a special application to get the number that we have.
1702.
The Chairperson: Even in your own building?
1703.
Prof Bain: Yes. Prof McCanny may want to say more about intellectual property, and Prof Cormack would be the best person to speak about the cap on student numbers.
1704.
Prof Cormack: Dr Farren had asked both universities to make a submission last December. Our submission made in the last academic year was a thorough analysis based on continuing and previous research aimed at evaluating the flow of students leaving Northern Ireland. The analysis was submitted, and then we focused on areas where we could expand in the university. I will not go into great detail, Mr Attwood, but the document illustrates our plans for the university should the cap be lifted, and in what areas we would expand.
1705.
Evidently, one area in need of expansion is computer science, in response to the needs of the local economy. This could begin immediately.
1706.
One of the things your Committee needs to be addressing is a joined-up Government. At present, Dr Farren and Dr Birnie are considering Mr Cubie's report on student support in Scotland. The Scottish people have got to make a choice between Cubie's or Bett's report. Bett's report recommends substantial increases in the salaries for academics. I do not think that you can fund both, but that is for the politicians to decide. To develop computer science in Northern Ireland we must find ways of paying academics in this area more than we are able to pay them at present. This is possible. We are more than willing to expand in this area, but we will need assistance to do so.
1707.
Mr O'Kane: As a university we have, in conjunction with the University of Ulster, talked about the importance of creating a new society for the people - particularly young people. At the moment, around 40% of 18 to 19-year olds are going across the water for further and higher education. Both universities are attempting, with the support of the Government, to address that exodus of 40%, and to reduce that figure substantially. We have recently discussed this with the Minister.
1708.
Prof McCanny: From a technological perspective I was surprised to find the Northern Ireland Economic Council saying that we have enough in terms of supply and demand. This contradicts everything I have heard anywhere else in the world. Indeed, demand is great for more and more of these young hi-tech people, and there are thousands of jobs for them, should we meet that supply. We have difficulties - with MScs in computer science and electrical engineering - in that people applying cannot get funding, because there are no grants.
1709.
Furthermore, the four hi-tech departments in both universities are now debarred from receiving Government PhD grants due to bureaucracy concerning submission rates. This relates to how young people are being headhunted by companies. Those are some practical issues that could be addressed fairly quickly.
1710.
It is important that we create opportunities for new businesses and the attraction of investment for the good of these young people.
1711.
Prof Hogg: We have been making great efforts over the past year with regard to research funding. We have applied to the Joint Infrastructure Fund - the UK-wide fund. Indeed, we have made a number of applications.
1712.
Unfortunately, there is intense competition, so we have been successful in only two of these. We hope Northern Ireland will benefit from a programme similar to the £1 billion research package to be awarded to English universities from 2002, or that we will have access to this fund. We also hope there will be a more balanced distribution of funding than that carried out under the Joint Infrastructure Fund, the majority of which seems to have been awarded to areas in the south of England.
1713.
In terms of research infrastructure funding, we need well-equipped laboratories and appropriate accommodation. For a long time universities have not been able to maintain their buildings adequately. Many of the laboratory facilities are not up to international or even appropriate standards for high-quality research - even those where we have made efforts to provide top- quality equipment.
1714.
This is a vitally important area, which needs to be covered. It affects the quality of our research and our ability to recruit high-quality researchers. If we want to bring in a world-leading professor, for example, in medicine or engineering, and assuming we can deal with the salary issue, it is the standard of our research facilities that will determine whether he comes. Such people will not come if they have to wait two years while laboratories and facilities are being set up. They will stay in one place and maintain the continuity of their work. Unless we can provide facilities of similar standard, we will not be able to bring in top researchers, or retain them. We have already heard about the difficulties in retaining researchers. This is a crucial problem. The rapid loss to the industry of high-quality staff and top researchers is affecting Northern Ireland's research base. If that disappears, we will not be able to rebuild it.
1715.
These people are at the forefront of their fields, therefore, as teachers, they are helping us to provide the top-quality courses we have in areas such as computer science and electrical and electronic engineering. That flow of high-quality graduates from our universities is driving the Northern Ireland economy. The Industrial Development Board is advertising this factor to attract inward investment.
1716.
If we lose those staff, the flow of graduates will disappear and Northern Ireland can forget about 'Strategy 2010' - we can throw it in the river.
1717.
Mr O'Kane: Universities are a primary source of research in Northern Ireland but attract less business investment than establishments across the water. We support the Economic Council's recommendations for substantial additional investment in research in Northern Ireland universities. The figure they are recommending is an additional £8 million per annum.
1718.
Dr McDonnell: I want to comment on a number of the issues discussed today. I am concerned about some mechanism for increasing professors' salaries, because John McCanny gets far too much money for the work he does.
1719.
Prof Bain: I can assure you this comment is not from Queen's.
1720.
Dr McDonnell: I would like to keep returning to the problem of finding a mechanism for working out academic and research students' salaries until we can solve it. These are key bottlenecks we must solve. We should also keep coming back to the lifting of the cap on the science and engineering side. We should at least be able to deal with these key issues. Ideally, every subject would be dealt with but, while we welcome progress on such subjects as philosophy, new technologies are the most important areas in economic terms.
1721.
There are a couple of points that I want to raise. My concern - and, indeed, one which many of the members of this Committee and of the Assembly share - is how we would get our R and D rolling and the new technology into spin-off and million-dollar companies. We see this happening in the United States in both the new technology and biotechnology companies. We would like to see one or two more of these in Northern Ireland, and to some extent, that underlies a lot of our drive and interest.
1722.
We look to Queen's as a major driver of the new economy, and, to some extent, our presence here this morning is about how we can engage with you and further develop our relationship to the point where that new economy becomes automatic and runs on automatic pilot right through from your undergraduate to your postgraduate research and right through spin-out companies, and so on. We know that you have some spin- out companies and structures, but we would like to see them multiply tenfold and function a lot more rapidly.
1723.
I think we are all agreed that a single development agency would probably be a good thing, provided we could get it to talk to itself internally. It does not matter whether you have six agencies or one, it is a disaster if its internal communication is not functioning, or communication between them.
1724.
Our big challenge is as to where the new technologies - and I am including the area of biotechnology and not just engineering - IRTU and the universities fit, because I do not see the spin-out things, the new things (the twenty-first century things) and the "Cinderella" things of the new economy being nurtured within one big amorphous agency.
1725.
Vice-Chancellor, you referred to it yourself in terms of the fact that one had to be sure that everything was covered - one big agency was great so long as some bits were not left behind. We see a big risk of that research bit's being left behind as one big agency concerns itself with the plethora of small business.
1726.
Prof McCanny: That was the point to which I was referring earlier, the concern that one structure fits all. Characteristics of high tech spin-off companies are very radically different from even large corporates, et cetera, and there are lots of issues now.
1727.
Many of the ingredients for that are being put into place, for example, the University Challenge Fund. Start programmes are extremely important as a key issue in making sure that when ideas are spawned they are nurtured to the level that they can create something. That early stage of growth and incubation has been part of our policy for a long time, and we have already put many of the elements in place to do that. I agree with you that there is a need within any agency looking after that to have a more specific remit for that and to work with the inter-relationship between research, development and commercialisation.
1728.
Dr McDonnell: My personal experience of this is very much conditioned with my interest in BCO at that time - how it just shattered and did not work. The system could not cope with it, and I do not think that the system has moved on that much since. It has moved on a bit, but it still cannot cope with something that does not fit the -
1729.
Prof McCanny: The important thing is that people in the system are very aware of this now, and that is a very positive thing. One thing feeds the other; there is no point putting lots of processes in place if there are no clients to take it up. As we evolve, those things will start to look after themselves.
1730.
Prof Hogg: May I just comment on one element of this and not on the agency that does it. If you are concerned with stimulating the number of potential starter companies - which is really the essence of all this - there is venture capital available. There are agencies, however they might be organised, and so on.
1731.
The essential part comes at the first stage, when somebody in a laboratory has an idea. There is the potential for that idea to be developed, but until it has been brought to a prototype, or some proving level, he can not seek funding from venture capital or the university, which has been setting up companies for a considerable time through QUBIS Ltd.
1732.
There is a gap in the support to enable the researcher with an idea to develop it for a year or so, to see whether it is worth the investment of venture capital. It will not always work, but, unless the mechanism for doing this exists, then the growth of new ideas and new companies will not be generated, since people will not take the risk because they already have a job - for example, teaching, researching or administration - or are in university. The funding that will pay their salary for a year to enable them to develop the prototype is necessary; they will have the security to take a sabbatical from university and take that important step, which, at present, is too big a risk for work or family reasons. We need large numbers of ideas to be developed, and, even if only half of them work, we would be much better off.
1733.
Dr McDonnell: How do we go about generating the sort of openness, filling the gaps and building the bridges that have been spoken about this morning? We sit up at Stormont and try to grapple with these ideas. We are, in many cases, gifted amateurs who enjoy some power and influence because the public have invited us to act on their behalf, but you have the insight.
1734.
How do we get the openness, because in the past it has been - cloak and dagger is, perhaps, too strong a term - too secretive? One of the challenges is to identify where the gaps, bottlenecks and stoppages are; only then will the culture begin to change. At present the culture is inhibitory, since people are unaware of those gaps and how to bridge them.
1735.
Do you believe, Prof Hogg, that we can help you to create a mechanism in order to bridge the gaps?
1736.
Prof Hogg: We would have to create one, as no mechanism currently exists, although you will know that, about a year ago, we established a University Challenge Fund of venture capital, which we lead jointly with the University of Ulster. The fund of £2·75 million is to stimulate university start-ups, but an element is available for pre-start-up. However, that is a drop in the ocean compared to the amount needed to stimulate the number of ideas, start-ups and companies that would make a difference in Northern Ireland.
1737.
Prof McCanny: When one looks at the levels of funding we consider to be appropriate for developing the seed ideas, they are of orders of magnitude smaller than our counterparts have in California. There are two reasons for that: obviously there is much more money available in California; but, more importantly, the money put in upfront allows a head start, and being first and staying ahead of the competition is what provides the big growth path further down the line. So it is not a matter of self-interest but of competing with others, and if we are going to do something, then we should do it right.
1738.
Dr McDonnell: Do you feel that the Government should reach you a dollop of money for your research fund and let you decide what to do with it, or do you believe there is benefit in dialogue and a sharing of responsibility?
1739.
Mr O'Kane: Yes, we would concur; some of the building blocks are starting to be put in place with the establishment of the Northern Ireland Centre for Entrepreneurship (NICENT). It will try to change the culture at a very early age, so that undergraduates and postgraduates will have a module in entrepreneurship, which might stimulate interest in becoming the next Bill Gates.
1740.
That is starting to emerge. The first roll-out of those modules will be in this academic year, starting this month. We hope that it will start to generate a lot more ideas, and in a sense remove the risk factor. There is still a culture here of avoiding risk; we do not want to fail. We need a substantial sum of money. Brian talked about the challenge fund. We are setting aside £100,000 of this per annum for five years which will fund four pre-start-ups, which is basically £25,000 for each project. It allows the individual to take a year's sabbatical, perhaps to develop a prototype. We need to gain a substantially greater fund than that to increase the volume of such activity.
1741.
Dr McDonnell: The funds are not going to drop out of a coconut tree. We are going to have to work at it together. There is a partnership here. Prof McCanny, you have been aware of the Investment Belfast innovation award. We see that being dramatically expanded. Will that be of some help?
1742.
Prof McCanny: Those clever, small initiatives have a very valuable role to play. I have not been involved in this in much detail, but I understand that there was quite a good response to it. That has the effect of uncovering new opportunities. It seems to have worked very well. It was modelled on something that has happened at the Massachusetts Institute of Technology. Picking up on entrepreneurship and business skills, perhaps we should also be trying to bring this culture in at a much earlier level in the schools. When I contrast the United States and here, I deduce that we educate people extremely well, but our United States counterparts seem to be more commercially aware at a much younger age. Perhaps that is something we could think about.
1743.
Dr McDonnell: I have covered research and development. I would like to talk about links between universities and businesses. How do you see our being able to facilitate, encourage and build those links into working partnerships?
1744.
Prof Cormack: We have talked about business links. There are a number of ways to answer your questions. One of the particularly interesting ways is to look at our students. We have to make them less risk- averse, with a greater knowledge of the business world. We have a programme to develop work placements, work-related learning and those kinds of activities, in association with our undergraduate degrees. Those kinds of links with business are going to be very important. That is in a wider context of lifelong learning, which might help answer your question. That is at the top of our agenda in the university.
1745.
We spent last year preparing a report on our Institute of Continuing Education, which is now being renamed the Institute of Lifelong Learning. We have just appointed someone whom you might know. Paul Nolan, from the Workers Educational Association, has been appointed as the director and will be developing many of those links and continuing professional development programmes in the university. The Committee might like to know that there was a parliamentary question about six months ago regarding part-time study in Northern Ireland. The statistics revealed that we have more part-time students than the University of Ulster. That is because of our Institute of Lifelong Learning. We have 700 people doing part-time degrees, and nearly all of them are in employment. The programme of those degrees is to develop on their work experiences as part and parcel of their degree. Many of these people are coming in with non-traditional qualifications.
1746.
Dr McDonnell: One of the problems is that our traditional businesses are stagnant. They need stimulating, and some would see the universities as being of positive influence here. We see a lot of businesses being set up. During the first generation, the business grows. During the second, it levels off. During the third generation, skills are not genetically inherited. I am told that that is a very typical pattern in such businesses, and while some accountancy firms attempt to tackle it, there is an opportunity for universities to open up that lifelong learning for third-generation business families.
1747.
Mr Newsom: The university, in developing its front door for businesses through the research and regional services office provides a facility for people coming in. We should then look at how that interaction could take place. There is probably a need for you to take some action to give businesses an incentive, credit, or some funding that is available for them to cash at the universities. It might well be a route that would actually encourage companies to take part.
1748.
We have to look at how we can introduce the skills and expertise of the university into those businesses and companies. Prof Cormack mentioned work placements for students, placements for graduates, and exchange schemes for staff. We would like to see - certainly in some of the areas where Prof McCanny is working - some of the industrialists contributing to the programmes.
1749.
It is all about building relationships, and I think you have a role in creating some incentives to bring people to universities who would not otherwise go there. We have a role in making sure that services are imaginative, innovative, accessible, are delivered promptly, and cover all aspects. That is what Mr O'Kane referred to when he said some of the bricks are in place. In our view, a lot of those bricks are there, and it is our job to turn them into the right structure that works properly.
1750.
Dr O'Hagan: I want you to be very specific about research and development funding. If you were given a chance to prioritise three key areas of university funding in relation to research and development, what would they be?
1751.
Prof Hogg: I have a lot more than three.
1752.
Dr O'Hagan: I want you to prioritise them.
1753.
Prof Hogg: One area has got to be that of information and communications technologies, in the widest definition. Another would be the area of health and life sciences. There are going to be huge opportunities, not only relating to biotechnology but in the whole range of pharmaceutical, medical devices and medical informatics.
1754.
It is difficult to describe what the third area should be. It would probably be that of environmental technology. Environmental engineering and environmental technology, which runs into biotechnology, has huge world-wide potential and clearly affects not only industrial development but the problems of pollution of the environment.
1755.
I am also thinking of general engineering as an area that has to be a focus. However, engineering is involved in all areas. For example, you have medical devices with clinical medicine. In the area of environmental technology, you have engineers and scientists, people in the life sciences, and so forth.
1756.
The major emerging areas of research are interdisciplinary. That is a crucial factor. It is the bringing together of engineering, science, medicine and pharmacy. It is those types of areas, which have great growth potential. That is where the real problems and real issues are.
1757.
If you look at the European framework programme, the four or five main elements are very broad. They consist of totally multidisciplinary areas such as the quality of life.
1758.
Prof McCanny: It is important not to lose sight of the need for continuing investment in fundamental research. Many of the present technologies are the result of investment made 10, 15 or 20 years ago. It is very easy to get caught up in whatever is trendy today. It is also important to ensure that the underlying capabilities that feed into those technologies are also supported.
1759.
Dr O'Hagan: I want to go back to a point you mentioned earlier on the importance of consultation. One of the key concerns around 'Strategy 2010' was the consultation process. A wide swathe of society felt that they were excluded from the whole organisation of 'Strategy 2010' and the consultation process around it. How does the panel feel about a proper consultation process being put in place to ensure that as broad as possible a range of interests are included, enabling us to move into a situation where we have much more accountable and open government, and society in general?
1760.
Prof Bain: Is this in relation to the monitoring of it?
1761.
Dr O'Hagan: It is in relation to both, in a sense, as I would agree that the whole issue of monitoring is key. Part of the reason for this review was that organisations and individuals felt that they were not privy or party to the organisation of 'Strategy 2010'.
1762.
Prof Cormack: The simple answer is that it was formulated in a period before devolution. One must look forward with some considerable optimism that our new structures are going to tackle the democratic deficit. We are looking forward to the Civic Forum's being set up, which would be an area where some of these issues would be discussed. We are having this meeting today - and it is a pity that we do not have more of the public joining us - but it is an open meeting.
1763.
We have been conducting meetings in the university with all the political parties. We have met with your colleagues here over the last year, listening to your concerns and trying to give you the information you need. I hope that your colleagues have picked up from us the issues that we have in the university. We are looking at different ways to try to continue a dialogue, to explain what we are about in the university, and also to understand how the university can contribute to the social, cultural and economic well- being, to use that tried-and-tested phrase, of Northern Ireland.
1764.
The Chairperson: I would like to thank you for your original submission and the way in which you dealt with the questions. We have some way to go to complete our report, but we will reflect on what you have said. Thank you.
TOP
MINUTES OF EVIDENCE
WEDNESDAY 13 SEPTEMBER 2000
Members present:
Mr P Doherty (Chairperson)
Mr Neeson (Deputy Chairperson)
Mr Attwood
Ms Lewsley
Mr McClarty
Dr McDonnell
Ms Morrice
Dr O'Hagan
Witnesses:
Mr David Hunter ) Association of
Mr Tom Place ) Northern Ireland Colleges
1765.
Mr Hunter: We welcome this opportunity to discuss what we consider to be vital issues. The Association of Northern Ireland Colleges is a partnership organisation made up of the 16 or 17 further education colleges, which is determined to work in partnership with other agencies. Our role is one of lobbying, supporting incorporated colleges in their new roles, developing policy and partnership, supporting governors in their jobs, providing facilitating networks for our human resource managers, marketing people and so on. We provide an employers' forum for colleges for 5,500 staff which is for further education in Northern Ireland, and we support curriculum and staff developments. We act as an intermediary agency on behalf of the Department of Higher and Further Education, Training and Employment.
1766.
Dr O'Hagan: You support the recommendation that an economic development strategy must inform education and training policy. Do you see the establishment of the Skills Task Force helping to meet this aim? What information would you expect or require from the Skills Task Force to inform education policy and which body should in your view be represented on the Skills Task Force?
1767.
Mr Hunter: We support the provision of additional focus. We were disappointed that further education was not involved in the process but we are happy to give advice and support although we should have been involved. We are very keen to have this particular focus as, for some considerable time, further education has been out on the fringe. 'Strategy 2010' puts us right in the centre, and we appreciate the model in the Republic for which the institutes of technology and the developments they had five or six years before the economic boom provided the foundation.
1768.
We can see parallels here for Northern Ireland and are helping to support them. We are planning a conference in November - 'Skills for 2000 and Beyond' - and we asked our Minister to speak on the report of the Skills Task Force so that we might be as focused as possible. With regard to the Skills Task Force, we are concerned that Northern Ireland is considered along with the Republic as a lot of our people are moving in that direction. Also, it is a two-way street and we can learn a lot from what is happening there. We are particularly concerned for the areas of electronics, building trade, ICT and transferable skills. We are also very keen to focus on the support for adult literacy in the workplace - a big issue in Northern Ireland, as I am sure you are aware.
1769.
We also have an intelligence network with colleges in every part of Northern Ireland who are in touch with local SMEs and are seeking to provide for their needs. We have a good idea of what works and what does not work and we have some very interesting examples of collaboration. We are very keen to support our colleges as they customise training for employers.
1770.
Mr Place: One thing that is becoming clear in our area of work is that the Skills Task Force would need to focus on the Northern Ireland overall regional economy as well as on the local economies. Even within a small area such as Northern Ireland, the local areas are very different in their economic and industrial infrastructure; therefore the needs are greater. You need to be aware of the local picture as well as of the provincial scene.
1771.
Mr Hunter: We strongly emphasise the need to customise training. An example of this is Nortel, who required a particular HNC, but it was necessary to adapt that from the standard electronics engineering to meet its particular requirements, and we have assistance to do that. We see it as a very important step forward and a sign of new co-operation between the Training and Employment Agency, DHFETE and the further education sector that we hope will be replicated in the future as we try to meet the precise needs of larger businesses and of the SMEs. Colleges have some useful ways of doing that with small business clubs, et cetera, where you can get together SMEs, each with five or six employees, so that a training programme can be made that would not otherwise be viable. With regard to what bodies should be represented on the task force, you would expect, of course, those closest to trade and investment, IDB, LEDU, DHFETE, DED the Social Security Department, T and EA, and ourselves. It is vital that we remember just how important the Republic example has been to economic development, and I hope that we will benefit from some of that boom in the North.
1772.
Dr McDonnell: I would like to follow on from what Dr O'Hagan has raised. Are you telling us that colleges are now moving definitely towards more vocationally orientated teaching, rather than courses for courses' sake? Is each college tailoring its programme to local demand?
1773.
Mr Place: Yes, courses for courses' sake are now not sufficient. In fairness, we have to say we are pleased that the Department's strategy for higher and further education, 'Lifelong Learning: A New Learning Culture for All' has come about. That has stemmed out of 'Strategy 2010', and it is the first time in a long time that the further education sector seems to have been given that strategic steer that it has lacked. For example, we now know the specific vocational areas that are short, for example electronics, software engineering, construction, tourism and hospitality, and not only can we now focus on those, but the Department has earmarked funding to make sure that those are the areas that will be supported. My colleague, Mr Hunter, referred to Nortel. It needs skilled people quickly, and we are in the process of developing a custom-made Nortel Higher National Certificate in Electronics - it needs to get 1,400 technicians in with those particular skills. We welcome this. It is the first time that we have really felt pressure from the Government and from business and industry to tell us what is needed. We have complained for a long time that we had no strategic steer. We now believe that that is coming.
1774.
Dr McDonnell: You referred to one aspect of it, Nortel. As we grapple with the new technologies and the rapid pace of evolution, it is very clear that there is a gap at degree level for high-grade technicians - if you like, applied new technologists as distinct from academic ones. How do you see the colleges coming to terms with that and producing not just run-of-the-mill technicians, but high quality technicians who are as good as people with degrees?
1775.
Mr Place: We are talking about two slightly different animals with regard to the qualifications. The HNC and the corresponding HND are very much about technician-level people. But there is a fundamental problem, which goes back to Government policy and that is the capping arrangements on higher education places. We have the freedom to develop part-time higher level work but there is a real problem with HND and degrees at university because the Government have capped some places available to these people.
1776.
Three or four years ago the Dearing Report on higher education made the specific recommendation that there needed to be substantial growth at HND level. We can deliver. We have enough resourcing, staffing and teaching expertise. However, we cannot run the programmes that are needed because those places are capped. In my constituency, in the East Down Institute, we have many people coming out with the good A level qualifications, for example, in maths and science. Not all of them choose to, or can afford to, go across the water to find higher education places, but we can do nothing for them locally because of that. We have the capacity to do it, but there is the policy issue.
1777.
Mr Hunter: Capping is the big issue but we have a very credible qualification which is well respected and can also be tailored to meet particular needs. Without capping we could be a long way down the road to providing what you are talking about.
1778.
Dr McDonnell: 'Strategy 2010' recommends a clear focus in further education. How do you propose to sharpen the focus?
1779.
Mr Place: Is that a reference to vocational education or to further education generally?
1780.
Dr McDonnell: My understanding is that it is for further education to be more pragmatic and more outcome-orientated.
1781.
Mr Place: There has been criticism from people who believe that further education is trying to do too much and has too broad a focus. There are many shades of opinion on that issue. We do an excellent job for second-chance people outside vocational education. That is one example of work that we would not wish to give up. We meet people on a regular basis who have done well in their careers because they were given a second chance. I could quote the student who did poorly in a grammar school. He came to further education, got three As in his A Levels and got into university. There was also someone who went to an intermediate school, scraped GCSEs, came to further education and got an A, B and C and then got into university and moved on. It is not as simple as saying that further education should have this narrower vocational focus only. On academic subjects at A Level we do an excellent job for a lot of people, and those are the jewels in our crown that we do not want to give up.
1782.
Dr McDonnell: I accept that. Nobody would want you to give up that second-chance stuff. But there is a general feeling, which is perhaps unfair, that there is a range of 'Magic Roundabout' courses in some colleges - courses for course's sake - and that they lead nowhere. This Committee has a bit of influence over the Minister who, in turn, has some influence over economic development.
1783.
Vocational courses need to be geared towards employment opportunity and results rather than towards filling time.
1784.
Mr Place: I do not accept that many students in further education are marking time. All our courses have an agreed outcome. The one exception is the small number of leisure time courses we offer to pensioners, which are also very important. All our vocational students are on either NVQ programmes at level 2 or level 3 for modern apprenticeships or on GNVQ programmes, now known as vocational A-level programmes, which help people secure employment or move into higher education, or Higher National Diploma courses. We are focused in that regard.
1785.
However, we need clearer direction from the industry sector about the relative emphasis which should be placed on certain vocational courses. I suspect that this argument is based on the fact that the Government have decided that too many graduates have been produced in the last ten years at vocational level such as business studies, social care, leisure and recreation. They have now identified the areas I mentioned earlier. It is about a shifting of that balance.
1786.
The Department of Higher and Further Education, Training and Employment is steering funding to direct us away from those areas. It is a new focus. Ten years ago, business studies was a highly rated course. Organisations wanted people with HNDs in business studies. They valued GNVQs and HNDs. This has now changed. There has been a shift in focus in terms of what our needs are, and we will respond to this.
1787.
Dr McDonnell: How can we structure the communication link between businesses and colleges?
1788.
Mr Hunter: As an association we have looked to other exemplars. We brought 160 people to Ennis in County Clare and looked at a new town, a town of the future. We compared ourselves to the institutes in the Republic and benchmarked ourselves against them. We went to Ennis with the Industrial Development Board and developed a relationship between it and the further education sector for the first time in 20 years. The IDB representatives were saying "You were not on our inward investment trail, but you should have been. Let us talk and do something about that." We are now working with them to rectify that.
1789.
Next, we took part in a number of events with the industry sector; Tom had considerable involvement in that, and he can tell us about it. One event was with Moy Park when we examined how we would meet the needs of small and medium-sized enterprises, about which I have talked. We looked at it in inventive and creative ways. We then took part in an event with BT, when we brought together key agencies and businesses to talk about their vision of the future for further education. We are developing a joint strategy with businesses and industries, and we will be presenting this to the Minister of Higher and Further Education, Training and Employment at our conference on 16 November to see what we get from the Department on that.
1790.
Rather than waiting for the Government to tell us what to do, we are trying to collaborate to come up with solutions to the problem we have been talking about, to have the focus that has been missing in the past. We need to avoid past waste of resources and energy and meet needs as effectively as possible.
1791.
Mr Place: We have been caught in a catch-22 situation, as there has been criticism that the further education system is not delivering what is needed. Our problem was that we could not get anybody to tell us what was needed, and we were going round in circles. The development plan that Mr Hunter referred to will be presented to our Department in November. It will contain seven or eight specific action points relating to collaboration, and mechanisms to bring the industry and further education sectors closer together.
1792.
Mr Hunter: The association has also been busy in other areas. On behalf of the whole sector, it provides support for curriculum development projects, so that our students benefit from all the latest developments. At the moment we have projects in electronics engineering and manufacturing, learning in the workplace and three-dimensional streaming - engineering. We have also built partnerships with small and medium enterprises, and there are projects underway concerning on-line delivery of NVQs and hospitality, and on improving the quality of teaching and learning. We are seeking to provide the best service possible wherever it is needed.
1793.
We also want to raise the standard of the quality of teaching and learning. To this end, the association has been developmental in the establishment of the Further Education National Training Organisation in Northern Ireland. For the first time, this organisation is putting together standards for managers, lecturers, non-teaching staff and governors.
1794.
We are learning a great deal from the close relationships that are being formed. The association will be signing the protocol with the institutes of technology next week. We have close relationships with our opposite agencies - the Association of Colleges in England, the Association of Scottish Colleges and Fforwm in Wales. Although we are a very young organisation - only two years old - we are seeking to provide as much of that focus as possible, on behalf of colleges which are independent organisations.
1795.
Mr Attwood: I have two questions, and they have already been touched on. One has an immediate significance, and the other has a medium-to long-term significance. You mentioned that you had developed a course for the particular needs of Nortel and the skills that were required for employment with them. This morning we received a copy of a document from PricewaterhouseCoopers expressing their concerns about a skills shortage in the North. It is feared that this skills shortage could quickly become the single biggest impediment to economic regeneration. Given that you are fine-tuning your courses where there is a skills gap, for example with Nortel, are companies asking you to introduce courses to fill these skills gaps? Due to overall strategic funding restrictions, are employers saying to you "We require, and you are unable to deliver."?
1796.
Mr Place: Yes, that is starting to rear its head because there is a great fear that Nortel will wipe out any existing manpower and skills that are available in the electronics sector. We are working hand in hand with the Training and Employment Agency on this issue because Nortel has appointed it to broker the programme. The Training and Employment Agency is working with colleges individually to see what the possibilities are. For example, in the area that I represent, this is the first time that we have had a company in the greater Belfast area looking to the rural areas for a labour force. But that is a reality now. They have to look beyond the greater Belfast area because there is plenty of employment but the workforce is not available.
1797.
In my local area there are ex A-level science and mathematics students on the unemployment registers or in jobs that do not apply to their background. I think that we will be able to create a workforce for them.
1798.
With regards to electronics the Training and Employment Agency has said that there are other companies beginning to queue up behind Nortel, and that is a worry. We will deliver for Nortel but where will the additional people come from who are required for those other companies.
1799.
Mr Hunter: We are working with the Institute of Electrical Engineers to provide briefings on what we can do in particular areas, but we are having some problems. One is recruiting the people to train. There may need to be financial incentives offered for this as there has been in teaching in some areas in England. There is also the matter of having financial incentives to keep our own staff. We are losing very good information and communications technology staff to people who pay them a lot more than we can pay them at the moment. This is a real problem for us.
1800.
Mr Attwood: That theme was articulated by the university this morning. You have introduced the Training and Employment Agency into the discussion. Somebody senior in the education sector told me recently that one of the structural weaknesses in the overall funding of training education was that too high a proportion of the resources is going to the Training and Employment Agency, compared to further and higher education. We are going into very difficult territory here. It was put to me that what was required was not just the review of student funding that is going on at the moment, but a larger review of further and higher education college funding, with the intention of redirecting resources from the Training and Employment Agency into those sectors. You might want to comment cautiously on that. On the other hand, is the method to integrate the Training and Employment Agency more into the further education sector in the way that you are describing in relation to the engineering area?
1801.
Mr Place: Prior to devolution, when the Departments were structured in a different way, relationships between the further education sector and the Training and Employment Agency were difficult. It was not necessarily deliberate. We had different cultures and, therefore, saw things differently. We still have different cultures, but since the amalgamation of further and higher education and the Training and Employment Agency into the new Department, things are starting to change. The fact that the Training and Employment Agency is now knocking on the doors of colleges on behalf of Nortel is part of the process that I am talking about. Things are starting to improve and develop, which is giving us an opportunity to respond in a meaningful way. Previously we were working in a vacuum. As the days and months pass, there will be a closer working relationship between the agency and the further and higher education unit. We are now under the same Department, and we see benefit in that.
1802.
Mr Hunter: We are still waiting for the outworking of the restructuring in the Department. It will be helpful when that is completed, so that we can know exactly what we need to do. We have suffered for 20 years from competition with Training and Employment Agency-sponsored training centres, for example. We have got over that this summer, and we welcome that. We hope for a new era of relationships, and we want to forget the past.
1803.
Mr Attwood: You did tread cautiously.
1804.
Mr Neeson: I will start off with some parish- pump stuff. Nortel is in my constituency, and there are also Selectron and Seagas requiring similar skills. I was interested in Mr Place's point about the skills that are required and the courses being provided in your area. Just how widely are these skills being sourced in the further education colleges?
1805.
The second interesting thing you said is that the travel-to-work culture in NorthernIreland extends to only five or ten miles. How do we change this travel- to-work culture? Sometimes the jobs are not on your doorstep.
1806.
Mr Place: There are 17 colleges in the Province. We can exclude the catering college in Portrush, because it is not into this kind of work: that leaves 16 colleges. I am aware of 12 that are involved in this work, or at least have expressed an interest in being involved. They are moving forward as quickly as the Training and Employment Agency can get around to them. I do not know exactly which 12, but there is a proliferation around the greater Belfast and County Down area. Most of the colleges from North Down through ourselves to Newry and out to Upper Bann are proposing to be involved. The North West Institute is also involved, so there is quite a spread.
1807.
The travel-to-work issue is very important in relation to that. However, there are very few places in Northern Ireland now that are not travel-to-work areas as far as Belfast is concerned. It depends on the incentives that the companies make available here. If I may again refer to my own area, may I say that it has a very weak industrial infrastructure. It has no factories bar one in Ballynahinch and is very weak in terms of having any manufacturing and production facility at all. People have either found employment locally in service industries or, it is reckoned, 40% of the local population drive to Belfast anyway. As far as we are concerned, that is not a major problem. I am aware of the package that Nortel are making available, and it is quite attractive, I have no doubt. I cannot answer for places slightly further afield - for example, Fermanagh is probably not reachable by car on a daily basis. However, people are much more prepared to travel now than they were 10, 15 or 20 years ago. If the companies make the packages attractive enough, we will certainly be able to deliver on the training side, and I hope that we will address the niche here.
1808.
Mr Neeson: If I could preface my second question by saying, as a former head of careers in quite a large secondary school, that you are very critical of the career guidance service. You find it lacking cohesion and ineffective. What changes would you like to see made to turn this around and make it more effective?
1809.
Mr Place: When we talk about careers service in the broadest sense, we think of the Training and Employment Agency, the Educational Guidance Service for Adults (EGSA) and the schools' careers service. There is very little cohesion in that system. We think that the schools system is too narrow - for example, grammar schools tend to point their best students towards the schools' chosen preference as far as an academic career is concerned. That is not necessarily the best thing, either for the individual or for the economy. The Educational Guidance Service for Adults works very well with further education, and we do a lot in terms of providing adult guidance. The Training and Employment Agency system - and I am sure it may not thank me for saying this - tends to focus more on its own training provider network. I do not think that further education gets a good deal out of the Training and Employment Agency's careers guidance service. So that is a picture of disaggregation, and there is no coherence. Young people need to be exposed to a much broader array of career opportunity from an early age, perhaps through online careers guidance. They should not be channelled in a particular direction early on. It may not have happened in your school, Mr Neeson, but further education does not get the opportunity to market its services. Maybe that is understandable because we are now into a scenario whereby schools want to hold on to their pupils as the boards now have no statutory duty towards further education. However, that is having the effect of nibbling at the edges of our full-time provision. You are finding that small GNVQ classes are forming in secondary schools, and that is nibbling away at the system. There is a job to be done there as well.
1810.
Ms Morrice: My question about consultation has virtually been answered so I will go off script. One point I was making this morning was that there is a disappointing lack of interest in economic regeneration, economic policy. I get the impression that there are 16 and 17-year-olds who have vision and interest and excitement and enthusiasm, but by the time they reach 20, it has been beaten out of them.
1811.
Have you experienced that? Do you agree with that? How can we regenerate enthusiasm, interest and excitement in our young people for making progress, whether it is economic, social or whatever? How can we get that back in? How have they done it in the South?
1812.
Mr Hunter: The whole information/communication technology world has really gripped young people. As we know, our children can usually do better than we can in that department. The South is not without its problems. They are having difficulty keeping people. Their figures have just been published for people competing, and they were quite low. Our figures tend to be much higher, but we do not know why. They also have a significant drop-out rate. At the same time, with the new emerging technologies, there seems to be interest. It is the older, heavy industry that seems to be left behind and that does not grasp the imagination of young people. That is partly down to marketing, career structures and where the action is; where the buzz is; where the excitement is. Certainly it is in the new technologies, and we see that.
1813.
Mr Place: It links back to the last debate about careers guidance. The careers guidance is not right. The process is getting off on the wrong foot from a very early stage with young people. Despite all that is being done, young people are not getting the proper information to allow them to make informed choices about possible future career opportunities.
1814.
Ms Morrice: My point is quite interesting. As you say, 10 years ago business courses were the thing to go for. Now you are finding it difficult to predict 10 years ahead. Interestingly enough, Dr O'Hagan asked Queen's which areas they would prioritise, and they came up with information and communication technology, health and life sciences, environmental technology, and engineering. They are predicting, and I am assuming that is five years down the line, that those are the areas they would like more support for in research and development. I am assuming those are the areas which we are moving into. First, what would you say are the priority areas for the next 10 years? Secondly, how do you start diverting your resources?
1815.
Mr Place: That is the really tough question for us. It is different for us at further education level. The universities have the capacity to link into research and can predict markets better than we can. Who could predict where IT and technology is going at the present time? It is changing very quickly. That is why the Skills Task Force has such an important part to play, not only in trying to find out where the gaps are at the moment, and what has stagnated in terms of development, but in trying to get this dialogue going with employers and relevant agencies to find out where the various customers are. We fully endorse the six areas our department has highlighted for us in respect of the Northern Ireland region. We are not in a position to make an informed judgement at this time, as to where we will be in 10 years.
1816.
Perhaps when the Skills Task Force reports back, and we start to get closer involvement, we might be better placed to answer.
1817.
Ms Morrice: In respect of things like health, lifestyles and environmental technology, at the higher university level obviously they are going into the top end of those skills. In further education there is a lot of interesting employment in those areas that you could be developing the skills in at a different level - for example, waste management and recycling.
1818.
Mr Hunter: That is one of the issues about 'Strategy 2010'. It does seem to miss out the important service areas. It is significant when you look at our reliance on health and social care. The important employment opportunities for an ageing population have been missed out of 'Strategy 2010' and are not quite receiving the same funding priority as, say, HND places. I am from a health and social science background myself. There are things that should be there that are missing, but that will always be with us. There are priorities there, particularly in the new areas that you have talked about, but that should be a part of it.
1819.
Ms Morrice: It is related to the demography really, with nothing changing.
1820.
Mr Place: It is changing to suit that. It is not that business studies and social care have gone away. They are there, but market forces, if you like, are changing the balance. We are still, as a sector, doing a lot in health and social care at GNVQ Advanced National Diploma level, which is a direct feeder into a HND or a degree level programme, and we will continue to do that. At HND level there is no growth in health and social sciences. The department has decreed that is not an area for development. There is even less growth in the environmental sciences. There is some provision, but not as much as for, for example, business studies, social care, leisure and recreational management or construction engineering, which we now call built environment. It is not a high priority, and funding tends to go the other way.
1821.
Ms Morrice: Is that an oversight?
1822.
Mr Place: Obviously, but, as Mr Hunter says, there will always be different views about priorities. Technology is driving it at the moment. There are a lot of jobs there, and it is a very obvious and transparent industry.
1823.
Ms Lewsley: One of the problems with being at this end of the table is that the majority of questions have already been asked. It is very interesting from the point of view of being involved in NVQs. I had a horrendous time because they were only out at the time. A lot of them have been modified and I am glad to see flexibility within qualifications. With regard to flexibility it is OK for Mr Neeson in Carrickfergus. Nortel is going in there, identifying that need and addressing it. Is there flexibility to identify needs in other areas? I tried, in particular, to encourage women into engineering. It is a collective approach. It is not just a matter of trying to encourage students. You have to inform and educate the parents, the careers teachers and the schools. There is a training centre in Lisburn, which is now connected to Lisburn College of Further and Higher Education. We had a day for engineering. We brought the engineering companies in to sell their wares to the students. We had grammar schools ringing up and asking why they were invited - they said most of their students went to university. I think there is a joint package there. You need to back out and sell your wares in the schools to allow students the opportunity for choice. Also there are a lot of areas within constituencies where you could offer courses. The need is there, particularly in the service sector and the care end of it, where people have to travel to other towns or cities to gain that type of qualification. I would also ask you about the accessibility of some of these courses, in particular for people with disabilities. How flexible are you there? Is there the opportunity somewhere further down the line, when we are talking about the whole issue of technology, e-consultation and e-government, for some type of outreach online programme to be offered so that they can be part of the workforce and gain the skills that they deserve?
1824.
Mr Place: I must apologise. We did not mean to give the impression that we are only interested in developing electronics for Nortel. It is hot at the moment because pressure is being put on the Training and Employment Agency, and ourselves, to deliver. Much more is going on. We are running the normal provision at the same time and developing in a number of new areas - for example, the whole area of construction. Building firms are crying out for bricklayers and plasterers.
1825.
Many workers have moved to Dublin and are earning good money. The local markets are getting cleared out as quickly as we can train people to NVQ levels two and three. They go to Dublin to build bricks and plaster and return at weekends. Some do not come back at the weekend and get even more money for working during this time.
1826.
You also mentioned engineering. Unfortunately this area was neglected academically for about 15 years. Somebody made the decision that engineering was no longer needed. In fact, what was needed was a change of focus in engineering. The old mechanical engineering disappeared, but we are now faced with a shortage of electronic engineers. As far as responsiveness is concerned, we profess that we are responsive. However, this brings us to the problem of anticipating the demand. Some colleges have now appointed business development officers to get out there, to knock on doors and to try and get a foot into business firms. It is almost impossible to get organisations to tell you what their training needs are, and that is what this debate is about. The women into engineering programme has operated in a number of colleges and has been very successful in introducing women back into education, specifically into engineering areas. As far as disability access is concerned, I credit the Department of Further and Higher Education, Training and Employment. Colleges are now receiving annual sums of money, which they never got before, specifically to deal with issues of access. Disability access has involved considerable improvements in terms of lifts, extra ramping and the widening of doors.
1827.
Ms Lewsley: Not to be rude, but the issue is not about physical access to a building, but access to the services inside. It is not always somebody with a physical disability that would like to gain access to a course, but somebody who has impaired hearing, or has a speech impairment, or is an epileptic who needs a carer with them. This type of access is not available in many places.
1828.
Mr Hunter: Speaking as the ex-chair of the National Bureau for Students with Disabilities in Northern Ireland, colleges have come a long way here. Several now employ a learning support co-ordinator who will seek to meet the needs of the individual, with the assistance of other agencies such as the Cedar Foundation - previously NICOD - coming in to support. They have a series of contracts with four or five colleges providing that support service. This has come a long way but could go a lot further. We are also helped by legislation now. I am very pleased to see what is happening, but a lot more needs to be done and this takes time.
1829.
Mr Place: An example of this occurred last year when, for the first time, we were able to run a small group for six visually impaired people. We purchased additional computer equipment with special keyboards. That was a need that had been articulated three years earlier, but it took us that long to get the initiative off the ground. This is simply because there are social services problems, and problems, to be overcome with the students. It took them a long time to articulate. It is a slow process. We are doing more than before, but I agree that there is a lot more to be done.
1830.
Mr McClarty: All the questions have now been asked and answered. This has been a fascinating and informative session, and I would like to thank the gentlemen for their frank and open answers to all the questions put to them.
1831.
The Chairman: I would like to reinforce that and to thank you for the way you have dealt with our questions. Your submission will be effective when we come to produce our final report. We will take on board everything you have said. Once again thank you. I hope that we will meet again sometime.
TOP
ADDENDUM TO MINUTES OF EVIDENCE
THE ASSOCIATION OF NORTHERN IRELAND COLLEGES
14 September 2000
May I take this opportunity to thank you on behalf of the Association of Northern Ireland Colleges for affording Mr Place and myself your committee's time to give evidence in relation to Strategy 2010 and economic development, on Wednesday 13th September. We found the experience fascinating and very rewarding and appreciate the opportunity to have articulated the views of the further education sector.
We wish to request that, in relation to the final question posed by Ms Patricia Lewsley, MLA, member for Lagan Valley about access, the attached short statement be added as supplementary material to the oral evidence given by us.
Thank you once again, to you and your committee for receiving us.
DAVID HUNTER
CHIEF EXECUTIVE
SUPPLEMENTARY STATEMENT TO ORAL EVIDENCE GIVEN IN RESPONSE TO MS PATRICIA LEWSLEY'S QUESTION ABOUT IMPROVING ACCESS TO FURTHER EDUCATION
There are many barriers to assessing further education, some real and some imagined.
The further education colleges are acutely aware of the problems of the marginalised in their communities, be it those residing in TSN Wards, those who endure a physical disability, lone parents, adult returners, to mention but a few examples.
One of the biggest problems which colleges have faced is that, due to serious under-funding prior to incorporation in 1998 physical access to, and appropriate facilities within buildings was poor. Since 1998, with Department help through ear-marked funds for this particular purpose, the situation has improved considerably. For example, one college has been able to create a Learning Support Unit which offers confidential and private facilities for young people and adults who need extra support to improve their basic skills in numeracy and literacy and to build their confidence generally which will, in turn, provide the necessary foundation for them to progress into vocational programmes at a later stage.
On a wider front, colleges are aware of the many people in their communities who through perception view educational buildings negatively and intimidating. Work has commenced with the help of European funding and the Department's Access Initiative fund to address this problem. For example, in the East Down area, the Institute has networked itself to over 50community groups and through them can now identify and respond to specific needs not only in the towns but also the outlying, rural areas.
This work has been made possible through the appointment of three Community Development Project Officers whose role it is to liaise at close hand with those groups and individuals and set up training and education programmes in locations and at time to suit the particular client group. This work has also extended to the running of computer classes in IT in church and community halls throughout the area, with the use of two banks of lap-top computers, conveyed to wherever they are required. This work has resulted in 150 additional adults joining basic numeracy and literacy classes in the past year and a total of 45 families (some 250 parents and children) engaging in and returning to learning.
Colleges view the future necessarily as one of partnership with local groups and agencies, and of changing and adapting to meet a radically-changing world.
