Criticisms of Invest NI's financial policy may be misdirected
Invest NI was put under the microscope during 2013 by a team from consultants SQW, appointed to examine the impact of its selective financial assistance policies.
The results are both complimentary and critical.
Top of the lists of credits, Invest NI was told that the rationale for its scheme of selective financial assistance (SFA) was valid and appropriate. Also, the scale, variety and flexibility of Invest NI's interventions were assessed as valued and important. The evidence confirmed delivery of significant in-firm benefits and an economy-wide impact.
At the other end of a spectrum of conclusions, the clarity and focus of SFA was argued to be reduced because there was a lack of a formal theory of change. SFA was said to be more about addressing symptoms and less about solving the underlying cause of market and other failures. In addition, there was a lack of ownership, strategic leadership, and active steering of SFA, which was diffused across Invest NI. These criticisms were linked with sub-optimal monitoring and performance management, alongside evidence of underperformance against agreed targets.
These contrasting conclusions merit careful reading. Some of the criticisms seem somewhat misdirected.
This investigation was commissioned by the Department of Enterprise, Trade and Investment (DETI), not by Invest NI itself. The justification was to provide an evidence base 'to inform on-going discussion with the (UK) Department of Business Innovation and Skills and the European Commission, (about) Northern Ireland's Assisted Area status.'
The logic and statistics in the report are impressive, although it contains many points of criticism and, in one important technical area, is inadequately explained for a lay audience.
The SFA review was based on the work if Invest NI in the years 2004/05 to 2010/11, with information of the promotion of c.31,000 new jobs and c.11,000 jobs safeguarded. Of the new jobs, around 60% were in non-Northern Ireland-owned firms. The new jobs were split nearly equally between manufacturing firms and service businesses. One of the largest gains was 11,700 new jobs in business and financial services.
The consultants addressed the comparative performance of Invest NI in terms of evidence from other areas also seeking to attract investment, and asked whether Invest NI could demonstrate value for money from this public sector spending. Of the total number of new jobs promoted (with the usual caveat that jobs promoted are not jobs actually created) the estimate was that 20,100-22,600 were created and of the safeguarded jobs, 9,500-10,400 were created. A critical unfinished argument repeated by the consultants is whether Invest NI could reasonably improve the monitoring of projects to have better information on this subject.
The consultants say that the present systems are inadequate. Invest NI reasonably argues that more detailed continuous monitoring could be excessive.
In an effort to assess the impact of SFA on businesses, the consultants found evidence that some businesses experienced a range of benefits, including improved staff knowledge and skills, the introduction of new improved products or processes, and improved technical capability. In parallel conclusions, evidence from some businesses found cost savings, increased sales and productivity improvements.
This conclusion should be no surprise, since SFA will only be approved if some of these benefits are part of the business plan.
Perhaps the most important and conceptually the most difficult question to ask on the impact of SFA, is whether it was allocated to projects that were 'additional' to what might otherwise have happened. Did businesses receive SFA to make investment that was planned and would have happened anyway, or did SFA leverage 'additionality'?
The consultants recognise that measuring additionality is inevitably imprecise. However, they conclude that there was a positive net benefit to the economy of £53m to £77m per annum.
DETI has been given a reassuring answer on SFA.
It has also been offered a series of criticisms that are, partially, more academic than practical.