Belfast Telegraph

EAG must be heard above some unpopular budget decisions

By John Simpson

The Northern Ireland Economic Advisory Group (EAG) was established in 2010. With an initial impetus from Enterprise Minister Arlene Foster, it brought together a small group of senior people from different sectors of the economy. The group was given an extra impetus when the minister attracted Kate Barker as chairperson. She is a leading and respected policy analyst on the UK economy who had worked at the top level in several Government departments.

More recently honoured to become Dame Kate, she brought a wealth of important experience to the challenge. Sadly, after a five-year stint, Dame Kate has now retired from the group.

This change was not at the behest of the minister, who is thought to have been keen to renew the appointment.

There is now an opportunity to ask questions about the achievements of the EAG and to reflect on what contribution a refreshed group might make in the preparation for the next Programme for Government, which should be prepared later in this year before the next Assembly elections in 2016.

The EAG played an important part in debating whether Northern Ireland should ask for the devolution of corporation tax powers to the Executive. Through the network of contacts, it can be assumed that the voice of the EAG was heard by Treasury ministers and officials. At an early stage in the debate, the EAG offered a more realistic assessment of the benefits of a corporation tax change, which took some of the excessive optimism out of early local forecasts of the possible outcomes. The EAG is on record as still campaigning strongly for the changes in the corporation tax regime. That series of decisions is, of course, paused as the Treasury waits for the commitment from the Executive that a balanced and sustainable budget programme has been adopted by the Executive.

Critically, in the next few weeks, the Treasury (with whatever new ministerial team is in office) will ask the Executive key questions about the implementation of the Stormont House Agreement. The Treasury will have been reading the comments of the two largest local political parties, which, one way or another, are asking for a more generous interpretation of the Barnett formula (or effectively a rewriting of the rules), so that welfare reform can be managed within an easier budget allowance.

The recent comments by David Cameron, as outgoing Prime Minister, about his reluctance to allow a more generous welfare regime point to a possible stand-off. That may mean that Stormont's Finance Minister, Simon Hamilton, will be faced with even greater budget problems than are currently being handled.

Given the critical importance of a sustainable, well-directed local budget, there needs to be some external support pushing the Executive to make sure that the budget is amended and accepted, even with some unpopular consequences.

Ideally, this is an issue where a fully-functioning EAG should have a voice and should make its voice heard.

The EAG, if it fulfils its influential role, should now be actively preparing for the next Programme for Government. That suggestion has two dimensions.

First, an independent review of the Programme for Government by an agency outside the government machinery, and conducted outside the civil service, should be an unquestioned part of the EAG agenda.

The last five years have seen the design of improved regional economic policies, but whilst the designs have improved, the implementation could be more forceful.

Second, as the EAG (or its successor) independently considers how to reprioritise local economic policies, the EAG should take part in a public debate on its proposals. Unhappily, the recent work of the EAG has been 'behind closed doors'. Northern Ireland lacks a forceful debate on how to strengthen the local economy, which reassesses priorities.

Northern Ireland's regional economy will be inadequately served if the prescription is 'more of the same'.

Company Report

Kilmona Holdings

Kilmona Holdings Holdings is the renamed and refinanced company formerly known as PBN Holdings.

The group results combine the consolidated figures for a group of companies in a diverse range of businesses. Subsidiaries are in the hotel business, warehousing and storage, as well as the development, sale and rental of property.

The annual accounts also reflect the complications for the company of holding a number of properties whose balance sheet values have been affected by the fall in property values.

The balance sheet value of property investments peaked in 2008 at over £326m. In June 2014, property assets were registered as over £102m.

Although some of its major property assets are in Great Britain, including the Savoy Centre in Glasgow and the West One Retail Park in Salford, the company is registered in Northern Ireland. In 2009 the company balance sheet was seriously affected by an adverse valuation of the physical assets when an unrealised loss of over £48m was deducted from the value of shareholders’ funds. This cancelled out a large part of unrealised capital gains in the previous years.

More recently, impairment of the value of assets, along with unrealised losses on the revaluation of assets, lead to charges of nearly £179m being deducted from the balance sheet value of assets. At the year end in June 2014, shareholders’ funds were in deficit to the value of £222.7m.

In the period immediately prior to June 2014, the financing of Kilmona was through loans that had been transferred to Nama. On June 20 2014, these loans were sold by Nama to Cerebus Capital Management. Then, subsequent to the recent financial accounts, following discussion between Cerebus and the directors, Cerebus sold the Kilmona loans to an American bank on January 21 2015.

Also in January, the directors completed a group secured debt restructure to strengthen the group’s financial position.

In March 2013, Patrick Kearney became the sole shareholder in the company when he purchased the 50% holding formerly held by Neil Adair.

In the most recent year, three other new directors were appointed.

Belfast Telegraph