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How the CBI is helping the Executive with its strategy

Analysis & Company Report with John Simpson

Published 30/08/2016

Electricity costs should be a priority
Electricity costs should be a priority

Ministers in the Northern Ireland Executive are currently coping with replies to the consultation on the content of the next Programme for Government (PfG).

They are well aware that replies to consultation tend to drift away from good operational ideas showing costs and likely benefits.

Frequently, consultation results in a statement of unquantified ambitions take little account of the budgetary consequences. Failure by respondents to match expected resources and operational detail is an ever-present weakness.

The Executive asked for responses to 14 themed desirable outcomes using, where relevant, some of the 42 statistical indicators to assess the impact of refreshed policy decisions.

To the credit of the CBI in Northern Ireland, its response starts from an endorsement of the new approach taken by the Executive, saying that it offers a strategic focus and the promise of more joined-up Government.

That complement to the Executive is quickly tempered by an apparently perverse comment that members of the CBI feel that the new framework "fails to provide a clear strategic vision of how the Executive plans to provide delivery focused government that can facilitate sustainable economic growth".

The new strategic focus is emphasised when the CBI suggests that the Executive must make specific improvements before the final PfG is published. Improvements are commended through:

1. Prioritising policies with the greatest impact on people's lives, unambiguously making first priority the size of the economy and creating more jobs;

2. Tackling uncompetitive electricity costs to businesses;

3. Requiring the public sector to focus on delivery and productivity, doing more with less;

4. Setting targets to challenge politicians, the public sector and the private sector to work together - with innovations and acceptance of change to meet common goals.

Even with some detail on the ranking of the agenda, the CBI is vulnerable to a lack of precision on how the prioritised outcomes should be managed in terms of practical operational policies and their costs.

For example, there is an acknowledgement that the Executive faces considerable financial challenges - meaning threatened budget imbalances.

But there is no contribution to the debate about how the budget imbalances should be tackled.

Re-enforcing the need for a stronger regional economy, CBI suggests that the theme should be 'Improving well-being for all - by driving economic growth and tackling disadvantage'.

There is no mention of the target set by the two larger political parties in the election, to seek 50,000 new jobs over the period of the current mandate.

That target is hugely symbolic and its achievement could be part of the final Programme for Government.

In the evolving Brexit debate, CBI cautions on the dangers of a loss of easy access to the EU Single Market. There is a message in that conclusion.

Northern Ireland representatives should use their influence to retain favourable EU trade and payments arrangements.

The CBI advice for the PfG puts the emphasis on several wide ranging themes:

1. Radical action to improve global competitiveness through investment in skills, innovation and infrastructure.

2. Facilitating economic growth by encouraging private enterprise, moving from over-reliance on the public sector.

3. Tackling decades of decline in Northern Ireland's principal city with an ambition to drive central Belfast's population to more than 500,000 people in the next 15/20 years, also linked to growth in other urban conurbations.

4. Selecting areas for improvement identified from the recently published index of NI's overall competitiveness.

5. Use the examples of successful indigenous businesses to facilitate a step change in economic growth.

6. Improving the educational outcomes for more people, in part to improve competitiveness and also to address current levels of disadvantage and inequality.

7. Efforts to reduce the proportion of the budget spent on health and social care.

The agenda for the next PfG is wide-ranging. The CBI has passed back to the Executive some pointers on how the problems of competing ideas can be reconciled.


Company Report: Coolkeeragh

The Coolkeeragh ESB gas fired electricity generating plant, owned by the Irish parent company ESB, is a major source of electricity generated in Northern Ireland.

The formal statement of annual accounts is distorted by the specific accounting arrangements adopted by ESB. Unusually, the generating plant reports that it has no direct employees. This seems to reflect the charging of labour costs through another ESB financial subsidiary which then recharges labour costs indirectly to this company.

In another unusual feature of the most recent financial year, the company has taken an impairment charge of £32.7m into its trading accounts, resulting in a pre-tax loss of just over £15.3m. The impairment charge is explained as a result of a reduction in operating demand from the Single Electricity Market because other technologies are offering more economic sources of electricity capacity. This includes other natural gas plants in the SEM offering competing bid prices.

The balance sheet valuation for the Coolkeeragh plant is now being carried at £56m.

This is less than half the £119m value attributed to the plant in December 2011 and reduced by £35m in the last financial year.

Coolkeeragh ESB has shown healthy profits for most of the last seven years and has reduced its borrowing. However, in 2015 an overall pre-tax loss of £15.3m has been recorded.

Although trading as part of the all-island Single Electricity Market, it publishes little detail of the main influences on its corporate results.

The figures (in £'000)

Turnover 169,054 130,619 142,270 Up 9%

Operating profit (loss)16,677 6,517 20,609 Up 216%

Pre-tax profit (loss)12,063 2,553 (15,334) Loss noted

Capital expenditure60 360 2,187 Up 507%

Employment (ave. no)3 None None No employeesShareholders' funds10,216 6,087 (6,920) Negative value

Shareholders' fundsxxxxxxxx

2013 2014 2015 % change annually

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