Uncertainty puts jobs pledges in the balance
Published 12/06/2012 | 08:00
In the Programme for Government (PfG), Invest NI has the lead responsibility to secure commitments to 25,000 new jobs alongside investment of £1bn in the four years from April 2011 to March 2015.
The jobs results in 2011-12 are consistent with the four-year target and the investment expected, at a further £452m, makes the overall ambition of £1bn seem modest. A total of 6,485 new jobs have been promised.
The target of 25,000 new job commitments in four years may be ambiguous. Even in more optimistic circumstances, job commitments are not firm promises. There will, inevitably, be changes and slippage in delivery.
There must be an expectation that some current jobs will be lost. In short, even if 25,000 commitments are in evidence, the net impact on the total number of local jobs in businesses which are Invest NI clients will be nearer to half of this headline figure. This is not enough to make a large dent in current unemployment.
The tensions for policy making by Invest NI are more complicated than a debate about the jobs target and its impact. Other aspects of the Invest NI annual results synopsis cast a serious shadow on possible future achievements.
First, Invest NI has revealed that its budget in 2013-14 and 2014-15 will be significantly lower. Compared to an allocation of nearly £150m in 2010-11, the figure in 2012-13 is £132m, followed by £107m and £106m in the next two years.
Invest NI will have a much reduced annual budget. This points to a concern about a constraint on the jobs and productivity objectives during these recession recovery years.
Second, and alongside a reduced budget, Invest NI faces considerable uncertainty about its ability to maintain even the present levels of selective financial assistance because of both a more restrictive policy framework imposed by the UK Department of Business and also a more stringent set of State Aid rules emerging from the European Commission.
In recent years, UK policy for the less prosperous regions has treated all of Northern Ireland as a single area when qualifying for financial assistance to incentivise business investment. The UK Department of Business has been consulting on an amendment that would sub-divide Northern Ireland into three different areas from 2013. Northern Ireland agencies are thought to have argued against the change but the expectation is that the argument has been lost.
The EC becomes a player in the debate because, from 2013, Northern Ireland's preferential status with permission to retain higher levels of selective financial assistance is ending.
Put together, these changes will make it more difficult for Northern Ireland to compete to attract external business investment. Invest NI, in some forms of financial assistance (but not all forms), will be constrained. However, the temptation to link the tighter rules with the case for a decrease in the annual budget is fallacious. There are other options which now need a wider debate.
The uncertainties affecting future strategy for Invest NI are multiplied by the uncertain future of the devolution of corporation tax. Agreement in principle from the Treasury has not yet been confirmed. Even if (or when) confirmed, the date of any reduction in tax rates needs to be announced, the restrictions on which businesses do, and do not, qualify must be clear, and the restrictions to minimise unwelcome tax avoidance must be unambiguous.
This uncertainty is on the minds of senior Invest NI people. Such is the worry that the chairman of Invest NI, even in late May, put the odds on making the changes as only 50/50.
Invest NI is fighting for the local economy: it needs much more targeted support from its allies and its 'ammunition' stock needs to be effective, well-chosen and fully demonstrable.