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Invest NI: Going for broke

Invest NI is heading for a situation where it is short of funds. The planning forecast from within Invest NI shows that 98% of the available funds in 2010-11 are already committed or earmarked for specific purposes.

Alastair Hamilton, chief executive, believes that the 2010-11 budget would be over-committed based on projects currently being considered with a £12m shortfall.

During the remaining 10 months of 2010-11, the flow of new projects that should be approved by Invest NI could take commitments above the allowed £170m. More importantly, while Invest NI has the assurance of Executive support for the initial stages of any further worthwhile projects, Invest NI must not knowingly plan for excess commitments in subsequent years.

Stephen Kingon, chairman of Invest NI describes the new situation succinctly.

“Limited funding is a real constraint on what Invest NI wants to do,” he said.

Invest NI had an annual budget in 2008-9 of over £170m and budgets for similar sums in 2009-10 and 2010-11.

The early results for 2009-10 point to a full agenda of different forms of development assistance for businesses and increased emphasis on steps to encourage R&D along with innovation ideas.

The summary results now released are not a good basis to test whether Invest NI has shown good value for money. When there is fuller detail, questions may be asked about the scale of assistance for the major investment projects, the number of jobs expected and delivered, and the change in the key ratios from one year to another.

The performance targets set for Invest NI, as part of the Programme for Government from 2008 to 2011, are expected to be met. These achievements are commendable.

However, the next stages in the evolution of the programme must be expected to be more ambitious and set in terms that, in addition to basic quantitative performance measures, also add tests of achievement measured through relative costs.

Assessing the achievements becomes more helpful when indicators of output, or outcomes, are linked to the allocation of costs so that outcomes and efficiency can be tested. The improved structures in Invest NI mean that this type of analysis is now a logical extension of its transformed operational methods.

Facing a potential budget shortfall means that Invest NI now has difficult questions to answer both to the paymasters in the Executive and to the business community.

Has investment and job creation now become so much more expensive that, within the £170m, this gives leverage for investment of about £700m and/or support for under 7,000 jobs?

Does Invest NI use the range of incentives selectively and at minimal rates to avoid deadweight and displacement consequences?

The fairest assumption is that Invest NI can confidently stand over its policies and practices to competently answer these questions. From that assumption, the stark problems facing Invest NI and the Executive become clear but not easily answered.

Effectively, if the Executive does not find some supplementary funding, Invest NI needs to either decline to assist some otherwise welcome investments, or place some of these projects in a queue (and risk them going elsewhere), or offering lower levels of assistance (or none) and risk their disappearance.

This becomes a severe test of whether the Executive will give the economy top priority and, if so, how?

In response to a question about the merits of trying to obtain a lower rate of corporation tax in Northern Ireland, Stephen Kingon has reservations.

His preference, to make investment projects more profitable and thus add extra incentives to locate here, is that an extensive system of tax credits related to training, R&D, and innovation could be just as, or more, effective and offer stronger incentive leverage.

Since Invest NI announced its performance review, last week, the Minister for Enterprise, Trade and Investment has held the first meeting of the new Ministerial Sub-Committee on the Economy. That sub-committee does not need to look far for a big agenda item.

Will the new Executive group of ministers suggest answers to the dilemma posed by Invest NI?

Belfast Telegraph