Belfast Telegraph

John Simpson: Northern Ireland must make changes if it's going to continue attracting investment

Analysis

By John Simpson

Northern Ireland needs to continue to attract more incoming business investment in the years ahead. Following Brexit, should the incentive mechanisms that attract incoming investment remain as at present? If not, should or could the incentives be revamped?

Too much uncertainty is a good reason to leave well alone. Yet, inaction will risk losing an opportunity to take a new approach.

Northern Ireland should offer a combination of trading advantages that are an example of a progressive west European society that has developed our advantages to standards that are as good as and better than can be found elsewhere. There is a big preparatory agenda awaiting action.

Developing and improving our generic 'offer' is a compelling motive, whatever the outcome after Brexit. Put perversely, there is little excuse for failings in the basic and higher educational standards of people available to be employed by incoming investors.

Regrettably, there are deficiencies in the present outworking of our educational structures. The proud claim, sometimes made, that we have a well-educated labour force ready and prepared to offer consistent, conscientious engagement in demanding occupational skills, is less justified than would be hoped.

Alongside a constructive critique of Northern Ireland's readiness to offer dedicated and skilled employees, there also needs to be some reassessment of the other aspects of the human and man-made infrastructure. Does Northern Ireland have an infrastructure that meets some of the best standards available elsewhere in Europe or North America for communications, transport services, public utilities, housing and regulatory provisions? While it can be argued that 'we can manage with what we have', that is effectively an admission that the infrastructure standards are - to a degree - second best.

If our infrastructure falls short of the high standards available elsewhere, that detracts from the attractiveness of Northern Ireland as an investment location and raises questions about how to secure improvements. That challenge introduces problems of choice and priorities.

The NI budget for infrastructural services must compete for funds from the NI government budget. That budget, by the normal comparative standards, is fairly endowed and fully allocated. However, compared to other UK regions, the local discretionary spending is skewed heavily to push down household spending bills, whether in rates, utility charges or social services. Local decision makers, hopefully Ministers, should now be challenged to make longer-term planning decisions that, initially, may be unpopular.

There is a major challenge to tackle in showing the logic of such a shift.

In the search for additional incoming business investment, there is also logic in asking whether the inherited structure of supplementary investment incentives also merits a root and branch review. For many reasons, the answer must be yes.

Targeted tax advantages, off-sets to start-up expenditure, fiscal discretion, R&D support, partial support for critical services and regulatory concessions may be feasible, post-Brexit.

After Brexit, the degree of local discretion may change. However, if near seamless international trading conditions are agreed, some constraints on local discretion may follow.

The UK Government, as part of Brexit, has indicated that, to avoid unhelpful competition in the new Europe, the UK may be prepared to retain the rules on State Aid that apply in the EU.

On balance, NI should willingly accept that constraint and also be ready to sustain the rules on the scale of State Aid in ways to support acceptable levels of competition.

This is only the first step in recreating a revised schedule of incentives for Invest NI and linked to the wider programme for Government.

It is a demanding agenda, raising questions about whether the cost of lower corporation tax rates offers value for money. This agenda merits careful selective proposals that should be developed in the next six months.

Without a devolved local Government, this critical agenda may be stalled.

Yet another reason to compromise enough to allow the reform of the Executive.

Belfast Telegraph

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