Posted on Saturday 9 April 2011 by Ulster Business

Secretary of State Owen Paterson, here launching the consultation document on Northern Ireland’s Corporation Tax, has driven the Enterprise Zone idea

Secretary of State Owen Paterson, here launching the consultation document on Northern Ireland's Corporation Tax, has driven the Enterprise Zone idea

By John Simpson There are important new plans to improve the 'weapons' of economic development policy in Northern Ireland. After four years of an Assembly and Executive where the ambition to grow the economy was often stated but continued much as before, the levers of economic policy may now be reshaped. A new Assembly and a reformed Executive have an agenda to consider three key initiatives. First, they will receive and then decide on the recommendations of the special Economic Strategy Group, chaired by Kate Barker. Second, the long awaited paper on the scope to devolve corporation tax to the regional authorities is out for consultation and poses critical far reaching questions. Third, the Executive must consider how to respond to the proposal to make Northern Ireland an Enterprise Zone. There is an immediate challenge (not necessarily the most important) in proposals for an Enterprise Zone. The concept that all of Northern Ireland should deploy measures which allow the whole region to be seen as welcoming for additional enterprise and business is attractive. Whilst the initiative for an enterprise zone has stemmed most strongly from Owen Paterson, Secretary of State, the concept would readily be widely endorsed. The generic appeal of the concept can also confuse its scale, purpose and administration. There is a potential confusion in terminology. The Chancellor of the Exchequer has announced that there are to be 21 new enterprise zones in deprived areas in England. That announcement was generally welcomed in the areas that may benefit and, from initial comments, will replicate and develop the concept that was used in 1979-80 to earmark areas for special treatment on planning, local taxation and business regulation. The ambition for Northern Ireland should differ significantly from the English model. For that reason, a Northern Ireland proposal should adopt different terminology. As a first suggestion, perhaps the Northern Ireland concept and proposals should be described as features of an Enterprise, or Enterprising, Region. The emphasis on the inclusion, initially, of all of Northern Ireland and the scope for a wider agenda both point to the need to avoid confusion in terminology. The possible scope for a wider agenda needs to be translated into an action plan. That action plan should draw on the potential targeting of variations in corporation tax to incentivise business development, including attracting more external investment (FDI). There are numerous variations in the reshaping of company taxation which are being, and will be, debated elsewhere. However, a critical element in shaping an Enterprise Region is that variations in corporation tax should only be one element in the package. An Enterprise Region must be much more than a favourable tax regime. The strength of an Enterprise Region should be the capacity to demonstrate a competitive base which attracts businesses that are viable and sustainable in the long-term. An Enterprise Region that offers high value-added output must have a favourable structure in competitive terms. The components are diverse but, for analysis, can be separated into two general parts. For simplicity, these can be seen as, first, the enduring fundamentals of a strong regional economy and, second, the specific or unique additional features that add to the attractiveness of the region. If Northern Ireland is to succeed as an Enterprise Region, both components must be in evidence. Part of the challenge in the creation of an Enterprise Region is an acknowledgement that, before the local special factors are added, the fundamentals of a successful region need to be strengthened. In terms of business regulation, employment legislation, planning laws and practices, educational standards and skills, and urban and rural infrastructure and regeneration, there are weaknesses to be addressed. To date, these weaknesses are sometimes denied, or sometimes acknowledged, but rarely are they being tackled in a convincing drive to raise the local 'game plan'. A worrying feature of the local political debate is the degree of complacency about the fundamentals which constrain the competitiveness of the local economy. Too often this is linked with naïve reliance on small Government adjustments to business rates levels or similar variants. Strengthening the fundamentals that underpin the economy is more significant than being regarded as a feature for emphasis in an Enterprise Region. The review group chaired by Kate Barker will fail in its purpose if it does not review and comment on steps to improve the fundamentals. Simply to recommend that Northern Ireland should become more export orientated, as has emerged elsewhere, would be not just a missed opportunity but a serious dereliction of the review team's responsibilities. There is then, in parallel, the opportunity to add the extra agenda for an Enterprise Region. What features, in addition to the (still uncertain) corporation tax changes, would be commended? Where should the responsibility for the Enterprise initiative rest? Owen Paterson has campaigned for an enterprise zone and led local politicians to refer to this initiative as emerging from the Treasury. In principle, responsibility for delivery of an enterprise concept should lie in Northern Ireland. Most of the scope for individual initiatives is devolved so that a devolved administration should have the primary responsibility. Indeed, they would ideally rest the responsibility with just one Minister who might appoint the best possible advisers and a high profile business leader who commanded respect and would co-ordinate a strategic agenda. So, what should an Enterprise Region offer alongside a highly structured and professional delivery of public services? For a minimum guaranteed period of ten years it should include:
  1. tax concessions on new capital invested by businesses
  2. tax concessions on R&D and innovation possible exemption from business rates for a genuinely new business
  3. cheaper and quicker planning application decisions
  4. 90% guarantees on approved loans from banks
  5. allowances to meet training and education costs for new employees
In principle, Northern Ireland should be a single region-wide Enterprise Region. There is a further refinement of these measures that would be justified. For defined (but not too narrowly) inner city areas including inner Belfast, the wider Ilex areas in Derry City and other areas of industrial decline, special status akin to a Development Company might be awarded. The intention would be that the special Development Companies might be given authority to purchase land, develop key road lines and standards, consolidate sites, and prepare development plans to break the cycle of inner urban decline. The Enterprise Region concept is no simple, one-phased application. It is complex because it calls for co-ordinated action. Part of the scope depends on the transfer of corporation tax decision making. If that happens, then the responsibility more clearly falls on Stormont. After the Chancellor's announcements for English enterprise zones, the case for a locally designed concept and a local branding is even stronger.

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