SIR DAVID VARNEY'S CALL FOR EVIDENCE FOR HIS REVIEW OF THE COMPETITIVENESS OF NORTHERN IRELAND.

The Londonderry Chamber of Commerce is pleased to respond to Sir David Varney's call for evidence of 28th January 2008, in respect of his further review of the Northern Ireland economy.

The Chamber was first established in 1885. It is the largest Chamber in North West Ireland and represents the interests of SME's and the few large corporate organisations in the area. Derry, with a population in excess of 100,000 people, is the largest City in Northern Ireland outside Belfast. Derry, together with Belfast, has been designated in the Northern Ireland Regional development strategy as one of the only two Regional City Gateways in Northern Ireland.

Located some 75 miles from Belfast and situated within 3 miles of the land border with Donegal in the Republic of Ireland the Chamber of Commerce in this City is ideally placed to highlight the social and economic issues and challenges facing a sub-region which constantly struggles to be competitive in the shadow of the emphasis, focus and investment priority accorded to the Belfast Metropolitan Area by Central Government on the one hand whilst, on the other, coping with the additional business challenges arising from our close proximity with a neighbouring EC Member State with a more favourable Corporate tax regime with which we believe Sir David is already well acquainted.

The first point which the Chamber wishes to make is to express its disappointment at the outcome of Sir David's Review of Tax Policy in Northern Ireland. It is well documented that in 1987 the Irish economy was on the brink of collapse when Bertie Ahern, as Finance Minister, cut the Government workforce by 20%, axed spending across the board and maintained a 10% tax rate for most corporations. These radical changes led to investments from nearly 500 American companies and corporations, the majority coming from pharmaceuticals and high technology.

Now that a comparable rate of Corporation tax to that of the Republic of Ireland has been ruled out by Sir David's first Review how should we expect to develop significant opportunities for economic growth by embracing the concept raised by Peter Hain when he was Secretary of State for Northern Ireland (and to which this second Review refers) of an all Island economy. We comment on this issue in more detail below but it is difficult to conceive of significant advances on an all Island front if Northern Ireland is to remain tightly tethered to the straight-jacket of UK Treasury taxation rules.

The framework outlined for this second Review includes many issues which are being continuously debated within Northern Ireland. Indeed Central Government, both as a Direct Rule administration and as a Devolved Assembly has a strategy to tackle most, if not all, of the questions listed in Sir David's Call for Evidence. A trawl through existing literature of Central Government Departments and economic development agencies in Northern Ireland will reveal the existence (inter alia) of:-

· Programme for Government, Priorities and Budget 2008-2011

· Investment Strategy for Northern Ireland 2008-2018

· Economic Vision for N.Ireland, based upon the 4 key pillars of Innovation, Enterprise, Skills, Infrastructure.

· The Regional Innovation Strategy

· Enterprising Education. Entrepreneurship and Education Plan.

· Accelerating Innovation Strategy

· Success through skills: The Skills strategy for Northern Ireland

Working together for a stronger economy (N.I.Economic Development Forum) with its seven key priority areas to increase knowledge and productivity, to innovate and be creative, to support enterprise, to be outward looking, to promote equality of opportunity and social inclusion, to enhance the capabilities and skills of all our people and to establish the physical infrastructure necessary to support current and future needs.

· Tourism and the Northern Ireland Economy.

· Regional Development Strategy for Northern Ireland

· Northern Ireland Transportation Strategy

· The Northern Ireland Better Regulation Strategy

· Public Procurement-a Guide for SME's.

This is by no means an exhaustive list - merely an illustration of some of the key documents already in existence here with a direct bearing on improving economic performance.

Part of the difficulty with so many strategies is that their respective ownerships are scattered widely across Central Government Departments and a plethora of other public agencies. With 11 Government Departments, around 150 public agencies and 26 District Councils implementation, monitoring and evaluation of the impact which all the various economic-linked strategies may be having is fragmented and un-co-ordinated.

Some strategies, such as the long-term 25 year Northern Ireland Regional Development Strategy, which impacts upon the work of many Departments and agencies have not been developed into specific action plans and have no budget allocated to their implementation. Ownership of the Regional Development Strategy rests with the Department for Regional Development but there is no obligation on other Departments to take any action on implementation beyond the vague exhortation of "having regard to the N.I.Regional Development Strategy" when developing their policies and programmes.

The Londonderry Chamber believes that there is more than sufficient information and analysis of the weaknesses in the Northern Ireland economy already in the public domain. We do not need yet another economic review which, when published, will sit on the shelf alongside our existing library of unimplemented strategies. We suffer at present from over-strategisation. Attention needs to be turned urgently to how we streamline the public sector in Northern Ireland in ways which will achieve greater co-ordination and better delivery, monitoring and evaluation of outputs than it has been possible to achieve to date.

When it comes to streamlining the public sector in Northern Ireland there is no more graphic illustration of how inept we seem to be in tackling the task of implementing strategies. "Fit for Purpose" the reform agenda for the Northern Ireland Civil Service (all 32,000 officials) was published in October 2004. The Review of Public Administration in Northern Ireland was eventually published in March,2006 after some years of preparation.

The implementation of the recommendations in these reports is still largely on hold. As long as we persist with 11 Government Departments, 26 Local Authorities, 100 + Quangos, 4 Health Boards, a plethora of Heath Trusts, and 5 Education and Library Boards we are unlikely to develop the capacity in Northern Ireland to co-ordinate and implement long-term strategic plans.

Professor Michael Parkinson of Liverpool's John Moore University, in work for the Deputy Prime Minister's Office on competitive European Cities highlighted the capacity to deliver long-term strategies as one of the six crucial factors which make certain Cities more economically competitive than their rivals. This is a competence which we do not have in Northern Ireland at present at either City or sub-regional level.

Despite all the work which has gone into the Review of Public Administration in Northern Ireland the examination of the size and functions of Central Government Departments has remained outside the scope of this work. No plans, as far as we are aware, are in preparation to tackle our administrative problems from the top downwards.

But it is not only the size and structure of the public sector which, we believe, is impeding our potential to improve our economic performance it is also the functions which Departments insist on retaining in-house and which we believe could be done in more streamlined ways by the private sector. The Roads and Water Services, for example, still retain direct labour forces for a range of manual tasks many involved with routine and winter maintenance. Departments retain staff to run and manage Forest Parks and Country Parks. The Housing Executive retains a Direct Labour force for maintenance work and has an in-house design capability, even though the new build function for the social housing programme in Northern Ireland now rests with Housing Associations.

The Planning Service's Development Plan function could be commissioned entirely from the private sector and there are numerous other examples. The Private Finance Initiative has only had a limited (and not very successful) impact on education and Health programmes here. This Chamber believes that there is considerable scope to increase the volume of work being transferred from the public to the private sector in Northern Ireland which will take us far beyond "Procurement a guide for SME's". From time to time Departments carry out in-house exercises to determine whether more functions might be transferred to the private sector but seem reluctant to pursue this issue in a determined and robust fashion, frequently concluding that it would not be feasible or cost beneficial to choose that option.

The Chamber believes that the task of reducing the size and changing the functions of the public sector needs to be taken forward hand in hand with growing the private sector. To date dare we say it there is no integrated strategic framework for approaching this task and moving it forward jointly and in measurable ways. There is much documentation, largely unimplemented though it may be, for reforming the public sector but little on growing the private sector.

There is a great danger, we believe, in tackling the reduction of the public sector and the growth of the private sector as separate stand alone challenges.The public sector is crucial to the economy of Northern Ireland and reductions and changes there must be matched increased private economic activity. There are many talented people working in the public sector in Northern Ireland and as part of a raft of initiatives to redress the balance between the private and public sectors here some attention could well be directed at incentives and measures which could help public sector employees to move from the public sector and set up private sector businesses.

One other issue mentioned in the Call for Evidence and which we touched on briefly above refers to the opportunities for economic growth presented by further developing the all-island economy. Located, as we are, within 3 miles of the land border with Donegal in the Republic of Ireland, we are very conscious of the potential to make significant progress on this front. That potential could have been strengthened considerably had Sir David accepted the representations from Northern Ireland to introduce the same rate of Corporation tax here as in the South of Ireland. Nonetheless there have been some encouraging moves on this general front. The Republic of Ireland's National Development Plan has devoted two Chapters to North-South

co-operation and to growing an all Island economy.

In relation to the North West infrastructure measures of benefit to both jurisdictions have been identified. Investment monies from the Republic have been allocated to the development of City of Derry Airport and proposals to increase the potential of the two neighbouring Regional Gateways of Letterkenny and Derry by drawing up an integrated development have been put forward. On the all island front a wide range of activities have been identified which could be taken forward on a joint basis. The Chamber believes that these proposals, if followed up and agreed with both Governments could make a considerable contribution to developing a mutually beneficial all island economy.

Meanwhile the North West continues to suffer from the Regional disparities which exist in Northern Ireland between the areas west of the Bann and the Belfast Metropolitan Area. Although the Northern Ireland Regional Development Strategy which includes the N.I.Spatial Strategy embraced the European concept of decentralised territorial development and parity of access to infrastructure the failure to persuade all Government Departments to buy into these concepts has resulted in the continuing disproportionate allocation of funding from public sector budgets, including key infrastructure projects, to be directed into the greater Belfast area.

The lack of essential infrastructure, including road and rail, continues to weaken our connectivity with the outside world. Our comparatively poor educational achievement which is referred to in some detail in the Ilex Urban Regeneration Company's social and economic baseline for Derry, drawn up by the Consultants Indecon,hampers our ability to provide the sort of well educated and skilled workforce capability which would attract hi-tech foreign direct investment.

There may be more focused efforts made under a devolved Assembly than were experienced under Direct Rule to tackle these issues on a systematic, structured and long-term basis. However, the current timescales associated with essential infrastructure projects on the A6 and the A5 Key Transport Corridors together with long-awaited upgrading of the rail link with Belfast suggest that there will be no quick fix to the social and economic impediments of the North West sub-region.

This Chamber is grateful for the opportunity to respond to the letter of the 28th January 2008 and hopes that the issues which have been highlighted above are helpful to Sir David in his deliberations.