Londonderry Chamber of Commerce Response to Northern Ireland’s departmental draft Budgets

Executive Summary and Recommendations

The Londonderry Chamber of Commerce are concerned that when all departments' draft Budgets are taken into consideration, the overall impact of the proposals is severely detrimental to the North West.

This report puts forward proposals that support the objective of rebalancing the Northern Ireland economy to make it more sustainable and to rebalance the regional economy so that the North West becomes self-financing - thereby potentially contributing to the prosperity of Northern Ireland, rather than being a financial burden.

Particular priorities for the CSR Consultation for the North West Region are:

• Expansion of the University
• City of Culture 2013
• Integrated Transport Strategy - with particular emphasis on progressing construction of A6 Scheme
• Radiotherapy Unit

The Londonderry Chamber of Commerce recognises that departments are unlikely to give serious consideration to proposals for additional spending unless equivalent savings are identified. Proposals for additional spending are therefore accompanied by suggestions on how that expenditure could be financed.

Please Note

It is important to note that the Draft Budgets that have been put out for public consultation lack very little detailed information and in the absence of this vital information this Chamber is not in a position to make an in-depth analysis or present detailed business cases based on content.

For further information or inquiries regarding this document please contact:

Sinead McLaughlin
Chief Executive
Londonderry Chamber of Commerce
The Old Fire Station
1A Hawkin Street
Derry
BT48 6RD

Tel: 02871 262379
E-Mail: Sinead@londonderrychamber.co.uk

 

 

 

 

This paper also recommends:

1. That Department of Health spending priorities are re-evaluated to enable the proposed cancer care and radiotherapy to go ahead with revenue funding support.
2. That DEL allocates £8m a year to increase the STEM MaSN at Magee by 1,000 students from 2015. These costs can be found from efficiency savings identified in this report.
3. That a priority be given to identifying savings opportunities from the rationalisation of government departments, with those savings used to promote and stimulate the higher education sector in Northern Ireland.
4. That DSD's capital programme priorities be re-evaluated to increase its support for City of Culture and the Ilex regeneration plan. Savings from improved cost control in revenue spending in the department - including through more efficient administration of social housing schemes - should be identified and where possible re-allocated to capital programmes, including the Ilex regeneration plan.
5. That DCAL's capital spending priorities be re-evaluated and appropriate allocations towards City of Culture be inserted.
6. That the A6 road programme be recognised as one of DRD's highest priorities, with a need to make urgent progress on the upgrade for its entire length between Belfast and Derry-Londonderry.
7. That if funding for the A5 is not forthcoming from the government of the Irish Republic, the funds allocated from DRD for the A5 should be reallocated to prioritising and accelerating the upgrade of the A6.
8. That the programme for the rail upgrade between Belfast and Derry-Londonderry be brought forward, for completion before 2013.
9. That the Department of Education allocate funds to capital spending to enable the new campus for Foyle and Londonderry College and Ebrington Primary School to go ahead. Those funds should be found through rationalisation of the system of school administration and by rationalising the schools estate to reduce the pool of surplus pupil places.
10. That the Department of Environment's proposed spending cuts be re-evaluated to determine if the changes to the Planning Service will damage the economy of Northern Ireland and, in particular, the North West.
11. That the charging policy proposals for on-street car parking from DRD and the business rates policy regarding out-of-town shopping centres be examined to ensure they do not discriminate against historic urban retail centres. Increasing business rates for out-of-town shopping centres to the equivalent levels of city centre retailers could generate substantial income for the Executive.
12. That DETI be asked to provide an explanation of how in future it will promote investment and economic growth in the North West.
13. That DARD should make available modest financial support to assist with developing the tourism infrastructure in the North West, to improve the use of the River Foyle and to promote boating, walking and angling holidays.
14. That DETI and DSD recognise the particularly important role that social economy enterprises have played in supporting deprived communities and a weak economy in the North West and that both departments continue to provide support to this sector.

Context

The North West of Northern Ireland has long suffered weaknesses in economic infrastructure that are much more severe than in other parts of Northern Ireland containing large urban areas. These weaknesses relate, in particular, to transport, higher education, health and tourism support.

Those infrastructure weaknesses have a relationship to economic weakness in the North West - the region has severe problems with unemployment and economic inactivity. Northern Ireland's highest rates of unemployment and economic inactivity are located in the North West and parts of Belfast. (The most recent figures show the three highest claimant count district council areas as all being in the North West - Derry at 7.3%; Strabane at 7.0%; and Limavady at 6.8%.)

The weak infrastructure is part of the reason for the economic difficulties of the North West and for the migration of people, jobs and businesses out of the region. Equally, without adequate investment in the skills infrastructure, it seems unlikely that the North West will attract sufficient (or sufficiently well paid) employment to substantially improve the economic wellbeing of the region.

Putting right that weak infrastructure is key to improving the economic wellbeing of the North West. In doing so, this can achieve a fiscal improvement of the situation for both Northern Ireland and the UK as a whole. In short, a more economically healthy North West will not require the continuing financial subsidy (such as the level of welfare benefit spending) that at present comes from the Belfast and London governments.

 

Submission

This short report seeks to make the case for specific infrastructure investment in the North West. This report argues that departmental draft Budgets have not sufficiently addressed regional imbalances within Northern Ireland. Rather, they are likely to make them worse, with high profile projects in Belfast and the East receiving much greater support than some economically and socially more significant projects in the North West.

It is essential that the Executive - and the Assembly - consider not only the overall Budget and individual departmental Budgets, but also the overall impact, taken together, of the various departmental Budgets. The case argued in this report is that once these departmental Budgets are taken into consideration together, it becomes obvious that the situation of the North West has not been addressed appropriately or adequately.

 

Abbreviated Analysis of Departmental Budgets - based on information available

1. Department of Health

The cancer care unit at Altnagelvin is one of the most important projects for the North West. The minister of finance, Sammy Wilson, deserves much praise for including the capital funding for the unit in his draft Budget. The decision of the Department of Health not to include revenue funding for the unit has drawn strong criticism in the North West.

The reasons for this are:

a. Travelling between the North West and Belfast for cancer care is arduous and causes additional negative health impacts for those patients with cancer. It can involve extended periods of separation between patients and their families, denying them emotional support when they need it - and preventing them from having the right environment to improve their chances of recovery.

b. The cancer care project was an important cross-border project, which would attract financial support from the Irish Republic and would help to create a more rational cross-border system of healthcare.

c. Cancer care provision in Belfast is nearing the limit of its ability to cope with patient numbers. Additional provision is required within the foreseeable future.

d. The cancer care provision at Altnagelvin is seen as an economic opportunity for the North West, not only from the jobs that would be created directly, but also from the spin-off opportunities in related businesses. This sector has been identified as a major commercial growth opportunity for the North West.

The Londonderry Chamber of Commerce believe that there are opportunities to make spending reductions in other parts of the health budget that would enable the cancer care unit to go ahead. The annual cost of the unit is estimated by the Trust at £7.5m. According to health minister Michael McGimpsey, the lost annual revenue from the introduction of free prescriptions for all is around £6m. While the repeal of free prescriptions for all would be generally regretted, if this would free up moves to create a proper cancer care unit in the North West this may be appropriate.

Alternatively, cost savings might be identified to release this comparatively small amount of revenue. According to the CBI, £190m of cost savings are available in Northern Ireland, by rationalising the health estate, improving GP services to reduce the use of hospitals and making more effective use of technology.

2. Department for Employment and Learning

The DEL budget assumes a massive reduction in spending on higher education. There are only modest reductions in expenditure on other budget heads - for example, in further education and employer skills programmes. This appears to be a budget that requires tuition fees to be introduced; that will not lift the MaSN (Maximum Student Numbers) cap; and will not enable Magee to grow in terms of full time student numbers. Capital spending restrictions are such that there would be no support from DEL for any expansion at Magee. This is despite the expansion of Magee as being identified in the Ilex regeneration plan as being fundamental to improving the economic outlook of the North West.

Specifically and immediately, it is imperative for the economy of the North West that Magee achieve an early increase in MaSN of 1,000 full time students in the key STEM (science, technology, engineering and maths) subjects. This would cost £8m per year, which could be found through efficiency measures.

Significant savings are possible should government departments be rationalised. It would be more logical if further education responsibilities be transferred from DEL to the Department of Education, while higher education and employers' skills training support could transfer to DETI. According to analysis by the CBI, the streamlining of Northern Ireland government departments could save between £10m and £20m a year, while improving performance.

In the medium term, there is a need for a capital infrastructure expansion grant to support the substantial expansion of Magee. Such an investment might be achieved on a cross-departmental basis, supplemented by private sector and philanthropic support.

3. Department for Social Development

DSD has allocated £5m per year for two years jointly for the City of Culture and the Ilex regeneration plan. This is a total allocation of £10m, compared to £70m for capital spending during the programme period to the redevelopment of Belfast's Royal Arcade. It is difficult to understand how it can be argued that the Royal Arcade project is more strategically important to Belfast than the City of Culture (plus the regeneration plan) is to Derry - nor even how it is more strategically important to Northern Ireland as a whole.

Significant savings should be available in the provision of social housing services: comparison with other UK nations shows a much higher cost of social housing, yet it is not obvious that this is translated into superior standards and services. There should be savings available through the rationalization of housing associations supported by DSD. The CBI has suggested that savings of around £100m should be available from reorganizing the structure of housing provision.

It is also important that DSD continue to recognise the need for regeneration of deprived communities. Social economy enterprises have for a long time played an important role in the social and economic regeneration of deprived communities in the North West and it is essential that there is support for this to continue. The role of the social economy in the North West has been recognised as a key component of the Ilex regeneration plan.

4. Department of Culture, Arts and Leisure

DCAL appears not to have allocated any funds towards City of Culture. This contrasts unfavourably with the £6m allocated to the World Police and Fire Games to be held in Belfast from 1st to 10th August in 2013. The City of Culture, of course, lasts an entire year - and is all about culture, the first name in the title of the department.

Over the Budget period, some £110m has been allocated for capital spending for three regional sports stadia - one each for football, rugby and GAA. The three stadia option is in place of the single stadium for multi-sports use, which was planned for the Maze site. It seems that all three stadia will be located in Belfast.

These spending priorities will seem perverse to many residents in the North West. The failure of the Department of Culture to provide support for the City of Culture seems particularly bizarre.

5. Department for Regional Development

The DRD draft Budget states that "there are no allocations to commence construction on other major roads schemes such as the A6 Randalstown to Castledawson" and only promises to "continue development work on the A6 Dungiven to Derry" - which may mean only further consultation on the exact route and plans. On Tuesday 13th December 2005, Mr Peter Hain, Secretary of State, announced 30 km dual carriageway from Derry, incorporating the Dungiven by-pass. Devolved Government have continually made assurances to Chamber that this entire scheme was progressing and on time for construction. It is shockingly regrettable to be informed by DRD in January 2011 that this vital road scheme is being delayed. DRD also implies that work on the improvements to the A5 are dependent on finance from the Republic, which may now be in jeopardy.
There is further unhappiness about proposals relating to the upgrade of the rail line between Belfast and Derry-Londonderry. The plan states that the department will "begin the Coleraine to Derry rail track improvement project by the end of the Budget period". This appears to mean that the upgrade will commence before April 2015 - several years later than previously intended. It had been hoped that all upgrade work would be completed by the end of 2012, to enable this unique piece of important tourism and heritage track - recognized as one of the most beautiful stretches of railway anywhere in the world - to be in place in time of City of Culture, 2013.

It is worrying that in this period of severe pressure on capital budgets, some £6m is proposed by the plan to be removed from the capital programme to be used instead for revenue expenditure.

There is also concern in the North West at the potential impact of possible on-street car parking charges. The city centre of Derry-Londonderry has been badly damaged in recent years, not least by the growth of out-of-town shopping destinations. Any proposals for on-street car parking charges in Derry city centre need to be properly consulted upon before implementation to ensure that it does not have the effect of inadvertently encouraging out-of-town shopping at the expense of the city centre.

6. Department of Education

Some £41m of capital spending allocations for 2011/12 have been reallocated by the Department to its revenue budgets. This puts on hold for the foreseeable future the development and construction of the new Foyle and Londonderry College and Ebrington Primary School. In turn, this also holds back planning for the expansion of the University of Ulster's Magee campus.

While the transfer of capital funds to revenue spending protects, hopefully, the jobs of teachers and teaching assistants, it again fails to deal with the excessive costs incurred each year by the failure to rationalise our education system and the very large number of surplus places. These issues have been identified as wasteful by both the current Secretary of State, Owen Paterson, and by one of his predecessors, Peter Hain.

It is very frustrating that progress towards the creation of a single Education and Skills Authority has repeatedly been stalled. This was expected to save around £20m a year, rising to £25m a year. Meanwhile, there are over 54,000 surplus places in our schools, wasting an estimated £100m annually (according to the CBI).

However, the signatories to this report also believe that the UK Government should rescind its decision to withdraw year end flexibilities from the devolved government of Northern Ireland - a decision that particularly severely affects the Department of Education.

7. Department of Environment

Savings identified in the Department of Environment draft Budget include a reduction in spending of £2.9m in Planning Services costs and what appears to be an increase of £2m from increased planning charges. Given that the Planning Service is already having difficulty in dealing with the backlog of applications and that existing levels of planning fees are causing difficulties for many applicants, these proposals may be incompatible with the Executive's objectives of stimulating the economy.

The proposals may also indirectly particularly harm the North West, as they may cause a slowdown in planning applications related to City of Culture 2013, which need to be handled expeditiously.

Other jurisdictions have raised significant income by levying charges on off-street (private) car parks. Such an approach may have the benefit of equalising the treatment of inner city and out-of-city retail environments.

Additional measures to stimulate the economy should be considered. These include more generous rate rebates for small businesses, particularly small retailers, and the creation of a more equitable rating system, that does not discriminate against city centres. These measures are particularly important for historic retail centres, such as Derry-Londonderry.

Departments need to take action to protect city centre retailers. This action should include setting business rates for out-of-town shopping centres at no less than those of town and city centre retailers. This would raise very substantial amounts of revenue and remove discrimination against traditional retailing centres. Particular concern has been raised about the 'double whammy' that is likely to arise from the introduction of on-street parking charges, while out-of-town retailers benefit from consumers having free car parking.

8. Department of Enterprise, Trade and Investment

DETI's draft Budget indicates two areas of substantial spending reductions. One is in the Invest NI capital budget, the other is on Selective Area Assistance. The potential abolition of SAA from 2013 is outside the power of the Northern Ireland Executive and is the result of decisions taken by the European Union. Spending by Invest NI on building infrastructure in the North West has traditionally been one of the few levers available to it to promote inward investment and the expansion of indigenous businesses in the North West.

Given the reduction of these two types of spending that have traditionally been applied in the North West, it is important for DETI to indicate what steps it expects to be taken in future to encourage higher levels of job creation in the North West.

It is also essential that DETI continues to recognise the key role of social economy enterprises in the social and economic regeneration of deprived communities in the North West. It is important that there is continued support for this through DETI's social economy programme. An expanded role for the social economy in the North West is a key component of the Ilex regeneration plan.

9. Department of Agriculture and Rural Development

Development of the River Foyle as part of Northern Ireland's impressive and attractive tourism offer is a key element of the economic development plan for the North West. A modest financial allocation is needed to support this and assist both urban and rural areas to improve their economic prospects. Additional minor investment would achieve significant benefits for the rural economy by improving the infrastructure for walking and angling holidays.

It is to be hoped that DARD will also give serious consideration to relocating its headquarters to Derry-Londonderry.

 

10. Department of Finance and Personnel

It would be helpful if DFP initiated action to require all departments to undertake a ‘zero base budget' review. This is an exercise in which no prior expenditure is taken as sacrosanct, each department's budget is built from scratch and every item of spending has to be carefully argued for and justified. While such an exercise may sound radical, the stringent financial situation facing local authorities in England has led to many councils conducting zero base budget reviews, through which they have achieved substantial savings. Our argument is that these savings could, at least in some instances, be allocated to support the North West, so that the economic conditions improve and the region becomes financially self-sufficient - thereby removing the need for continued subsidy from the Northern Ireland and UK exchequers.

11. Office of the First Minister and Deputy First Minister

Ebrington Barracks is recognised by OFMDFM as one of two major regeneration projects to be funded by the Office: the other is the site of the former Maze prison. Accordingly, some £23.12m has been allocated for capital contributions to the Ebrington Barracks site over the forward period of the plan. In this regard, OFMDFM could be regarded as the only department to provide an apparently reasonable level of support for the North West region in its forward plans. (Arguably, the Department of Finance and Personnel might also be spared from criticism, on the basis that funding was explicitly made available for the construction of the cancer care unit at Altnagelvin.)

However, it is not clear from the spending plans why the majority of these funds - £14m - is earmarked for spending in 2014/15. It would be preferable, if realistic, to complete the majority of the work on the Ebrington site by 2013, in time for City of Culture.

Yet the scale of investment from OFMDFM remains inadequate given the scale of the challenge in Derry-Londonderry. City of Culture projects need perhaps £100m or so investments to facilitate the expansion of arts, culture and tourism sector projects and city infrastructure to allow these sectors to flourish beyond 2013.

Other measures will be required from government as a whole to stimulate an economy that is severely damaged. Those measures that should be considered include a North West economic zone offering special assistance to foreign direct investment, including 100% capital allowances on new investment, 100% rates relief for five years, NIC holidays for new job creation, with VAT reduction to 5% on hotel accommodation across Northern Ireland.

There needs to be clarification over the future of the regeneration delivery vehicle, with a commitment to implementation and delivery over the medium-term.