The Forum for Political Dialogue met between 1996 and 1998 in Belfast as part of the negotiations that led to the Good Friday Agreement.
The Northern Ireland (Entry to Negotiation, etc) Act 1996 provided for a Forum constituted by delegates elected in elections under the same Act to consider and examine issues relevant to promoting dialogue and understanding within Northern Ireland. The Forum met at the Interpoint Centre, York Street, Belfast from 14 June 1996 to 24 April 1998.
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Explosive Device, pre-school education, business, special debate
Northern Ireland Forum
for
Political Dialogue
~~~~~~~~~
REPORT ON EVIDENCE
ABOUT THE PERFORMANCE OF THE
NORTHERN IRELAND ECONOMY
GIVEN TO
STANDING COMMITTEE E
(The Northern Ireland Economy)
~~~~~~~~~
Presented to the Northern Ireland Forum for Political
Dialogue
on 25 July 1997
This report has been prepared by Standing
Committee E for the consideration of the Northern
Ireland Forum for Political Dialogue. Until adopted
by the Forum in accordance with its Rules, this
report may not be reproduced in whole or in part or
used for broadcast purposes.
Note
DRAFT REPORTS
ACKNOWLEDGEMENT
The Committee wishes to express its sincere thanks to
all who gave evidence to it during the course of its
examination of issues relevant to the performance of the
Northern Ireland economy.
CONTENTS
Page
1. BACKGROUND 1
2. ORAL EVIDENCE 2
3. THEMES ARISING FROM EVIDENCE 3
4. IDENTIFICATION OF KEY AREAS 4
5. SUMMARY OF KEY ISSUES 5
6. MINUTES OF EVIDENCE 21
1. BACKGROUND
The Economy Committee (Standing Committee E) of the Northern Ireland
Forum for Political Dialogue was set up on Friday 8 November 1996 with
the following Terms of Reference:-
"To examine issues relevant to the performance of the
Northern Ireland economy and report to the Forum at
periodic intervals."
The Committee began its work of examining issues affecting the
performance of the Northern Ireland economy by identifying issues to
focus on, setting priorities and deciding which experts it might wish to
address it.
1
2. ORAL EVIDENCE
At the outset the Committee considered it important to seek an overview of
the Northern Ireland economy from the Department of Economic
Development and to meet with both sides of industry. The following
organisations were invited to give evidence to the Economy Committee:-
21 November 1996 - Department of Economic Development
28 November 1996 - Confederation of British Industry
- Irish Congress of Trades Unions (Northern
Ireland Committee)
5 December 1996 - Northern Ireland Tourist Board
12 December 1996 - Northern Ireland Growth Challenge
16 January 1997 - Industrial Development Board
23 January 1997 - European Communities Commission
30 January 1997 - Northern Ireland Federation of ACE Schemes
6 February 1997 - Training and Employment Agency
13 February 1997 - Northern Ireland Centre in Europe
20 February 1997 - Northern Ireland Chamber of Commerce
27 February 1997 - Northern Ireland Association of Community
Based Training Organisations
13 March 1997 - Northern Ireland Council for Voluntary Action
2
3. THEMES ARISING FROM EVIDENCE
The Committee discussed briefly each of the following themes arising out
of the evidence provided by the various organisations:-
A. Long-term unemployment (self-reinforcing).
B. Unemployment is not equally spread across NI.
C. High percentage of employment (30%) is in the public sector.
D. Political stability - effect of ceasefires and disturbances.
E. Transport difficulties.
F. Energy costs.
G. Education - skills gap/new technologies.
H. Cross-border trade gap.
I. Consensual/co-ordinated economic management.
J. Importance of services sector in advanced economies.
K. Comparative Studies.
L. Number of administrative/executive layers.
M. European dimension.
N. Competitiveness.
O. Voluntary sector.
3
4. IDENTIFICATION OF KEY AREAS
The Committee agreed that all of these themes are worthy of consideration
but in an effort to prioritise identified the following as key areas:-
(a) long-term unemployment/new technology/skills gap;
(b) number of administrative/executive layers required for Northern
Ireland;
(c) transport difficulties;
(d) cross-border co-operation;
(e) European dimension; and
(f) energy costs.
4
5. SUMMARY OF KEY ISSUES
The following is a summary of the key issues arising from the evidence
given to the Economy Committee to date. This summary does not
represent the position of the Committee but that of the evidence submitted
by the various organisations.
A. Long-Term Unemployment (Self-Reinforcing)
1. The unemployment situation in Northern Ireland remains
substantially worse than the whole of the UK. In recent times
short-term unemployment has more or less equalised with the
rest of the UK but long-term unemployment is still at least
double.
2. Northern Ireland has the highest level of unemployment of all
the regions of the United Kingdom but the movement and
direction are always pretty much in line.
3. Recently the gap has been narrowing and unemployment in
Northern Ireland has been converging on the Great Britain
level. Despite a good employment creation record and
migration, the pressure of numbers of people is still too great to
prevent high unemployment. Over half of the unemployed in
Northern Ireland are long-term unemployed. This structure of
unemployment is now quite different from the structure in the
rest of the United Kingdom.
5
4. Of the jobs created by assistance from IDB or LEDU as few as
one in five go to the unemployed and the proportion that go to
the long-term unemployed is significantly lower.
5. When employers are demanding increased skills, some people
who have less skills or less education are finding it quite
difficult to get jobs. Young, unskilled males are being affected
more than women.
6. The benefit trap and the unemployment trap is more severe in
Northern Ireland than elsewhere in the UK. There is a higher
dependency level which makes overall benefit payments higher.
This makes it more difficult to move out of unemployment and
the longer people stay unemployed the less attractive they are
to employers. Benefits should be refocused. One of the
reasons the long-term unemployment problem is so intractable
is that the benefit system militates against people 'taking the
plunge' to come off benefits and take a job. The longer
unemployed, the less chance there is of getting back into work,
and the more chance there is that that will cause health
problems, political problems and social problems in local
communities.
7. Long-term unemployment is, therefore, self-reinforcing. Once
people get into long-term unemployment it is very difficult to
get back into employment even if an economy is booming.
The booming economy in Northern Ireland relative to Great
6
Britain in the last number of years has reduced short-term
unemployment to the GB level but long-term unemployment
remains high.
B. Unemployment Is Not Equally Spread Across NI
8. Unemployment is not equally spread across Northern Ireland.
The numbers and percentages of unemployed claimants in
travel to work and District Council areas are set out at
Annex A.
C. High Percentage of Employment (30%) is in the Public Sector
9. About 30% of Northern Ireland's employment is in the public
sector, mostly in services. There is not much public sector
production adding wealth to the economy. In Great Britain
employment in the public sector is only 20%.
D. Political Stability - Effect Of Cease-Fires And Disturbances
10. Economic growth did pre-date the ceasefires for reasons that
are quite complex but include improved competitiveness,
improvement in unit wage cost and higher subsidies. In
manufacturing, vertical and horizontal linkages are increasingly
important and in a difficult security situation opportunities are
7
fewer because people do not want to travel to Northern
Ireland.
11. Community relations affects economic growth. Inward
investment from eg tourism is obviously at risk from that
non-economic factor. Disturbances during last summer are
forecast by the Northern Ireland Tourist Board to have a
downward effect on tourism figures of the order of 11% in
total visitors, 25% in holiday visitors and 6% in revenue.
12. Ironically the violence helped unemployment because people
migrated. Under more peaceful conditions the economy would
grow and the private/public sector balance would be likely to
change.
13. The political background and the state of Northern Ireland in
terms of peace or otherwise has a significant influence not just
on whether investors and tourists wish to come in but whether
people will make links with other companies.
14. Political stability and the reduction of uncertainty would have
an enormous impact on our economy, not just on inward
investment, which a lot of people focus on, but on the
confidence that local enterprises need to have to invest in their
businesses and on the confidence that their customers overseas
need to invest in them.
8
15. The actual costs of violence and instability and funding for law
and order are enormous. The prize we all want to see is
political stability. Unless we have political stability in Northern
Ireland, we are not going to make progress in tackling
long-term unemployment and developing a successful
economy. We need a form of political stability which has the
maximum amount of community support.
16. Recognising the good work District Councils can do and if the
political parties in Northern Ireland come to a settlement that
enjoys consent across the population legislative power should
be restored to Northern Ireland.
17. The enormous potential of Northern Ireland can only be
realised if we have peace. During the period of the IRA
cease-fire, interest in Northern Ireland really took off.
18. In terms of the cease-fire period and its effect on the economy,
one of the interesting and unexpected things that happened in
business terms was that businessmen discovered that it was
actually a lot easier to export when the cease-fire was on.
19. Survey work indicated that few people expected the cease-fire
to have an impact but in the event they discovered that for
purchasers and buyers of Northern Ireland goods, political
stability and political certainty were very important.
9
20. Political stability needs to be achieved to restore business
confidence in respect of medium and long-term prospects.
10
E. Transport Difficulties
21. The population here is not big enough to justify direct air
connections with European capitals. We can get leisure traffic
but they are not paying adequate fares and business traffic
remains the basis of sustaining routes on a year-round basis.
22. Transport costs tend to place Northern Ireland firms at a
disadvantage. The CBI has found transport costs to be
particularly high and has been quite critical of the lack of an
integrated transportational strategy and investment with
particular reference to the West Link.
23. Despite the fact that the Government has signed up for
European vehicle weights (40 tonne limit), weights are being
held down to 38 tonnes gross.
F. Energy Costs
24. The DED indicated to the Committee that electricity costs are
higher in Northern Ireland than in Great Britain and very heavy
users of electricity, where electricity is a big part of their costs,
would rather have costs closer to the GB average. However,
for very many companies energy costs are quite a small part,
something between one and two per cent of their overall costs.
11
25. Energy costs here are something like 20% or 25% above Great
Britain and the Republic of Ireland. Generation costs are the
key to delivering competitive energy costs.
26. One of the best ways to minimise costs is likely to be greater
interconnection with the Republic of Ireland.
27. The fact that our energy costs are so much higher than those
in the rest of the UK has a negative impact on both indigenous
business and inward investment.
G. Education - Skills Gap/New Technologies
28. Because the education system in Northern Ireland is
university-based the whole focus is on the academic, rather
than the vocational. We need to develop a much closer link
between schools, further and higher education colleges and
industry. There is a two-tier education system in this country
that concentrates on those who have the academic abilities.
29. There is a need for partnership between employers who have
jobs and know exactly what is required and local further
education colleges and training establishments.
30. Although there has been a significant reduction in the level of
low achievement it is still significantly higher than in the rest of
12
the UK. Employers need to inform the education and training
systems what they actually require from them.
31. A skilled and flexible work-force is essential, flexible not just in
capability but in the ability to work as required. Core skills are
absolutely fundamental in the way of: communication,
working with others and numeracy. In certain areas there is a
shortage of people with the right attitude and core skills.
H. Cross-Border Trade Gap
32. Cross-border trade has doubled in the last four years, resulting
in 2,500 jobs being developed each side of the border.
Growing the economy for the whole of Ireland is in everyone's
interest.
33. Northern Ireland is part of the United Kingdom and realistically
and pragmatically has to work within that dimension but that
should not deny us the opportunity to develop trading and
economic linkages elsewhere.
34. Northern Ireland has a significant trade imbalance with the
Republic of Ireland. Over the last few years that trade
imbalance has been decreasing. A significant gap has been
identified in the area of North/South trade which could lead to
the creation of 5,000 jobs.
13
35. There has been development in terms of North/South
co-operation in tourism from which Northern Ireland stands to
gain more than the Republic does. Since 70% of visitors to
Northern Ireland come from or via the Republic it makes very
good commercial sense to advertise the island of Ireland jointly
with the Republic.
36. Over the last 3 years manufacturing sales to the Republic have
increased by 45% and Northern Ireland Economic Research
Council figures indicate that a doubling of trade with the South
could generate 7,500 jobs North and South.
I. Consensual/Co-Ordinated Economic Management
37. A system of social partnership operates in the Republic of
Ireland where the trade unions, the employers, the Government
and the farmers work out their common objectives and
interests. They share the national cake and in that consensual
model a situation exists whereby jobs come in and the
economy prospers.
38. The Government has a catalytic role - a leadership role - and
part of that is drawing the social partners together and
establishing a public/private sector partnership with very clear
objectives on taxation, wages and on how to get the proper
interaction between benefits and taxation levels.
14
39. The Danish economy is also based on consensual management.
15
J. Importance of Services Sector in Advanced Economies
40. We need to recognise the importance of services which are
becoming more important in advanced economies. The
provision of services has to be much more of a focus than it
has tended to be in the past. Services in Northern Ireland are
much more in the public sector than they are in Great Britain.
Northern Ireland should be setting some ambitious longer-term
targets as they are doing in the Republic of Ireland.
K. Comparative Studies
41. The economic performance of the Republic of Ireland is
currently considerably better than that of Northern Ireland
except that despite improvements in GDP, employment,
manufacturing etc unemployment has risen by 26% in the last
five years. Solutions that work in certain places cannot always
be easily transplanted to other situations.
42. Studies carried out by NIERC show that the growth rate of
small firms in Northern Ireland has exceeded that of similar
firms in Leicestershire and in the Republic of Ireland.
43. In Scotland and the Republic of Ireland tourism contributes
5%-7% of GDP. An equivalent figure in Northern Ireland
would produce an additional £500 million in tourism revenue
each year and an additional 20,000 jobs.
16
44. Over the last five years total industrial production went up by
13% in Northern Ireland, in the United Kingdom by just less
than 6% and within the European Union as a whole by only
3.6%.
45. Manufacturing output over the period 1991 to 1996 in Northern
Ireland went up by over 15% compared with just over 5% in
the United Kingdom.
L. Number of Administrative/Executive Layers
46. Mr W Tosh of the Confederation of British Industry expressed
concern to the Committee that "the economic strategy for the
Province is not sufficiently integrated" and added that "the Civil
Service and civil servants drive everything from fairly isolated
positions". An assembly would be important because through a
mechanism such as that we could have some local lobbying to
affect our regional strategy. We need an inclusive,
broadly-supported entity here, which would have at the top of
its agenda the strategy for the economic development of
Northern Ireland.
47. The Province is administered by those who have interests that
are diluted, because of their constituency and association.
Businessmen want to see a local institution created to deliver
ownership back into our hands. The CBI is in favour of a local
17
democratic institution which would pull together all the local
interest groups and develop the local economy.
48. The 1973 reorganisation of local government set up fairly
distinctive, separate, and nearly uncontrollable departments.
Northern Ireland needs a high degree of local involvement and
control.
M. European Dimension
49. Northern Ireland is peripheral in the sense that it is on the edge
of Europe thereby creating a distance problem and also in the
sense that it is away from the central areas where new ideas
and new products tend to be generated more easily.
50. One of the big problems we face during the next number of
years is the whole question of European Monetary Union. We
have to consider very carefully the implications of what
happens in a situation where the Republic of Ireland may go in
and the United Kingdom, of which we are a part, stays out.
Northern Ireland is going to be in an interesting position.
51. If you look at the single currency from the standpoint of
individual companies it is possible to make a very powerful
case for it because it means that companies will be able to
export within the currency area without having to worry about
exchange rate risk. On the other hand, if you get a number of
18
weak players joining the single currency area, interest rates
would tend to be higher and the benefit to business would be
that much less.
52. Aid from the European Union has undoubtedly played an
important part in the relatively good performance of Northern
Ireland. It has had an impact on the economy through
increased investment, better infrastructure and employment.
53. In 1999 there will be a full review of European Union funding
for the regions and there is no telling whether or not Northern
Ireland will continue to fall into Objective 1 status. Should
poorer countries like Romania, Hungary, Poland, Estonia and
Lithuania join the EU, the fund will be dissipated eastwards.
54. European money comes to Northern Ireland from several
sources. The main source is through the Single Programming
Document which covers a six-year period running to the end
of 1999. Northern Ireland has been given high priority
(Objective 1 status). The money is to promote economic and
social cohesion.
55. The Special Support Programme for Peace and Reconciliation
shows Europe's commitment to Northern Ireland to try and
promote social inclusion and cross-community development.
19
56. Programmes like INTERREG, which promotes cross-border
co-operation, URBAN, which promotes urban regeneration,
and LEADER, which is for rural development also contribute to
the Northern Ireland economy. It is important that Northern
Ireland as a region is represented and puts forward its own
ideas for future funding.
57. There are a number of issues coming up on the European
agenda which people in Northern Ireland need to be aware of
including:- enlargement, monetary union and the future
development of the Inter-Governmental Conference (IGC).
N. Competitiveness
58. Over the last five years the performance of the Northern
Ireland economy has been very good relative to the United
Kingdom as a whole. Manufacturing here has grown at twice
the rate and employment has gone up by 5.5%, whereas in the
same period it has declined in the rest of the UK. Unit labour
costs in Northern Ireland have now come down to below those
in Great Britain partly due to adjustments in wages and partly to
adjustments in productivity. This gives us some competitive
advantage against the rest of the United Kingdom.
59. A big part of the approach of the Department of Economic
Development is now to help Northern Ireland companies to
20
become internationally competitive. Basically DED wants to
improve the competitiveness of the economy.
60. There is an increasingly competitive world in manufacturing,
and the sort of new competition that has become so important
is in terms of inter-firm linkages.
61. The focus of the Confederation of British Industry has been on
competitiveness and growth. This led to the formation of
Growth Challenge. In giving evidence to the Committee
Mr W Tosh of the CBI said, "the Growth Challenge is a very
complex exercise employing over 500 people looking at how to
advance Northern Ireland's competitiveness and growth".
O. Voluntary Sector
62. As part of a European requirement each member state must
classify and quantify the role of the voluntary sector in its
country's economy.
63. The voluntary sector in Northern Ireland is made up of around
4,000 organisations and has an estimated turnover of £480
million. In Northern Ireland only 0.2% of income comes in the
form of support from business whereas in the UK this figure is
5.3%.
21
64. There are over 30,000 paid workers, which accounts for 5%
of the paid workforce in Northern Ireland. The sector also
benefits from 65,000 volunteers. There is a high concentration
of part-time and female workers.
65. Northern Ireland has a thriving voluntary sector that is involved
in many different areas of work contributing significantly to the
economy and employing a significant number of people.
66. The highest concentration of voluntary groups is in Belfast and
the lowest in County Fermanagh.
22
6. MINUTES OF EVIDENCE
Minutes of the evidence given to the Economy Committee by the
organisations listed in section 2 is available on request.
23
ANNEX B
MEMBERSHIP OF
STANDING COMMITTEE E
(THE NORTHERN IRELAND ECONOMY)
Ulster Unionist Party - Mr D Nesbitt - Chairman
Mr R Stoker
Mr J Clarke
Mrs M Steele
Democratic Unionist Party - Mr St C McAlister - Vice-Chairman
Mr S Wilson
Rev E Smyth
Mr M Carrick
Alliance Party - Mr S Neeson
Mr S McBride
*Mr P Osborne
UK Unionist Party - Mr C Wilson
*Mr P Roche
NI Women's Coalition - Ms M McWilliams
*Ms N Heaton
Labour - Mr M Curran
*Mr W White
Ulster Democratic Party - Mr G McMichael
*Mr D Adams
Progressive Unionist Party - Mr H Smyth
*Mr B Hutchinson
*attend the Committee on behalf of the party under Rule 14(4)(a) of the
Forum Rules of Procedure