Decision time: Alban Maginness

Alban Maginness emphasises the risk of public spending cuts for businesses, and calls for a collective political decision on whether corporation tax should be cut. The debate cannot continue forever.

It is just over a year since I chaired my first meeting of the Northern Ireland Assembly Committee for Enterprise, Trade and Investment so it is an opportune time to reflect on what has happened to the economy in that time and to consider what needs to be done in the future to ensure a sustainable economic recovery.

Before the economic downturn, unemployment in Northern Ireland was at 4 per cent, according to DETI figures. When I was appointed chair of the committee we were in the midst of a global economic downturn. In Northern Ireland businesses were struggling, some were closing, unemployment had risen to 6.4 per cent and job losses were being announced on an almost daily basis.

To be frank, during the past year, little has changed. Many businesses are still struggling and we are still hearing of closures and job losses. Economic growth is slow and indications are that it will continue to be slow. We hear that recovery will be jobless as businesses try to survive and recover from the events of the past two years. The latest figures show unemployment at 7 per cent.

The banks too are in difficulties. Some people might say “so what?” but a strong banking sector is important for economic recovery. It is important however that the correct balance is struck. This was highlighted by the church leaders recently when they said that they are going to press the banks for “a balance between measures to restore strength to the banking sector and to ensure the survival of businesses essential to the development of the local economy.”

Committee members have heard of many examples of banks’ failure to support what seem to be sound and viable businesses. The committee has agreed, together with the Finance and Personnel Committee, to seek a meeting with the banks to explore what further measures they can take to support and assist viable businesses.

Coalition cuts

The Coalition Government has announced a range of measures intended to support economic recovery. One measure that will impact significantly on the Northern Ireland economy is public spending cuts. The Prime Minister has said that Northern Ireland needs a bigger private sector. The converse of that is, of course, a smaller public sector. The truth is that Northern Ireland is highly dependent on the public sector for employment. Government spending cuts over the next four years will have a huge impact on public sector employment.

The situation looks bleak. With reduced employment in both the public and private sectors there is less money in the economy, therefore less spending power, making it increasingly difficult for local small businesses to survive. If the public sector is to shrink, it is important that steps are taken to ensure that our private sector grows, and therein lies the challenge for the Assembly and the Executive.

We need to recognise that we cannot just keep doing the same thing and expect the outcomes to be different. If we want things to change we need to change what we do and how we do it. If we want to prevent unemployment from increasing further and reduce unemployment in the long term it will be up to us here in Northern Ireland to take the steps needed to increase private sector employment. Our options are, however, limited.

Government spending cuts will result in cuts right across the Northern Ireland public sector. This may mean that the capacity for government to support businesses financially is also reduced. The Northern Ireland economy has relied to a large extent on providing selective financial assistance to overseas companies to locate and provide jobs in Northern Ireland. With changes to EU state aid rules from 2013 this option will no longer be open to us.

The committee recently re-opened the corporation tax debate on the floor of the Assembly* following the report from the Economic Reform Group. All parties are aware of the difficulties faced by Invest NI in encouraging businesses to come to Northern Ireland where corporation tax is 28 per cent when just a few miles down the road they can avail of corporation tax rates of 12.5 per cent.

The corporation tax debate is ongoing but it cannot continue forever. We need to make a decision on whether we believe reducing corporation tax is the right thing to do or not. It is therefore encouraging to hear that the Northern Ireland Affairs Committee at Westminster is to hold an inquiry on the issue.

If we are not going to consider reducing corporation tax then we need to think very imaginatively about how we are going to compete with other countries and regions to attract businesses to Northern Ireland and create jobs.

If we are going to support a reduction in corporation tax we need to set the wheels in motion. It would be a long-term project with a number of considerable barriers to overcome. Either way, we need to come to an agreement in the very near future.

Alban Maginness, MLA for North Belfast, is Chair of the Northern Ireland Assembly Enterprise, Trade and Investment Commitee.

* Assembly debate on Economic Reform Group report, 11 May 2010