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Safeguarding Northern Ireland’s economic recovery

Submitted by on 23 Nov 2010 – 16:12

Stormont Parliamentary Building Photo: Wknight94

By Owen Paterson, Secretary of State for Northern Ireland

The Northern Ireland economy has had to endure some tough times over the last forty years or more.

Labour intensive industries like ship building and engineering, that once made Belfast in particular a manufacturing powerhouse, have declined.  In addition, Northern Ireland endured a sustained terrorist campaign in large part focused on destroying local businesses and discouraging inward investment.  These have taken a massive toll on the economy of Northern Ireland.

Despite this, I remain hugely optimistic about Northern Ireland’s economic potential.  I believe that working together with the devolved administration, we can help turn the position round and see the economy match the great political progress that Northern Ireland has made since the early 1990s.

My confidence is based on my experience of visiting Northern Ireland on a regular basis as first Shadow and now Secretary of State.  Over the past three years I have met a wide range of entrepreneurs and business leaders who are up there with the very best that the UK has to offer.

There are world-class businesses in Northern Ireland; the problem is that there are too few of them.

I do not underestimate the size of the challenge facing Northern Ireland.  As a new Government we have inherited the largest peacetime budget deficit in our history.  As a result we are currently borrowing as a nation £300k per minute.  The deficit must therefore be brought under control.

I acknowledge that this places particular pressure on those parts of the economy that are heavily dependent on the public sector, like Northern Ireland.  For reasons that are well rehearsed, state spending here accounts for around 77 per cent of GDP according to one analysis.  This is simply unsustainable in the long-term.

Unfortunately, we also have the lowest productivity in the UK.  Around 29% of those of working age are inactive compared to the UK average of 23.4%.

Education and training are, of course, vital to our economic future.  Northern Ireland has a young, highly qualified and skilled population.  This year, once again, Northern Ireland’s schools produced the best GCSE and ‘A’ level results in the UK.  Northern Ireland can be rightly proud of its academic achievements.

Regrettably, Northern Ireland stands as a monument to the failure of UK regional policy over the past 40 years, which has invariably just meant spending ever more public money.  The situation here must be transformed.

The first step is to safeguard economic recovery by dealing with the deficit.

Again, this will be a team effort.  As David Cameron made clear during the election, Northern Ireland will continue to be funded according to its needs and will not be singled out over and above any other part of the UK.  We will be tough, but fair.  My job is to represent Northern Ireland’s interest at the Cabinet table and that is what I will do.

We are, though, all in this together.  So along with the rest of the UK Northern Ireland will have to contribute.  That will mean some hard decisions being taken by the local administration in managing its budget in these difficult times.  I accept that this will be a real challenge.

Northern Ireland will of course benefit from the economic measures the Government is taking to ensure economic recovery for the United Kingdom as a whole.  These include a national insurance holiday for the first ten employees in new businesses.

I recognise, however, in Northern Ireland we have to go further if we are to rebalance the economy and end the over-reliance on the public sector.

This is why in the Conservative manifesto, and now in the Coalition Programme for Government, we are committed to producing a paper looking at ways in which Northern Ireland can be turned into an economic enterprise zone.

We are currently looking at a whole range of radical measures which could help the private sector.  These will include examining the mechanisms for giving the Executive in Northern Ireland the powers to vary the rate of corporation tax.

Even with current reductions to Corporation Tax rates for the UK as a whole announced in George Osborne’s June Budget, just across the border in the Irish Republic the main rate is just 12.5%.  That must be a factor that companies take into account when looking to invest.  Bringing down Corporation Tax in Northern Ireland would send a dramatic signal to the world that Northern Ireland is the dynamic place to do business.

Rebalancing the economy will not happen over night.  I have said that I think it will take upwards of 25 years to achieve it.  To do nothing would be irresponsible; equally it would be wrong to move too rapidly.

We must, however, make a start now.  Without firm action to reduce the deficit we continue to fall further and further into debt which future generations will have to deal with.  There is nothing progressive or remotely fair about that.

I firmly believe that once we have arrested the slide the outlook for Northern Ireland as part of an economically sound UK geared for continued growth is good.  For all the difficult decisions that will have to be taken, it will be worth it.  There is light at the end of the tunnel.  Northern Ireland’s best days really do lie ahead.