Northern Ireland Economy

Naomi Long Excerpts

Thursday 1st March 2012 Westminster Hall

[Sammy Wilson]

I will not go back over the happy bit, because we have got that dispensed with, and I think we are all suitably happy.

My first point is that when we talk about rebalancing the Northern Ireland economy, there is a misconception that that means contracting the public sector and filling the gap with the private sector. If that is all we did we would be no better off. We would still have a cake the same size, but it would be divided differently. At present in Northern Ireland the public sector is too large relative to the private sector; but that is not a function of the public sector being too big. It is a function of the private sector being too small. If we are to improve the well-being of people in Northern Ireland we must grow the economy, but the part that must grow fastest is the private sector, because a certain level of provision for health, education, roads and so on, will always be required.

[Naomi Long (Belfast East) (Alliance)]

I agree with the hon. Gentleman on that point. Does he agree with me that if the public sector is cut too quickly, without growth in the private sector, much of the good work to try to get people into employment is undone, perversely? Also, more demand for the public sector is created, because people become reliant on benefits and other things that require servicing by the state.

[Sammy Wilson]

That is correct. In the past three years when I have been Finance Minister in the Northern Ireland Executive we have cut spending on consultancy by 56%. That is a good result, as far as I am concerned, but of course many private sector consultancy firms do not see it as a good idea at all, because people have been laid off. That bears out the hon. Lady’s point.

I am not complacent about the relative size of the public sector vis-à-vis the private sector, but we must avoid a simplistic view of how to go about things. It should not be a case of squeezing out the public sector and filling the gap with the private sector. We should grow the private sector and use what we can, and the resources of the public sector, to encourage that.

--- Later in debate ---

[Sammy Wilson]

Having two of the major power stations in my constituency, I know this already. They are considering what their investment will be in future. In a single electricity market and with that interconnection with the Irish Republic, of course, we could find ourselves increasingly at the mercy of what happens in another country, with all the difficulties that that causes. The Government should consider what can be done with energy costs, because that is important.

On devolution of other tax powers, there may be occasions when we look specifically to have control over some things. I want to put on the record my appreciation, and that of the Northern Ireland Executive, for the work done by the Government on air passenger duty, particularly on direct long-haul flights from Northern Ireland—especially to north America—which was going to have an impact on our economy. Hon. Members have mentioned the importance of tourism, but it was not just about that; it was much more about the impact on foreign direct investment and inward investment, which was worth an awful lot in respect of our economic strategy. Around summertime last year, Northern Ireland Office Ministers worked with Treasury Ministers in the middle of the recess to get this thing resolved. It would be churlish not to show our appreciation for that work and for the way that it will now go through. That was an important measure.

I am not a great fan of devolution of more fiscal powers to the Northern Ireland Executive, but there will be occasions when we perhaps need to consider specific issues. I hope that a response will be forthcoming.

It is important to mention that the banking structure in Northern Ireland is not the same as in any other part of the United Kingdom. Some 95% of banking in Northern Ireland is done through Irish banks, which are in a poor state, or through Ulster Bank, which is an annexe of RBS. Many of the other banks that people have access to in the rest of the UK do not operate in any significant way in Northern Ireland. As a result, all the surveys about how businesses are faring in respect of banking show that Northern Ireland falls well below other parts of the UK, in respect of the terms that are offered, the availability or restriction of credit, or calling in loans.

If anything will crush the ability of the private sector to grow in Northern Ireland, it will be the absence of liquidity. The Northern Ireland Executive have considered various things, including loan guarantee funds, which the Department of Enterprise, Trade and Investment operates. We are considering how we can attract equity funds and what we can do to put some money into equity funds to get venture capital, especially for start-up businesses in Northern Ireland.

It is important that the banking sector operates properly in Northern Ireland. For example, here are some things that the Government could do. Why do we not have regional figures for how well Project Merlin is operating? I suspect that, although banks are meeting their targets throughout the UK, proportionally those targets are not being met in Northern Ireland. Could the Government do something in respect of credit easing? What could the Government do to ensure that the liquidity, which is generally pumped into the banking system, is reflected in the liquidity available to banks in Northern Ireland and, therefore, available to customers?

[Naomi Long]

The banks tell me how few people they turn down when applying for loans. However, the small businesses that say they cannot access finance say that they are dissuaded, at the first hurdle, from applying for loans and are told that, if they did, they probably would not get them. A circular argument develops, with banks saying no one is asking and small businesses saying no one is getting.

[Sammy Wilson]

That is one reason why, when one looks at all the business surveys and the terms offered for loans, compared to the rest of the UK—I had the figures here somewhere, but I cannot dig them up at the moment—some 10% more businesses in Northern Ireland are saying that terms for loans have worsened between 2007 and 2011. Of course, on top of that many businesses have huge debts associated with property.

I listened to the chairman of RBS the other morning on Radio 4 saying how the bank had brought down its bad property debts. That is good from the point of view of the bank’s record, but I know what that means in places such as Northern Ireland: a good, strong business with a core operation, but with some bad land loan attached to it, is squeezed to bring down the debt on the land and, in doing so, people are being put out of work and businesses are finding it impossible to expand, even where they have good markets. The Government have to address the banking issue in the longer run.

I will mention only one more thing, so that other Members have a chance to get in, and that is VAT. I understand Government reluctance to reduce the rate when VAT brings in a lot of revenue, but to do so would of course have very beneficial effects in stimulating the economy. The Government do not have to reduce VAT rates generally; specific reductions in the tourist sector, as in the Irish Republic, or in the building sector, so that people could put extensions on their houses and so on, could stimulate a lot of labour-intensive employment not only in those particular industries but wider afield—I am not saying for Northern Ireland specifically. Come the Budget, the Government should look at that.

--- Later in debate ---

[Naomi Long (Belfast East) (Alliance)]

I am glad to participate in the debate because rebalancing the economy of Northern Ireland has been on the agenda of my party and of many other parties for a considerable time. It must be realised, however, that the current economic climate—the challenges presented to public expenditure, the availability of finance from banks to fund growth in the private sector, including that of small and medium enterprises—has added urgency to the debate in recent years.

Others have laid out many of the statistics and problems, so I shall avoid repeating and rehearsing those arguments. It does bear saying, however, that the imbalance between the size of the public and private sectors in Northern Ireland is well documented, and it is not in the interests of the people of Northern Ireland to sustain that imbalance. I agree with the hon. Member for East Antrim (Sammy Wilson) that action to address the imbalance has to be focused on both growing the private sector and reforming the public sector to make it efficient, effective and supportive of growth. There are some good reasons why it would be foolish to pursue a project simply involving public sector cuts which, alone, cannot be the emphasis for reducing the overall imbalance. For example, the Northern Ireland economy is around 70% public sector in terms of gross value added or of gross domestic product, but public sector employment is around 30% of all employment. I acknowledge the mix of indices, but it illustrates that a quite significant element of our economy—probably more than a third and perhaps up to 40%—is effectively the private sector doing work for the public sector. The hon. Member for East Antrim referred to the effect of public sector efficiency savings on the private sector, which must be borne in mind as we consider how to rebalance the economy, its timing and how we phase any approach.

In my constituency, I have been told how public sector cuts and efficiency savings could, perversely, force contraction in some of the private sector, at least in the short term. We have already seen an example, which only this afternoon I raised with the hon. Member for East Antrim, in his other capacity in Northern Ireland; Departments seeking to reduce their expenditure are using Government-only facilities for training and so on. The impact is that many of the private conferencing centres, which have developed good business models, are being squeezed out, not because they are not competitive but because the impetus is to use Government and therefore subsidised facilities for training.

Over-reliance on the public sector is not good for Northern Ireland, leaving us more exposed and more vulnerable when there are public expenditure cuts than we would want to be the case. It can also have a dampening effect on business innovation, and the dynamics risk the absorption into the public sector of many of the graduates with the skills and abilities to set up their own businesses, because they believe it to be the more stable opportunity. The size of our public sector in Northern Ireland, compared with our private sector, can also create a clientist culture generally in society. When so many people directly or indirectly depend on the Government for their employment, the normal robust challenge faced by the Government from the private sector and others on economic policy can be dampened or squashed. People are afraid to challenge, because they recognise that their own jobs could be affected.

It is not possible to have a proper debate about rebalancing the Northern Ireland economy unless we also look at the rebalancing of the UK economy more generally. Northern Ireland is dependent on economic subvention from the UK Treasury, but it is important to recognise that only three UK regions are net contributors to the Treasury. Northern Ireland is the most dependent of the other nine, and the imbalance and the reasons for it need to be scrutinised carefully. Clearly, a more active regional policy is needed by the Government, to promote a more even distribution of economic activity throughout the UK. It is not sufficient to concentrate wealth creation in the south-east and for the Treasury then to redistribute the proceeds among the other regions; to do that has considerable implications not only for the economic prospects of the regions and the individuals who live there, but for the health and well-being of those residing in less economically active regions. There is a correlation between the degree to which regions are contributors to the Treasury and their level of dependence on the public sector. For example, the regions most heavily dependent on subvention are the most acutely affected by cuts in public sector spending and by welfare reform.

Currently, the overall GVA of Northern Ireland is around 80% of the UK average. Successive Governments have nominally committed policy to regional convergence, but London and the south-east are still regarded as the main drivers of the UK economy. It appears that Governments have traditionally put a much higher premium on protecting and maintaining that position and then tolerating financial subsidy and dependence than on giving regions greater autonomy to become sustainable in their own right. Many of the levers to address the imbalance in the Northern Ireland economy are devolved, and other Members have already reflected that. While the Assembly and the Executive have rightly prioritised the economy in their work, it is worth noting that the Northern Ireland Assembly currently has no real financial incentive to deliver economic growth, as the level of the block grant is set independently of considerations of economic change.

Devolution of some tax-varying powers linked directly to economic growth should therefore be considered, because they would be not only positive in their own right, as with corporation tax or air passenger duty, but a positive step in developing a responsible and normalised system of government in Northern Ireland, under which the Executive can make decisions that influence economic outcomes and will benefit financially from making the right decisions. Greater access to those financial levers could encourage and facilitate creative local solutions for economic growth and prosperity, if implemented carefully. I take on board the caution expressed by the hon. Member for East Antrim about the risks attendant on devolution, and I understand the need for robust engagement with the Treasury to ensure that whatever price tag is attached is fair and reasonable and will not blight the economy in another way.

Alliance is therefore generally supportive of the devolution of corporation tax in Northern Ireland. Although we recognise fully that that alone is not a silver bullet for the challenges facing our economy, the Executive can make and implement many other interventions to co-ordinate with it and help it rebuild the economy. As other hon. Members have recognised, revenue lost in the short term due to the lower rate of taxation would have to be met from the Northern Ireland block grant, under the terms of the Azores ruling in the European Court of Justice.

However, I firmly believe that without a reduction in corporation tax, there is little scope for a step change in Northern Ireland’s economic condition. Despite more than 15 reviews of Government economic strategies since the mid-1950s, there has been no substantial reduction in the performance deficit between Northern Ireland and the UK. It is therefore important that the Treasury works closely with the Executive to consider the case in an open and transparent way, in order to ensure that it is affordable and to build the confidence necessary to deliver it.

As well as making the case for a reduction in corporation tax, we must ensure continued investment across policy areas in Northern Ireland that have a strong impact on economic growth: capital investment, energy infrastructure, education and skills and research and development. It is vital that all those policy levers are fit for purpose and can be shown to produce the desired outcomes when the correct environment is created.

[Mr Lee Scott in the Chair]

My party colleague, the Northern Ireland Minister for Employment and Learning, is also focused on ensuring that skills are prioritised and developed, and has been working closely with others to deliver the economic strategy. The information and communications technology working group, for example, is bringing together the Department for Employment and Learning, the Department of Enterprise, Trade and Investment, Invest NI, universities, further education and businesses to consider skills shortages and mismatches and find a plan to address them.

Reclassifying tourism as a priority skills area—I will return to tourism later—changes the funding formula and has been done in recognition of tourism’s hugely increased potential from 2012 onwards. Research on potential changed skills needs under a lower level of corporation tax is also hugely important, as the kinds of job created by that reduction will be different from those we currently attract.

It is also important to note that Northern Ireland has had its largest increase in higher education places since 2000, and that they are all in science, technology, engineering and maths subjects. The role of science and technology in developing the economy has been given due recognition, and it is important that the Executive continue to do that. I say that not only as someone who was an engineer before becoming a politician but because I genuinely believe that science and technology hold opportunities to help regrow our economy and build on our strong base.

The Government have also started to consider the issue of air passenger duty, and I give them huge credit for how they have handled it. Differential rates across the land border with the Republic of Ireland created challenges for us in maintaining our direct international link with the US. The Government’s timely intervention was hugely helpful not only in maintaining that link, which is important for both tourism and business, but in keeping a base on which we can build for the future. That is just as important as retaining the current link. Long-haul flights have been dealt with, and a proposal is being considered to devolve the matter to the Assembly in order to allow them to consider future issues involving rates.

That is welcome, but we must also recognise the impact on regional connectivity, for example with the south-east, which is still the largest economic driver in the UK. We live in a region where the only option for business travel is flying. We pay a premium to access the south-east of England. Others can at least consider alternative means of transport, but that is not open to us, and it has a direct impact on our ability to grow the private sector. That continues to be a significant challenge, and I hope that the Government will consider it with a degree of sympathy.

[Mr Laurence Robertson]

The hon. Lady might mention at this point that it has been agreed that our next inquiry will be into aviation policy, for the reasons that she gave.

[Naomi Long]

The hon. Gentleman is one step ahead of me, as always. I thank him for bringing that point to my attention. I was about to say that the opportunity to consider aviation as part of the Committee’s future studies is hugely important, because we can look at the interconnectedness of all aspects in terms of the economy and the ability to deliver new opportunities for Northern Ireland.

Another area in which Westminster has at least some control is banking, although, as the hon. Member for East Antrim indicated, that control is perhaps not as extensive as we would wish. Much has been said already that I do not wish to rehash. I will simply say that access to finance for growth continues to be a significant challenge for the private sector. Companies that are not just viable but extremely competitive, even in a difficult economic climate, and which wish to have liquidity in order to expand are finding it incredibly difficult. Even the figures that we can access in order to determine how well banks are distributing the money available are so opaque that it is difficult to hold banks to account. I mentioned in an intervention the circular argument being delivered. On one hand, banks say that money is available but that no one is applying; on the other hand, businesses say that they are being dissuaded even from applying. We need to cut through that and find out exactly what the situation is.

I will touch briefly on a couple of other economic issues. VAT has been mentioned. For a long time, my party has supported reducing VAT on renovations. We believe not only that it is environmentally sustainable but that it would help boost the local construction sector and create employment and jobs, allowing people to adapt their homes at a time when moving home is often not an option because they are trapped in negative equity. That option should be considered. I urge the Treasury to examine its potential impact carefully.

The differential rates of VAT between hotels in Northern Ireland and in the south must also be considered. Currently, VAT for hotel services is 20% in the UK, but about 9% in the Republic. The need to attract investment and encourage home-grown business is paramount to growing our economy and bringing opportunities for employment, and tourism is a hugely important part of that strategy for growth.

In my constituency, 2012 is an important year for tourism, with the centenary of the Titanic and the opening of the Titanic Belfast visitor centre. That is just one example of the opportunities out there. Many other Members are equally enthusiastic about the opportunities in their constituencies, and some have already exploited the opportunity in this debate to promote them with no shame. I do not blame them at all, because I wish to do the same for my constituency.

However, hotels in Northern Ireland, particularly those near the border, face a competitive disadvantage that makes life difficult. Given Northern Ireland’s extremely positive reviews as a destination and the success of our golfers on the international stage, among other things, investment and support in the tourism sector would bring tangible benefits. I have referred to the fact that it is a priority skills area, which has created a step change in preparing people for employment. However, a VAT reduction would even up the playing field, resulting in long-term tax gains and supporting the strategy being developed by the Executive to grow our tourism industry.

The hon. Member for South Down (Ms Ritchie) mentioned the aggregates levy and some other areas where the land border and direct competition affect Northern Ireland business. Flexibility on such issues is needed. We cannot expect to be treated differently on all occasions, but some issues are significantly different in Northern Ireland and need to be considered in that context.

Several Members mentioned energy costs. It is important to recognise their impact, particularly on large energy-reliant businesses. They also have a general dampening effect on the economy, as energy bills eat a lot of profit that could be reinvested in other growth within business. However, there are opportunities to create new jobs. Although I agree with the hon. Member for East Antrim about energy costs, I know that he is perhaps less enthusiastic than I am about the green agenda. However, I do not think that he opposes creating new jobs in renewables, given Northern Ireland’s rich natural resources and strong research and manufacturing base. As the environment is one of the economy’s fastest growing sectors, embracing green energy technology will bring jobs to Northern Ireland, whether in building wind turbines or in harnessing local tidal and wave technology.

Research and development of renewable energy is a lucrative sector in Northern Ireland, and can become even more so. Opportunities for close working between the Department of Enterprise, Trade and Investment, the Department for Employment in Northern Ireland, and the Department for Business, Innovation and Skills to try to develop that sector have real potential.

There are good news stories in the Northern Ireland economy. The hon. Member for East Antrim mentioned Bombardier.

[Mr Nigel Dodds (Belfast North) (DUP)]

Does the hon. Lady agree that it is encouraging that the Northern Ireland Executive have set out in their programme for the Assembly’s next term their aim to encourage industry to achieve 20% of electricity consumption from renewable sources? That is ambitious, and to be commended.

[Naomi Long]

I certainly commend that. If one is ambitious, there is always the risk of failure, but if one is pessimistic and the bar is not set high enough, no one reaches out and there is often under-achievement. It is good that the Executive have set robust targets. It is good for the environment, and for the economy, and it is important for our local engineering base that we continue to do that. Harland and Wolff in my constituency invests quite a lot of time in renewables, and has reinvigorated a site that is providing sustainable employment for the future. That is a model that should go forward.

In my constituency, Bombardier’s work in creating employment during these challenging economic times has been impressive. The hon. Member for North Antrim (Ian Paisley) is still present, so I will name-check Wrightbus and its work with the Routemaster bus system, even here in London. It is novel to see a London bus being driven through County Antrim or County Down while it is being trialled, but it shows that Northern Ireland has something to contribute to the wider economy, and that is positive.

I want to close with an issue that is particularly close to my heart: the impact on the Northern Ireland economy of the sad reality that even so long after the Good Friday agreement and the St Andrew’s agreement, we still live in a deeply divided and segregated society. There has been huge progress and forward momentum in Northern Ireland in recent years through the political process, and I believe that we should celebrate and recognise that progress, because it holds great hope for the future.

Northern Ireland has been entirely transformed from the place where I grew up in the 1970s, but it would be wrong to gloss over or ignore the significant challenges that remain as a legacy of the past. The first Northern Ireland peace monitoring report was issued yesterday, and sets out the extent to which division and segregation still impact on society. It comments positively on the stability of the political institutions, the reduction in the general level of violence, and the emergence of what the report describes as

“a confident and neutral urban culture”,

typified by the number of people who identify their city centres as both safe and shared. However, sadly, it also highlighted the degree to which paramilitarism is still a threat, the lack of a strategy for reconciliation and dealing with the past and its legacy, and the degree to which Northern Ireland remains a divided society at every level.

Much of the responsibility for tackling that segregation is a devolved issue, but it is impossible to rebalance the Northern Ireland economy and to grow our private sector without looking at the degree to which segregation impacts on our economic competitiveness as a region. A divided society costs us in many ways. Divisions damage us at the human level, and limit people’s opportunities to mix with one another and to develop their social potential. They also hurt us socially; it is no accident that there is a high correlation between segregation and deprivation. We cannot ignore that if we are meaningfully to tackle social and economic deprivation. Divisions also hurt us environmentally. The Royal Institution of Chartered Surveyors argues that the divisions in Northern Ireland impact on our carbon footprint, which is one of the worst of any region of the UK, even those that also have significant rurality.

Divisions hurt us economically, hindering our labour market mobility, and acting as a deterrent to tourism and investment. They continue to limit somewhat our ability to attract and maintain the top talent. Finally and crucially, divisions cost us financially. My party, Alliance, estimated some time ago that the financial costs of division are around £1 billion per annum, and that figure was substantially validated by the Deloitte report in 2007, which suggested an upper estimate of £1.5 billion.

The costs of a divided society are apparent in a number of respects. There are direct costs for policing riots, civil disturbances and parades, as well as distortions to policing from the security threat, and costs for a wide range of agencies in repairing damaged buildings and facilities. Indirect costs include providing duplicate goods, facilities and services for separate sections of our community, either implicitly or explicitly, including a wide range of services such as schools, GPs surgeries, jobcentres, community centres, leisure centres and so on. Those costs are borne not just by the public sector, but by the private sector, and they act as a drag on development. Related to those indirect costs are hidden factors linked to divisions that impact upon the cost environment that Departments, agencies and businesses must respond to. There are opportunity costs of lost inward investment and tourism. The Northern Ireland economy has undoubtedly performed better in recent years, but it is still well below its potential capacity.

I believe strongly that there are moral and social imperatives for tackling sectarianism and segregation, but there are clearly also economic and financial imperatives. In the context of current financial pressures, the need for an overall strategy to look at government in Northern Ireland and to seek reform and efficiencies, not within existing divided structures, which could simply further balkanise the community, but in a way that increases sharing and co-operation, is a hugely important part of reinvigorating our economy, rebuilding our community, placing services on a more sustainable footing socially, environmentally and economically going forward, and making Northern Ireland a more attractive place in which to live, work and invest.

Those are primarily matters for the Executive, but the impact is significant in the context of this discussion. Any pressure and support from this place that can be brought to bear on the Executive in terms of delivering on that agenda will be hugely important. I believe that Northern Ireland has the potential to turn the economy round. I believe that the opportunity to rebalance it exists, and that now is the time to unlock that potential.

[Mr Nigel Dodds (Belfast North) (DUP)]

It is a pleasure to take part in this debate under your chairmanship, Mr Scott. I agree with much that has been said. There is great consensus among Northern Ireland Members on all sides. I welcome the Select Committee’s excellent work on air passenger duty and corporation tax, which is the context in which this debate is taking place. The reports have been helpful to the debate, and I commend the Select Committee’s Chair and members on what has been achieved so far.

It is right to begin by putting on the record and endorsing what my hon. Friend the Member for East Antrim (Sammy Wilson) said about the importance of the link between Northern Ireland and the rest of the United Kingdom, because the matter must be put into the context of the enormous advantages that Northern Ireland gains from being part of the United Kingdom. That comment may not receive total consensus in Northern Ireland, but given what we have seen of the eurozone crisis and the impact of the global financial situation, being part of a much bigger economy—the United Kingdom economy—and out of the eurozone has been of enormous benefit to the United Kingdom and Northern Ireland. I commend the Government on that and, indeed, a previous Government who decided to stay out of the eurozone—certain sections decided to stay out and the then Prime Minister had to go along with that. It is important to say that at the outset.

It is also important to put on the record the fact that many good things are happening in Northern Ireland’s economy. We have many advantages, and as a former Minister of Enterprise, Trade and Investment back in the early days of the restoration of devolution, I became well versed in repeating those advantages in meetings with potential investors and others. It is worth putting on the record the fact that Northern Ireland attracts the second highest amount of foreign direct investment of any region of the United Kingdom outside London and the south-east. That is a phenomenal achievement. Our population is 2.8% of that of the UK, but we receive 7% of the foreign direct investment that comes in to the United Kingdom. Invest Northern Ireland and those who work in the Department of Enterprise, Trade and Investment deserve credit for their work.

We have a relatively young, well-educated work force and, as has been mentioned, good competitive costs. We have a low rate of attrition in work force turnover; workers are loyal to their employers, and by and large, the infrastructure is good. I was delighted to hear the recent announcement about more investment in our roads. Northern Ireland is on the peripheries of the United Kingdom, but when looking at its own peripheral areas—indeed, those of any country—there is no doubt that the biggest single boost that can be given to the economy is investment in infrastructure. We will get people, particularly young people, to stay in those areas only if there are good transport links and it is easy for them to move freely, work in those areas and get their goods to market elsewhere.

The roll-out of superfast broadband is one of the Government’s priorities, and the situation in Northern Ireland is one of the best in the United Kingdom, with extremely good coverage across the Province. As the Secretary of State for Culture, Media and Sport said the other day in a response to my question on that issue, Northern Ireland is well ahead of other parts of the United Kingdom, which is a positive point.

Air links have been mentioned, and it is important to stress the significance of Northern Ireland’s dependence on the Heathrow link, given that we do not have alternatives such as rail. On the sale of BMI, the takeover bid has been launched, and I understand that International Airlines Group is the preferred bidder. A process is under way to look at that, and we need a meeting with the group’s chief executive and others to discuss the takeover. From both a tourism and business point of view, we must recognise Northern Ireland’s dependence on the maintenance of strong links between Belfast, Northern Ireland, and London, Heathrow, which is the still the main hub for long-haul business travel.

I do not mean to run down other air links involving low-cost airlines that fly to Gatwick, Stansted or Luton, because such links are important and serve different sectors of the market. However, if we want to ensure good links with business, we must maintain the connection with Heathrow. At the same time, we must develop direct long-haul routes out of Belfast, and I wish to put on the record our thanks to the Government and note the tremendous work that was done at local executive level in Northern Ireland and at Westminster—particularly in the Treasury—to deal with air passenger duty and maintain the link between Belfast and Newark, New Jersey.

The Northern Ireland Executive are committed to growing the private sector and supporting innovation, research and development, and creativity. They have set out plans to support £300 million of investment by business in R and D, to help 500 businesses to undertake R and D for the first time, and to support 200 projects through the creative industries innovation fund by 2015. That support has been set out in the programme for government and by the Department of Enterprise, Trade and Investment.

On skills and employability, the plans are to increase to 70% the proportion of young people who leave school having achieved at least five GCSEs at grade A to C, or the equivalent, including in English and maths; to deliver 210,000 qualifications at levels 2, 3, 4 and above by 2015, through further or higher education and essential skills training; to increase skills in subjects that are important to the Northern Ireland economy, such as science, technology, engineering and mathematics, and implement actions within the STEM strategy; and to improve support for companies and increase the number of people who gain skills in management and leadership. The Northern Ireland Executive have made important commitments to place growing the economy at the centre of the programme for government.

On business growth, the plans are to promote £330 million of investment and 6,300 jobs in locally owned companies—with 50% paying salaries above the private sector median—and a further 6,500 new jobs in new start-up businesses; to support projects that improve competitiveness, encourage diversification of the rural economy, improve the quality of life in rural areas and protect and enhance the environment, including through the introduction of national parks; and to invest in social enterprise growth.

I want to put on the record that in Northern Ireland, the Executive and political parties are working together to promote growth in the private sector and the economy. We do not come to this debate simply to set out the needs and challenges of Northern Ireland, although there are many. The hon. Member for Belfast East (Naomi Long) referred earlier to the division and segregation that continues to exist. Sadly, in many areas, such divisions will continue for the foreseeable future. We in Northern Ireland have come through difficult challenges and problems that cannot be dealt with or swept away in a matter of years or during the term of one Government, either in the Assembly or at Westminster. In many cases, those challenges will take generations to sort out.

The good thing, however, and the message that goes out from Northern Ireland is that although parties may be opposed on some of the details—we have seen a flavour of that today and with certain parties who do not take their seats in this place—and we are diametrically opposed on many issues, for the first time in generations, indeed decades, we are working together within the context of the locally elected Assembly to try to make life better for the people of Northern Ireland whom we represent.

Today, most of the debates that take place in the Assembly, or in this place, are on economic and social matters, rather than the issues that used to blight us—those of violence, terrorism and political uncertainty. Those issues have not entirely gone away, and we are conscious of the threat from dissident terrorists. The good work done by Invest Northern Ireland, Tourism Ireland and the Northern Ireland Tourist Board could be undermined by a bomb planted somewhere, or if some incident takes place and gets into the headlines. When people see such things on the news they believe that the entire area or Province is up in flames—far from it. That was not true even during the bad times and the troubles, but such incidents can do a lot to undermine confidence and deter visitors or investment.

We must bear down strongly on dissident terrorism, and I welcome the Government’s recognition that terrorism within Northern Ireland from dissident republicans should be viewed as a high priority in terms of the security threat. Although the focus, particularly during the run-up to the Olympics, is on the threat from extremist Islamists and others, there is still a threat within the United Kingdom from dissident republicans. However, that threat is being tackled, and the Treasury gave extra money—some £200 million—to the Northern Ireland Executive for that.

[Naomi Long]

Does the right hon. Gentleman agree that the security response is a hugely important part of the response to paramilitarism? We also need an economic response to help people invest more in their communities and get better jobs, which they do not want to see destroyed. That would be another way to insulate communities against paramilitarism and protect young people from being drawn into paramilitary activity.

[Mr Dodds]

The hon. Lady is absolutely right. She represents the constituency of Belfast East, and I represent Belfast North, which has more of the so-called peace walls than any other constituency. She and I share many of the challenges that come with representing a Belfast constituency and inner city areas, and I totally agree with what she said.

I was talking about tourism and the impact that violence on our TV screens has on attracting visitors. I believe, however, that the tourism industry has great potential to help grow the private sector. When the troubles—the violence—started in the late 1960s, the number of visitors coming to Northern Ireland, which had been growing very much during the ’60s, dropped off massively overnight and stayed at that very low base for 30 to 40 years. There is massive potential to grow the numbers back to what they were previously. We are not even back to that point yet.

[Mr Dodds]

The hon. Lady has a point, but I think that it is a matter of doing both. We must have the product. That is why the number of signature projects that have been and are being developed in Northern Ireland is extremely important. Then, as everyone knows, we have to get out there and sell the product. We need a combination of both.

I congratulate the Executive on their aim to have, by the end of December 2013, 3.6 million visitors coming to Northern Ireland, with a revenue of £625 million. That will provide a major boost to employment. We are talking about investment in product. The Titanic signature project, which has been referred to and which opens on 31 March, is a very significant addition to the tourism product in Northern Ireland.

I am reflecting on the first meeting of the Northern Ireland Executive in 2007, after devolution was restored. The first item of major expenditure brought to the table was a proposal that I brought to invest and commit public funds, alongside private investment and European funds, to the Titanic signature project. I am delighted that that has come to fruition. Along with some other projects, it was derided, criticised and picked over at the time, but everyone now agrees that it will probably be the biggest tourist draw on the island of Ireland, apart from the natural attractions, such as the Giant’s Causeway. It will be a massive addition to the tourism product. That was a far-reaching and visionary decision of the Northern Ireland Executive, taken at one of their first meetings in 2007.

[Naomi Long]

The right hon. Gentleman has been generous about taking interventions. Does he agree that, as is so often the case, there is still negativity, even about such important and positive projects, and that part of what we need to do is not just to market these things internationally to potential visitors, but to engage in some selling of confidence to local people that we can attract the tourist numbers required to sustain them? We need to build self-belief again in the people of Northern Ireland. We need to build the belief in them that it is a good place—a place worth visiting—so that they become ambassadors for the product that we have.

[Mr Dodds]

I agree. My hon. Friend the Member for East Antrim referred earlier to cynicism. I do not fault him for that. It is right to be cynical at times, especially when dealing with statistics, facts and figures coming from the Government and so on. It is right to interrogate people about that, but over the years there has been a tendency for cynicism to be almost the natural reaction to anything happening in Northern Ireland. To be frank, sometimes our local media do not help. There is a sense in which everything that happens is to be criticised and picked over, particularly in Northern Ireland. There is always someone there to do that.

With regard to the Titanic signature project, a report came out recently from the audit people saying, “We’re not quite sure how this will all work out. We’re not too sure, because we don’t know how many visitors are going to come.” Well, we could have told them that without doing all that work. Of course there are issues to be looked at, but we must take some risks in trying to develop the private sector. That is the key point. Sometimes people say, “Oh, you’ve wasted this money and wasted that money. You’ve invested too much money in this and put too much money into that.” Well, if we are to develop the private sector, we must encourage private investment, but sometimes we have to prime the pump. That will require some public investment, and it sometimes does not work out in exactly the way that we wish. That is part of the business of creating growth.

I am conscious that other hon. Members wish to speak. I will not take up too much more time, but I want to support the call, in the run-up to the Budget, for the Government here to help. I believe that there is a strong case, as the hon. Member for Belfast East said, for a VAT cut in relation to renovations, because the construction industry is a major employer in Northern Ireland. Proportionately, it is much more important there than it is elsewhere in the United Kingdom. In 2007, 46,800 people were employed in our construction sector. By September 2011, the number was down to 32,800.

Again, the Northern Ireland Executive have done their bit. The amount of capital investment that is going in now—that has been brought forward and speeded up—is significant. The recent announcement by the Minister of Finance and Personnel—my hon. Friend the Member for East Antrim—of an extra £600 million was significant. However, something such as a cut to the VAT rate on renovations would help us in Northern Ireland.

Also relevant are the effects of high energy prices and the high price of fuel and diesel in Northern Ireland on the economy locally. That is having a big impact on the haulage industry—on the private sector, never mind household budgets. The issue has been debated on a number of occasions recently and has also been raised at Prime Minister’s Question Time. The fact is that people and businesses in Northern Ireland are paying a higher price for petrol and diesel than people in any other region of the European Union. If we are talking about rebalancing the economy and growing the private sector in Northern Ireland, that must be examined. Something must be done about it. When we add to it the high cost of car insurance, which is well above what people in the rest of the United Kingdom pay, and the high cost of energy generally, we have a case for saying that if we are to rebalance the economy, those things need to be addressed.

The issue of the banks and access to finance has been raised. I will not go into more detail on that, but I will draw the attention of the House to a couple of cases in my constituency. Recently, a couple of business men have come to me in despair. One of the businesses has now gone out of business completely—it had to fold. The other is struggling on. In both cases, the bank, having agreed a lending regime with them—this was the Ulster bank, part of RBS—came to them and said, “Well, we have this arrangement in place. You’re servicing your debt. That’s all very well, but we now need you to reduce overall the amount of your overdraft by x hundred thousand pounds.” They were not massive figures in the scheme of things, but they were massive to those businesses. The bank said, “We now need you to reduce your overdraft by x hundred thousand pounds. We want that by the end of two months. If you don’t do it, we’re going to say, ‘That’s it. We’re not going to lend to you any more.’” Those business men came to me in despair—“How are we to get this money?” They gathered money from friends and relatives and from savings and selling things off. Then the bank came back to them and said, “Well, you’ve been able to do that. You can go a bit further. We’re now asking for an extra amount of money.”

As I said, a company in my constituency, right on one of the peace lines, in a very highly deprived area, employing some 25 people, was out of business as of last month. The guy who owned that business is now working as a sales rep for another company elsewhere. The banks have a very heavy responsibility in this, and it is all done to reduce their outlay. It is all driven at headquarters level. People meet the banks and they say, “We’re sorry. There’s nothing we can do. This is the policy. We’re told that we have to do it.” It is driving some businesses that are totally viable—they could trade away, work away and provide employment—out of business. That is a deplorable situation.

The Government have talked about the importance of rebalancing the economy. The Secretary of State for Northern Ireland has talked about that a lot. He has talked about the creation of an enterprise zone in Northern Ireland. I am delighted to see here the shadow Secretary of State, the hon. Member for Gedling (Vernon Coaker), and his deputy, the hon. Member for Ealing North (Stephen Pound). I note that neither the Secretary of State nor the Minister of State is here. I regret that, because the Secretary of State has talked a lot about—he has made it his priority—the creation of an enterprise zone for Northern Ireland. When we have queried what the creation of an enterprise zone actually means, it has appeared to mean Northern Ireland being open for business. It does not appear to amount to anything definite or concrete, other than his reliance on a cut in corporation tax.

In that context, let me raise the importance of regional aid in addressing the special circumstances in Northern Ireland. Currently, Northern Ireland has 100% assisted area status, but the Department for Business, Innovation and Skills is intent on removing that, while the Treasury is claiming that it is doing all that it can to rebalance the economy. BIS says that there is no longer an economic rationale to support Northern Ireland retaining its 100% assisted area status, but that fails to recognise the ongoing and unique situation in Northern Ireland, which has been outlined in great detail here today and is not experienced in any other region of the United Kingdom. It is particularly concerning that moves are being taken to remove our 100% assisted area status at a time when a consultation on rebalancing the economy is under way. It is inconceivable that while one part of the UK Government are seeking to rebalance the Northern Ireland economy, or grow our private sector, another part is taking steps that will have a significant detrimental effect on our ability to encourage private sector growth.

The potential loss of Northern Ireland’s 100% assisted area status impacts on our ability to progress the UK Government’s enterprise zone policy, particularly the capital allowance element, which is based on zones being within assisted areas for the five years from 2012. There are concerns, too, about proposals coming from the European Commission regarding assistance and regional aid being paid to large companies that are located in areas such as Northern Ireland. Any steps to remove regional aid for large companies would have a severe detrimental impact on Northern Ireland’s ability to support business competitiveness and to attract foreign direct investment. The Enterprise Minister in Northern Ireland is concerned about this matter and has been in regular contact with BIS, but if we are talking about rebalancing the economy and growing the private sector, all sections of the Government must do their bit. The Northern Ireland Assembly is, I believe, putting private sector growth at the heart of the programme for government. We will see in the forthcoming Budget what proposals come forward. Above all, though, BIS must do what it can to help.

I urge the Minister to work with his colleagues in BIS and the Northern Ireland Assembly to address the issues that have been outlined today, so that together we can grow the economy and make life better for all our people in Northern Ireland.

--- Later in debate ---

[Ian Paisley (North Antrim) (DUP)]

I too will try to keep my remarks brief, to coincide with time as it runs out before us.

At the outset of my comments, I congratulate the hon. Member for Tewkesbury (Mr Robertson) on the very positive way that he introduced this debate. He did not put a foot wrong in making his comments about our economy. He also indicated that we are all signed up to these issues and that there are issues that we can find commonality upon and that we should be able to move forward on. If that is so, as I believe it is, we need to do that with haste and make progress. I welcome this debate on the economy and how we try to address some of the issues.

Many Members have referred to the fact that Northern Ireland is a happy region of the United Kingdom. Of course I agree with them, but I think that that actually says something about the potential of our country. The fact is that the political and constitutional issues that bestrode us for so long have been settled. We have a settled country now, and we have the ability to focus on our economic needs and the opportunity to flourish economically. We have an opportunity to seize the moment and take our country forward.

Those who talk down our economy should be dismissed. I do not say that lightly, but I believe that our First Minister was correct when he made the comment last week that we should not glibly talk down the economy and the advances that Northern Ireland has made. Northern Ireland has moved on in leaps and bounds, which are noticeable in our children and in economic terms. We should recognise and welcome that. I believe that we have a duty—nay, a responsibility—to realise and deliver the potential that Northern Ireland has, and constantly talking Northern Ireland down is bad for the economy. I believe that today is the day when we must stand up and be counted for Northern Ireland, and I hope that we can do so.

We must be honest in doing all that, however, and Members have said that there are difficulties, that there has been disadvantage and that we have a legacy of violence. Of course we have to build on the fact that Northern Ireland faced decades of under-investment because of that legacy of violence, and we must address that legacy. But we are turning the page.

I had the joy one night of trying to answer a question that my daughter put to me. She is a teenager and she said, “Daddy, what were the troubles?” What a question to be asked as someone who grew up in the troubles and who knew, as a 15-year-old, why soldiers were being killed and murdered on our streets, why businesses were being put out of business and why our country was being torn apart? Today, 15 or 16-year-olds ask, “What were the troubles?” The fact of the matter is that our violent history has now become a foreign country. That is a good thing, and we should see it as a building block and something that gives us the momentum to move forward. I hope that we can move forward.

We have a land border problem with the Republic of Ireland where there is competition, but again that is an opportunity that we should address. Many Members have talked about the energy costs that our country faces and about how they create major disadvantage. We know those things, and we have to work in the context of those things.

I am delighted that many Members have referred today to the economic and tourism initiatives in my constituency, which is the most tourist-friendly part of the entire United Kingdom.

[Naomi Long]

Nonsense.

[Ian Paisley]

The hon. Lady is crying “nonsense”, but she invited people to come to St Patrick’s country. In fact, the only place where St Patrick put his feet was on Slemish mountain, so I welcome her to come to North Antrim any time, and I also welcome those tourists who want to come to North Antrim.

The golf resort that has been mentioned fits in with our Department for Regional Development strategy, our tourism strategy and the various economic strategies that have been put in place. It offers vast potential, but it does so 10 years after that potential was first identified. It offers that potential at a time now with approvals, when the economic climate has changed quite dramatically. But I believe that people are up to meeting the challenge, and I hope that Government will encourage them.

Again, those people who would talk that project down and say, “Oh, it’s not the time for that type of proposal,” or, “It’s destructive of our natural environment,” really have to be put in their place by our national Government, who can say to the likes of those organisations that may be opposed to the project, “Look, do you want Northern Ireland to go forward? Are you on the side of Northern Ireland? Or do you want to be in that bank of people who talk the place down?” I hope that we can get a collective view, and I congratulate the SDLP Minister who was able to get the case over the line, but he addressed, and people must address, the fact that many misnomers have been identified.

Some people said, “Oh, this is being built on the Giant’s Causeway.” It is not. It is closer to Bushmills than to the Giant’s Causeway. A public representative today issued a statement that houses would be dotted all over the causeway. That is rubbish. They are being built in the curtilage of Bushmills village. The previous Environment Minister, my hon. Friend the Member for East Antrim (Sammy Wilson), made sure that that was in the proposal.