1
Responding to the Independent Review of Economic Policy
Chartered Accountants in Business Annual Lunch
David SterlingDETI Permanent Secretary
10 June 2010
2
Overview
CURRENTPOSITION
ECONOMIC STRATEGY
Recession
Economic Prosperity
Jobs
Wealth
1 2
Executive Sub Group
Economic Strategy
Programme for Govt & IREP
Key Themes & Issues
3
-3
-2.5
-2
-1.5
-1
-0.5
0
0.5
1
1.5
2
19
90
19
91
19
92
19
93
19
94
19
95
19
96
19
97
19
98
19
99
20
00
20
01
20
02
20
03
20
04
20
05
20
06
20
07
20
08
20
09
GD
P (
Qu
art
erl
y %
Ch
an
ge
)The UK economy has faced its longest recession since
records began…
RecessionLast recession almost 20
years ago
GrowthUnbroken economic
growth for 63 quarters
RecessionUK economy contracted
for six quarters
Greater South East44% of UK output is driven by London, South East
and East of England
4
0%
5%
10%
15%
20%
25%
-45% -40% -35% -30% -25% -20% -15% -10% -5% 0%
Change in Output (from sector peak)
Siz
e o
f S
ec
tor
(as
% o
f G
VA
)
Retail
Hotels & Restaurants
Construction
Mining
Manufacturing
Business & Finance
Other ServicesTransport
Energy
LA
RG
ER
SE
CT
OR
LARGER CONTRACTION
ContractionBusiness & Finance, Manufacturing and Construction severely impacted
during downturn
…and the Northern Ireland economy has also been badly impacted…
5
60
65
70
75
80
85
90
95
100
105
110
1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
GV
A p
er
Ca
pit
a (
UK
=1
00
)
Prosperity GapNorthern Ireland living standards
have remained around 20% below UK average
Lower Prosperity than NINorth East, Wales
…but low prosperity has been a long term problem…
N Ireland relative to Rep of IrelandGVA per capita was 48% of RoI (2008)
6
MAIN REASONS FOR LOWER PROSPERITY
JOBSNot enough people in
employment and too many economically inactive
WEALTHNot enough high value added
employment in the private sector
Low prosperity is due to jobs and wealth creation
7
Overview of Labour Market
TOTAL WORKING AGE POPULATION1,097,000
IN EMPLOYMENT740,000
INACTIVE309,000
Want Job 15 %
Sickness 30 %
Student 37 %
Don’t Want 85 %
Family 23 %
Retired 6 %
UNEMPLOYED48,000
Long Term 40 %
Other 60 %
Youth 27 %
Other 73 %
Other 3 %
8
500,000
550,000
600,000
650,000
700,000
750,0001
99
4
19
95
19
96
19
97
19
98
19
99
20
00
20
01
20
02
20
03
20
04
20
05
20
06
20
07
20
08
20
09
Em
plo
ye
e J
ob
s
Job GrowthNI economy added over 177,000 jobs
between 1994 and beginning of recession
Job LossesNI economy has lost 33,500
jobs since March 2008
Northern Ireland was successful at job creation until the downturn…
9
-8% -6% -4% -2% 0% 2% 4% 6%
Economic Structure (NI vs GB)
Public Admin
Manufacturing
Health
Construction
Education
Agriculture
Retail
Energy
Transport
(Tourism) Hotels & Restaurants
Mining
Other Services
Financial Services
Business Services
Under RepresentedIncluding high value added business and
financial services
Over RepresentedIncluding public
services and lower value added sectors
…but is under represented in high value added activities…
Output (NI vs GB)
10
0
5
10
15
20
25
30
35
40
45
50
No Employees 1-49 50-249 250+
Employee Size Bands
Pro
po
rtio
n o
f T
urn
ov
er
by
Siz
e (
%)
United KingdomNorthern Ireland
Small FirmsNorthern Ireland economy is
dominated by small firms
Large FirmsNorthern
Ireland lacks critical mass
for R&D, exports and investment
18%
29%
…and lacks sufficient large firms to invest in high value activities…
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The economy is at the centre of the PfG…
EconomyGrowing a dynamic, innovative economy is
central to achieving all goals in the Programme for Government
RecessionThese priorities remain key to driving
economic growth
PRODUCTIVITY EMPLOYMENT
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1
Restructuring of Economic Policy: 4 Key Areas
The way economic policy is coordinated in NI
2
3
4
The way DETI and Invest NI provide assistanceto businesses
The freedom and flexibility Invest NI needs todo its job.
The way policy is developed and monitored.
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1. Restructuring of Economic Policy: The Co-ordination of Economic Policy in NI
Department of the Economy
• Executive has agreed to consider establishing a Dept of the Economy as part of the Strand One Review.
Sub-Committee of the Executive
• First meeting of the Sub-committee took place on 20 May 2010.
Economic Strategy
• Executive sub-committee on the economy to develop draft economic strategy for Northern Ireland by end of 2010.
15
2. Restructuring of Economic Policy: DETI and Invest NI Assistance to Industry
Concept of Client Company
Rationalise Programmes
• Invest NI to review the number and breadth of programmes by June 2010.
Shift towards R&D&I
• IG to bring forward recommendations on when and where SFA should be used by June 2010.
• DETI / Invest NI to consider how shift toward R&D&I is further addressed in 2011-14 PfG.
Business Expansions
• IG to consider the potential use of debt instruments in appropriate circumstances.
• Invest NI to develop proposals for a tiered portfolio of support to the wider business base by September 2010.
Venture Capital• Invest NI to continue to intervene where appropriate to support the
development of the venture capital market. • Invest NI to outline its proposed VC strategy going forward.
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3. Restructuring of Economic Policy: Autonomy, Flexibility and Decision-making
Increased Autonomy
• Proposals to increase Invest NI delegated limits agreed in principle.
Economic Appraisal
• A new protocol for handling cases has been agreed.• A new appraisal methodology for R&D projects is being developed
End of Year Funding
• IG currently exploring what greater flexibility might be achievable but unlikely that recommendation can be implemented.
Invest NI Board • Precise role and remit will be reviewed in the context of the work on revising governance arrangements.
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4. Restructuring of Economic Policy: Policy Development and Monitoring
DETI Policy Development
• DETI currently undertaking a review of staffing structures to ensure that resources reflect priority areas. Target for initial proposals - June 2010.
Invest NI Performance
• DETI will oversee the production of the next Invest NI Performance Report - end of 2010/11.
Economic Dev. Body
• The Minister has stood down EDF. A smaller economic advisory group (drawn from business and economics) met for the first time on 28 May.
18
A cross-departmental Executive sub-committee on the economy has been established…
EXECUTIVE SUB COMMITTEE ON THE
ECONOMY
Other departments as necessary
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…along with the EAG to strengthen independent economic advice to the ETI Minister
ECONOMICS
Kate BarkerFrances Ruane
SKILLS
Bill McGinnis
BUSINESS
Michael Ryan, CBE Mark Nodder
Alan Armstrong Stephen Kingon
Gerry MallonLorraine Hall
ECONOMIC ADVISORY GROUP (EAG)
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A new economic strategy will build upon existing economic strategies…
INNOVATIONRegional Innovation StrategyMATRIXHigher Education Strategy
INFRASTRUCTURERegional Development StrategyInvestment Strategy for NI
ENTERPRISEDraft Enterprise StrategySocial Economy Strategy
Draft Tourism Strategy
EDUCATION &SKILLSSuccess through Skills 2
FE Means BusinessEssential Skills for Living
STEM StrategySchool Improvement Programme
OTHERAnti-Poverty Strategy
Rural White Paper Sustainable Development
Strategy for NI
EMPLOYMENTProtecting employment in short term
Attracting new jobs through FDIWelfare reform agenda
NEW ECONOMIC STRATEGY FOR NI
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…and will focus on six key themes as drivers of the Executive’s overarching goals
IMPROVING PRODUCTIVIT
Y
INCREASING EMPLOYMENT
1. CONNECTIONS TO THE GLOBAL ECONOMY(attracting inward investment, growing exports)
2. ENCOURAGING BUSINESS GROWTH(entrepreneurship, social economy, green economy,
tourism, access to finance, planning)
3. STIMULATING INNOVATION AND R&D(R&D and absorptive capacity, wider innovation,
business to business / HE / FE collaboration)
4. IMPROVING LEVEL AND RELEVANCE OF SKILLS(literacy, HE, FE, existing workforce, low skilled)
5. ADDRESSING SUB-REGIONAL GROWTH(role of cities, rural economy, housing)
6. DEVELOPING ECONOMIC INFRASTRUCTURE(transport links, energy, telecoms, tourism product)
CR
OS
S C
UT
TIN
G T
HE
ME
S(e
qual
ity,
sust
ain
able
dev
elop
men
t)