Transcript Document

Responding to the Independent Review of Economic Policy
Chartered Accountants in Business Annual Lunch
David Sterling
DETI Permanent Secretary
10 June 2010
1
Overview
1
CURRENT
POSITION
2
2
ECONOMIC STRATEGY
Recession
Programme for Govt & IREP
Economic Prosperity
Executive Sub Group
Jobs
Economic Strategy
Wealth
Key Themes & Issues
The UK economy has faced its longest recession since
records began…
Recession
Last recession almost 20
years ago
Growth
Unbroken economic
growth for 63 quarters
Recession
UK economy contracted
for six quarters
2
GDP (Quarterly % Change)
1.5
1
0.5
0
-0.5
-1
Greater South East
44% of UK output is driven by London, South East
and East of England
-1.5
-2
-2.5
-3
2009
2008
2007
2006
2005
2004
2003
2002
2001
2000
1999
1998
1997
1996
1995
1994
1993
1992
1991
1990
3
…and the Northern Ireland economy has also been
badly impacted…
20%
Manufacturing
15%
Retail
10%
Construction
Transport
5%
Other Services
LARGER CONTRACTION
Hotels & Restaurants
Mining
-45%
-40%
-35%
-30%
-25%
0%
-20%
-15%
-10%
Change in Output (from sector peak)
4
Energy
-5%
0%
Size of Sector (as % of GVA)
Business & Finance
25%
LARGER SECTOR
Contraction
Business & Finance, Manufacturing
and Construction severely impacted
during downturn
…but low prosperity has been a long term problem…
Lower Prosperity than NI
North East, Wales
N Ireland relative to Rep of Ireland
GVA per capita was 48% of RoI (2008)
110
GVA per Capita (UK=100)
105
100
95
90
85
Prosperity Gap
Northern Ireland living standards
have remained around 20%
below UK average
80
75
70
65
60
1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
5
Low prosperity is due to jobs and wealth creation
MAIN REASONS FOR LOWER PROSPERITY
JOBS
Not enough people in
employment and too many
economically inactive
6
WEALTH
Not enough high value added
employment in the private
sector
Overview of Labour Market
TOTAL WORKING AGE POPULATION
1,097,000
IN EMPLOYMENT
740,000
UNEMPLOYED
48,000
INACTIVE
309,000
Want Job
7
15 %
Don’t Want
85 %
Sickness
30 %
Family
23 %
Student
37 %
Retired
6%
Other
3%
Long Term
40 %
Youth
27 %
Other
60 %
Other
73 %
Northern Ireland was successful at job creation until
the downturn…
Job Growth
NI economy added over 177,000 jobs
between 1994 and beginning of recession
750,000
Employee Jobs
700,000
650,000
600,000
Job Losses
NI economy has lost 33,500
jobs since March 2008
550,000
8
2009
2008
2007
2006
2005
2004
2003
2002
2001
2000
1999
1998
1997
1996
1995
1994
500,000
…but is under represented in high value added
activities…
Public Admin
Manufacturing
Health
Over Represented
Including public
services and lower
value added sectors
Construction
Education
Agriculture
Retail
Energy
(Tourism) Hotels & Restaurants
Mining
Under Represented
Including high value
added business and
financial services
Other Services
Transport
Financial Services
Business Services
-8%
-6%
-4%
-2%
0%
Economic Structure
GB)
Output (NI(NI
vsvs
GB)
9
2%
4%
6%
…and lacks sufficient large firms to invest in high
value activities…
Small Firms
Northern Ireland economy is
dominated by small firms
United Kingdom
Northern Ireland
50
Proportion of Turnover by Size (%)
45
40
18%
35
29%
30
25
20
15
10
5
0
No Employees
1-49
50-249
Employee Size Bands
10
250+
Large Firms
Northern
Ireland lacks
critical mass
for R&D,
exports and
investment
2
ECONOMIC
STRATEGY
11
The economy is at the centre of the PfG…
Economy
Growing a dynamic, innovative economy is
central to achieving all goals in the
Programme for Government
PRODUCTIVITY
EMPLOYMENT
Recession
These priorities remain key to driving
economic growth
12
Restructuring of Economic Policy: 4 Key Areas
13
1
The way economic policy is coordinated in NI
2
The way DETI and Invest NI provide assistance
to businesses
3
The freedom and flexibility Invest NI needs to
do its job.
4
The way policy is developed and monitored.
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
14
• Executive sub-committee on the economy to develop draft
economic strategy for Northern Ireland by end of 2010.
2. Restructuring of Economic Policy:
DETI and Invest NI Assistance to Industry
Concept of
Client Company
• Invest NI to develop proposals for a tiered portfolio of support to
the wider business base by September 2010.
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.
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
Invest NI Board
16
• IG currently exploring what greater flexibility might be achievable
but unlikely that recommendation can be implemented.
• Precise role and remit will be reviewed in the context of the work on
revising governance arrangements.
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
17
• The Minister has stood down EDF. A smaller economic
advisory group (drawn from business and economics)
met for the first time on 28 May.
A cross-departmental Executive sub-committee on the
economy has been established…
EXECUTIVE SUB
COMMITTEE ON THE
ECONOMY
18
Other
departments
as necessary
…along with the EAG to strengthen independent
economic advice to the ETI Minister
ECONOMIC ADVISORY GROUP (EAG)
19
ECONOMICS
BUSINESS
SKILLS
Kate Barker
Frances Ruane
Michael Ryan, CBE
Mark Nodder
Alan Armstrong
Stephen Kingon
Gerry Mallon
Lorraine Hall
Bill McGinnis
A new economic strategy will build upon existing
economic strategies…
EDUCATION &SKILLS
INNOVATION
Regional Innovation Strategy
MATRIX
Higher Education Strategy
Success through Skills 2
FE Means Business
Essential Skills for Living
STEM Strategy
School Improvement Programme
ENTERPRISE
Draft Enterprise Strategy
Social Economy Strategy
Draft Tourism Strategy
NEW ECONOMIC STRATEGY FOR NI
OTHER
INFRASTRUCTURE
Regional Development
Strategy
Investment Strategy for NI
20
EMPLOYMENT
Protecting employment in short term
Attracting new jobs through FDI
Welfare reform agenda
Anti-Poverty Strategy
Rural White Paper
Sustainable Development
Strategy for NI
…and will focus on six key themes as drivers of the
Executive’s overarching goals
2. ENCOURAGING BUSINESS GROWTH
(entrepreneurship, social economy, green economy,
tourism, access to finance, planning)
IMPROVING
PRODUCTIVITY
INCREASING
EMPLOYMENT
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)
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CROSS CUTTING THEMES
(equality, sustainable development)
1. CONNECTIONS TO THE GLOBAL ECONOMY
(attracting inward investment, growing exports)
Key Challenges
•
•
•
•
22
Global economic outlook
Public expenditure cutbacks
Implementing change
Gaining consensus on the right
economic strategy for Northern Ireland