Terms of Reference
Background
1. The economic challenges facing the Northern Ireland economy have been the subject of extensive debate. A number of factors have been identified as inhibiting regional economic growth, most recently in Sir David Varney’s final report into the competitiveness of the NI economy (April 2008). For example, in terms of employment, the economy has proportionately the smallest private sector of any UK region. It is also poorly structured, with a bias toward lower value added sectors (agriculture, construction, retail) and low levels of productivity relative to other UK regions.
2. In recognition of these challenges, the NI Executive, in its Programme for Government (2008/09 – 2010/11), has placed the economy as its top priority. The accompanying Budget has allocated new resources to economic development programmes.
Programme for Government: Productivity Goal
3. The NI Executive is aiming to grow a dynamic and innovative economy, and has set the following goal which aims:
‘to halve the private sector productivity gap with the UK average excluding the Greater South East of England by 2015’.
4. The Greater South East of England (GSE) has been excluded from the productivity benchmark because it is markedly different from the NI economy. For example, GSE is endowed with exceptionally high value added sectors, particularly in financial and business services. Even after the GSE is excluded from the benchmark, the goal remains aspirational, as current analysis suggests that existing policies, programmes and resource allocations may not be sufficient to achieve the goal.
5. It is important not to underestimate the scale of the challenge. For example, from a sub-sectoral perspective, whereas the manufacturing sector has performed reasonably well in terms of relative productivity, this is not the case with private services, where productivity has been in long-term decline relative to UK excluding the GSE. Furthermore, the Executive recognises the tension between its objectives for Productivity improvements and for Employment growth, with previous increases in private services employment contributing, in relative terms, to reductions in private sector productivity.
6. There are also imminent changes with respect to Government support to businesses. The existing Regional Aid ceilings will decline significantly from January 2011, and they will be removed entirely from January 2014 onwards.
Review of DETI / Invest NI Policies and Programmes
7. In light of these factors and having regard to the recommendation in Sir David Varney’s report into the competitiveness of the NI economy, the Executive has decided that there should be an independent review into the work of DETI/Invest NI. The main aim of the review will be to determine whether existing DETI and Invest NI policies, programmes and resources will contribute optimally to the delivery of the productivity goal contained in the Programme for Government. This goal also places obligations on DRD and DEL. However, in the first instance, the Review will consider relevant DETI and Invest NI policies relating to manufacturing and private services productivity (PSA 1 in the Programme for Government), and:
(a) Advise on the extent to which existing strategies, policies, programmes and resource allocations may need to be better aligned to help deliver the productivity goal;
(b) Identify whether any new policies are necessary, having regard to the existing legislative powers of the NI Executive; and
(c) Identify whether there are any issues which risk compromising the delivery of the goal, but which fall to other departments, for example DEL and DRD.
Project Brief
8. The overall aim of the Review is to ensure that DETI/Invest NI’s policies, programmes and resources are targeted to help achieve the stretching productivity goal outlined in the Programme for Government. The Review should make recommendations in the following areas:
(a) The current and forecasted performance of the Northern Ireland economy, relative to other regions with access to similar policy instruments, programmes and resources;
(b) Current DETI/Invest NI policies and programmes, with an assessment of their effectiveness in stimulating productivity improvements, particularly within manufacturing and private services;
(c) Policy options to stimulate economic growth / productivity and build a larger and more wealth creating private sector, particularly in financial and value added business services;
(d) How NI can further attract value added FDI and promote domestic investment;
(e) Review and advise on the structure and remit of Invest NI and the existing governance arrangements between DETI, DFP and Invest NI;
(f) Identify any issues which may inhibit the delivery of the productivity goal which fall to other Departments in the NI Executive, particularly DEL (in relation to skills) and DRD (in relation to regional planning and infrastructure investment);
(g) Consider the optimal way by which the Minister of Enterprise, Trade and Investment engages with key stakeholders on economic development issues;
(h) Consider whether any improvements could be made to DETI and Invest NI’s working links within the NI Executive and on an east/west and north/south basis; and
(i) The sub-regional distribution of inward investment and other support measures to indigenous businesses, and the effectiveness of policy in encouraging the location of investment.
(j) Assess the challenging nature of the economic goals/targets contained in the Programme for Government and, where appropriate, recommend any change.
Methodological Issues
9. The Review should draw on recent research and evaluations of economic development policy in NI (e.g. the evaluations of Selective Financial Assistance, Accelerating Entrepreneurship; the Regional Innovation Strategy and the draft Regional Economic Strategy). It should also take account of DETI and Invest NI’s Corporate Plans and Invest NI’s Performance Reports.
10. The Review will be led by a person independent of the Executive. The appointee will be supported by a number of independent experts on economic development. The review will also be supported by a secretariat drawn from DETI / Invest NI.
Output
11. The product of the Review will be a report to the Executive, through the DETI Minister, advising on the optimal set of economic development policies and programmes to improve productivity in NI over the next 8 to 10 years. DETI will follow current research and evaluation protocols. The ETI Committee and Economic Development Forum will be notified of the Terms of Reference, before the work is commissioned, and then given access to the draft final report prior to external consultation.
12. It is intended that the Review should report in Summer 2009.