“This Report is a major contribution to the debate..”

RTÉ reports some of the recommendations, and some of the criticisms of Invest NI, in the Independent Review of Economic Policy (IREP), chaired by the University of Ulster Vice-Chancellor, Professor Richard Barnett – full report here [pdf file]. In yesterday’s Belfast Telegraph David Gordon asked the question for the report to answer, “Are Invest NI really up to the job?” The Northern Ireland DETI Minister, the DUP’s Arlene Foster has welcomed the publication and “[intends] to carry out a short period of consultation on the report” – Here are the recommendations highlighted in the University press release.

Key recommendations put forward by the report include:
• Core economic functions (covering DETI and DEL areas of responsibility) should be brought under a single ‘Department of the Economy’
• The Executive should establish a permanent sub-committee, chaired by the ETI Minister, to prioritise action on the economy. The committee should oversee the development and implementation of an economic strategy, building on the findings of the IREP, as a matter of urgency
• More emphasis needs to be placed on developing a portfolio of policies to promote Innovation and R&D, and there are a number of specific recommendations in this regard
• Invest NI should have a more focused, dedicated and professional approach to strengthening export performance in both manufacturing and tradable services
• Invest NI should be allowed more freedom to operate, enabling the organisation to be more responsive to business needs
• A small business unit to be created within Invest NI, and the approach of working only with ‘clients’ should cease

And the full list of recommendations in the report [pdf file]

Full List of Recommendations

Policy Development
• As part of the review of structures within DETI (proposed in Chapter 8), the department should ensure that more resources are dedicated to policy development and monitoring
• DETI should appoint an independent economic advisor (with extensive experience as an economist) to strengthen capacity in economic policy making

Policy Delivery (Invest NI)
• The concept of Invest NI ‘clients’ should be removed to allow Invest NI to work throughout the entire business base to raise awareness and provide support for businesses undertaking Innovation, R&D and exports
• Invest NI should work to significantly reduce the number of its support programmes
• Most assistance delivered via SFA should be redirected between now and 2013 to provide greater levels of support to Innovation and R&D
• Grants for business expansions should be phased out towards 2013, after which such grants are unlikely to be available under EU state aid rules
• Business expansion not involving Innovation and R&D should, where necessary, be supported in the form of co-investment in companies that have already been successful in securing funding from the private sector. Invest NI assistance should be in the form of sub-ordinate debt or equity
• Invest NI should further reduce its support for company training, and concentrate support mainly to small firms and to projects with a high Innovative content, where retraining is necessary to realise a substantial rise in productivity
• Invest NI should transfer its budgets relating to tourism accommodation back to DETI to be redistributed to a more appropriate body

Portfolio of Innovation policies
• A portfolio of new Innovation policies should be developed over time, but should initially include four elements:
– A new institution for commercially-oriented research should be explored in NI, along the lines pioneered by the successful VTT institute in Finland. The institution should be outside the University system and not subject to the constraints of the Research Excellence Framework (REF). It is envisaged that this would incorporate a number of existing near market research organisations in NI and would be charged with reviewing and taking forward the MATRIX agenda
– Additional research in Universities and public sector bodies should be aligned closely with the needs of industry in NI and potential inward investors to NI. Furthermore, the development of specific new research capabilities should be used as an incentive to attract potential investors
– Industry-led Innovation communities, as suggested in the MATRIX report, should be developed as a pilot to bring together business, academia and Government and exploit available market opportunities
– More should be done to support Innovation in service sector firms beyond software, which we believe is well served. The concept of Innovation in the service sector should include the broad range of areas outlined in the definition of Innovation (presented in Chapter 5)
• Additional support for Innovation and R&D should not involve new public expenditure but instead be financed from savings in grant support for investment by existing firms and in property development
• Invest NI’s export assistance should become more dedicated and professional, adopting a similar model to the fee-charging export agencies identified in Chapter 6, with two tiers of charges depending on whether the company is an SME or large firm

Policy Delivery (DETI)
• As soon as practicable, DETI and other relevant departments should commence work on preparing a case for retaining state aid limits that support the changes outlined in this Review
• Promoting greater energy efficiency / conservation in the private sector should be accorded a higher priority in the 2009 Strategic Energy Framework (reflecting, where appropriate, the current and ongoing work of the Green New Deal for NI)
• DETI and Invest NI should undertake an immediate and focused review of its overall strategic and sectoral approach to capitalise on the benefits of new telecommunications connectivity in NI

Policy Performance
• DETI, as the funding department, should report on the strategic performance of Invest NI, with the co-operation of Invest NI statistical staff
• Relevant policies and accompanying resources should be updated annually to quantifiably demonstrate how individual policies/organisations contribute to the PfG productivity goal
• Wherever data availability / quality allows, ‘impact’ targets for economic development should be expressed in relative terms (to the UK average or appropriate subsection of UK regions) rather than in absolute terms
• When reporting on performance, DETI / Invest NI should include targets specifically for investments new to NI (expressed as a share of equivalent jobs coming into the UK)
• The Invest NI data collection system needs to be developed as a single database, to be maintained by DETI. The IREP database, constructed specifically for the Review, will be transferred to DETI to help facilitate this process

Finance
• Aside from those funds designed to support seed stage projects, Invest NI should disengage its direct involvement with venture capital (VC) funds. Rather than direct participation in the market, Invest NI should act as a facilitator between companies and VCs. In the case of seed stage VC funds, Invest NI should avoid placing restrictions on the market as outlined in Chapter 3

Project Appraisal
• Project appraisal rules should be re-assessed to ensure that projects involving investment in Innovation and R&D, which generally present uncertain and wider outcomes, are not placed at an unreasonable disadvantage

Further Research
• A study should be undertaken to determine how NI can more rapidly shift the pattern of inward investment towards higher value sectors
• A study of industrial land provision should be commissioned to determine why there is a perceived need for Invest NI to purchase large amounts of land over the next few years
• DETI and other relevant departments should undertake a study to establish how the social economy might be further helped to reduce deprivation and increase labour force participation in disadvantaged areas within NI

Co-ordination of Economic Policy
• If Northern Ireland is to achieve a step change in economic performance, the economy should remain the top priority of the Executive for many years to come
• DETI, DEL and Invest NI should work together to more effectively implement their existing liaison arrangements
• As part of the review of strand one institutions, the core economic functions (covering existing DETI and DEL areas of responsibility) should be brought together under a single ‘Department of the Economy’
• The FM / dFM and the Executive should establish a permanent sub-committee to prioritise action on the economy, to be chaired by the Minister for the Economy (in the interim, the Enterprise, Trade and Investment (ETI) Minister)
• The Executive sub-committee should agree an economic strategy, building on the findings of the IREP, as a matter of urgency

Governance Arrangements
• DETI should undertake an internal review of its structures to ensure that the allocation of staff is more fully aligned with its policy objectives
• The core functions of strategic policy development and performance monitoring should be brought together within any revised DETI structures. The department should also provide the necessary support, professional and otherwise, to the Executive sub-committee on the economy
• Invest NI should consider an internal reorganisation that reflects the differing skill sets required to support FDI, exports, Innovation / R&D and small business support
• A small business unit should be created within Invest NI, with responsibility for the development and c0-ordination of relevant support to SMEs thoughout NI
• World class training in sales and marketing should be provided for relevant Invest NI staff (particulary those working in international offices). In addition, staff should be recruited with relevant experience to meet the demands of investment decisions that are increasingly based on Innovation and R&D
• Invest NI should be allowed more freedom to operate, with DETI having less involvement in operational matters, to enable the organisation to be more entrepreneurial and responsive to business needs
• To help achieve greater autonomy for Invest NI, their delegated authority limits should be both simplified and increased significantly. The current DFP delegated limits for mobile SFA (currently £10m) should also apply to Innovation and R&D projects
• An NI version of the Central Project Review Group (CPRG) should be established, incorporating Invest NI, DETI and DFP, in order to speed up the decision making process for major industrial assistance cases
• Given the non-executive composition of the Invest NI Board, it should cease to perform executive functions and focus on providing strategic direction and oversight
• A senior member of the DETI Departmental Board should be represented on the Invest NI Board
• High level experience in international business and expertise in economic development should be sought when the Invest NI board is reconstituted
• Invest NI should be given greater autonomy and flexibility in managing its budgets,
including End Year Flexibility (EYF) where required
• For projects involving financial assistance to industry, ex-post assessments of value for money should be taken on a portfolio basis
• The DETI / Invest NI Accounting Officer Memorandum should be reviewed in light of the revised governance arrangements implemented as part of the IREP
• The Management Statement and Financial Memorandum (MSFM) should be reviewed and revised, where appropriate, in light of the recommendations contained in this report

Advisory Bodies
• The ETI Minister should stand down the Economic Development Forum and establish a small advisory body, comprising expertise on regional economic development (drawn from business and economics) to provide independent advice on the economy
• Stakeholders involved in economic development should continue to engage with the ETI Minister on a bilateral basis

Skills
• The local education system should prepare now to meet the anticipated increased demand for higher level skills in STEM and other Innovation relevant subjects arising from the increased prioritisation of Innovation and R&D
• The current focus on technical and professional qualifications, including apprenticeships and vocational training, should be extended to emphasise higher level qualifications at levels 4 and 5
• DEL, DETI and Invest NI should work to significantly develop management and leadership skills in NI and support the proposal for government to sponsor a ‘Management Masterclass’ to identify and develop the best managers from local industry and the public sector

Infrastructure
• The Executive should ensure that the third ISNI plan takes a much greater economic focus by committing more investment into projects that will maximise NI’s future economic performance

Planning
• In the context of reform, the Planning Service should be given processing time targets which are comparable and competitive with those countries and regions against which NI is competing for mobile international investment
• Planning Service should work to ensure that the legislative timetable for reform is met
• The Strategic Projects Team should deal with all applications relating to investment new to NI. In addition, in terms of what constitutes a ‘regionally significant development’, a clear definition and qualifying criteria should be developed and agreed between DoE, DRD, DETI and Invest NI
• The Pre-Application Discussion (PAD) process must be as efficient as possible and the time allocated for PAD should be included when reporting on timings for all applications

Pete Baker