Official Report: Minutes of Evidence

The Chairperson (Mr McGlone): With us today are Mr Roger Pollen, head of external affairs; Mr Wilfred Mitchell, policy chairman; and Ms Carolyn Brown, policy manager. It is good to see you again. We always bump into each other somewhere along the way. Thank you very much for coming along and giving your written evidence and for attending today. Wilfred, you know the way it works here — you are a seasoned practitioner at this now — an opening statement and then questions from members. The floor is yours, Wilfred.

Mr Wilfred Mitchell (Federation of Small Businesses): Thank you, Chairman and members, for the invitation to appear here today to input into your inquiry into how to grow the economy and create jobs under, hopefully, a lower rate of corporation tax in Northern Ireland. First, I will take a few moments to outline the importance of small businesses to the Northern Ireland economy, the role of the Federation of Small Businesses (FSB) in representing the sector and our position on corporation tax. My colleagues will then comment on the other issues that, we believe, need attention to ensure the best environment for businesses to flourish.

Small and medium-sized enterprises (SMEs) account for 99% of private sector business in Northern Ireland and employ over 75% of the private sector workforce. In fact, Northern Ireland has the highest concentration of small businesses in the United Kingdom. According to Office for National Statistics business population estimates, of the under 19,000 private sector enterprises here only about 140 are large companies with more than 250 employees. Together, small businesses contribute over 60% of private sector turnover here. Furthermore, 82% of Northern Ireland's gross value added is produced by small and medium-sized businesses.

The FSB has around 7,000 members in Northern Ireland, and it is the business owners who are the members, rather than the companies. Many of our members own several businesses, so we represent many thousands of businesses, which, in turn, employ many thousands of people — 190,000, in fact, at the start of 2014, or nearly half as many again as the 123,000 employed by large companies. There is also a tendency for large businesses to be located in Belfast, but we have over 4,000 members outside Belfast. Small businesses are located throughout Northern Ireland, in both urban and rural areas. I am conscious that some people look on small businesses with some disdain, and instead look toward large businesses as the drivers of successful economic policy. I would highlight, however, that it took only a single decision to end 800 jobs at JTI Gallaher. It would take 800 separate decisions to cause the same damage in small and micro businesses. As such, the economic role of micro and small businesses in creating employment right across all constituencies of Northern Ireland needs to be welcomed and championed; they are the backbone of the entire private sector.

I turn to corporation tax. To be clear, the Federation of Small Businesses lobbied long and hard for the devolution of the power to set the rate corporation tax, and we welcome the fact that the legislation has now been passed. We believe that the rate should be reduced to encourage inward investment and reinvestment by indigenous businesses, and that decisions need to be taken swiftly to set the date and the rate for the new lower tax regime, so that business can begin to plan with certainty.

Mr Chairman, you and the Committee will be aware that we have already provided a written submission to the inquiry, and in that document we addressed three main areas: the cost of doing business; skills and education; and access to finance. In summary, the areas that we urge your Committee to focus on are business rates; employment law; skills and training; energy; red tape and regulations; finance and access to finance; planning; procurement; infrastructure, both for business in general, including broadband, transport, gas and electricity networks, and for tourism in particular; and, finally, business support.

That outlines our contribution. I now ask Carolyn to take you through some of the issues that we would like to highlight, such as rates, employment law, and skills and training. Roger will follow on energy, regulation and access to finance.

Ms Carolyn Brown (Federation of Small Businesses): Thank you very much, Wilfred. Chairman, I will very briefly expand on some of the themes from our written submission. I will focus on rates, employment law and business support. These are each very complex issues in their own right, and I will only speak briefly on each at the moment. I will be happy to answer any questions afterwards.

I start with rates, and remind you that rates have a disproportionate impact on small businesses. They can be the third largest cost for a small business after employment costs and rent. It is the only business tax that does not take account of trading and economic conditions at the time. Rates do not take account of a business's ability to pay, and we are therefore very pleased that the small business rates relief scheme has been extended to this year; but we emphasise the need for a continuing system until at least the planned review, in which we want to take a very active part. We believe that the rates system is fundamentally flawed and needs to be fundamentally reviewed, and we would like there to be a sea change. We think that there are a couple of options, but we do not yet know which is most appropriate. One option is to base rates on profits or turnover, taking into account the economic health of the business; another possibility is to exempt small businesses altogether. If you exempted small businesses, you would lose a very small amount of the full rates take, so that is a possibility that we are going to look into in more depth.

Several small businesses have suffered a great deal from the recent changes — the changes that have taken place this year — between rates convergence and revaluation. Some of our members have experienced rises of 75%, 100% or 150% in their rates bills. Some have been taken through the rates threshold and are not therefore getting small business rates relief. These are small businesses which happen to be in larger premises. The small business rates relief system, we acknowledge, has its flaws: it is not necessarily the best system, but it is there. It has helped a lot of businesses during the past five years, and we would like to see it retained until something else comes along. We are going to look at that further.

I will say a couple of sentences on employment law. Micro and small businesses see employment legislation as a major barrier to growth. Up to a third of our members, which is quite a large proportion, tell us that they have decided not to employ anybody, because they are so concerned about the business risk of taking on employees. That is huge potential for expanding employment and reducing unemployment by taking out of the equation the small business sector, which, as I say, is the largest in Northern Ireland. There are 27,000 businesses in Northern Ireland employing between one and nine people, and if they all took on one more person, think what that could do to the unemployment statistics. That is the scale we are looking at.

We took a very active part in the employment law review, and were delighted to do so. The resulting recommendations were not all that we wanted, but we were pleased to see them. We are therefore quite disappointed that it has not progressed at all. We believe that the Bill is in draft. If there is one thing that I would urge the Committee to do, it is to support the employment law Bill, because that is a stress on small businesses; that is what is affecting their ability to expand and grow.

We believe that there should be a review of the business support system. I am not going to say that there is not enough business support out there. It is quite the opposite: there is rather a lot. Back in 2008, when RSM McClure Watters did a report for Invest NI, it found over 200 sources of business support in Northern Ireland. That is just far too many for a small business, which does not have the time to research what might be suitable or what they need. There needs to be a simplification and a convergence of business support, and it needs to be appropriate for the small and micro business, as well as for those that want to grow. Focusing on export and innovation is great and necessary, but not all businesses feel that they need that support at the moment. They might need more basic support, and they do not necessarily know where to look. There needs to be a promotion of business support, and it needs to be simplified and accessible. We would like to see a network of small business advice centres throughout Northern Ireland, where a small business owner could go in, talk about their business, ask someone what support is out there, what training is available or what they should do. It would cover everything they need to know from training employees and taking on employees to tendering for a procurement exercise — a one-stop shop, as I say, where they can talk to somebody face to face about their business and, through that process, identify the sort of business support that they need. That will encourage expansion and growth in the small business sector.

Finally, I do not need to say very much, I hope, about the skills and education sector; I will just give it a quick mention. We are very concerned about the budget cuts to the skills and education sector. Skills are absolutely vital, both for the growth of the small business sector and for incoming foreign direct investment. It will not come if the skills and labour are not there for it. That needs to be addressed quite urgently as well. That is me for now.

Mr Roger Pollen (Federation of Small Businesses): Thank you very much. The first thing to say is that we very much welcome this inquiry. The corporation tax powers are something that we have lobbied for. There has been some unanimity of purpose throughout the political parties and businesses on this one. What you are looking at around that — the other things — makes for a very welcome inquiry.

I spent yesterday in London with colleagues from the FSB in Scotland, Wales and England. The Administrations in each of those areas is grappling with similar problems to ourselves and everybody is trying to find appropriate solutions for their patch. Here, with the Bill becoming an Act for corporation tax powers, we have seen Northern Ireland get a huge advantage over all of those colleagues. They have not quite seen the potential of it yet, because we have not done anything with it yet, but a unique opportunity is starting to emerge for us to position ourselves differently and compete differently. It will help us to overcome some of the disadvantages that we have historically laboured under.

We need to go much further than corporation tax powers alone to differentiate ourselves, which is the purpose of what you are looking at. In our written submission we have highlighted quite a lot of the areas in more detail, but what I wanted to speak about in particular was regulation and energy, because these are two of the things coming across that our members repeatedly tell us are, in so many ways, barriers to their trade.

A very good piece of work that we were privileged to be involved in was the first innovation lab, set up by the Department of Finance and Personnel to look at regulation and how it happens. A panel of experts was brought together and various expert witnesses were put in front of it. It produced a very good report, and one of the interesting things coming out of the workings of that was the lack of clarity over what regulation is. To some people it was very clear what the process was, but to businesses regulation is just anything that gets in the way of doing business. That report produced quite a lot of interesting findings, but what we identified is a real sense of a need for a robust culture of policy development. At the moment, an awful lot of policy seems to come out. There is no limit to it and no regulatory budget. We have no idea of the cost of all of the regulation that emerges from Stormont and, increasingly, from the councils. There is no quantification of the cost of that regulatory burden, and there seems to be no effort to use the power of the Assembly and councils to reduce the regulatory burden. There is a real opportunity. I know that across in Westminster and Whitehall they have the slogans "one in, one out" and "one in, two out". When we looked at this more closely it became clearer that it was not just a single regulation in and a single one out. It was a regulatory pound of cost to business in, and you had to take one out. There is an opportunity for yourselves to take a lead on changing the culture of the amount of regulation that is put in the way of doing business in Northern Ireland.

It is always easier to test these things with real-life examples. One that we spotted in FSB in Northern Ireland was something coming from Europe, and then through into Whitehall, with a devolved impact. That was a proposal to introduce an MOT-type test for trailers. That seems innocuous enough, except that we realised that that would require a register of trailers to be maintained, since there currently is not one. There is a vast cost to that. When we then dug into it from our perspective in Northern Ireland, looking at the importance of agriculture to our economy, we found it was going to encompass every trailed implement. Suddenly you can see the potential impact on Northern Ireland of a piece of regulation that started somewhere far off, many years ago, and is gradually working its way through. There is an opportunity there for the Assembly. If a regulation like that has come through, we need to ask what we can do to reduce the cost to business in the areas that are under our control, and use the Assembly as a really dynamic tool on behalf of business, rather than to keep adding to the regulatory burden without considering the impacts of it. You may want to come back on that.

The other one I wanted to flag up was the cost of energy and the whole energy market. I know you have done several big pieces of work on that, and I do not want to overlap with those too much other than to say that our membership includes producers of energy, as well as users. There is great dissatisfaction about the ability to contribute into the system if you are creating energy. There is a great lack of clarity about what it will cost to connect to the grid, why it should cost that, what might be covered by that cost and so on. There is also great dissatisfaction with the notion of a single electricity market without the reality of a connection between north and south markets.

The security of supply issue is one that you have touched on in some detail. What we will look at is the fact that, so far, it is six years since the North/South interconnector was proposed, and planning permission applied for. There is no sense that that is making a difference to either the security of the supply or the cost of electricity for our members. There are projections that, if that project were expedited, it could reduce electricity costs in Northern Ireland by up to £20 million. That would obviously benefit business here, but it is not happening.

I suppose the message from both of those is the sense that we need to get to decisions more quickly, to get to better decisions, and to use the power of the establishment to work with business, rather than the current perception that it is often creating barriers to stop business.

I will stop there for the moment.

Mr Mitchell: Do you want to touch on finance and access to finance?

Mr Pollen: Access to finance is one of the things that is such a huge area that there have been some measures taken by the Department, and through Invest NI, to put in place access to funding for small business. Having failed at every other potential area of getting access to finance, at least there was some kind of safety net there, which, while very welcome, served to illustrate the problems that there were further upstream.

One of the simplest things that we would urge, which is probably within the influence of Stormont — if not within its power — is to encourage the banks to look at maintaining the branch network, which our members identify as being very important to them. The banks, coming under pressure from different areas, see an opportunity to reduce service provided through a bricks-and-mortar presence and to move online. That is not helpful. Back to the point that Carolyn made about the sources of advice: the bank has historically been one of those sources, and if you remove that provision you are inevitably going to find that the provision will be removed in the more remote rural areas, where our members — as Wilfred identified — are a key part of the employment fabric of those communities.

The Chairperson (Mr McGlone): Thank you very much for that. One of the things that you were bringing us to, Roger, was the need for decisions to be made quickly and efficiently. That is a theme that has been running, from different sources, right through the inquiry. If you were to make recommendations in the context of the reduction of corporation tax or, indeed, other contexts on how there could be a more integrated, strategic approach by government to effective and efficient decision-making, what would those recommendations be?

Mr Pollen: We were all quite enthused when the Programme for Government came out and said it was putting the economy at the heart of it. The reality of that, however, seemed to be somewhat different. There is a big vision, but it is almost too big, so it can mean anything to anybody within there. We need to start to get a really serious grasp on how to get government out of the way of business. To do that, we need to have business more tightly linked to government, not actually into the process of government but informing government much more closely. In America you have the Small Business Administration, which sits in there and is able to make sure that policy is considered in advance of decisions being taken.

Mr Mitchell: We went on a visit to Washington five or six years ago — seven now, I think. We met the Small Business Administration, which is largely government-run. For example, when Obama takes up his position, he puts someone in charge of the Small Business Administration to carry out his business manifesto, which he agreed prior to taking up office. That means that it cannot be derailed during his time, and it is therefore more consistent.

That is very helpful to small businesses. They help small businesses and take them by the hand through the regulations. If the regulations present more difficulties, they will go to the ombudsman on behalf of small businesses and pay for that. So, those are models that are working in America to carry out what has been agreed prior to taking up position.

The Chairperson (Mr McGlone): I know that the American structure is a good bit different from ours, but how do you see a model such as that impacting on the decisions of various Departments in a cross-departmental way? In other words, how would something akin to that work here?

Mr Mitchell: We would need perhaps not a manifesto but an agreed plan beforehand, because once you start implementing, that is when issues arise. You need to have things agreed beforehand and overcome the issues together.

The Chairperson (Mr McGlone): Do you have any idea how a model like that would work here? We have endless consultations going on around the place on endless documents, and we are probably going to hear about another one later today around grade A office accommodation. You are talking about something that says to Departments, "This is how you do it. You need to do it this way. This is how we see you doing it." With the best will in the world, you could have an organisation set up like that, and there are probably a number of organisations out there saying that they advise government and the Executive. Advice is one thing, but it can readily be put on the long finger, discarded, or whatever. You are talking about a body that, in effect, cannot be ignored, has to be acknowledged and recognised; and more than that, its recommendations must be acted upon, and that it is agreed with following the election of an Executive. Is that what you are talking about? Is that how it works?

Mr Mitchell: Going back to the small business administration; this is something that has been handed by Obama and his party to small businesses. It is government appointed, and is carrying this out on their behalf.

The Chairperson (Mr McGlone): So, if you like, it is Invest NI-plus.

Mr Mitchell: Yes. If we blur the areas of Invest, where it could be more involved in the private sector, then that would be a big advantage because it has more of a global view of businesses.

The Chairperson (Mr McGlone): So, you are talking about a body that has a cross-departmental range of responsibilities and, more importantly, activities. It is not just a consultee body.

Mr Mitchell: Yes.

The Chairperson (Mr McGlone): How does that fit in with the Government — the Executive, in this instance? How would you see it working through?

Mr Mitchell: I think we are tip-toeing a little bit into the private sector and the reduction of the public sector, in a sense. We should be seen as contributing together and not as a "them and us" with different conditions. The public sector should be rewarded the same as the private sector if it is successful in that area. This is what I mean about blurring the edges, so that we may not have the same brain drain of people who are highly qualified and gifted and who do not come back home when they get their qualifications somewhere else. We maintain that ability at home, by blurring the edges between public and private. Invest Northern Ireland would probably be one of the best examples to start with.

The Chairperson (Mr McGlone): If you have some modelling, or concept, that you want to provide to us, that would be very helpful to us in formulating where we are going with this inquiry.

There was something else you touched on, Roger, and that was EU regulation. There are two things about that. When we are out and about we find that EU regulation and how it is defined and interpreted by nation states can vary across Europe. In the North, there could be a definition or interpretation of "trailers", but if you go a few miles down the road, they might say, "Don't worry about that". In other words, do we have to stop taking as read what has been handed down to us by what some civil servants take as an edict and say, "Let's have a look at this and see how we can best interpret it that will not influence what business is about in a negative way".

Mr Mitchell: Ten years ago, the FSB had a booklet out on gold-plating. That is what we are referring to. Northern Ireland seems to dot the i's and cross the t's more than its EU competitors. We seem to get the short straw when it comes to being effective when competing with businesses. I will let Roger come in.

Mr Pollen: The independent review of economic policy recommended that there be a Department of the Economy, and that is starting to be adopted. We think that will provide a lot of solutions to a lot of problems. There is a sense that we take a gold-plating approach to regulation, and possibly with the creation of that Department of the Economy, you might start to see a spirit in which the entire Executive are challenging regulations and working alongside business to see how we can implement regulations in the way that will have least impact, rather than in a way that will show that we have done so absolutely perfectly. It is that difference of mindset — the glass half-full towards business, rather than half-empty towards extra regulation.

Mr Chairman, I accept that this was from your own party, but I will highlight an illustration of the need to be very careful about regulation. The plastic bag levy is regarded by many as being a very successful piece of regulation; but it set out to achieve two things, and to our mind that causes confusion. It set out to change behaviour, but it also set out to raise revenue. Therefore, from the point of view of businesses, it cannot be a very satisfactory piece of regulation because it will fail on one measure or the other, or only partially achieve both. It is a slightly unfair one to pull out, but it illustrates the need to be very clear about why we need to regulate, and, if we do regulate, how we can do so in a way that achieves the objective and does not create other, unintended, consequences and distortions of markets.

The Chairperson (Mr McGlone): Finally — and then I will open up the meeting to members — I will raise the whole question of Europe, which, obviously, we are all fighting about on the doorsteps at the moment. I represent a pretty big rural constituency, and a lot of issues are coming back, not least from farmers and the farming community, about jeopardising single farm payments if we were to pull out of Europe. Has the FSB got — the issue came up with other organisations, including the Northern Ireland Chamber of Commerce and Industry last week — a considered view on Brexit? The Committee has also had a research paper done on that.

Mr Pollen: Just going back slightly; the first thing I would say is that the FSB took extraordinary care in Scotland not to have a formal position on the issue, but to inform the debate. Its members are from all sides of the debate, so it brought facts to help people actually evaluate the arguments that were being put forward on the basis of hard facts, rather than on heartfelt wishes or emotive arguments. The intention is to approach any EU referendum debate in the same way. We recognise that our membership is divided and that people join us because they are in business and not because of their politics. We want to strive to ensure that any impacts of a process like that would be properly informed with facts, and we would not take a firmer position than that.

The Chairperson (Mr McGlone): We have established that from 2007 to 2013, £2.4 billion came into the local economy. To jeopardise that and increase red tape through customs would not, based on the members of your organisation and business people whom I know, be a route they would like to go down. Maybe that is presumptuous on my part.

Mr Mitchell: We took in much less in the previous period compared to the Republic of Ireland and so were disadvantaged: there are a lot of different angles to look at this from.

The Chairperson (Mr McGlone): I appreciate that you do not have a considered view, and I respect that.

Mr McKinney: I will just dive into a sub-area of energy, which I think will be touched on elsewhere, and ask about the training you are talking about, specifically training for gas engineers. How do you see that advantaging us? This is the training for gas engineers and boiler installers. It is a bit specific, but it is something that could be going on now, and I will deal with it in the wider apprenticeship context.

Ms Brown: We have a lack of skills in that area. Wilfred, you mentioned a business in the west — was it Dale Farm? It is a dairy, anyway. It is looking to connect to the gas network, and there are simply not the engineers to carry out the work. It is terrible that this is being held back because of a lack of skills.

Mr Mitchell: They had to bring people in from overseas to carry out the work.

Mr McKinney: What does that tell you about joined-up government, when they have firm knowledge that the gas network is coming here?

Ms Brown: We need more joined-up thinking, obviously. We need all the strategies, and even all the actions, to be considered by all the Departments that they affect, because a decision on skills can affect infrastructure.

Mr McKinney: Roughly, in your estimation, how many people could be employed locally if we were to embrace that wholly, or if we had embraced it wholly?

Ms Brown: A couple of hundred, I would say.

Mr Mitchell: Yes, and if you brought it out to the whole energy field, it would keep multiplying. Not only that, globally we need to be ahead of the game in order to be experts in that area.

Mr McKinney: What is your understanding of the further emerging businesses that we could benefit from and where apprenticeships should be introduced now?

Mr Pollen: In some ways you are —

Mr McKinney: I am referring to the wider apprenticeship structure. You say that school-leavers must be better prepared for the workplace and that better apprenticeships should be in place. What should those apprenticeships be, if you like, and what are the businesses that we need to look towards?

Ms Brown: We need more people with technical skills, such as engineers, who can connect gas networks. We also need people who are qualified in science, technology, engineering and mathematics (STEM), who can take forward IT infrastructure; because, although we have very good broadband compared to some other nations in the UK, we still have many gaps. We need to work on fixing them, especially when wider government is looking for more and more transactions and activities to be undertaken electronically. We do not necessarily have the engineers to do that.

I hardly need to say that companies like Harland and Wolff and Shorts need engineers and STEM graduates. Instead of bringing people in, we should be providing that labour ourselves, when we have such a high level of unemployment. That will be a selling point when it comes to attracting foreign direct investment. We will get people to bring more business here if we have the correct skills.

Mr Pollen: I go back to the point that there was an expectation in 2009 that there would be a new 400 kV overhead link with the Republic. Businesses might then have quite reasonably started thinking, "OK, we will now engage with the Department of Employment and Learning to develop some apprenticeships. We will invest in our workforce, so that we are ready to bid for that successfully". Six years on, would that have been regarded as a good investment? We still do not have clarity about the timescale. It goes back to the point that, unless the business community has confidence that decision-making at the high strategic level is happening fairly quickly and with the might of the Assembly and the Executive behind it, the workforce will always be out of step with opportunity.

Mr Mitchell: To get into the higher level of employment, we need to recognise that technology is there and is changing and that you need to have a lifelong-learning attitude. It is not like it was in the past, when you learnt a trade and that was that. We need to have the expectation that things will change and will have to be monitored constantly and that people will have to be qualified accordingly throughout their lifetime.

Mr McKinney: What confidence do you have that those conversations are taking place? I appreciate what you are saying that, on the one hand, if we had done all that training, would people have been able to get the jobs; yet, on the other hand, we did not do the training and people have potentially lost opportunities in the gas industry. What confidence do you have that the conversations are taking place, with sufficient ambition and realistic prospects, in terms of emerging industries? There is now going to be research in 2015 about future industries: is that research now too late?

Mr Pollen: I do not think that it is ever too late to have more knowledge added to your decision-making processes, so I would not say that it is too late. However, other things might have happened had research been carried out earlier into market scoping and alignment with opportunities and needs.

Mr McKinney: What mechanisms would allow small businesses to identify opportunities and links into those apprenticeships? Your example was that if everybody took on one person, it would enormously advantage employment here. Where are the strategic conversations taking place to ensure that businesses like yours or those you represent will take those decisions?

Ms Brown: That is another issue. There needs to be better communication between organisations such as Invest NI, enterprise agencies and councils, and their small business constituencies.

Mr Mitchell: Following on from that, we would like to see people moving on as entrepreneurs and setting up their own businesses. That should be facilitated in the early stages of education programmes so that it does not come as a surprise later in life when they have to find out the basic needs when setting up a small business. Instead, they could use their expertise and knowledge to become entrepreneurs and it would flow more smoothly.

If you compare us to other countries, you can see that the expectations of young school-leavers is not to move into setting up their own businesses. This is an area that we need to address.

Mr McKinney: Undoubtedly, there is a gap for business, a gap for government and a gap strategically. Do you agree?

Mr Mitchell: There needs to be synchronisation.

Mr McKinney: I will move back to the non-domestic rates issue. Clearly, it is of concern, and the change in the non-domestic rate and the revaluations have had an impact. However, while it has had an impact, you are saying that uncertainty remains. Surely certainty is now there, even if it is bad news. You refer to uncertainty. Where does that remain?

Ms Brown: There is uncertainty because we have a rate relief scheme that is going to end. We welcome a planned review of the rating system, but that will bring about some uncertainty. Small businesses here are suffering from shock at the moment due to the rise in their rates.

We need a system that is appropriate and relevant to small businesses. They are anticipating further rises now that they have experienced this one. That is the nature of small businesses: when they see a rise, they think it might happen again and again.

So, we want fundamental reform of the rating system, not tweaking around the edges. We want the rate relief scheme retained until such time as it can be bettered. We need a better system, a sea change.

Mr Mitchell: It needs to be affordable, and that needs to be quantified.

Mr McKinney: What types of business decisions are being affected by the recent increases? Are people being laid off? Are you getting a comprehensive picture in that regard?

Ms Brown: It is too early to say given the short time since people received the current round of rates bills, but several members have contacted me to say that they cannot stay in business. That is their initial reaction. We will have to monitor this and see what happens, but that is the impact it is having on them, where the rates bill has been doubled. It is already a very large proportion of their outgoings, and they think it is going to impact on their survival. If some are thinking that, others are thinking that it will impact on their plans for growth and expansion. It is a very serious issue in the small business sector.

Mr McKinney: Are you getting information about the effect it will have on businesses potentially coming into Northern Ireland and setting up here?

Ms Brown: It would be one of the costs they would consider.

Mr Flanagan: I want to stay on the issue of non-domestic rates for a moment. Do you believe that the current system is fair?

Ms Brown: It is not necessarily fair. It is what it is, and it has been in place for a long time. It is based on property size rather than business size and that, in itself, produces some unfairness.

Mr Flanagan: Do you have a better alternative?

Ms Brown: We are looking at alternatives and thinking about options, but all of them have advantages and disadvantages: that is the problem. So, we need to think about the best way forward. A lot of small businesses believe that the rate should be based on their ability to pay, which should take into account their profitability, their turnover or the actual nature of the business. We recognise that that is going to bring some complexities into the administration of the system. It has advantages and disadvantages, but there must be a way forward on that. We are looking at it very closely.

We are also looking at the option of bringing a proportion of small businesses out of the rating system altogether, because the majority of the rates take is from larger businesses. That would be a fairly small proportion of the overall rates revenue. You could take a large proportion of small businesses out of the rating system without making too much of an impact on it. I do not have figures for that at the moment; we will be looking into that.

Mr Flanagan: Have you met the Finance Minister about this yet? It is my understanding that he seems to be fairly reluctant to meet business representatives about this issue.

Ms Brown: We have met representatives of Land and Property Services and the rating policy division.

Mr Flanagan: It is an issue that is exercising an awful lot of businesses in Fermanagh, particularly among people who own shops with filling stations attached to them or those who run pubs. The way that filling stations and pubs operate is not based on property value but on revenue and turnover, and the levels of profit on beverages and fuel are very low.

These business owners have experienced a disproportionate impact on their income and on the level of rates they have to pay. Some bills have gone up by £1,000 over the year and some by £12,000 or £15,000. It means that they are going to have to lay off staff or reduce their hours, otherwise it is not going to be financially viable for them to stay in business.

An awful lot of people feel a deep sense of injustice because the unfairness in the current system means that their rates can double overnight. There is no form of transitional relief, nor is there any help or guidance given to those businesses. They simply get a letter with the bill for the year, telling them that there is no change in the level of services they will get, and they are deeply frustrated by it.

Ms Brown: That is what we are hearing too.

Mr Mitchell: That is our concern.

Ms Brown: That is definitely what we are hearing and it is why we are very concerned about it. We have had to accept the current system, but we lobbied and got the small business rate relief system, which does not affect some of the members you are talking about, Phil. That is why it is unfair and not right. The fact that it is automatic and that people receive a discount at source makes it easy to administer and means that a lot of small businesses have received relief but quite a large proportion of businesses do not receive it. As well as the types of businesses you are talking about, those such as car dealers or furniture retailers need large amounts of property space but do not necessarily qualify for relief even though they may be small businesses with small turnovers.

Mr Flanagan: There has to be a huge inaccuracy in some of these rates calculations. Look at some of the property values. Land and Property Services told the owners of a small restaurant in Belcoo that they could rent out the property for £20,000 a year. However, they are saying that if they could get £20,000 a year to rent the place out they would do it, because they would make more doing that than they are making at the moment. It is a completely flawed system and it needs to be updated.

Ms Brown: All we can do at the moment is encourage our members, when they contact us, to contact LPS and appeal for a revaluation. We were in close contact with Land and Property Services in the run-up to the revaluation. We supported the revaluation; it has been 12 years since the last one. One of the things we would like to see in the rating system is more frequent valuations so that these big shocks do not occur.

Mr Flanagan: Of course, in the Minister's defence, he is saying that this should have happened years ago and that people have missed out on paying increased rates over a number of years, which would not have happened if the revaluation had taken place sooner.

I want to take you on to the issue of regional imbalance. There was a commitment in the Programme for Government 2011-15 that the Executive would do more to tackle regional imbalance. Do you think that Invest NI should be set subregional targets for the jobs it creates, the jobs it helps to create and where they are created?

Ms Brown: I do not know about regional targets, but there should be targets for increasing the number and growth of small businesses. One of the things that the independent review of economic policy recommended was that there should be a small business division or a department of Invest NI specifically set up to do just that. That would, therefore, target rural areas, not just Belfast and the main cities and towns.

Mr Mitchell: As far as I remember, Richard Barnett carried out a review, one of the recommendations of which was that a small business forum would be set up. That has not happened.

Mr Flanagan: Are you supportive of subregional targets?

Mr Pollen: The risk with subregional interventions is creating a playing field that is not equal and not even for all businesses to play on. We have reservations over it. I think that one of the illustrations of this is that, with the change to the new super-councils, we have concerns that you could start finding, for example, planning policies in neighbouring councils very different to navigate. You could have businesses in one area where people can sail straight through, get planning permission, move on and progress their business, which is welcome, but, at a different level, another council, for other reasons, could have a very different system in place. When you start to go into subregional policies, there is the risk of distortion. That may be welcome in some places but usually because it is penalising and not advantaging somebody else.

Mr Flanagan: There is already distortion, Roger. In the financial year that the G8 meeting took place in Fermanagh, £92 million was spent in hosting that. Invest NI brought three companies to Fermanagh to consider locating there. So, there is already distortion in the market, where the vast majority of companies are being brought to Belfast to be encouraged to invest there and are not being taken anywhere else. We need to take proactive action to address that historical and current imbalance.

Mr Mitchell: We support that, because our membership is throughout the whole of Northern Ireland.

Mr Flanagan: I appreciate that.

Do you accept that paying workers a living wage has an overall positive impact on the economy and on society?

Mr Pollen: Yes.

Ms Brown: The short answer to that is yes. We are supportive of the living wage. We believe that the more businesses that offer the living wage the better. What we do not want to see is that it is made mandatory in Northern Ireland at this time. Most of our members, over 70% I think, already offer a living wage or higher. Our small businesses tell us that they will offer a living wage as soon as they are able to do so and as much as they can because they value their staff. It is their ambition to do so. As we generally believe in the less government intervention the better, we believe that more small businesses will do that on a voluntary basis.

Mr Flanagan: Of the 70% of your members who pay a living wage, is there anything that you can do to encourage them to become accredited with the Living Wage Foundation to encourage other employers to opt for paying a living wage? If you do not want to go down the regulatory road, how can we all work together to encourage more employers to pay a living wage?

Ms Brown: The best thing we can do is to encourage the small business sector to survive and grow. When a small business reaches the point where it can reward its staff, pay them a living wage and support a number of members of its local community, that is exactly what it will do.

Mr Flanagan: Will you encourage them to become accredited?

Ms Brown: You need to provide the situation and the climate where a small business can and will do what it wants to do, which is pay its staff a living wage and higher.

Mr Flanagan: Will you encourage your members who already pay the living wage to become accredited and to showcase the benefits of paying a living wage?

Mr Pollen: I do not think that we have a policy of encouraging members to do things of that sort. To a certain extent, it is their choice, and we do not want to set up artificial divisions between members.

Mr Flanagan: Do you encourage your members to participate in programmes like Investors in People?

Mr Pollen: No.

Mr Flanagan: You do not get involved in that type of thing at all.

Mr Pollen: Businesses will choose to do it or choose not to do it as they see appropriate. It is not for us to encourage them to do it.

Ms Brown: We provide information to our members. We give them links so that they can then find out how to get accredited with Investors in People.

Mr Mitchell: Our aim is to provide the best environment for them in which to operate and improve.

The Chairperson (Mr McGlone): Thanks very much for that. I am anxious for us to not move into the realm of the Finance and Personnel Committee, but, Gordon, you wanted to raise some issues about rates. We will then move on to your other questions.

Mr Dunne: I understand that a major review of rates is pending, is that right?

Ms Brown: So we believe, yes.

Mr Dunne: It is important that you have an input to that. I know you well, and we appreciate your contribution today. That is a major issue, certainly in North Down, which I represent. The big frustration is that towns and villages like Holywood, which are doing well, are being penalised, while places like Bangor, which is struggling, is finding it difficult and has major problems, will mostly not see the same impact with the rates bill as those places that are doing well. So, places that are doing well, are enterprising and are trying to develop are being penalised. I think that that is a major issue that needs to be looked at. We certainly support your comments.

Basically, at the moment, are rates assessed against the rentable value?

Ms Brown: So we understand. I am not an expert property valuations —

Mr Dunne: Neither am I.

Ms Brown: — but that is my understanding from LPS.

Mr Dunne: You are up to speed. That is right. I think that we have all been in contact with LPS in recent days about it. It works on the rentable value and is very subjective.

You talked about the need for small business advice centres. How does that fit in with the local enterprise agencies that already exist? Do you think that there is more work to be done? The role of the new councils will obviously be a major factor, so it is an opportune time to see change. Maybe you could elaborate a bit more on what you want to see from the agencies.

Ms Brown: The enterprise agencies are one source of business advice, as are the councils, Invest NI and the further education colleges and universities. There is a vast array of sources. The first problem for a small business owner is deciding which of those institutions to go to.

Mr Mitchell: We are proposing a one-stop-shop.

Ms Brown: Yes. We see a small business advice centre network as a one-stop-shop not unlike citizens advice bureaux or tourism offices. I am not saying that those are specific models, but you find them in every town centre, if you like. We want something that is clear, obvious and branded and that a small business owner can go into. They may not know that about the centres, because, as you will appreciate, small business owners are very focused on their businesses. I remember a quote from a member who said that they were too busy working at working to do the research on the Internet. If they could walk into a centre somewhere and talk to somebody face to face, as we are talking now, they could say, "Here is where my business is at the moment. What can I do to expand? How can I tender for a government contract? What can I do to increase my staff's productivity? How can I move forward?" They could sit down with somebody and have an hour's conversation and get some pointers. Even then, they would not necessarily get the full range of advice, but they would know who to talk to in a more specific way.

Mr Dunne: Do you feel that there are weaknesses in what exists? A lot of councils would contend that they are already doing that through the business agencies, yet I take it that you feel there are gaps.

Ms Brown: We feel that there are still gaps. One of those gaps is that small businesses are not aware of what they should do and who they should see. We are finding that, when small businesses go to any of those sources of advice, they come back with positive perceptions of it. They get helpful advice and information, and they move forward. We need to get them in there in the first place and encourage them to think about using business support, taking advice and moving forward. Some councils — in fact, all the councils — provide very good programmes for small businesses.

Mr Dunne: Yes, that is right. A lot of training and advice is offered, and they run programmes.

Ms Brown: Yes. We just need to get people on the way to going to the centres. If they hear about a council scheme, they might also hear about something that their local college network is running. So, which one should they go to?

Mr Dunne: So, there is work to be done, you reckon.

Ms Brown: Yes. We think that there is work to be done and that more could be done to promote and encourage businesses to take up support and to use it.

Mr Mitchell: It all comes back to synchronisation between the different Departments.

The Chairperson (Mr McGlone): Can I just come in on that very point? You mentioned a small business unit within Invest NI. That came from the independent report. I do not want to run the risk of having parallel processes running on and doing the same thing, but how distinct do you see that small business unit within Invest NI from the one-stop-shop concept? We have been told that there is a lot of signposting to the 0800 number that people can ring in Invest NI, so I am conscious that we do not want to reinvent the wheel and just plonk it somewhere else, with people being further confused about where they can go for advice.

Ms Brown: I do not want to say anything that will commit a particular set of people to doing something specific, but for a small business unit in Invest NI, if we decide that Invest NI is the central overseeing body, it could oversee that network. However, as Wilfred said, it needs to be joined up. There needs to be communication between councils, colleges, Invest NI, DETI and DEL. There needs to be that communication, and they need to ask, "What are you offering? We are offering something the same. Why can we not just have one course that does that?"

Mr Mitchell: This would be as broad as planning and developing your business while considering the time factors that are involved. It is a total picture of what that particular business needs. You might move into a specialism after that.

Mr Pollen: It seems to me that the objective is to try to get a relatively uniform, identifiable, recognisable, prominent place that businesses know they can go to so that they can access all the services that are already there — Invest NI, the councils, enterprise agencies and so on — and that will give them a clear portal to get to that and direct them towards the sources of support.

We in the FSB did some work on the councils' payment and procurement practices. That highlighted some extremely patchy performance. There were some exemplary councils. Cookstown council and Newtownabbey Borough Council did a lot of local procurement from small businesses and paid their invoices promptly. Others were much less good. Part of the advantage of sowing small business advice centres in every area is that it will raise the visibility of the importance of small business to each of those areas. For instance, when we did that research, it turned out that barely half the councils had a procurement officer. In fact, I think that it was just under half the councils. For something as fundamental and important as that, they did not have somebody who was specifically tasked with procuring and assisting procurement in their area. Therefore, you get a lot of wasted opportunity. This might give a focus to that sort of initiative as well, without any duplication or increase of provision. It is simply a better channelling of it.

The Chairperson (Mr McGlone): Gordon, that was on the back of your question.

Mr Dunne: I think that most of the other stuff on training has been covered. Thanks, Chair. Thanks very much, folks.

The Chairperson (Mr McGlone): Are you happy with the school-leaver stuff?

Mr Dunne: Yes. I think that has been covered. Fearghal was asking about it, so I think he covered everything.

Mr Frew: Thank you very much for your answers so far. I will take you back to planning: have you attended any planning committees yet?

Mr Pollen: The new planning committees?

Mr Frew: Yes.

Mr Pollen: No.

Mr Frew: I have, and I was representing an interested party. I will quote from your report:

Those are all the buzzwords that you can have, but I would worry. You could add "messy" and "risky". It would be unfair to name the council, but I will leave you guessing, as I represent two council areas. It seemed that it would be much less accountable and that Planning Service has basically usurped the council. Councillors around that body will be given a report in five minutes in a public meeting. They will be shown pictures, and people will be asked to speak for between three and 10 minutes to represent a certain argument. They will then have to make a decision there and then.

If they go against the Planning Service's advice, they need a very good reason or it will end up in court. It happens in a public meeting, but it could well become less transparent and certainly more messy and less accountable. What are your thoughts on councils gaining responsibility for planning?

Mr Mitchell: Roger implied that there needs to be consistency between the three. The time factor means that some people in certain areas, rather than in others, may find it easier to develop, so some of the new super-councils could suffer as a result of delays. However, the main thing that we are finding is the length of time of delays. If a business is starting to expand, it generally needs everything done within that year. Money may need to be left aside and everything, or inward investment may be needed. People will have left aside the money to develop within that time, so there needs to be an effort to reduce the time factor.

The other issue that affects the smaller business is environmental impact tests. The costs of doing those are quite prohibitive, and sometimes just that extra cost can put people off. To me, it seems quite exorbitant for a small business to pay the high cost. I am not saying that there should not be an environmental impact test, but the cost of it is starting to be prohibitive. As you said, if you are not happy and want to appeal, you are not in control of the cost or where it will end up. So, there needs to be some measure of restricting the financial aspect.

Mr Frew: I understand. In my eyes, all the requirements that they ask for, such as environmental impact assessments, have to be done before the process, whereas before, it was done during it. That, to me, is not necessarily a bad thing, and I think that the new councils' taking over may well speed it up. The problem that I have is in their making the right decisions and the elected bodies on a council being able to effect real change within policy. I suppose that that goes back to your consistency approach throughout the Province. If councils start developing and tweaking policy for their given area, whilst that may be a good thing for a certain area, it may well impact badly on neighbouring council areas. What is your view on that?

Mr Mitchell: I think that we need consistency among the decision makers, and there might need to be an education programme for the decision makers to deal with responsibility and accountability. You might then get a degree of consistency within the different council boundaries. The effect of a difference will be very stressful, and it will affect one area over the other.

Mr Pollen: The truth of it is that, in any walk of life — planning is a good example of that — those who decide divide. All that we are urging is that they get to the decision-making process more swiftly with a fair ability to get the inputs that are needed to get there properly and to make sure that there is a good, robust decision. We recognise that decisions will be divisive — that is just their nature — but we want to make sure that the process is more manageable for small businesses so that they do not start out with some degree of trepidation with no idea of where and when it might end, what it might cost and whether they will even get the right result at the end of it.

Mr Frew: I will take you on to energy costs. Of course, that is a massive issue for all businesses in Northern Ireland, not least the large employers with an industrial and manufacturing base, although a lot of them will be small businesses, which you represent. You rightly said that Northern Ireland is clearly behind the rest of Great Britain and Ireland in the roll-out of smart metering. What benefits would smart metering have on businesses in Northern Ireland? Is that only scratching at the edge of what is a massive problem in energy costs?

Mr Pollen: It seems to me that all those things are scratching at the edge — I was going to say rearranging the deckchairs. Ultimately, you have to find a way of getting power more cheaply into the market, and thereafter you can look at ways of being more efficient and more clever with it, as well as at ways of being more effective at creating a market. At the moment, we have a blockage, in that we do not have enough supply running throughout the single market that has been established.

Mr Mitchell: We have heard that the cost of energy is concerning people who would consider inward investment. That is one of the single most restrictive considerations that they identified.

Mr Frew: The different networks and the wholesale prices that businesses have to pay are very confusing, and there is no doubt that renewable energy has put the cost of energy up. When a business wants to relieve itself of a high energy bill, it tries to apply for planning permission for renewable energy but is told that the state of the grid cannot take what it wants to produce. Have you been in discussions with NIE or the Utility Regulator about the state of the grid?

Mr Mitchell: We are very concerned about that, and a lot of members are lobbying us on it. My understanding is that DFP is looking to Europe to get some infrastructure funding to address that in the near future. However, "the near future" could be in four years.

Mr Frew: We get a massive amount of money from Europe for the electricity grid's infrastructure. I think that it is £42 million.

Mr Mitchell: I think that it is about identifying and addressing access to the network. As far as I understand it, at the minute, you can pay your £3,000 or so to try to get planning permission, and then you have to pay £4,000 to apply to the grid. You then discover that you cannot go on to the grid and that, at the moment, nobody is dealing with that block on the ground. It seems crazy for somebody who is trying to develop on renewable energies, for example, to spend that money while not knowing the potential outcome.

Mr Frew: The Minister has called a summit, if you like, of all the major players and the problem-makers, as I call them. We cannot really ask NIE to put a line up to every cliff edge and every nook and cranny of Northern Ireland, so it has to be strategic.

Mr Mitchell: We are clearly in competition in a global market now. That is the change for Northern Ireland compared with 20 years ago or whatever. There is a completely different scene, and, if we have high energy costs to produce something, right away we are completely disadvantaged compared with our competitors. You would think that that should be an urgent concern.

Mr Frew: You certainly have a sympathetic ear here when it comes to energy prices. You mentioned the single electricity market, and we are now advancing into what is called the integrated single electricity market or ISEM. There are certain fears about that, because when any player in this problem makes a move, it seems to inevitably put the price up either directly or indirectly, which then penalises business even more. It seems that the security of supply is sorted. We had to pay for it, and when the North/South interconnector comes on board, that will also relieve pressure on security of supply. What do you know of the ISEM, and what fears do you have about it?

Mr Pollen: Truthfully, you have carried out deeper inquiries into that than we have, so I do not think that I will add to your existing knowledge of that specific issue. All I will say is that security of supply has been addressed temporarily, as I understand it. There is further regulation from Europe that will cause further restriction of the existing fossil fuel capacity. There is a solution to it, which is the interconnector. It has been in the offing for years now, and it is a question of what it will take to get that decision advanced to the point where it is the solution, rather than the patches that have been put in place to date. We see an end date by which action will have to be taken on one front, and we are not seeing an end date to action being taken on the solution.

The Deputy Chairperson (Mr Flanagan): Do you have any idea how the ISEM will work? I saw material that the regulator or the SEM committee put out that was supposed to be easy to understand. There was about a 6 inch-long technical formula — that explained to me why I could not do my homework for A-level maths.

Ms Brown: We agree. [Laughter.]

Mr Pollen: We have an energy committee in our London office, and we have its chair coming over next week to work with us to examine that. You are probably asking that question about a week earlier than we would be in a position to shed light on it. We want to examine all the issues and impacts to see —

The Deputy Chairperson (Mr Flanagan): It is not something that a layperson could understand.

Mr Pollen: No.

The Deputy Chairperson (Mr Flanagan): You accept that.

Mr Mitchell: That is why we are going to our portfolio chairman —

The Deputy Chairperson (Mr Flanagan): You should not have to. What they put out was supposed to be for a layperson to understand, and it was completely unreadable.

Mr Pollen: It is a massively complex problem.

Mr Mitchell: That is why we summoned our portfolio chairman for the UK.

Mr Frew: Just on that, will you produce a piece of work, evidence or a report on that work with your expert?

Mr Mitchell: Yes, he will work with us.

Mr Frew: I would be keen to see that.

Mr Mitchell: Yes, that is happening for the reason that Phil just gave.

Mr Pollen: We are doing several pieces of work on key policy areas. Additional research on —

Mr Mitchell: I heard him speak at the last policy meeting in London, and Northern Ireland was singled out at that. He explained the differences in Northern Ireland compared with other areas within the United Kingdom.

Mr Frew: If you could afford the Committee sight of that report, it would be very useful.

Ms Brown: Yes. It is going to be a few months before it is ready, but —

Mr Frew: I understand. The problem is not going to go away any time soon.

Ms Brown: Indeed.

Mr Agnew: Thank you very much for the submission. There is much in it that I agree with, but I would like to tease out some of the issues. You are obviously supportive of the proposed cut in corporation tax. You alluded to the opportunities there and the powers that have not yet been used. You are also asking us to invest more in skills and to deliver better and more in that regard. If I can paraphrase it, it sounds as though we are saying, "We want to pay less and get more". How do you see that working? How does government make that work, particularly given the budget constraints?

Mr Pollen: One of the ways you could do it is to use the power of government to cut the cost of doing business. I will give you one very simple illustration of that, although there are probably 100 or 1,000 more that could be found if you looked. This one has come forward to us from a lot of our members, and it is to do with children's day care. There is a private day-care sector in which we have about 300 businesses. Most of them are FSB members, and they have typically invested between £500,000 and £1 million per facility. So, there is about £150 million to £300 million of capital investment there. They employ more people than Asda. They employ about 5,500 people in Northern Ireland, so they are a great source of employment in communities all over your constituencies.

That sector is regulated to death — literally to death, as we have businesses that have gone under because of the excessive regulation. I will give an illustration of that: it comes right down to the degree of measuring a room for its square footage. Unless there is x square feet per child in that room, you have to reduce the number of children in it. That could be where your profit margin is. I will illustrate the minutiae to which it is regulated: if you have a cupboard fixed to the wall in the room, that reduces the square footage, so it might bring you down to the level where you are no longer allowed to have x number of children. If you put that same cupboard on castors so that it is not a fixture, it does not impact on the notional square footage. You still have the same cupboard in the room, but that level of regulating the industry means that you can turn it from being profitable to being loss-making.

I accept your point that it is always easy for business to come along and say, "Yes, do more with less", "Cut our taxes" and so on, but there is a perfect example where regulation has been brought in. It was brought in for many very good reasons, do not get me wrong, but it is more heavily regulated in Northern Ireland than it is in Scotland, England, Wales or most parts of Europe. That has a cost to it that then frustrates that part of our membership in providing one of your objectives, as an Executive and Assembly, which is to provide affordable childcare. That is one illustration. There are many, but I hope that answers the question.

Mr Mitchell: Just to touch on a slight variation of that subject, we can look at government assets and how well they are used. What is happening with forestry, for example? Is it being used to best benefit economically? Another area that Roger referred to was residential homes that government run. What about the cost of running those compared with other areas, such as the social economy? Have we looked at those to see how we can reduce operational costs?

Mr Agnew: Do you not think that there is a risk with the cut in corporation tax? The Varney report in particular, and even the PwC report, said, "A cut in corporation tax would be nice, but it is not the key thing for businesses that we are looking to attract". Do you not think that there is a risk in the amount? It has been estimated that over £300 million per year would be taken out of the public's ability to invest in skills. Even coming to your regulatory point, as somebody who has had kids in a nursery — I am not sure whether it was a member of the FSB; I never asked — I would rather see investment in the skills of the staff than to worry too much about square footage. I am certainly sympathetic to your point. I very much feel that the priority should be on skills. Is there not a risk that, if we keep pushing the low-tax agenda, we will harm our ability to invest in those skills?

Mr Pollen: An awful lot of evidence has illustrated that cutting corporation tax encourages businesses to grow. That is not just your foreign direct investment; it is indigenous businesses. We are looking not at a loss of wealth to the Northern Ireland economy but at the transfer of control of that wealth from the public sector to the private sector. The private sector is the sector in which you need to create jobs. The public sector will not be doing it. It is accepted that it will not and that it will be reducing its numbers. We all need to see further growth and further jobs created, and the only sector that will be doing that is the private sector. If you can have a transfer of capital to the sector that needs to invest in itself to create more jobs, that is the policy that you need to pursue.

I accept that we are looking at all the other things around that, but there has been a sense of "taken as given" by the five parties of the Executive and the coalition Government. Even the Labour Party, whilst not necessarily wanting to support the Government of the day, is certainly supportive of the will of the Executive parties to move in that direction. If you look at the trend, you see that the UK Government have cut corporation tax from 28% to 20%. In that same time, a lot of the growth in private-sector jobs has been through large companies, which have benefited from the corporation tax cut and have invested in it. A lot of it has also been through small and microbusinesses, which are finding that there are is an environment in which they can sell skills and services created by that bigger upstream supply chain.

Mr McKinney: Can I just jump in there? I am interested in what you were saying about how, if the public sector is cutting and the block grant has been cut, the private sector needs to have investment in it, including infrastructure. Where is the money going to come from?

Mr Pollen: Part of it has to come from prioritising where you want to spend the money that you already have.

Mr McKinney: But, to radically change it, do we need to have a different conversation with Westminster?

Mr Pollen: I think that every part of the UK is looking at the moment at what it can get out of Westminster and is asking whether it has the right slice and so on. I think that everybody expects their politicians to go out and fight for them.

Mr McKinney: Yes, but I think that the case that you are making is that we will not change it unless we have that conversation because we do not have the money in our system.

Mr Pollen: Looking at things like the gas to the west, how much is that costing the public sector?

Mr Agnew: Thirty two and a half million pounds.

Mr Pollen: And how much is coming into it from the private sector? Government plays a role; it creates the opportunity and sets the framework, and private-sector investment then comes in as well. So, we set a shared objective.

Mr McKinney: I will finish on this point, Chair.

The Chairperson (Mr McGlone): Please, Fearghal, because Steven has to get back in.

Mr McKinney: That might be something in a sector that may create a certain number of jobs, but if we are going to regionally transform, surely we need to have the bigger conversation.

Mr Mitchell: There is, obviously, the transition stage. The worst that we can do is drop overnight between the public and private sector in Northern Ireland. That would be devastating. There has to be a clear plan for a transition period to deal with where the money comes from.

Mr Pollen: Look at things such as the agrifood sector. Government has worked with the industry here to identify it as an industry of importance. It has resourced it and championed it while letting the sector invest in itself and create the markets. Then look at the employment that has come along in the wake of that. That is a useful, fairly recent illustration of the opportunity for growth.

The Chairperson (Mr McGlone): Back to you, Steven.

Mr Agnew: Finally, yes. To be fair, Fearghal continued the thread, so it is fine.

On how government makes decisions, even if I accept, and I do not, that cutting corporation tax will eventually pay for itself further down the line, the projections that we have had are that it will be 10 or 11 years before we break even. I think that it was the economic advisory group, when it presented to the Committee, said that it was looking at 11 years. We have this interim period — I am sure that you will still be saying in which to invest in skills — in which there will inevitably be cuts to the public sector without there being immediate compensation from the private sector. Where do we look at? When I speak to businesses that are looking to invest, they say that they want there to be cultural activities, a good health service, a good education service and everything else. Yes, they want low taxes of course, but if we are bringing in businesses, we want those who are coming with those businesses to live in a holistic, developed society. Inevitably, what happens is that things such as the arts and environmental services get cut when we say that we are putting the economy first. If we are cutting everything else, how do we sell Northern Ireland to companies that are looking to invest?

Ms Brown: First, I have to say that the economy is not a separate issue from society; it is not separate from developing communities and society in Northern Ireland. Indeed, it is a fundamental part of it. If we have a comfortable and confident community, we have a better economic environment and vice versa. The two are not separate issues. We do not focus on the economy at the expense of other things. The issues are interconnected, and that comes back to having joined-up government and joined-up thinking. A social economy strategy is not divorced from an economic strategy or a small business strategy. All are moving towards the same thing. There will be a transition period, and there will be difficult choices to be made. I do not think that skills is the area to suffer most, if you like.

Mr Agnew: I agree, but where is the area? Equally, nobody wants health to suffer.

Ms Brown: No.

Mr Agnew: Therefore, the obvious places are in the margins, such as culture and the environment. However, I always say that the environment is where we live. If people do not want to live here, they will not want to work here.

Ms Brown: We have to remember as well that the block grant reduction that will result from the cut in corporation tax will not happen for a couple of years after the powers are implemented, because of the nature of tax collection. There is that bit of leeway. Furthermore, I know that it sounds like an enormous amount of money, but I think that it might be less than the Budget cuts that we are experiencing now.

Mr Pollen: You are asking where the money will come from, and that is the other side of it. Some of the most robust estimates suggest that about 40,000 jobs will flow from the change to the corporation tax regime. Look at the additional rates that 40,000 people with jobs would contribute to the system. OK, that would not come into Stormont, but it would come into the Northern Ireland public sector for the delivery of services. This is about setting out our stall and finding out how we can send signals to the whole international business community that Northern Ireland is the best place in which to do business. Part of that is corporation tax. That is, if you like, your flag to attract attention, but a lot of it has to be about quick decision-making; a timely way of getting through planning; the good infrastructure that has been invested in; and the skills base that is there to support it. It is about putting that comprehensive mix in place and using corporation tax to attract attention to the other great basket of —

Mr Mitchell: We clearly accept that it is only one aspect. We do not believe that the devolution of corporation tax powers is a magic wand.

The Chairperson (Mr McGlone): The creation of disposable income has a ripple-out effect to other —

Mr Pollen: To your small businesses and your shops, to people who do not pay corporation tax.

Ms Brown: Increasing demand is more important.

Mr Pollen: They may be sole traders, but they will still benefit from the wealth that is being created.

The Chairperson (Mr McGlone): That is the idea.

That concludes our session. Thanks very much. It was very interesting. Thank you for giving of your time, and it is great to see the three of you again. There are one or two questions that we did not cover, but we will send them to you in writing for a response.

Ms Brown: Certainly.