Official Report: Minutes of Evidence

The Chairperson (Mr McGlone): Briefing us today are Mr Alastair Hamilton, the chief executive of Invest NI; Mr William McCulla, the director of corporate finance and property solutions in Invest NI; Mr Thomas Hunter McGowan, the chief executive of InterTradeIreland; and Mr Chris Stewart, the deputy secretary of the policy group in the Department of Enterprise, Trade and Investment.

You are all very welcome, and thank you for giving up your time to be with us today. It is good to see that you are well aware of the inquiry and what we are doing. You know the procedure, and most of you have been before the Committee before. We will have an opening statement from whoever is delivering that. Is that you, Mr Stewart?

Mr Chris Stewart (Department of Enterprise, Trade and Investment): It is, Chair.

The Chairperson (Mr McGlone): Following that, we will move to the question-and-answer session. Please continue.

Mr Stewart: Thank you, Chair. I will make a few brief remarks, if I may. We welcome the opportunity to join you here this morning. The Committee will have received a copy of our written briefing, which outlines the economic drivers that we believe are key to helping grow the Northern Ireland economy. Of course, one of the most significant of those is corporation tax.

DETI very much welcomes the Corporation Tax (Northern Ireland) Act 2015, as it is now, and the opportunity that it provides for the Executive to take control of that major economic policy lever. It is our firm belief that a reduced rate of corporation tax will significantly add to the attractiveness of Northern Ireland as an investment location. Therefore, we see the power to adjust the rate as being a key economic lever that will help us achieve our long-term goals. The economic strategy outlines how securing the power to reduce the rate of corporation tax will enable us to rebalance the Northern Ireland economy towards greater private-sector and value-added growth. That is the Executive's long-term economic goal.

We acknowledge within the economic strategy that lowering the rate of corporation tax is an important but not by itself sufficient measure to transform the local economy. Nevertheless, the evidence strongly suggests that it will allow us to do so much more quickly than would otherwise be the case. As Members will have seen in our written response, the economic strategy identifies a range of economic priorities to grow the Northern Ireland economy. Those include increasing the skills base; creating the conditions in which to allow Northern Ireland to complete globally for the highest-value prospects; strengthening the approach to innovation, research and development; encouraging business growth, particularly in the supply chains for foreign direct investment offers; and developing a modern and sustainable economic infrastructure. Members will recognise that those are the five key areas in the economic strategy's rebalancing themes. Underneath those, there is a range of key specific drivers; for example, exports, access to finance, business regulation, energy and telecoms infrastructure, and accessibility issues, including the prospects for an air-route development fund.

I have referenced the economic strategy, and it is important to note that it is a living document. It is in that context that we will shortly begin the process of developing a refocused economic strategy action plan for the period beyond 2016. That updated plan will factor in the Executive's response to the devolution of corporation tax powers across all its key themes.

Members may also wish to be aware that DETI, along with our colleagues in the Department for Employment and Invest Northern Ireland, will be carrying out research later in 2015 that will look at Northern Ireland's international competitiveness in key FDI sectors, particularly those that are likely to be attracted by a reduced rate of corporation tax. That research will identify sector-specific actions that are needed to strengthen our proposition and the Northern Ireland offer. That work will be a key information source in identifying those drivers that the Executive need to focus on as we move ahead. We will also commission, along with our colleagues in DEL, research on the factors that affect the demand and supply of skilled people, with a view to improving our ability to forecast and meet demand.

In summary, the ability to set the rate of corporation tax is central to our economic strategy. It is important but not sufficient for rapid growth. To make the best use of it, we need a number of things. We need certainty on the rate and the date, and you will probably hear us use that phrase a number of times during our evidence. We also need to make sure that the policy framework is in place for the other drivers that I mentioned earlier. Those will be our focus as we take forward work on the next Programme for Government and on refocusing the economic strategy.

We are happy to take Committee members' questions on those points.

The Chairperson (Mr McGlone): Thanks very much for that, Mr Stewart. A recurring theme in the evidence that we have taken so far is that, although we have government there, there are a number of issues. You have rightly said that a reduction in the rate of corporation tax by itself will not be a big game changer. There is a plethora of other issues involved, whether they be infrastructure issues, communication issues or — we will come to it later — the availability of office accommodation.

A recurring theme in the evidence is how we do business corporately as an Executive more efficiently and in a more joined-up and integrated matter. Will you reflect on whether there has been any thinking in the Department on that issue so that those who want to make decisions elsewhere — hopefully, there are those who will want to make decisions whenever we get around to making them, but that is another matter — can do things more efficiently?

Mr Stewart: There has been, and there are a number of areas in which that is very much the case. Of course, it is already the case that we work very closely with our colleagues in DEL, as does Invest Northern Ireland. That will be even more the case when DETI comes together with DEL in the new Department for the Economy next year.

I mentioned the specific pieces of research that we will commission, again working closely with our colleagues in DEL and, indeed, the Department of Education. When it comes to things such as the supply of skilled people, it is important to go all the way upstream and look at the factors that will affect that, going right back to primary and post-primary education. That will also be the case.

At a more strategic level, when it comes to refreshing and refocusing the economic strategy action plan, it is very important that that be a cross-departmental exercise. It is, and it is being taken forward in that manner. We recognise that a broad range of factors will have an impact and be necessary enablers for corporation tax. That, of course, includes things such as infrastructure, and we are talking to colleagues in the Department for Regional Development about that.

Another strategy area in which that is very important is business regulation. I chair a cross-departmental group of officials that is looking at formulating the Executive's response to the report on better regulation that was produced at the end of last year. Through that process, we stress that this is not simply a DETI exercise into which others are inputting but is of equal importance right across government. Corporation tax is part of the overall approach to rebalancing the economy. Therefore, we emphasise to colleagues in other Departments that, increasingly, our ability to fund and develop public services will depend on our ability to grow the economy. Better regulation and making Northern Ireland more business-friendly is not just a DETI interest but an interest for every Department.

The Chairperson (Mr McGlone): You will forgive me for saying that it appears to be a wish list, to the point of realising all those issues in a corporate manner and bringing them to fruition. Many could justifiably argue that that should have been done a long time ago, and it was probably the responsibility of the Executive to make sure that it was done a long time ago. Do we have a time frame within which to work, or is it just a tick-box exercise to say that Departments have been consulted and back we go to our silos?

Mr Stewart: I fully agree that it cannot be a tick-box exercise. It has to move from being a wish list, if that is what it is, to being an action list. The two areas in which we want to show you real delivery are in the refocused economic strategy action plan and the Programme for Government. That is where you will see the fruits of our labours in the months ahead.

The Chairperson (Mr McGlone): I want to tie this aspect down. You said that you were talking to other Departments: is that just informal chit-chat, or are we doing something more strategic, formal and focused?

Mr Stewart: It is more focused and formal. I would be concerned, as would the Minister, if it were merely informal chit-chat. There is a formal governance arrangement for specific issues such as the better regulation report. I chair an interdepartmental group on that. For the even more substantive work around the economic strategy and the Programme for Government, there is the Executive subcommittee on the economy, which Minister Foster chairs. That will be driving forward action in those areas.

The Chairperson (Mr McGlone): You are saying that it will be driving forward —

Mr Stewart: It is driving forward.

The Chairperson (Mr McGlone): Can you give us any indication of what it has done to date?

Mr Stewart: There are two pieces of work on the economic strategy action plan. It is being immediately refocused for the additional year of the Programme for Government, and that is almost at the point at which it will see the light of day. Therefore, work had been going on across Departments. All Departments have had an input, and we have a range of action steps and measures that they will take. The only reason that that has not yet seen the light of day is because it has to be kept in step with the roll-forward of the Programme for Government. We hope that you will see that in weeks rather than months.

The major reworking of the economic strategy action plan will be taken forward in conjunction with the development of the new Programme for Government. That will get under way very soon after the election.

The Chairperson (Mr McGlone): You said that some stuff has not yet seen the light of day. When is that likely to happen?

Mr Stewart: In weeks rather than months.

The Chairperson (Mr McGlone): That is grand.

I want to bring you on to a number of other things that have come up. You will know from your work abroad that, for any business that is thinking of investing, a key element is certainty of decision-making and of the environment that it is going to enter. We may come to this in a minute or two with Mr Hamilton, but it is very difficult to go abroad and work on a "maybe". We may get powers to change the rate of corporation tax. Although we made a decision that we will take that road, we only might get the powers. That is not a good sell to anybody, because you get only one opportunity before you are banjaxed. You are out the door if you cannot give certainty.

The second element, and I am reflecting what I have heard out and about on doorsteps and elsewhere, is that there is an uncertainty about our withdrawing from Europe. Clearly, freedom of movement of goods, services and people is a key element of any economic strategy. Aside from the damage that withdrawing from Europe would do to our local economy, and we have seen that in papers that were independently commissioned for this Committee, do you, without taking us directly into the political arguments, have a view on how the ramifications of certainty affect business when it comes to either of those two issues?

Mr Stewart: I am very glad that you provided me with that self-denying ordinance at the end of your question. [Laughter.]

The Chairperson (Mr McGlone): I know that you are prudent enough not to go there.

Mr Stewart: I am sure that members will appreciate, particularly in the formal pre-election period, that I need to be even more circumspect than I would normally be, especially where there are issues around a potential exit from the EU. However, I think that the generality of your point is observably correct.

Alastair will want to say some more about this, as certainty is extremely important. Of course, it is a matter for the Executive to determine how and when they would use the power to change the rate of corporation tax, but whatever the decision, certainty is extremely important. You are absolutely right. For Invest Northern Ireland to lever in the maximum advantage that it can get , Alastair needs to know exactly what it is that he has to sell.

Mr Alastair Hamilton (Invest Northern Ireland): Chair, thank you for the invitation to be here.

I will reflect on both points. There are three aspects around certainty that, from our point of view, are critical. One is the rate, and clarity that that rate will be maintained for a period. The second is the date on which it will start, and the third element is having some clarity around its longevity, because we are moving into an environment in which people will build business plans based on a long-term opportunity from corporation tax. What we are talking about is an investment distinctly different from those that are being made today. In our service-related inward investment, which accounts for the majority of what we do today, the investment is very quick and potentially a lot lower than the profit centre projects. By and large, it is property, and I am sure that we will come to property. It is desks, telephones, Internet and infrastructure. I have massively simplified it, but it is basically what people need in order to get up and running. One of the benefits that we have seen is that we are able to secure inward investment in the service-related sector and see businesses come in and ramp up very quickly. Once we start to leverage corporation tax alongside that proposition, it is a longer-term investment and a larger facility, with capital equipment perhaps required to drive and maximise the benefit that businesses get out of the rate of corporation tax. People will want to be assured that, over the lifetime of five, 10 or 15 years of investment, the tax is going to stay at that rate and that their business plan stacks up for them.

We need three things assured — the rate, the date and some horizon over which the benefit will be maintained — to ensure that people can build business plans with confidence. You are right: even as we sit here today, there are people out there, both existing investors who have other potential opportunities that are profit-related and other people who have picked up a little bit on the message and on the conversation that is going on. The longer that time goes on before we are able to clarify those three things, the longer that it will be before we start to maximise the benefits. There is a real opportunity in front of us today to take this out and start to sell it, and that is what the business case was built around. The sooner that we can get there, the better.

On the EU piece, I will probably follow some of Chris's cautious comments, but we did write to you, and I will just repeat what we put in our submission, as it is in the public domain:

I signed that document. I say that because, at this moment in time, and I envisage this continuing with the corporation tax profit centre proposition, one of the key things that we present, particularly to those coming from the west, and increasingly those from the east, is that Northern Ireland, as part of the UK and part of Europe, is a lower-cost, high-quality destination for them in which to locate their operation and get access to Europe. Those last few words are important words when it comes to the proposition.

Furthermore, you and the Committee will know the numbers, Chair, for our exports to the European Union. The previous time that I sat here, it was fine that we looked at performance over and above in all the job-related areas, but our exports still struggle. In that environment, I want to do all that I possibly can to grow our exports. If the majority of them are going to the Republic of Ireland, France, Germany and the Netherlands, those are areas where we can continue to grow, and I want to see that continue.

The Chairperson (Mr McGlone): Thanks very much for that. I have two final points to make. I have read the report and Mr McCulla's previous comments to the Committee about the difficulties that there were around grade A office accommodation. I see that Invest NI made a statement this morning. It basically lifts the two final recommendations from the report and states that you are going to explore them. What does that mean? I certainly hope that it does not mean another report that will take a couple of years to manifest itself, because this one was a long time in the making, and it went through multiple iterations. What are we hearing here? What exactly is going to happen?

Mr William McCulla (Invest Northern Ireland): The plan now is that we will go to market. We will seek expressions of interest from developers to put forward their projects and proposals for developments right across Northern Ireland. This is not just a Belfast initiative. In looking for those developers to put forward their proposals, we will enable them to seek mezzanine funding or second-charge funding from us. The plan is that the call for expressions of interest will be released to the market within the next two weeks. The opening period for responses will then run from the start of June to the end of August.

The Chairperson (Mr McGlone): Thank you for clarifying that, as it was a wee bit unclear from the statement. Can you tell me what the scale of the intervention will be?

Mr McCulla: The intervention that we are proposing is for up to 40% of the development costs. Therefore, it will still be a minority of the costs, but it will be a significant element.

The Chairperson (Mr McGlone): That is refreshing to hear, thank you.

Finally, the people from the Federation of Small Businesses (FSB), when they were in just before you, suggested that there should be small business advice unit in Invest NI. The purpose of that was that they felt that, although there is advice available locally for businesses, often through local council services, it can vary in quality, from high quality to not-so-good quality. They said that there should be some sort of coordinating centre at Invest NI to ensure that there is quality control of the advice that is being disseminated. Have you any ideas or thoughts on that? It is something that just came up earlier today.

Mr A Hamilton: I am a little bit surprised by that, because there is a small business advice unit in Invest Northern Ireland, the business support team. It was launched, if you remember, Chair, when we were launching the Boosting Business programme. We rolled out a fairly intensive programme, with an 0800 number and a website.

The Chairperson (Mr McGlone): I put that to the FSB.

Mr A Hamilton: That team is still there. That is the single point of contact for all inbound inquiries outside of those customers who are account-managed and have their own dedicated person to go to. Everybody else comes through via text, the website or telephone to the business support team. There are two aspects to what you asked, and that is the answer as far as an inbound enquiry to us is concerned.

Coordinating the information that is given by other parties, including the FSB, which would seek to give advice to small businesses, is quite a challenge. Although we want to make sure that our messages are there with all the representative bodies, including the FSB, our main remit is to make sure that we are aware of all the things that all government bodies and external parties are doing so that we can provide advice to the people who phone in. Therefore, that service is already there.

The Chairperson (Mr McGlone): I put the point about the 0800 number to the FSB representatives, but it appeared from listening to their evidence that they had something else in mind: some organisation somewhere, and they were pointing at you, that should be able to lift the quality of advice — not manage it, but lift it — presumably through workshops and the like. It might be opportune for a chit-chat to be held between the FSB and Invest NI on that matter, because clearly it has a theme in mind.

Mr A Hamilton: I will do that.

The Chairperson (Mr McGlone): Thanks very much for that.

Mr Frew: Thank you very much for your presentation and your answers so far. I want to speak on what is probably one of the biggest and most major problems that we have in Northern Ireland: energy costs, especially for large employers in heavy industry and manufacturing. During the Committee's review of electricity pricing, Invest NI stated that the cost of electricity continues to play an important role in investors' decisions to locate here. I imagine that that is still the case. Although we will be able to entice businesses in with lower corporation tax, energy costs may be the one factor that turns them around again, meaning that they go in a different direction. How big a problem is it for both bodies in trying to attract business, even with the carrot of the rate of corporation tax? How big an issue is energy costs to enticing new business here?

Mr A Hamilton: I will kick off on that one. There are two sides to that story. First, I could easily say to you that energy costs is not currently a big issue when it comes to our foreign direct investment proposition, but that would be unnecessarily avoiding a discussion around what might be a challenge for us in the future. As I said to you, the vast majority of our foreign direct investment proposition is service-related, and therefore energy costs are, generally speaking, a very low proportion of the overall cost of setting up a service-related industry or business in Northern Ireland. The majority of the costs are wages and salaries, followed by accommodation and then infrastructure and telecoms-related costs. Therefore, energy is not a big challenge for those companies.

However, as we look into a future world in which corporation tax will play a more significant role — we have looked at the sectors from which we could attract a profit-related inward investment — there is the prospect of optimism for the future. I envisage and hope that, particularly with the sectors that we have focused on such as advanced engineering, life sciences, pharma and spreading out beyond that, a higher proportion of their mix of set-up and ongoing running costs will be energy costs. In the future, that will be a challenge for us in building that proposition around corporation tax.

It would be wrong of me not to reflect on the companies that are here. Irrespective of the policy drivers today, related either to service or, potentially, corporation tax, there are a wealth of home-grown companies and companies acquired or built internationally that have maxed out on efficiency work in their operations. They have maxed out on transport and logistics efficiencies and cost reductions, and, increasingly, as one plant among a much larger family of plants around the world, the focus continues on the one piece that is disproportionate in the mix. As you know, we often say to them that there are other benefits with wages and salaries, and, potentially, corporation tax, which may play for those firms in the future. However, it is quite right to say that we are concerned about the challenges that some of those firms face in the current environment.

Mr Stewart: I will add to that from a policy perspective. Like Alastair, we recognise the challenge and the difficulty, and we are absolutely not in the business of denying it. Overall, there is some good news in that the number of firms that are expressing concern about energy prices has fallen. Again, that is not to deny the very real and serious concern that continues to exist, particularly among very large energy users. We know that that is there. If we look at the CBI's road map and its proposals for addressing the issue, the Department recognises, supports and is working towards the suggestions that it has made. It is about recognising, fundamentally, the importance of the second North/South interconnector and getting that up and running as soon as possible. While there are concerns about issues such as network costs, by far the largest component of electricity costs is and always will be the wholesale cost of electricity. We need to drive that down in the context of the new all-Ireland integrated single electricity market (I-SEM). Work on that is important, as is work on the North/South interconnector. Work on restoring the Moyle interconnector to its full capacity is extremely important, and the good news is that Mutual Energy tells us that that should be done ahead of schedule and at a lower cost than it first thought would be the case.

The CBI has pointed out that we struggle to find an easy solution to the apportionment of network costs. We recognise the very clear call from the CBI and Manufacturing Northern Ireland to change that and to change the distribution of the network costs. I am afraid that the response that we have to give to that is that it is not easily done. Of course, if there is a redistribution of costs, someone else has to pay. If you remove an element of cost from large energy users, it has to be passed on to somewhere else, perhaps on to smaller firms or domestic customers. We also have to be mindful of European law, both for state aid and competition, which very much restricts our room for manoeuvre. Nevertheless, the Minister is acutely conscious of the issue, and we continue to engage with the Utility Regulator to see what can be done and to make sure that we take every opportunity that we can to reduce unnecessary costs to larger users.

Mr Frew: I will take up each of your points. On I-SEM, it seems to me that DETI and the Executive are only part players and that their destiny is not their own, given the changes that need to be made. There are other problem players: NIE, the Utility Regulator and the System Operator for Northern Ireland (SONI). Of course, we are on the extreme edge of Europe, with a small-scale electricity grid, so there are challenges and problems, which I appreciate. Every time that the Government try to do something to ease the pain or to make things better, it ends up costing. Costs always fall on the consumer, whether it is paying for more capacity or fixing a fault or whatever on the grid. It all seems to fall back on the consumer. Given that industry and large employers have to pay more for that, they are burdened and hit. What fears do you have about I-SEM? You talk about cost, but there must be transparency about that cost. There are real fears with I-SEM that transparency will be lost, especially when you have a generation market and a retail market and companies that have an arm in both. They may be able to hide the true cost of electricity to skew the retail market and keep prices high.

Mr Stewart: You have rightly identified a number of the challenges with I-SEM, of which there are many. You used the word "fear", which I would not use for I-SEM. That is not to sound glib in any way or to underestimate the challenge. I-SEM is the biggest, most strategic and most challenging change to energy provision that we have seen, certainly since the last single market. We recognise that there is a great deal of concern, not least because of where that process is at the moment. People will have seen the high-level design, but they have not yet seen the detailed working-out of exactly how I-SEM will operate.

We are very conscious of the issues that we have raised, and I know that the Minister continues to impress on the SEM committee the need for clarity of communication and, in particular, the issue of transparency that you raised. There is, of course, market power and the ability of participants to distort that. It is important that the detailed arrangements for I-SEM address that and that that is communicated in a way that is open and transparent so that people have trust and confidence in what will be at the centre of our energy policy for many years to come.

Mr Frew: How will business be able to have a say in the finer details of I-SEM, if at all?

Mr Stewart: It will be in two ways. When the time comes for formal consultation on the detailed arrangements — even before that — we will expect to see evidence that the SEM committee is engaging effectively with stakeholders and taking their views on board. I-SEM is too important for any group of people to do it in a locked room and show their working-out at the end.

Mr Frew: I believe that NIE is misrepresenting the commission — I have forgotten its name — that arbitrated on its price review.

The Chairperson (Mr McGlone): The Competition Commission.

Mr Frew: Yes, the Competition Commission. Thank you, Chair; you pulled me out of a hole there.

Mr Flanagan: The Competition and Markets Authority.

Mr Stewart: Yes — its name has changed.

Mr Frew: I believe that NIE is misrepresenting the commission when it says that it did not get any money for investing in the11 kV grid, so it cannot do it. It did not justify the cost spend, but it should still be investing in that grid. At the moment, no businesses can generate power to feed into that. Their high energy costs mean that their arms are tied because they cannot generate their own energy. They are stuck in a limbo or a catch-22 situation whereby they are still paying these bills. What would you say about that misrepresentation?

Mr Stewart: I note your concern. I should be cautious in passing any judgement as to whether NIE has misrepresented the position. Certainly, if there is concern about that, we will look at it. As you know, the Minister very much shares your concern about investment in the grid at the 11 kV and 33 kV levels. You are quite right that the RP 5 price determination that went to the commission imposed significant limits on the investment that can be made in the grid, which will be funded ultimately by consumers. Again, you are quite right; it did not say that there is no investment.

The Minister is very concerned about that, which is why she recently called a round-table meeting of all interested parties, including SONI, NIE, the regulator and the Department. She made it very clear to everyone, including the Department, that she expected to see a joined-up approach and that she expected to see the investment that is permissible being made in a timely fashion and in a way that responds to the policy framework that she has set for renewable energy, which supports economic development. As you and other members know, the Minister's postbag contains as many concerns about load connections at the moment as it does about the development of renewable energy. We need to ensure that that does not impinge on economic growth and development.

The Minister will impress that on NIE. She received assurances from NIE that it is now ramping up the level of permitted investment in the grid at those two levels. She will also be looking to NIE and the regulator to see what else can be done. You are right: the commission sets certain rules, but, within those rules, there are opportunities, particularly for innovative solutions, to connections. The Minister will want to make sure that, if the bottom line is that we cannot invest as much as we would like, we make sure that we invest every penny that is available and do so in the most efficient and effective way. She has asked all organisations to have a mind, not just to the often-quoted duty of protecting the needs of consumers but to an assurance that it reflects the need to grow the economy and support business. That, after all, is the reason why energy policy is within DETI.

Mr Frew: You rightly say that the state of the grid could impinge greatly on investment and attracting investment. We seem to have an issue east of Ballymena, which is a highly industrialised zone. Invest NI has a number of acres of greenfield that could be used for investment and new business, but we have a problem with substations in that area. NIE's solution is that it consider power parks, which basically means subvention and intervention, I believe, from Invest NI to help to finance upscaling and investment in the grid. Is that a role that Invest NI should play in the future, and is it a part of the policy thinking?

Mr Stewart: Alastair may want to add to this. We are open to looking at all possible solutions. It is not good enough for the Department to sit back and say that nothing can be done, so we want to look at all possible solutions. However, as with any solution, we need to look at it carefully. The role of the regulator is central to what can be done. Her office and the Department will be mindful of what European law permits us to do. However, notwithstanding those caveats, we want to look at every possible solution.

Mr Frew: Does Invest NI have a view?

Mr A Hamilton: I probably do not want to go much further than Chris has already gone. Some time ago, we looked to see whether we could develop propositions on the infrastructure side, and there are challenges there, both at an EU and wider level, about subvention on electricity costs. We have now reserved more of our effort for the energy efficiency side, providing advice and funding on alternative energy sources and encouraging firms to go down that path of sustainable energy. That is where we are focused at the minute.

Mr Frew: My last question is on the restructuring of energy charges. You say that it may be contrary to EU law on state aid, and the Chair made a point that maybe you do not really cut it in the business world. How is it that the Republic of Ireland and Germany can reconfigure or restructure their tariff?

Mr Stewart: I wish that I had an easy, clear and comprehensive answer to that, but I confess that I do not. We look enviously at the position in both those jurisdictions. We understand that, particularly in Germany, that has come to the attention of the Commission — it is now looking at it — and the German authorities will see that being looked at. It could lead to a challenge. We have to go on the advice that is available to us, which is that, under EU law, it is not permissible to do what we would like to do. It may be the case that others have gone that way and, for whatever reason, have not yet felt the wrath of the Commission in doing so, but that does not really make it any easier for us to follow the same path.

Mr Frew: For how long do we keep looking enviously at other member states? You have just stated that you would like to do something on restructuring — my ears pricked up when I heard that — which probably makes me look more positively on it. For how long do we keep looking over the fence at other member states getting away with it?

Mr Stewart: I shall have to check the record very carefully in case I have invented a new bit of policy that the Minister would not thank me for. [Laughter.]

For the avoidance of doubt, I am not announcing any particular exercise to look at or to redistribute network costs. However, the Minister is on record as saying that she recognises the concerns of large energy users. We wish that it were some other way. We do not have an easy solution at the moment for redistribution of network costs, which would, in any case, be a decision for the regulator.

The Chairperson (Mr McGlone): I allowed that discussion to go on a wee bit because these costs are a major issue. I have just one point: do you ever talk to officials in other jurisdictions, who may have gone down a slightly more adaptable route, to see what advice they have taken and the context in which they have taken it?

Mr Stewart: We do, Chair. I cannot point to a specific engagement that I have had on this very issue, but it is a fair point, and I think that there is room to do more of that.

Mr Flanagan: Thanks for the presentation. Alastair, do you accept that energy prices here are not competitive, which is why you tend to go after the service sector as opposed to energy-intensive industries?

Mr A Hamilton: The motivation for going after the service sector is not directly related to the energy price. That is not the deciding factor for going down that path. The deciding factor is twofold. First, we have skills coming out of our universities, colleges and schools that suit the service sector. Secondly, to compete for those industries on this island with another jurisdiction that has a more attractive tax level has been and will continue to be foolish. We separate ourselves from that and compete for the projects that we have a chance of winning. Those are mainly in the service sector, aligned to our skills and the competitive environment on the island.

Mr Flanagan: Do you accept that our energy costs for intensive energy use are uncompetitive?

Mr A Hamilton: They are. They are much higher than other parts of these islands. In isolation, they are higher and a challenge. What you need to do, and what others do, is put it into the mix. I acknowledged in answer to a previous question that it is becoming a more visible part of the mix, but there are off-setting factors for high-energy users in accommodation costs and salaries that help to soften that a little. However, as I openly acknowledged, it is increasingly becoming a challenge.

Mr Flanagan: I do not think that you have done enough to tackle regional imbalance. The commitment in the Programme for Government 2011-15 to tackle regional imbalance was a positive step at a political level, but I do not think that Invest NI has done enough to embrace that opportunity.

One thing that I am considering through this inquiry is the setting of subregional targets. I am sure that you have been briefed that I raise that issue at most evidence sessions. If the Executive and the Assembly decided to set subregional targets for Invest NI in the next Programme for Government, could you work with it?

Mr A Hamilton: I will come to that question in a moment. Let us talk about what you classify as regional imbalance, which is, I suppose, in other people's language, the distribution of jobs in the work that we do. As you know, some of the responsibility for start-up business has transferred to the councils. Of the 25,000 jobs that was our target until the end of March, more than 6,000 were start-up business jobs, so a sizeable proportion of that responsibility has now transferred to the councils.

"Regional imbalance" can be expressed in lots of ways. Over the last two or three years, we heard it expressed at almost an Assembly level. Whether that is the 26 council areas or down to sub-sectors below that, it becomes a challenge. If you were to introduce subregional targets that broke it down to 20 or more areas, with goals and targets for each, that would be a significant challenge not only for us but for the economy in Northern Ireland in the way that it is driven.

Privately and publicly, you have often referred to some of the things that go on in the Republic of Ireland as an example and model for subregional growth. There, that is expressed almost in the negative: outside Cork and Dublin. Until recently, the targets there were expressed in that way.

I went back and looked at our performance last year. You will know that it was a record performance, with 10,765 jobs. Of those, 55% were outside Belfast. If I had asked you to guess how many of those were outside Belfast — maybe I should have — I do not suspect that you would have guessed 55%. This year —

Mr Flanagan: I would have told you that 3,000 were created in Belfast.

Mr A Hamilton: Sorry?

Mr Flanagan: I would have told you that 3,000 were created in Belfast.

Mr A Hamilton: Yes, but 55% of jobs outside Belfast is well in advance of the percentage target that colleagues in the Republic of Ireland were driving for outside Cork and Dublin.

A total of 7,500 jobs was announced in the first six months of the year that has just finished. Again, 43% of those were outside Belfast.

Mr Flanagan: When you talk about Belfast, are you talking about Belfast City Council or the greater Belfast area?

Mr A Hamilton: I am talking about the four parliamentary constituency areas. It is not as stark as it may seem for subregional growth. You were quite right to challenge me and say that you do not think that we have done enough. I think that we have done quite a bit in trying to incentivise and encourage firms. Just a few weeks ago, we announced the Eishtec project in Portadown. A few more are coming in outside Belfast — if you want to classify it as that. I have often said to you — I will repeat it again today — that there is a piece on how much we can motivate, incentivise and encourage people as to where they locate and the choices and decisions that firms make. As for setting targets, and to answer your very specific question, I would be very wary and cautious of setting unrealistic targets at a micro level when all that that will do is to stimulate a situation in which we may miss opportunities because we are not able to secure them for Northern Ireland as a whole.

Mr Flanagan: I would not like unrealistic targets to be set either.

Mr A Hamilton: I come back to your point when you referred to the Programme for Government. I have often made that point here. I find myself, oftentimes and again now, at a bit of a crossroads: a policy challenge. As you know, I am very focused on delivering targets in my operation. Every time that I come and sit before this Committee, I account for all the targets. The Programme for Government targets have been delivered against and have massively exceeded in performance. The thing that you, the wider Committee and the Assembly need to consider is that, once you start to break that down and take the focus off the delivery of economic benefit for Northern Ireland as a whole, and you start to parse, divide and split that and force investors, perhaps unwillingly, to go to a location that they do not want to go to, the bar will drop, and overall performance on delivery of jobs, particularly from foreign direct investors, will not happen.

My last point — this is a worthwhile point — is that, quite apart from all the usual reasons that I give you about people wanting proximity to universities, colleges, infrastructure, airports and all those things, bear in mind that, for the vast majority of projects that we compete for — I re-emphasise that, just because of the over-performance that has been delivered over the past few years, people think that this is an easy job, which it is not — we compete with over 200 economic development agencies around the world for mobile inward investment. The vast majority of times that we compete for projects, we are being compared with cities and regions of the world, particularly within the European dimension, that have populations in excess of one million or 1·5 million. That is what people are looking at.

Mr Flanagan: You are telling me that you cannot force people to locate somewhere, but, in 2013-14, when £92 million was spent hosting the G8 summit in Fermanagh, only three companies were brought to the county to consider investing there. Those are the statistics that we are dealing with. In the same financial year, only 155 jobs were created in Fermanagh, and 3,000 were created in Belfast. I acknowledge that Invest NI has performed exceptionally well in recent years in a very difficult environment, but there is a well-founded feeling in very many areas that this rising tide is not lifting all boats: we are not all benefiting from the historic over-performance of Invest NI. Three visits to Fermanagh and 155 jobs being created in a financial year is testament to that.

Mr A Hamilton: There are other dimensions to that that you probably need to reflect on. Where projects are located, where people live and where they travel to work are dimensions that you need to play into this mix. Sometimes, particularly in this environment, we get very myopic: "These things need to be in my back yard". Perhaps Fermanagh is a more distant location, and I accept some of the points about that. You could go elsewhere on these islands and look at people's commute-to-work times. I am quite happy that we are creating jobs in areas where people will have a 20- or 25-minute commute to access projects that would not otherwise be here. Let me make it clear: a sizeable number of projects, if they had not come to Belfast, would not be in Northern Ireland at all.

Mr Flanagan: I want to deal with the work on office accommodation. Is there any possibility that there is a conflict of interest for Invest NI? Are you giving the loan out, or will it be DFP? Will it be Invest NI money or DFP money?

Mr A Hamilton: We will manage the loan on behalf of the Executive in the same way that we manage the existing growth loan fund and equity schemes.

Mr Flanagan: Is there any chance that there will be a conflict of interest on where you encourage companies to locate? There is a perception that Invest NI might want to fill up the buildings that it is providing finance for more quickly to ensure that the loan repayments are met on time.

Mr A Hamilton: No. As a business case, we are interested in trying to stimulate the property market. I do not want to get into this debate today, but I recall being in front of the Public Accounts Committee a number of years ago when it looked at speculative builds and properties that were built by Invest NI. The accusation at that stage was that those buildings had lain unoccupied for a very long time and had not utilised public funding successfully. So I am not at all concerned that there will be any preferential treatment or any skewing of our effort towards a building that just happens to be funded or supported through government funds.

Mr Flanagan: Thomas, my final question is for you, because I think that somebody had better ask you a question. It is genuinely good to see you back here; we welcome you back and wish you well.

How are you getting on with the InterTradeIreland budget?

Mr Thomas Hunter McGowan (InterTradeIreland): There were cuts in the budget across all bodies because of the financial requirements, and we have tapered our activities to match that to best effect. Through all the things that you spoke about today and the issues that arise from the business monitor, access to finance came up as a key requirement. Small firms could not find their way through the maze of how to access that, so we recently started a new programme, Funding for Growth, with a series of workshops and information clinics to assist companies. We have allocated resources to the most immediate needs — to those who create the jobs most immediately — rather than the longer-term ones. We have scaled down programmes like Innova, which is a longer-term deliverer, to more immediate things like our sales functions or our intelligence end in FUSION, where we have a technology transfer programme. We have also brought on things like the Funding for Growth advisory clinics, which have proved to be a huge success in that we have clinics and workshops. We have six clinics and six workshops in Northern Ireland where we get the numbers in and, as the companies understand the range of options available to them for funding, they can go a bit deeper, attend a workshop and find out what they need to do with it.

Mr Flanagan: The innovation awards were hugely successful once again. It is good to see that kind of work being done.

I was in Waterways Ireland recently, and the fall in the euro has cost it €600,000 in its annual budget. Has InterTradeIreland faced a similar situation?

Mr Hunter McGowan: Our budget is framed in sterling, so it puts extra pressure on the Southern Government to come up with the extra sterling to make up any shortfall.

Mr Flanagan: So it is a government problem in the South; it is not that you have to take the hit.

Mr Hunter McGowan: They have always matched it and made sure that we were never left short.

The Chairperson (Mr McGlone): Thank you very much for that. I want to pick up on Phil's point about the infrastructures and links of subregional development. Alastair, you mentioned 26 different targets subregionally. Are you lifting it now to the 11 new super-councils? Can you work in that context?

Mr A Hamilton: There are options. Again, those things need to be considered as you formulate and shape the Programme for Government and the shape in which you put that out. If you look to the South, you will see that, until recently, it has been an "outside Dublin and Cork" measure. I suppose that that is three: Dublin, Cork and outside it. In the new framework that has been published, they have now moved to the NUTS 3 regions, of which there are eight in the South and five in Northern Ireland. You could look at that model, which means that you are breaking it down to five areas, or you could go for the 11 new council areas and beyond. From my point of view, the further you go out and the smaller those groups become, the more challenging it is to start to get balance across those groups in what you do. Those are the options.

The Chairperson (Mr McGlone): I hear what you say. Piggybacking on that, there is the grade A office accommodation, because infrastructure and what is available to investors is crucial. Have you given any policy direction that areas that are less well invested in — through no deliberate intent but that was the way that things rolled out — are incentivised so that grade A office accommodation is available? I hear often from my colleagues in Derry that that should be the case. Are you just leaving it to the investors to speculate on where they think there will be the best return for their money? The inevitable consequence of that will be that they will get the best return for their money, but you will still be left with the problem that the areas that need investment will, by nature of the market, be left off the edge.

Mr A Hamilton: William, I think that you have answered on the openness of the proposal that is going forward.

Mr McCulla: Yes, it will be for the whole of Northern Ireland, but it will be market-led. That is the approach that we are taking. We are also aware that there is office accommodation in regional cities or towns that has been there for some considerable time. There is about 150,000 square feet in Londonderry, 50,000 square feet in Cookstown and 30,000 square feet in Omagh. The market will take account of that. There is space that has not been utilised. We continue to show businesses those when there are opportunities, but, as of now, a lot of that is still available.

The Chairperson (Mr McGlone): Are you talking about grade A office accommodation?

Mr McCulla: Yes.

The Chairperson (Mr McGlone): You say that the market will take account of that but, if the market is just looking at the most lucrative bits, and if they have ignored it until now, they will continue to ignore it. That goes back to our problem with investment.

Mr McCulla: Given that our proposal is that we will provide up to 40% financing, the other 60%-plus has to come from the private sector through banks, funders of whatever sort or equity providers. They will bring forward projects that they believe will bring the best return. I understand what you are saying, but that is what will happen. We can only work with the private sector on a solution here, as opposed to trying to make something work that the private sector does not want to deliver.

The Chairperson (Mr McGlone): If you strip it all away, it will still be grade A office accommodation for Belfast.

Mr McCulla: Not necessarily. It really depends on whether developers believe that there are opportunities in their areas. There may well be in other cities such as Newry and places like that.

The Chairperson (Mr McGlone): That is grand. Thanks very much for that.

Mr Dunne: Thanks, gentlemen, for coming. I just want you to clarify a couple of points on that. Do potential customers have to be identified and in place for the grade A accommodation before they get funding?

Mr McCulla: We would not make that a precondition, but it may well be that other funders will. My expectation is that there will probably be some element of pre-let, but we do not want something that is fully pre-let. We want to see some speculative element as well so that there will be additional space.

Mr Dunne: But you want some assurance as well.

Mr McCulla: From the point of view of viability and a business being able to service debt and repay, it is important that there are customers.

Mr Dunne: Is it applicable to refurbishment of disused buildings, old factories etc or is it what we may imagine as a new build?

Mr McCulla: The initial plan is that it will be new build. This expression of interest will test the market and we will learn very quickly what type of projects come forward. We may then have to respond to that, but our initial situation is new build.

Mr Dunne: So it is mainly applicable to new build then.

Mr McCulla: Yes.

Mr Dunne: Is that fair?

Mr McCulla: We believe that that is where the greatest market failure is. We were not really looking at fairness, to be perfectly honest. It was about where government needs to intervene.

Mr Dunne: Yes, I understand that, but we are aware of disused factories, buildings, warehouses etc that could be refurbished and made into suitable accommodation in various enterprise sites throughout Northern Ireland. Initially, they will not be included. Is that right?

Mr McCulla: They will not be included initially, but, as I say, we will see how the market responds. We do not know whether developers will come forward. We will have to review and check and react to changes in the market.

Mr Dunne: It is very much market driven. I will change the subject. I have a couple of points. I will not go on too long because most of the issues have been covered. With the reduction in corporation tax, we will see a need for a more skilled workforce. Alastair, maybe you could give us a bit of information on the proposed research project that I understand Invest is working on in relation to developing skills and bringing forward solutions on how we fill the skills gap.

Mr A Hamilton: To roll back a little bit, it is now changed environment for bringing the skills proposition into part of our mix for foreign direct investors. You saw that first with the shared skills programme, which has been a very successful joint programme between ourselves and DEL, followed by the academy model where we now propose, through inward investors, that if there are very specific skills that they need for their inward investment, DEL will fund and we will support an academy. We have seen a multiplicity of those academies being developed mainly in colleges and across the country as well. Those have been very successful.

DEL did a piece of research around corporation tax a few years ago, and we have looked at it as well, as you would expect, as we look into the future and the business case looks at the possibility of almost 40,000 jobs being created over the next 15 or 16 years if corporation tax gets devolved at the level that we expect it to. From the comments that I made about the different sectors that we believe this will open up for us, you would expect us to look and see where the skills are for those sectors and what are the colleges and universities doing. Even at apprenticeship level, that will draw us into a straight-from-school-into-work environment without necessarily going through colleges or universities as an in-work upskill capability. That opens up all this opportunity for us to be able to tap into a much wider workforce than perhaps we are doing at the present moment.

Mr Dunne: So this research is looking at all that.

Mr A Hamilton: It is, yes.

Mr Dunne: I think that is important. Weekly, we are told by various business organisations about the skills gap. It comes up regularly here and we are very much aware of it. If we are going to develop and move forward, we need to broaden the skills and opportunities to address that issue.

The other point is access to funds. We know that Invest has made a considerable number of funds available. What further can be done in relation to making funds that are accessible to businesses to make progress and to make this place move forward, which we all want to see? We get feedback about banks being reluctant to lend money and take risks. How can that be addressed?

Mr A Hamilton: I will make an opening comment. Alongside properties, William is responsible for those funds, and he will probably be able to give you a bit more detail on that. I will reflect a little bit on some of the comments that were made earlier about market failure. Our only reasons for being involved in equity or debt-based funds is because our view of market failure up until three or four years ago was mainly equity-based programmes because that is where the majority of the market failure was deemed to be. As you have rightly said, because of the economic downturn, and, as we all viewed it, the challenges around getting access to more traditional bank funding, we then entered into the two funds that are there — the growth loan fund and the small business loan fund — both of which, and I am sure that you have heard this separately from us, have been very successful out there in plugging the gap for businesses and giving them access to working capital or growth funding.

At present, we see those funds continuing to be delivered. William will give you an update on some of the start-up equity-based funding that has just been renewed with a new programme there called Techstart NI. So, there is a lot of work going on around that space. We will be keeping a very close eye on the future because we do not see ourselves as a long-term debt-based funder. It was put in at a particular time to address the challenge. We hope and trust, as banks normalise in the future, that we can, at some point in the future, withdraw ourselves at least from that debt-based funding element because if we get into a situation where we are competing with banks in a normal market environment, that is not the place for us to be. William, I do not know if you want to add anything to that.

Mr McCulla: I will just say that the amount of funding that has been going into the market through our funds has been growing year on year. About three years ago, there was maybe £10 million a year going in, and, last year, it was about £30 million. So, it has been growing quite significantly.

Mr Dunne: It is a major factor.

Mr McCulla: It is. It was primarily the debt-based funds that have added most of that extra funding. That is the growth loan fund and the small business loan fund, but, for the equity funds, we are providing more money as well. For the start-up phase, with Techstart NI, which has been in the market since July 2014, it is doing deals and has got a good pipeline of businesses that it wants to support and provide funding to.

We are always reviewing what we do. This year, we will be starting an evaluation of the growth loan fund to determine what needs to come after it when its investment period ends in 2017. We start early to make sure that, if there is a market failure, we continue to address it.

Mr Stewart: Chair, if I might add to that from a policy perspective, on some of the findings that are emerging from the work that the economic advisory group is doing for the Department. Whilst no one would claim that access to finance is solved — there are still concerns there that Members are hearing — some of the findings are interesting. When we compare the results of the most recent survey at the end of last year with the earlier survey of firms from a couple of years ago, many more firms are now reporting that they are in growth and therefore have access to finance. There is a much higher success rate, particularly of SMEs, that are applying for finance and being successful.

We are still seeing a difference between the perception, held by many people in businesses, of what the banks' attitude to lending is and where it actually is now. It has moved on. We are also talking about what the economists call information asymmetry: a lack of clear information on the alternatives to traditional bank funding. That is everything from crowd funding, angel funding, and all sorts of terms that I am struggling to get to grips with.

I suspect the economic advisory group, when it dwells on this a little bit more, will probably make recommendations to us, particularly around consolidating progress that has been made on interventions, but also looking at communication and information, and ensuring that firms are aware of all the mechanisms and interventions that are available to them. That is everything from the work of Alastair, William and their colleagues, right through to the British Business Bank, which we work closely with to ensure that its mechanisms are available and accessible in Northern Ireland.

The Chairperson (Mr McGlone): You wanted to come in on that, Thomas?

Mr Hunter McGowan: I just wanted to say that it is the advisory financial services that we have rolled out now. It is a complex landscape, trying to get funding, and SMEs typically go off and get an overdraft or a bank loan, as do 94% of all companies on this island. We are really trying to get this advisory service going to make them fully aware of all the funds that are available. It is proving to be a great success and we are working closely with Invest NI and all providers to make sure that everybody is aware that there are other more appropriate fits for their financing needs than going through the bank or loans.

The Chairperson (Mr McGlone): It would be very helpful, certainly from my own point of view, to go down and have a chat with you sometime about the range of services available. I am sure the other Members could avail themselves of that too, if they so wanted. That would be great.

Thank you for that, Thomas. An tUasal Ó Muilleoir.

Mr Ó Muilleoir: Go raibh maith agat, a Cathaoirleach. Gentlemen, it is good to see you again. I was going to scold you for bringing an all-male delegation, but the Committee is somewhat challenged in that respect as well. Congratulations on your achievement, over the last year in particular, to everyone who is here, but in particular Invest NI, notwithstanding the comments and the different points of view that we have around regional opportunities and what we would like to do about them.

I want to chat about narrative. When someone makes a decision to visit Belfast, study in Belfast, live in Belfast or, particularly, to invest in Belfast, it is because they hear a narrative that is exciting. There are two opportunities in my, perhaps simplistic, view. I am quite excited by the fact that Concentrix has bought over the Maysfield Leisure Centre, putting $15 million of its own money into creating a hub and a headquarters for perhaps 1,500 of its staff; not all its staff. I am more excited again that Allstate have bought a parcel of land, as I understand it, a few hundred yards — on the water, really — behind Maysfield. Both of those are strong statements of confidence in Belfast. I wonder, if that is the case, whether there is a way that we can get the narrative out there in relation to these two investments, or is it just the run-of-the-mill? Maybe it happens all the time and I have not seen it, but I am quite excited.

To finish, Concentrix brought their global board — SYNNEX board — over last week or the week before. I thought it was marvellous that these people who are global titans of industry came to Belfast to hold their board meeting.

Mr A Hamilton: It is good to have the inside-of-Belfast debate as well, so thank you for that.

The Chairperson (Mr McGlone): He will be looking for it all to go into Belfast. [Laughter.]

Mr Dunne: It is a good job Phil's away. [Laughter.]

Mr A Hamilton: You make very strong points. I know that we did this before and I will repeat it here, but I need to be careful because I will probably not get the exact title right. However, one of the strongest things that has happened over the last 12 months, is the very successful award that Belfast got as one of the most business-friendly cities in the world. You know because you have seen our proposition, our pitch to inward investors, many times and we now have quite a strong list, at a Northern Ireland level but also at a Belfast level, in terms of our financial services and ICT credibility and where we benchmark around the world. All those are to the proposition and the very specific areas of financial services, IT or whatever. However, to actually have an award that talks about the place is a very strong additional element to it. These are not awards that we confer upon ourselves. Financial Times FDI Intelligence does the majority of the business-related awards, and the award made to Belfast recently was, again, part of a global awards scheme.

Those are the sorts of messages that make it very much easier for us to propose and talk about this place, whether it is Belfast — I joked a little bit — Northern Ireland or any of the other elements of this wonderful Province that we live in. Those are the messages that make a difference because, as you know, when those investors come, yes, they will pull the majority of their workforce population from the area and the travel-to-work area around it, but they will always seed it with one or two people who they bring from head office, whether it is in Chicago, San Francisco, New York or wherever. They will want to make sure that it is a good place for those people to come and live and for their families to grow up.

I should pay tribute to wider government. The Chair made a challenge earlier about the Executive working as a whole. I pay tribute to lots of other Departments that help and support in that respect, whether it is the Education Department in terms of placing kids into schools as they come with the wider family circle. All that infrastructure works tremendously well. I think that we have a really good, effective, nimble team of wider government organisation that works very effectively to make that happen.

The second point that I make is that case studies are tremendously important. I will not give the names of the companies: you will know them. I can tell you today that we would not have a thriving financial services sector here in Northern Ireland had it not been for the first one or two investments that were made when people took a step, and not only invested once but twice, three, four or five times beyond it. The brand name and the credibility that comes with that says a lot. All these international firms will do their due diligence; do not get me wrong. However, for us to knock the door and say "So-and-so is here" immediately brings down barriers. Potential investors think, "If they are there, they must have done their due diligence; they must be comfortable that it is a good place to be; and they must be finding it a healthy work environment in terms of finding skills and the cost model. Therefore, I will look at it." Those case studies, those clusters that are being built — whether it is in IT, financial services and we are now into the legal services sector and HR outsource capability that we have got through Alexander Mann and other opportunities that are on the horizon — all those helped to profile this place that we live in as an example, and a marketing example, for a place that actually delivers.

I will not take any more time, Chairman, but that is before we go into the creative industry sector and all those other aspects: the tourism environment that we live in, which are all very positive, culminating in the one that crosses very strongly for us between the tourism and the business sectors, which is golf. I have said to you privately and I will say it here that we have leaders of international businesses who will come here, at the end of May and the beginning of June, for the opportunity to play on one of the best golf courses in the world in the pro-am with some of the best golfers in the world, and we will have time to speak to those people while they are here doing that. That is something that we just cannot buy, and it is a tremendous asset to Northern Ireland to have both the place and the people and the proposition to do that around it.

Mr Ó Muilleoir: You have thrown out so many opportunities for us to follow-up and discuss, but I want to try to keep it focused. It is a real testament, to the city of Belfast especially, but to this place when people locate or relocate, often from the States to live here. Last week, I met a man called Jack Butler, of Market Resource Partners. I first saw him in New York five years ago. He moved with his family to Belfast and has 150 people employed in Belfast, and that company is a subsidiary of First Derivatives. It is a subsidiary of an indigenous company: what a great message that sends out.

There is a second opportunity that I see, and I want to pick up on whether any thought has been given to this. I know that the First Minister and deputy First Minister really well receive that narrative when they go out together to the States. I do not want any loose talk; I do not know who they were talking to just before St Patrick's Day. I know that you certainly realise the potential of that.

The other thing is the Boston-Belfast sister city agreement. It is just as well that Phil has gone. [Laughter.]

I do not think that it is Boston-Enniskillen; it is the Boston-Belfast sister city agreement. The wonderful thing about that — it really cheered me — is that our friends in Northern Irish Connections plus Robert Fitzpatrick of the Odyssey and the Belfast Giants have come up with the wonderful success of bringing four college ice hockey teams here in late November. It is the first ever time that college ice hockey has been played outside the US for points in an official tournament. I presume that it is going to bring about £1 million into the city of Belfast. Some of them might go on a day trip down to Fermanagh. With Boston being so powerful, as the Irish-American capital, the colleges capital and the life sciences capital of the US, is any work being done to consider how we can use the sister city agreement — the Mayor of Boston, Mayor Walsh, is so supportive — to try to trigger the sort of success that our friends in the Belfast Giants have obviously scored?

Mr A Hamilton: Absolutely. I pay tribute to you for the work that you have done to build some of those —

Mr Ó Muilleoir: That is not why I mentioned it.

Mr A Hamilton: No, but it is fair, in the day that is in it, to acknowledge that. It is in not only Boston but San Francisco.

Those things are really important to us in terms of building connections. You mentioned Northern Irish Connections. It took us a little bit of time to get to the point where we are now. We had to build the model and refine it a little bit, but, particularly with Andrew coming on board now, we are in a really good place in terms of the Northern Irish Connections model. He is really tapping into some key people across the globe and starting to maximise that affinity with home for a lot of people. I know that some of them are not originally from here, but they have an affinity with here even though they were not born here. Tapping into that is critical, so I would like to do all we possibly can on the back of that Boston-Belfast piece that has been built so successfully.

You mentioned a sector that is really at the heart of Boston. You might have heard what I said earlier in terms of the growth opportunities for us with the CT proposition; it is the health and life sciences sector. We have been very successful on a small scale through some of the Connected Health type of opportunities, but CT and some of the work that has been done around building those relationships with that part of the world really are untapped still in terms of what we can do if we can get all the pieces aligned; so much so that we have recently appointed a business development specialist in Boston to start to build and prepare for the future opportunities in the life sciences sector.

Mr Ó Muilleoir: Thank you. Apologies for being late for the presentation.

Mr Givan: Thank you, gentlemen. Apologies for missing the start of your presentation. How much of an opportunity is the devolution of the small start-up element of business to the 11 councils? In terms of the subregional discussion that people refer to, how much of a driver could be the new powers that councils are going to have to grab hold of some of that opportunity?

Mr Stewart: I will start, and perhaps Alastair will come in. It is a hugely important opportunity. If we look at what we know needs to happen and what we want to see happen, firms will move up the escalator of growth. As they move up, they will have different needs for support. At that very early stage, councils will be extremely well placed, because of their local connections and their understanding and knowledge of the local community, to give that early support and assistance. As firms grow and become successful, eventually they will reach the point where they will need different sources of expertise and help that will be provided by Invest Northern Ireland. We need to see them moving up that progression. It is a huge opportunity for councils, but it is a challenge for councils and Invest Northern Ireland to find ways of ensuring that that works well and that we have an effective approach. It cannot be one-size-fits-all, but, equally, there needs to be good learning and a good exchange of information on what is working across all of the 11 super-council areas and drawing on the expertise and the track record that Invest Northern Ireland colleagues have.

Mr A Hamilton: I have just a few comments on the back of that. At a practical level, we have found that the structures that have been set up in the preparation for the transfer of that power have worked very effectively for us in starting the engagement and getting ready for the transfer. It has not transferred yet; they have asked us to run it on for the first six months, which we are happy to do.

We have given some advice, and I listened to some of the comments from the previous people who spoke to you about the challenge of differentiation with new powers versus getting a common feel. They made that point, perhaps, in reference to planning, and I would make the same point about start-up business. Start-up business activity is marketing-led and is what we would call DMDR, which stands for direct marketing-direct response. I can show you very clearly that, whenever you come off air or come out of the media, your responses reduce, and it is then a direct funnel down to the number of businesses that start up. Once this is broken up and delivered by the various councils, the challenge will be in whether a common message can be delivered, such that you can continue to advertise the programme on TV. If we start to break it up into 11 different flavours of start-up business that will not allow you to have a complete provincial advertising message, you will potentially limit the ability of the programme to deliver the results that you need it to deliver.

The second point that I would make is about the relationships between us and the councils. One of the key things that we have done over the last two years is to develop further the local economic development (LED) funding programme. That is the European funding mechanism that allows us to draw down European money. We put money into it, and the councils put money into it, and you will know that there is a multiplicity of those LED programmes going in all your council areas. We have agreed with the Department that we will continue to fund LED programmes even after the power transfers to the councils. The reason for that, as Chris has said, is that there is an escalator. Businesses will start small and will grow. As they grow, they will get to a stage that they want access to mechanisms and support programmes that are outwith the councils' ability to deliver. That is fine. That is when they will start to come back into the remit of Invest Northern Ireland as high-growth companies or, potentially, account-managed companies. Therefore, it is important that we maintain those linkages with the councils so that, as those companies grow, we have total end-to-end sight of those companies and we can put our arms around them and start to help them to grow as they move up that escalator.

Mr Givan: When you are competing with the 200-plus global agencies for foreign investment opportunities and a company identifies an interest here, will there be a role for the new councils? Will you say to a company that wants to start up that a particular council might be best placed to help them with that? A new company might come along, and it might not be in the Belfast area. It could be in the Fermanagh District Council area or the Lisburn and Castlereagh City Council area. What criteria do you use to pinpoint someone? That could lead to questions about how you are differentiating between councils if you are signposting people to a particular area.

Mr A Hamilton: That is the area where I was perhaps cautious on differentiation. Those are what I see as common programmes that are best delivered across Northern Ireland. I will flip the story here; this is where councils can really differentiate themselves.

We have started that work. The key avenues through which it will be driven are the community plans. We are heavily involved with all the new councils across Northern Ireland. In some cases, we have provided matched funding for the development of some of those plans, and, in others, we have put people and resources into the teams that are developing those plans. Our very clear message is that what the councils need to do in their council areas — with us alongside; we are not standing back but are involved — is to decide how they can differentiate their areas. They need to look at how they put a proposition together in their areas that looks at the anchor tenants that they might already have, the infrastructure that they might have, the connections through colleges and universities and the skills supply that they have, and, perhaps, some connections out into the diaspora. It is about how they can combine all those factors together to make a unique selling proposition for their areas. We have told each of the councils that if they can develop and refine that — some councils are already on track to develop that — we will take that proposition and promote it. If we can match the USP of one of those areas with what a company is looking for, it will make it easier for us to land the project in Northern Ireland.

The last aspect of that that we have done is our joint funding of an FDI app. Quite a few councils have picked up on that, and I think that all of them will do so under the community plan. That app allows them to put all the data and information, including case studies in the area, in one place, and that then becomes a tool that can be used to try to attract investors into the area.

I do not want to go back too much to the debate, but there is a push-and-pull debate in subregional FDI if we take it right down to that level. There is a debate that setting targets will create a push, so there will be a forced element of a number that they need to deliver on. While that may be an element of where we end up, and I have no big challenge around that, provided that it is not at too micro a level, the pull is the important piece. That is what we are trying to stimulate. What is attractive in the area? I have often said to councils, "Do not just take the Invest NI combined view of Northern Ireland and say that that is us". It is not. They should break it down into something that is really unique for their area and sectoral, perhaps, to their area. That gives us an opportunity to do it. My commitment, in closing, is that, as I have said to all of the councils, if we can refine and assure ourselves that there is a viable proposition, we will promote it internationally.

The Chairperson (Mr McGlone): We are running low on numbers. Máirtín has to go for a meeting, Paul.

Mr Givan: I appreciate that, Chair. We have that many long-winded members of the Committee that others cannot get a word in.

The Chairperson (Mr McGlone): Sometimes, it is helpful to show up, you know.

Mr Ó Muilleoir: I have to meet your Minister. I will not keep Mr Hamilton waiting.

The Chairperson (Mr McGlone): We can continue to take evidence. Go raibh maith agat, Máirtín.

Mr Givan: I think that that is the right approach, personally. If the north-west complains, as it does regularly, let it put together the proposition and put the demands on Invest NI to say, "Here is our unique selling point. We want you to use that". Rather that than saying, "We are Invest NI, and we will dictate that investors will go to a particular area". The new councils have a real opportunity to put forward their proposition and pull the investors to them, and I think that that is where the focus should be.

In terms of the skilled workforce, I was with a few colleagues when we went over to Stuttgart. In that region of Germany, where they do not have any financial assistance to offer to foreign direct investors, it struck me that the skilled workforce very much drives those companies because of the expertise that is there, particularly in engineering for the automobile industry. It seemed to be that their universities were very hooked up with industry, and you had business people sitting on the boards of those academies and so on. In Northern Ireland, how well are we developing that business-led focus in our academic institutions so that we are generating what the workforce actually needs from our schools?

Mr A Hamilton: My personal, practical evidence back to you is that I think that we have moved significantly in the last few years. I cannot reflect beyond my time being here, apart from being in industry and trying to recruit people, but significant progress has been made, both in the willingness to cooperate particularly between DEL and us. That is all around the anchor of that Assured Skills programme. Previously, we said to investors that, in essence, they would get financial assistance in the form of a grant for the number of people who they recruited. We are now saying that that funding has reduced in quantum and, as of June of last year, in scale and that we cannot offer it to large companies for follow-on investment. That has reduced, and we have replaced it with another tool that is totally within our remit to be able to drive, which is incentivising and ensuring that we have the right people with the right skills coming out to meet the needs of those investors. That is a message that resonates very strongly. Go and talk to some of those existing investors. Fine, it is nice to get grant assistance, but that will disappear. To get the funding to drive the skills or the availability of skills is a much, much more attractive, or what we call sticky, proposition. It catches people and draws them back here. I think that we have come a long way. I will maybe leave Chris to talk about the potential for the future. I am a very strong advocate of the decision that this place has taken on the reduction of the number of Departments to more closely align skills, enterprise, trade and investment into a Department of the Economy, because I think that that will take us to another level and another stage.

The Chairperson (Mr McGlone): I will pick up on Paul's point. One of the things that we discovered in Stuttgart was that the academic curriculum is different. That needs to be done in the FE sector. I am interested to hear from you on what you are doing with the Department of Education over there. Secondly, I know that this relies very heavily on the management of individual schools. I have been to businesses where connectivity between schools and local businesses is good. I have also been to thriving businesses that are doing extremely well, where there are local schools that have very good qualifications coming out of them and never the twain shall meet. They are just ships in the night, and they are only about four or five miles away. You have a really good employer that requires a lot of skills, yet the local schools do not even think of visiting that employer. One is a practical level, and the other is academic and curriculum development.

Mr Stewart: You are absolutely right. I echo what Alastair said in praising the excellent work that has been done, particularly by colleagues in DEL, in building those linkages with universities and FE colleges. It is observably true that they are much more responsive to the needs of industry and businesses than has, perhaps, been the case.

There is considerably more potential with the Department of Education now. I hasten to add that that is not a criticism of that Department but a recognition that there is more to be done by DETI in ensuring that we influence as far upstream as we need to go. You are quite right: it does not start in just further or higher education. It starts in curriculum policy, careers education and how parents think in influencing the career choices that children and young people make. There is room for more systematic policy engagement between DETI and DE. That work is under way, and we would expect to see that reflected in the Programme for Government.

You made the point about management leadership in schools. That is vital. I spent seven years in that Department. All the research shows that the effectiveness of education depends, first and foremost, on the quality of teaching in the classroom and the quality of leadership in the board of governors. The board of governors is an extremely important and challenging role. It has been the policy of that Department for some years to encourage more participation on boards of governors by business representatives — people with knowledge, skill and experience of the world of business — to start influencing how the education system operates. As well as being important in its own right, that is the provider of human capital for our economy. If it is not responsive to the needs of the economy, we are one-nil down.

Mr Givan: How are we fostering businesses that we already have to come together in a partnership or cluster to develop technologies? I appreciate that some businesses would not want to reveal trade secrets about a particular skill, but what struck me when we were in Stuttgart was the number of partnerships. Companies were all chipping in so that technologies could be developed that benefited their own business. How is that being developed in Northern Ireland?

Mr Stewart: There is huge potential there. There are a couple of examples from the important health and life sciences sector.

The Department recently had the foresight study report of our science advisory MATRIX panel, which picked out areas, particularly in health and life sciences, with the greatest potential for economic growth. We need to take that forward with a mechanism that will be known as the health innovation life sciences (HILS) hub. That will be a partnership of the Department, education, industry and academia. It will be the space within which we will develop the communications so that where the economy or public service identifies a need, partnerships can be put together to respond to it.

We have a small-scale example of that that works very well. It is called the NI Connected Health Ecosystem, which focuses on Connected Health rather than broader health and life sciences. It has very successfully brought together a significant number of commercial firms with the buyers, if you like, in the health and social care service, and with academia.

This is anecdote rather than evidence, but a number of times I have witnessed conversations between someone in health and social care and someone in a firm, and it goes something like, "I never knew you made that", and the other side of the conversation is, "Well, I never knew you needed that". Great progress could be made there. HILS hub is taking that to the next level and pairing the needs of society with the ability of academia and the economy to deliver.

Another example is that Northern Ireland has been shortlisted for the Precision Medicine Catapult, a technology and innovation centre with UK-wide investment. Precision medicine is encapsulated by what Randox does. It uses leading-edge diagnostics to tailor medical interventions to individuals, as that is much more successful. As well as being hugely important in health, it is a multibillion pound business that is growing across the world. The catapult programme will incentivise this and other developments across the UK. In recognition of the track record capability that Northern Ireland has, I am pleased to say that we are down to the final shortlist on that. We will get the result of that after the election and, hopefully, we will be successful and get the catapult. Even if we do not get the overall catapult, it will be in a hub-and-spoke model, which will give us real opportunities to promote further development with academia and our leading indigenous firms alongside one another in Northern Ireland.

The Chairperson (Mr McGlone): OK, thanks very much. That concludes our evidence-gathering session today. We have other questions to ask, but we cannot get into them today. Will you be happy to respond to those in writing?

Mr Stewart: Absolutely; we will be happy to do so.

The Chairperson (Mr McGlone): That is grand. Thanks very much indeed. I hope that decisions will be made shortly that will set us all on course.