Critiques Submitted to the Committee

Irish Congress of Trade Unions - Northern Ireland

Response by NIC.ICTU to Review of Competitiveness of Northern Ireland

1. INTRODUCTION

As the central trade union body representing over 200,000 workers, Congress wishes to make the following comments on the above Review.

Congress is deeply disappointed in the content of the Varney Review which, in our opinion, is very shallow in the recommendations contained in this report. Congress would have expected that any such Review would have contained a number of innovative proposals designed to contribute to a dynamic economy in Northern Ireland. To this end, Varney has trotted out recommendations which we believe are certainly not innovative, nor indeed, make any significant new contribution with regard to identifying the ills or solutions for the economy of Northern Ireland.

Varney’s emphasis appears to Congress to be rooted in the simplification of reducing wages in the public sector; a hiving off of elements of the public sector to the private sector; an inference that the National Minimum Wage in Northern Ireland should be reduced; all measures which, in our consideration, are counterproductive to the economic well-being of both workers and the Northern Ireland economy in general.

Northern Ireland, as a low wage, low skilled economy, is a failed model and to advocate the continuance of this model is deeply disturbing. It should be evident to anyone versed in basic economic theory that the withdrawal of disposable income from the money cycle has an adverse impact on the economy per se, particularly on the services sector leading to the creation of more unemployment and closures of service sector enterprises.

There is a consensus that the aims of economic policy for Northern Ireland, in line with the Lisbon Strategy for the whole European Union (EU), are to achieve better growth and better employment. Our lower productivity compared with other regions of the UK and Europe has been identified as a major barrier to fulfilling this aim. There is also a large measure of consensus that there are two key factors to closing the productivity gap.

First we need to improve the structure of our economy so that we have more jobs in higher valued-added sectors, such as knowledge-based industries. Secondly we have to upgrade the skills of both those in the labour market and those who are economically inactive. The proposals set out in this paper are geared to achieving these two objectives.

2. SKILLS

Congress shares the concern of Varney and all other commentators on the requirement for a high skilled labour market central to the cornerstone of building a sound economy. Congress has in the past month submitted to the Northern Ireland Assembly Committee for Employment and Learning a submission on our evaluation of the Training for Success initiative under the auspices of DEL. That submission is attached as an appendix to this commentary.

To "move up the value chain" we need to engage with the competitive strategies of employers and sectors. Within the current Skills Strategy ‘supply orthodoxy’, it is not self evident how engaging companies through the tactic of providing public subsidy to individuals will move us forward. We know that Level 2 qualifications bring negligible wage rewards. Equally, many apprenticeship frameworks offer no real currency or worth in the labour market. This is particularly true of the business, administration and services frameworks. In many cases, we are asking our young people to second guess the labour market – to risk investing time in developing specific skills without any reasonable prospects of reward. This is compounded by the huge policy "churn" in education and skills policy over the past 20 years. It is no wonder that the drop-out rate in a bewildering succession of vocational skills initiatives remains stubbornly high.

For Northern Ireland to develop a world class skill base, we need to selectively intervene, to choose a small number of "winning sectors" suited to our geography, talents and infrastructure. As a small region, we need to harness all the talents - employer and employee - through proper economic partnership arrangements, similar to the Irish or European models. Without this sort of planned interventionist approach, and the tri-partite sectoral collaboration commonplace across Europe, it is unlikely that Northern Ireland will break out of our current, service based, low skilled equilibrium.

To up skill our population of working age we need the assistance of more highly qualified specialists for enhanced training and development. To attract these specialists on a short stay and long stay basis we should offer them allowances to facilitate their mobility and their employers in Northern Ireland should be offered employment grants or whole or partial exemption from employers’ national insurance contributions. With clever marketing such a scheme could bring Northern Ireland some return for the heavy investment of NI public funds in students who study for 3^rd level qualifications outside Northern Ireland and who tend to deploy their acquired skills outside Northern Ireland.

The Northern Ireland Skills Strategy should be reviewed so that it realises fully the opportunities created by the type of scheme outlined in the preceding paragraph. In particular the grants or national insurance exemptions should be available for organisations, which run special programmes to raise the skills up to NVQ level 3 of employees, the unemployed and the economically inactive.

It is an accepted fact that the skills base for those in employment must be moved up the value chain and initiatives such as Union Learn are the key to unlocking the reluctance of those in work to engage in further up-skilling. It has been the experience of Congress that in organised workplaces these mechanisms for up-skilling are, in many cases, not welcomed or availed of by many employers. It is crucial that a concerted partnership model be implemented across all enterprises in Northern Ireland to up-skill those in employment because it is recognised that over 60% of current employees will be in the workforce in 2020.

Congress welcomes the Review’s belief that the Northern Ireland Executive ‘should, as a first step, make a pledge to bring all eligible public sector workers up to Level 2. It should consider, in collaboration with the private sector, the possibility of introducing a wider pledge.’

Congress agrees that crucial to our economy is the necessity of increasing the active participation in the labour market of the huge number of people of working age deemed ‘economically inactive’. It is recognised that in securing such active participation new models of work need to be developed to act as a catalyst. It is our opinion that these new models require the inclusion of the following:

Travel/commuting scheme.
Mentoring in the workplace.
Work-life balance/family friendly policies.
Job share.
Careers direction.
Training.
Benefit retention.

One positive mechanism for achieving greater labour market activation involves making the most of the public procurement process wherein conditions for the performance of a contract can, in accordance with Article 26 Recital 33 of EU Directive 2004/18/EC.

Public authorities may lay down special conditions on performance of the contract and such conditions may concern social considerations (Article 26.

Contract performance conditions are specified in Recital 33, which also includes a non-exhaustive list of social considerations. They may be intended to promote:

On-site vocational training
The employment of people experiencing particular difficulty in achieving integration in the labour market
The fight against unemployment

It is also possible to include requirements, which would be applicable during the performance of the contract:

To recruit long-term job-seekers
To implement training measures for the unemployed or young persons
To comply in substance with the provisions of the basic International Labour Organisation (ILO) Conventions, assuming that such provisions have not been implemented in national law (Note this would imply that compliance with the Conventions would be required regardless of whether they have been implemented in national law)
To recruit more disabled persons than are required under national legislation (in the countries where quota systems exist)

3. RESEARCH AND DEVELOPMENT

To realise our objective of higher paid jobs we must raise our efforts to create more research and development (R&D) activities. Therefore organisations, which engage in R & D activities or employ those with the high quality skills essential for R&D work, should be paid employment grants or given whole or partial exemption form employers’ national insurance contributions. This proposal would be especially important in building up the skill base and capability in a variety of areas, such as energy research.

As part of the policy mix active use should be made of the EU rule which allows R & D aid to match state aid granted by a competitor outside the EU.

To scale up the effectiveness of the proposals set out in the preceding paragraphs there should be a system of certificates for accrediting R & D activities for the purpose of grants or other incentives. This streamlining of the scheme would increase its attractiveness, particularly for those in small and medium-sized enterprises, which can be inhibited from participating in R & D.

There should be more use of research foundations, possibly modelled on the North American approach. These foundations should harness the contributions not only of the universities and other higher and further education institutions, but also those of the public sector, the private sector and the trade unions. By channelling resources through foundations, tax incentives could be maximised. Consequentially the impact of every pound allocated to R & D could be boosted.

Some research foundations should operate on a cross-border basis in order to achieve critical mass, to promote collaboration across the research community and to take full advantage of the incentives available under EU laws and programmes. In furtherance of the last aim favourable consideration should be given to locating foundations in cross-border areas. The attractiveness to business of a single access point to the R &D capacity of the whole island should not be under-rated.

To ensure that the results of R & D are not left on the shelf there should be a means of delivering technology transfer. Cross-border technology transfer partnerships should also be created to develop R & D into tradeable goods and services. Partnerships should attract a tax regime similar to that for research foundations.

The proposals in paragraphs above could be a means for delivering the European Strategic Energy Plan and the goal of an all-island approach to energy research contained in the All-island Energy Framework Programme. Coupled with the proposals in the above paragraphs this set of proposals provides the opportunity to derive the optimum benefit from the EU 7th Framework Programme for R & D.

The cross-border bodies proposed in paragraphs above would be facilitated by the efforts of the EU to streamline tax administration across Member States. The EU proposals to simplify the corporate tax system are welcomed, particularly the target of introducing in 2008 a Common Consolidated Corporate Tax Base (CCCTB).

The proposals in paragraphs above have also been shaped so that as far as possible they are compatible with the competition provisions of the Treaty of the European Union (EU) and the EU rules on state aid.

4. PUBLIC SECTOR

Congress most strongly challenges the Review’s analysis, comments and recommendations on Northern Ireland’s public services. It is, to say the least, deeply disappointing to find the Review adopting effectively an anti public service philosophy and putting forward proposals without any supporting evidence or regard to historic facts.

4.1 Size of Public Sector

Congress refutes the argument that the public sector in Northern Ireland is too big. It was confirmed as fact in the NI Executive Budget publication (para 2.49), that when comparison is made taking account of relative population size, Northern Ireland’s public sector is similar to other regions of the UK. The real facts are that the private sector is too small despite unprecedented help from the public sector.

4.2 ‘Crowding Out’/Public Sector Pay

Congress also rejects the claim that the public sector ‘crowds out’ the private sector. There is no empirical evidence to sustain this claim. In fact, according to the Labour Market Bulletin NI No.18 ‘Taking the period 1990 to June 2004 the increase in public sector jobs was at 12,677 or 6.2%. In the same period the number of private sector jobs had increased by 132,640 (39.9%).’

In particular Congress does not accept the Review’s attack on public sector wage levels and that these have an adverse impact on the private sector. This premise is devoid of any supporting evidence or research.

The facts are that public sector wages in Northern Ireland are generally the same wages that apply in the public sector across the UK as determined by statute and/or collective agreement. This is entirely fair. Furthermore the vast bulk of employees in the public sector have no higher levels of pay than the private sector in Northern Ireland. This statement is endorsed by Varney himself at paragraph 7.6 (page 100 of the Review document).

The Northern Ireland average for private sector earnings is 21% below the UK average and the lowest of all regions in the UK.

4.3 Review of Public Administration

It is clear that the Review Team gave only superficial consideration to the Review of Public Administration (RPA) which is already in the process of implementation. Similarly the Review Team’s demand for the number of Government Departments to be reduced to six and the number of MLAs to be reduced sets aside the political history and reasons for the current structures. These comments serve to underline the weakness of the Review Team’s overall analysis.

4.4 Public Sector Assets

Congress does not disagree with the disposal of assets that are not required for the delivery of public services provided the sale of such assets are retained fully to benefit Northern Ireland’s public services.

However Congress strongly refutes the Review’s call for social housing to be considered within any programme of asset sales. This flies in the face of the long standing consensus that Northern Ireland should maintain a single public housing authority – the NI Housing Executive, which has a proven record of efficiency and effectiveness in delivering a social housing service. In fact Congress calls for the Housing Executive to be given responsibility again for new build provision.

4.5 Privatisation

Congress rejects the Review’s call for the privatisation of Belfast Port and other Trust ports in Northern Ireland. This issue has already been examined and considered exhaustively. The agreed settled position is that it is in the interests of the public and the NI economy to maintain Belfast (and other ports) in the public sector. Belfast Port has been highly successful.

Congress also rejects the Review’s wholly misguided call for privatisation of vehicle testing in Northern Ireland. The facts are that the current arrangements is Northern Ireland protect the public and motorists’ interests. It ensures that tests are carried out independently and efficiently by accountable public service staff