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Northern Ireland: Finance

Volume 691: debated on Tuesday 8 May 2007

My right honourable friend the Chancellor of the Exchequer (Gordon Brown) has made the following Written Ministerial Statement.

Following the St Andrews agreement in October 2006 and the historic agreement by the political parties on 26 March 2007 to the return of devolution, I am today setting out how the Government are meeting their commitment under the St Andrews agreement to provide the incoming Northern Ireland Executive with a package to create long-term economic and financial stability for Northern Ireland.

The return of devolution today provides a unique opportunity to create long-term peace and prosperity for all the people of Northern Ireland. The Government remain committed to ensuring that the incoming Executive have the capacity to provide quality public services, to continue the process of necessary reform, to plan for the future, and to make the long-term capital investments to underpin the economic transformation of Northern Ireland, as well as bringing long-term benefits for the island as a whole.

In advance of restoration and to this end, the Secretary of State for Northern Ireland and I have had meetings with the First Minister and Deputy First Minister designate. I look forward to continued dialogue with the restored Executive.

In advance of the final outcome of the Comprehensive Spending Review, I am today, however, confirming the following guaranteed package to boost investment, competitiveness and employment.

Investment

I am today confirming a funding package of at least £51.5 billion comprising:

£35 billion based on existing spending for 2007-08 together with uprating by at least inflation over the next three years; an £18 billion long-term investment strategy from 2005 to 2017; retention of value-for-money savings to be made over the period 2008-09 to 2010-11 expected to be at least £0.8 billion;

retention of asset sales to fund capital investment expected to be over £1 billion, with £500 million over the next four years;

additional spending over the next two years under the end-year flexibility scheme of £140 million resource DEL (£75 million in 2007-08 and £65 million in 2008-09) and £180 million capital DEL (£100 million in 2007-08 and £80 million in 2008-09);

additional spending financed by EU receipts expected to be in excess of £0.5 billion;

the provision of £400 million, additional to the £35 billion above, including an up-front £100 million in 2007-08 from the Treasury's reserve to enable an incoming Administration to delay the introduction of water charges without affecting existing spending plans in Northern Ireland and introduce an innovation fund; and

confirmation of £200 million borrowing under the reinvestment and reform initiative from 2007-08. Borrowing under the reinvestment and reform initiative will no longer be linked with the requirement to close the gap with GB council tax rates. This is in addition to the cap on rates and enhanced relief for pensioners already announced by the Secretary of State.

In addition there will be a major package of integrated investment in infrastructure, including for a substantial new roads programme. In addition to the £18 billion allocated to the revised investment strategy for Northern Ireland, the Irish Government have made £400 million available for the investment in infrastructure projects.

Within this package, I recognise the need to provide resource this financial year and therefore there will be £700 million available in 2007-08 above existing departmental expenditure limit plans.

Improving competitiveness

Following representations from all the political parties on differential tax rates, I announced on 22 March a review led by Sir David Varney to report on how current and future tax policy, and including the tax changes announced in the Budget, can support sustainable growth of businesses and long-term investment in Northern Ireland. The review will consider this in the context of the tax environment across the EU, including the Republic of Ireland. Sir David will report in the autumn.

A new Northern Ireland corporate tax office is being established to promote the competitive tax position that Northern Ireland enjoys, working closely with Invest Northern Ireland to promote indigenous and inward investment.

Provision is being made available to facilitate the new Executive to create an innovation fund focusing particularly on levering in private sector investment and promoting collaborative research. Up-front funding from within £100 million in 2007-08 is being made available along with funding of £36 million from the Irish Government targeted specifically on collaborative research and development.

I also agreed on 22 March to further discussions between an incoming Executive and officials of Her Majesty's Revenue and Customs (HMRC) with regard to excise duties and measures to tackle fraud in Northern Ireland.

To enhance Northern Ireland's competitive positioning in the global economy and, in particular, its ability to attract foreign direct investment, we will work with the Executive to organise a major conference in Northern Ireland for prospective investors in the autumn with a follow-up meeting in America next spring.

Increasing employment opportunities

In 2006 the unemployment rate in Northern Ireland was 4.2 per cent compared to 8.9 per cent in 1997. To build further on this progress, I also announced a new local employment partnership that will help create 5,000 jobs for the unemployed in Northern Ireland. It will be established between five leading employers in the retail sector—Asda, B&Q, Marks & Spencer, Sainsbury’s and Tesco—along with the British Retail Consortium and the Employment Service in Northern Ireland to support long-term benefit claimants into work, building on the successful approaches these retailers have already established.

Work will also take place in discussion with the construction industry on the development of a similar partnership, and extending this to the hospitality and hotel sector.

Future partnership

Looking ahead and building on this unique package, the Government look forward to continuing engagement between the Treasury and the incoming Administration, working in partnership to create a dynamic Northern Ireland economy and world-class public services for all in Northern Ireland and, together with the Irish Government, to create a strong all-of-Ireland economy.