THERE is No Doubt That the Almost Guaranteed Contraction of UK Public Finances Will Represent a Major Challenge to Northern Ireland, Particularly Post-April 2011.
A recent CBI report believes an additional Pounds 120bn will need to be taken out of current UK spending plans if public finances are to be balanced by 2015-2016. The big concern must be that as we slowly come out of the private sector recession in Northern Ireland, we are hit with a second wave of recession arising from public sector cuts. Unemployment could rise significantly as a result, particularly among 18-30 year olds. How do we build our private sector quickly enough to counter-balance this?
I would query whether it is realistic to expect our local private sector to do this alone in such a time frame without stimulus from Westminster.
Two initiatives could assist here -- the first being a form of localised corporation tax relief. This is a re-treading of old ground, but the circumstances over the next couple of years could become such that this needs to be revisited.
A second initiative could be a new capital gains tax relief programme for investors in trading businesses in Northern Ireland. The lack of access to capital for growing companies is going to be a barrier to growth over the next few years unless they have significant asset backed security available.
While there are some very good institutional equity funds in Northern Ireland that can invest up to a certain amount and in certain sectors, we still lack the levels of private equity seen in Great Britain.
If investors investing in trading businesses (businesses that will then grow, hire more staff, and pay more taxes) had the benefit of a lower capital gains tax regime this could have a significant effect on attracting this type of investment activity.
There is no doubt that there will be collaboration (and opportunities) for government, the public sector and the private sector over the coming years to deal with the inevitable reductions in public spending. However there is only so much that our public sector can be expected to deliver for the economy.
What we need is some type of sustained investment/taxation regime that encourages market forces and private equity to invest in and grow the private sector in Northern Ireland, and grow quickly.
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