Friday, 2 May 2008

Varney II

There was much disappointment last December when Sir David Varney announced that following a Review of Corporation Tax, Northern Ireland was not to be given a special dispensation. The disappointment was tempered by the announcement that Sir David was commissioned to do a further report, this time focusing on competitiveness. Some hoped he would announce some additional measures to make Northern Ireland more attractive to overseas investors.
Recently there was much speculation that his report ‘Varney II’ would be announced during next week’s US Investment Conference. Then there was talk of June. Much to everyone’s surprise it was released this week.
One wonders if it was being used to dampen down expectations around the conference. Having read most of the review it is long on analysis and short on new initiatives. It reiterates what the Executive is doing and emphasises the need to redouble efforts to reform the public sector for example.
Some might say that Varney I and Varney II are essentially ‘economics for slow learners’. Many politicians and commentators seem addicted to a ‘begging bowl’ mentality. These reports spell out that Northern Ireland is getting considerable assistance, it isn’t getting anymore, and it needs to stand on its own two feet.
The difficulty with this approach is that the Executive has so far shown little appetite for making the tough decisions required. Varney, for example, talks of privatising Belfast Port - something which all the local political have repeatedly opposed. He also talks about selling off the NI Vehicle Testing Agency, public car parks and parts of the public housing stock. Perhaps even more controversially, he calls for further public service reforms – cutting the number of public sector employees and ‘de-coupling’ NI public sector pay from UK pay agreements in order to reduce the 20% pay differential with the private sector.
This might make perfect sense from the point of view of increasing ‘competitiveness’ but it would be electoral suicide. It is obvious that the current politicians and Executive will never make such a move so is there any point in raising the issue of public service reforms, other than to simply position the UK Government to be able to highlight the Executive’s failure to address issues around competitiveness.

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