North's £1bn aid package gets muted welcome

Britain's latest aid package offers just £400m in 'new money' for the North, but an extra £18bn is earmarked for capital projects over coming years, writes Carissa Casey.

Packaging, as any good marketing person knows, is everything. Unfortunately for Gordon Brown, Northern Ireland's politicians are a little more savvy than they were last November when it took nearly a week for them to discover that of the £50 billion (€74 billion) then offered by the British chancellor, just £2 billion was new money.

It took less than a few hours for both the politicos and the North's business community to figure out that the "new" £1 billion offered on Thursday was largely made up of old money, repackaged.

For Democratic Unionist Party leader the Rev Ian Paisley it was particularly galling for a British chancellor to include Dublin euros in the deal. Addressing delegates at the annual Federation of Small Businesses (FSB) conference at Belfast's Waterfront Hall yesterday, Dr Paisley described the move as a "sleight of hand".

Aside from Dr Paisley's objections, the £400 million coming from the Irish Government was not new - it has already been announced in the National Development Plan.

Of the remaining £600 million, £200 million is end of year carry-over from spending allocated for the current financial year. When Ulster Unionist leader Sir Reg Empey asked at the meeting at Number 11 Downing Street, why this had been reduced from the £400 million carry-over available in November, the chancellor successfully dodged the issue.

So the only new money on offer was £400 million, partly earmarked for the previously announced "innovation fund" which could also be used to offset water charges for a year or so.

As Mike Smyth, an economist with the University of Ulster and adviser to the parties, pointed out that's a 0.66 per cent increase on public spending in Northern Ireland.

Despite the obvious disappointment, the response was remarkably muted with most parties giving the package a cautious welcome. There's good reason for that. Public spending in Northern Ireland outstrips spending anywhere else in the UK and that's guaranteed for the next five years. An additional £18 billion is earmarked for capital expenditure over the coming years and there's even talk that the North's economy might not be able to absorb that amount of money.

The biggest issue for Northern Ireland's politicians is not so much about getting hard cash, as getting the right tools to successful re-engineer a public sector-dependent economy. If there was genuine disappointment with Mr Brown's package, it was within the business community and those hoping for a lowering of corporation tax to stimulate overseas investment.

Sir George Quigley, chairman of Bombardier, who has spearheaded the corporation tax campaign, described the package as "very unsatisfactory". "The Treasury never engaged seriously with the parties at all on the structural issues," he said.

While Gordon Brown agreed - by all accounts reluctantly - to a six-month review of the tax situation in Northern Ireland, Sir George was quick to point out that the terms of the review meant it would be virtually a self-defeating exercise. According to the Treasury's statement, part of review's role will be to promote the "competitive" tax regime that Northern Ireland enjoys.

Some 98 per cent of the North's businesses are SMEs and after Wednesday's budget face a tax hike of 3 per cent. The mood at the FSB annual conference - held for the first time in 33 years in Belfast - was somewhat optimistic. Glynn Roberts, the FSB's lobbyist in Northern Ireland, said he believed there would be further progress on the package this weekend.

"The key thing is, whether it's business rates or corporation tax, we need incentives to attract foreign direct investment and build our indigenous base. Northern Ireland is the only part of the UK that doesn't have a small business relief scheme," he said.

Dr Paisley was clear on his objectives. "What are needed are measures that will allow our economy to grow and stop being an economic drag on the rest of the United Kingdom . . . That battle is not over and we intend, with God Almighty's help, to win that battle. Stormont will fail unless it is properly resourced to bring economic prosperity."