Listening – Responding –Leading

THE ULSTER UNIONIST PARTY

RESPONSE TO THE COMPREHENSIVE
SPENDING REVIEW

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ULSTER UNIONIST PARTY RESPONSE TO THE COMPREHENSIVE SPENDING REVIEW
Northern Ireland will take longer than most other regions in the United Kingdom to work free
of the resulting emergency caused by the economic downturn and debt crisis. The banking
crisis in the Republic of Ireland has resulted in an agreed bailout package of £77bn with the
European Central Bank. It illustrates the gravity of the current situation and the fragility of
the Eurozone and connected economies.

As global shares fluctuate it is crucial that Governments throughout Europe continue to have
a responsible approach – this includes the Northern Ireland Executive. A budget must be
agreed as soon as possible; however it would be wrong to ask government, businesses and
families to introduce financial constraint without devising a positive plan for delivering
growth and job creation.

In this paper the Ulster Unionist Party offers a framework for a Competitive Economy and
provides an outline of how we intend to deal with reducing costs in order to ease budget
pressures.

The Executive faces a significant challenge which will have an unavoidable impact on public
services, jobs and our economy. However, the manner in which the Executive reacts to these
cuts will determine the level of impact felt by individuals and families across Northern
Ireland. The Ulster Unionist Party urges a responsible approach that looks to utilise
opportunities to deliver services for less, involve the voluntary and community sector in
service delivery, retain jobs and boost the local economy. And we believe that if a corporate,
innovative and constructive approach is pursued by all parties in the Executive, the effects of
the cuts can be minimised.

A Competitive and Growing Economy

Northern Ireland, like many parts of the United Kingdom, is suffering from recession fatigue.
Doom and gloom has set in as talk of cuts is repeatedly versed across our newspapers and
televisions. Whilst no-one should be in any doubt that there are difficult times ahead, there is
also significant opportunity for business and government to grow the private sector. The
Executive cannot miss these opportunities by inaction.

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Corporation Tax

A reduction in Corporation Tax, whilst not a silver bullet, has the potential to significantly change
Northern Ireland’s economic trajectory. The UUP believes that the Coalition should devolve the
power to reduce Corporation Tax to the Northern Ireland Assembly.

In light of the Azores ruling, if the Northern Ireland Executive decided to reduce the rate of
Corporation Tax, there would be an inevitable impact on the public finances. The Northern Ireland
Executive and Assembly if it is serious about reducing Corporation Tax must start to examine in
detail the options available to them.

Whilst there are clear benefits to reducing Corporation Tax there are also considerable risks. The
amount of money it will cost the Executive is still disputed, the time it would take to see a return to
the Treasury from increased business activity is uncertain.

The Ulster Unionist Party believes that the possibility of targeting a Corporation Tax reduction must
be explored - the banks and the utilities currently create the greatest Corporation Tax revenue in
Northern Ireland – the possibility of excluding these large and stable companies from any reduction
and focusing a reduction on Small and Medium Sized Enterprises and inward investment, would
greatly reduce the burden on the Executive and target those businesses most in need. Rewarding job
creation and innovation should be the main principle driving a reduction in Corporation Tax.

There is also potential to create a bundle of tax break incentives - different incentives will increase the
potential to create jobs and reduce the impact on the Executive. The Government should examine tax
incentives for Intellectual Property Rights and Research and Development in conjunction with any
reduction in Corporation Tax.

There is also an argument for phasing in, over a period of time, any reduction in Corporation Tax to
ensure the minimum impact on public spending capability and maximising growth and job creation.

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Manufacturing

Northern Ireland has a history of industry and innovation; in recent times we have proved our
capabilities by attracting significant international investment from large scale employers. We must
build on this history and success to truly transform our economy.

However, the past twenty years has seen the further erosion of a small but effective manufacturing
base which survived the large scale de-industrialisation of the 60’s and 70’s. To ensure balanced
growth in innovation and manufacturing Northern Ireland needs a vision for the private sector. We
must make room for and facilitate local entrepreneurs willing to risk their own cash and back their
ideas. A major contribution to sustainable growth has to be in rejuvenating local manufacturing.

A transformed private sector must be our collective goal as we seek to increase employment and
living standards across Northern Ireland. Northern Ireland must foster a ‘can-do’ attitude and be more
visionary in our outlook – this must begin with local political parties. `

Enterprise Zones

The Ulster Unionist Party believes the Coalition must publish its policies for making Northern
Ireland an Enterprise Zone - Exploring incentives such as – rate relief in zoned manufacturing
areas – tax reductions on reinvestment of profits and networks to develop capacity to secure
borrowing for start-up capital or project expansions.

Enterprise

Small and medium sized businesses in Northern Ireland are usually locally-owned and make a
considerable contribution to employment and our internal market. The failure to proceed with Local
Government Reform, which had the intention to devolve responsibility for local business support to
reformed local authorities in the course of 2011 and the fact that there is no Enterprise Strategy in
place in Northern Ireland, means there is currently a vacuum of support to Northern Ireland
businesses which are not Invest NI Client Companies.

The Minister for Enterprise Trade and Investment has had time to consider the Independent Review of
Economic Policy and should bring forward proposals for an Enterprise Strategy in conjunction
with an agreed budget.

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Getting Banks Lending Again

Small businesses in Northern Ireland continue to find it extremely difficult to secure loans from our
local banks and face considerably increased costs associated with business banking.

The Northern Ireland Executive must have regular and direct contact with HM Treasury, the Bank of
England and leading UK banks with regards banking policy and its impact on Northern Ireland.

Northern Ireland has the lowest uptake in the UK of the Government’s Enterprise Finance Guarantee
Scheme with latest figures showing that 133 businesses have availed of the scheme.

The Coalition should review the Enterprise Finance Guarantee Scheme and make any necessary
changes to ensure that Northern Ireland businesses are not disadvantaged by the practices of
local banks.

Making the most of Existing Opportunities

Our manufacturing and export sector is largely reliant on a global recovery and whilst Invest NI has a
role to play in developing business exports its main function is to secure inward investment and
investment in large indigenous businesses. The UUP strongly supports the recent US investment
conference and welcomes the investment it has and will bring. However, we believe that, the
Executive and Invest NI must do more to help local businesses build networks and relationships
in the emerging BRIC economies. The imminent end of Selective Financial Assistance means we
must broaden our outlook - we propose that Invest NI rebalances its work load to promote
exports as well as attracting investment in Northern Ireland –we therefore call upon the
Department of Enterprise Trade and Investment to produce an Export Strategy for Northern
Ireland. Growth rates in Europe and America are at present slow, Northern Ireland plc must look
more strategically to those parts of the world which are displaying higher levels of growth.

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Green Investment Bank

The Green Investment Bank is planned to replace the £2bn a year spent through the Carbon Trust,
Energy Saving Trust and Marine Renewables Development Fund – it is of vital importance that local
manufacturers and businesses are prepared and able to tap into this funding stream as early as
possible. The operating principle of the GIB will be based on a public-private model. The DETI
must build capacity and provide incentives to tap into this funding stream. Northern Ireland is
overly reliant on expensive and polluting fossil fuels which increase our energy cost and emissions;
however, we have significant renewable energy potential which we are currently not realising.

Small and Medium Sized Enterprises

SMEs form the back-bone of our local private sector and it is therefore of paramount importance that
Government is on their side. The Executive must do more to build relationships with SMEs and
ensure they have the capacity to compete and win Government procurement contracts. It must
also ensure that businesses avail of all existing and future opportunities to increase energy
efficiency. Similarly the Ulster Unionist Party welcomes the Coalition’s plans to introduce a Grocery
Ombudsman as it will protect farmers, food producers and smaller retailers alike.

Tourism

Tourism has been a success story in Northern Ireland in recent years with considerable growth in the
area. However, tourism contributes only 1.9% to the Northern Ireland economy, compared to the UK
average of 3.2% and 3.3% in the Republic of Ireland. Visitor spend in the Northern Ireland stands at
around £37 per person per day, compared with upwards of £64 in GB. Whilst visitor numbers have
increased from the Republic of Ireland visitor numbers from Great Britain have been in decline in
recent years. The Ulster Unionist Party is concerned that this trend is due to the vehicle promoting
Northern Ireland plc. Tourism Ireland promotes Northern Ireland in Great Britain and due to the all
Island approach we believe some of our distinguishing features are often lost. The Ulster Unionist
Party believes a joint review should be carried out by the Northern Ireland Executive and the
Government of the Republic of Ireland into the workings of Tourism Ireland to ensure that
both jurisdictions are maximizing their tourist potential, and that Northern Ireland is assured
of the maximum benefits relative to its participation in tourism promotions.

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Responding to the Cuts.

There has been significant disagreement between the Department of Finance and Personnel and the
Treasury in recent weeks about the exact figures, PricewaterhouseCoopers (PwC) has outlined a
£1.4bn reduction over the four year period for Northern Ireland - with a 6.9% reduction in current
spending and a 37% reduction in capital spending. It is of paramount importance that the Executive
prioritises quickly and effectively. The Ulster Unionist Party believes that our National Health Service
is one of our greatest assets and most vital services. In light of growing need and years of under
investment we believe strongly that Health must be prioritised.

Reducing Costs/increasing efficiencies

Despite much talk about reducing bureaucracy and increasing efficiencies in Northern Ireland we
have seen limited progress under the DUP/SF domination of devolution. However, successes such as
the Reform of the Health Service prove that we can be leaders in reforming public services. The
Ulster Unionist Party believes that doing things more efficiently and effectively will help improve
frontline services and retain frontline staff.

Review of Non Departmental Public Bodies

Since 1998 Northern Ireland has seen a relative proliferation of Non Departmental Public Bodies. The
Northern Ireland Executive is responsible for 76 NDPBs and Commissions costing billions of pounds
a year. Arms length government bodies, on occasion, can deliver excellent services and provide
independent voices that central government cannot. However, in light of the evident overlap and
number of NDPBs a comprehensive review is long overdue. The Ulster Unionist Party supports an
immediate and time bound review of all NDPBs in Northern Ireland with a view to reducing
their number by a third by 2014/15.

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Review of North South Implementation Bodies

The Ulster Unionist Party is proud of the central role it has played in normalising and regularising
relations with the Republic of Ireland. However, in this time of growing fiscal constraint it is
becoming increasingly difficult to justify some of the cost of the North South Implementation
Bodies – this is true for both jurisdictions. The St Andrew’s Agreement Review into the North
South Implementation Bodies and Areas for Co-operation has been in progress for nearly three
years - the Ulster Unionist Party calls for the North South Ministerial Council to complete the
St Andrew’s Agreement Review within three months. It should pay particular attention to Foyle,
Carlingford and Irish Lights Commission, the Food Safety Promotion Board and the Language Body.

Sharing of Executive Departments’ and NDPBs’ Back Office Services

The Ulster Unionist Party believes it should become, where possible, mainstream Executive policy
to consolidate back office services, where possible, across all Executive Departments and across
all relevant Non Departmental Public Bodies in Northern Ireland. There should be one single
administration office for all of Northern Ireland’s Commissions. HRConnect, which focuses on NICS,
has provided us with the template and experience to expand this element of cost saving reform to
secure further cost saving consolidation.

Public Sector Pay Freeze

Protecting jobs must be our number one priority. The private sector has consolidated its position with
many employees taking pay cuts and working fewer hours in order to maintain their employment and
keep businesses afloat. The Executive has to reduce its spending and in order to secure jobs in the
public sector - we believe there should be a pay freeze in Northern Ireland Civil Service pay for
the next two years for all those earning above £26,000.

Reform of Civil Service

There is a need to reduce the excessive management layers that exist in some areas of the Civil
Service. Promoting and developing leadership amongst senior civil servants, reforming the middle
management, having leaner structures and better trained staff can significantly reduce costs. The
Minister for Finance and Personnel should seek to reform the management structures within the

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Civil Service, and do more to entice people with experience in the private sector into senior
management positions.

Reducing sick leave

Annual estimated savings of £45m per annum can be achieved by reducing the cost of public sector
absence through sickness leave to the same level currently met in the private sector. The Executive
must reduce the level of sick leave to private sector levels – introducing a more robust policy of
regularly tracking and publishing the level of Civil Service sick absence and its associated cost
in comparison to the private sector will help achieve this target.

Reducing number of Executive Departments

The Ulster Unionist Party believes that in the interests of better governance and cost effectiveness the
number of Northern Ireland departments should be reduced. However, we recognise that any
proposals will only create meaningful savings if the number of civil servants is reduced and/or the
number of functions of each department is reduced. The likelihood of political agreement on any
reduction is also marginal in the near future. The Ulster Unionist Party strongly believes that in the
short-term, immediate reforms concerning how Executive departments, interact, co-ordinate
and deliver Programme for Government objectives must be introduced. This should include
more joint strategies, cross departmental delivery groups and better financial management. In the
Long-term we believe the Executive can function effectively with a maximum of 8 Departments.

A Cost Effective OFMDFM

By next year the budget for the Office of the First and deputy First Minister will have increased by
nearly 30% (27.4%) since 2007. In light of its limited performance and the fact that there has been no
significant increase in output since the beginning of this Assembly, the Ulster Unionist Party believes
this is an unwarranted increase. We therefore propose that the budget for the Office of the First
and deputy First Minister be returned to its 2007-08 allocation saving the Executive some
£22.9million.

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Reducing the number of MLAs

Northern Ireland is currently over governed – the Ulster Unionist Party believes that the
number of MLAs should be substantially reduced to better reflect Northern Ireland’s
population. The final outcome of the Parliamentary Voting System and Constituencies Bill will have
a significant bearing on proposals from the UUP.

Voluntary and Community Sector

The Voluntary and Community Sector in Northern Ireland is extremely valuable and valued by the
Ulster Unionist Party. It is often able to do jobs that government cannot, filling gaps in service
delivery that exist between government departments and engaging with hard to reach people –
therefore adding value. The Executive must develop its relationship with the voluntary and
community sector.

Raising Revenue

Regional Rate

In light of the fact that the regional rate has been frozen by the Executive for three years and taking
into consideration the fiscal crisis facing the Executive; it is no longer defensible to maintain a freeze
on the regional rate. In order reduce the potential impact on households whilst creating a meaningful
revenue stream to deliver essential public services we propose a year on year 2% increase in the
regional rate over the CSR period. This will bring in over £50million to the Executive over the
CSR period.

Rate Arrears

By the 31st March 2010 rate arrears across Northern Ireland amounted to £113million. This is an
ongoing problem and completely unacceptable amount; in light of the pressures facing the Executive
this figure is little short of a disgrace. The Minister for Finance and Personnel must introduce a
robust and targeted action plan to reduce rate arrears by £45m by 2012 and a further £45m by
2014.

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MOT charges

The Ulster Unionist Party believes significant savings can be made by privatising MOT test centres.

Civil Service Car Parking Levy

Most businesses or individuals in the private sector have to pay for their car parking spaces. A charge
on car parking spaces in the Civil Service would raise much needed revenue whilst encouraging
car-sharing and reducing congestion on our roads. It would also be a potential boost for public
transport. A charge of £5 per week could generate between £10 and £15m - disabled badge holders
would be exempt.

Capital Assets Sales

The Executive must create a comprehensive single Asset Register and begin the process of
strategically selling off its capital assets. Monies raised should be hypothecated for capital
investment. It will take a long time before property market prices return to what they were, however,
this should not deter capital assets sales - in light of the ailing construction sector it is unacceptable
that such a register and process have not yet been created.

The Forest Service of Northern Ireland has 124 forests consisting of hundreds of thousands of acres.
Forest Service Land is worth over £150million whilst the timber growing business is worth over
£100million. The Ulster Unionist Party believes that the current model of being commercial owner
and regulator of forests in Northern Ireland is imperfect. We therefore propose that the Forest
Service estate begins to be privatised, creating considerable income for the Executive whilst
separating the regulatory and commercial roles of Forest Service.

Certain Departments within the Executive have considerable estates that are not being managed as
efficiently as possible such as the Department for Regional Development and the Department for
Agriculture and Rural Development. The Ulster Unionist Party proposes that departments
produce an estate rationalisation plan to ensure that the taxpayer is getting the most out of the
Government’s estate.

Water Rates

The non-introduction of water charges has resulted in the Executive forgoing spending on frontline
services during this Assembly in order to bridge this funding gap. At a time when public services are
stretched it is crucial that we maximise our potential resources. However, the Ulster Unionist Party
recognises the serious financial difficulties families are facing across Northern Ireland and recognise
that households are on average paying £160 per year servicing water charges through their rates. We
therefore call upon the Minister for Regional Development to lay out the facts and options open to the
Northern Ireland Executive with regards to water charges – focusing on the potential increase in cost
to the average household in Northern Ireland if they were to be introduced. The Ulster Unionist Party
firmly believes that an informed and time-bound debate must take place and that if water charges are

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to be introduced the most vulnerable in society must be protected, any charges must be phased in over
a period of years and all revenue must be hypothecated to frontline health and education services.

Investing in the future

Politics in Northern Ireland is too often based on cynical short-term party political gain. The Ulster
Unionist Party prides itself on its vision. In recent times we have led the way towards changing the
nature of political debate in this part of the United Kingdom. We have shaped the debate around the
economy and Corporation Tax, we have delivered reform in our Health Service and we are at the
forefront of developing a Higher Education system which now boasts two of the leading universities
in the United Kingdom. However, there is considerable work to be done to make sure that Northern
Ireland is a fair, prosperous and cohesive society in the future. The difficulties that CSR has posed
mean that planning successfully for the future is more important than ever.

Skills and Innovation

Looking at the medium and longer-term we must continue to invest in skills and education. As
western economies rely more and more on the knowledge economy and niche markets, investing in all
levels of education is crucial. As a Government we must ensure that investment in further and
higher education is maintained in order to give the people of Northern Ireland the skills needed
to thrive in the global market.

Early Years

Cycles of social deprivation are prevalent throughout Northern Ireland affecting thousands of
individuals and families’ lives. The Ulster Unionist Party has led the debate on Early Intervention in
Northern Ireland - getting to grips with educational, health, social and communication problems at an
early stage in life is crucial to ensure people have the opportunity to break out of poverty. In changed
fiscal circumstances we will not have the luxury of pouring further money into our education, health
and justice systems in order to address preventable problems. The future of Government services is
reliant on preventing people from entering into the justice system, by ensuring people are healthy as
they grow up and giving people the level of educational attainment they need to gain entry into the job
market.

The Ulster Unionist Party proposes the introduction of a cross-departmental Early Years
Strategy, with a centralized Executive fund, designed to tackle problems of health, education,
youth justice and regeneration.

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The National Health Service

The Health Service in Northern Ireland has been underinvested in for decades, the service provision
gap between Northern Ireland and the rest of the UK is in serious danger of widening further unless
we prioritise health in this forthcoming budget. However, in spite of this reality the Minister for
Health and Social Services is leading reform to ensure we still have a health service in 20 years. As
the only major Executive Department to complete its RPA process, DHSSPS is delivering more
efficiently and effectively. By creating the Health Agency the UUP is leading the way in Europe on
preventative health ensuring a healthier society and a Health Service in the future. By developing
Tobacco Regulations and a long-term ailments plan the UUP is leaving a legacy that will secure the
future of the NHS in this part of the UK. However, these innovative developments will only deliver if
they are backed up by investment. In order not to undo the progress that has been made Health
and Social Care Services must be prioritised.

Shared Future

If Northern Ireland is to be a prosperous and settled part of the United Kingdom, in which people
want to invest, we must ensure that we continue to make progress towards a truly shared future and a
genuinely pluralist society. The First and deputy First Ministers’ CSI strategy is an impediment to that
goal. In promoting a separate but equal programme they are condemning Northern Ireland to
perpetual division. The Ulster Unionist Party demands that CSI be rewritten based on the
foundation of good relations and an idea of the common good. It must have clear objectives and
retain the independent voice of the Community Relations Council. A society at ease with itself is
one that will attract investment and grow its economy – a genuinely shared future is critical for
our economic and social future.

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