Securing the Isle of Man’s future requires the next administration to tackle the public sector pension liability and the future trade agreement with the UK and Europe. Growing the economy is the most palatable way of meeting the estimated £63million annual shortfall in the pension fund from 2021 and that will require some innovative strategies from government also to support existing business. Light regulation is needed to assist them to expand and thrive. Tourism in particular is a good sector for potential growth. I would also like the Island to reinvigorate the film industry that benefited us on several levels through the nineties and early noughties. Government needs to listen to business more in terms of how it can encourage and support growth.
Pensions black hole
The bottom line with public sector pensions is that a huge debt has already been incurred and there don’t seem to be any sensible alternatives to paying it off long-term through tax revenues. If revenues don’t grow overall the pension bill could actually eat into funding for existing services.
The proposed pension reforms if implemented by the next administration will mean that, in the longer term, pensions will become more sustainable although there would still be a shortfall that will need to be met from government revenues. Other reforms may also be needed. By 2021 the predicted £63 million shortfall will have to be met by growth in the economy and contributions otherwise funding might have to be diverted from other services to meet this liability.
While the proposed reforms will require additional contributions, in implementing any further reforms we have to be careful they do not drive people out of the pension scheme or harm recruitment. Trying to cut pensions already in payment, or to tax them, like the Irish did when they were in serious crisis, would lead to massive legal challenges.
Thanks to the reserve fund set up in the 1990s the pension shortfall has been managed to date, and the zero-10 tax regime has helped the Island enjoy 26 years of unbroken growth. We need more creative thinking in the next government to replicate the success of the past two decades with sound fiscal management matched with innovation and imagination.
The Isle of Man and the Three Brexiteers
The United Kingdom voting to leave the European Union was a significant event for the Isle of Man.
The Island will have to seek a replacement for its Protocol 3 relationship with the EU, which allows free trade in manufactured goods and agricultural products. Protocol 3, as an attachment to the UK Treaty of Accession, is dependent on the UK’s membership of the EU and will come to an end when it finally leaves.
There will be no immediate change, however, as the UK’s withdrawal and the negotiation of new relationships with the EU, including the successor to Protocol 3, is expected to take at least two years.
Much will depend on what new economic arrangement the UK can negotiate with the EU, and how the Isle of Man as a Crown Dependency can fit into that framework. We will have to stay very close to the negotiations to ensure that the Island’s needs are known and protected.
With change comes opportunity, and Brexit may well open up new opportunities for the Island and the UK in the longer term. In the meantime uncertainty is bad for business and we must get a degree of clarity. That means opening and maintaining channels of communication with the three Ministers charged with negotiating the future trade agreements for Britain: Boris Johnson, David Davis and Liam Fox. The Island must also continue to join forces with the Channel Islands and the British-Irish Council to ensure that we are part of the conversation.
My suggestion is the next Chief Minister should appoint a Minister responsible for international affairs (perhaps in place of the current Minister for Change and Reform). Either the Chief Minister or the new appointee should lead the Island’s envoys to engage with the UK Ministers charged with negotiating the future trade agreements. The IoM Government will need to determine what it wants out of the process, and we need to utilise the experience we already have, both in government and the wider business community, to lobby and influence the final outcome for the benefit of the Isle of Man.
To achieve economic growth requires supporting and expanding existing business and a steady increase in the population to provide workers. Government’s Enterprise Development Scheme, the £50 million fund to promote economic growth, has a target of 500-1000 working people moving here each year for the next 10 years while the Chamber of Commerce wants to see double that rate. I believe a steady growth in immigration must be actively sought; ideally the Isle of Man should be attractive enough for our graduates to want to return home, with a wider range of job opportunities. The opening of the International Centre for Technology at the Nunnery will be a positive step towards training the workers needed to fill current IT vacancies. The next administration needs also to address the work permit system, and consider exempting more roles in areas where there is a chronic shortage of key workers – plus automatic granting of work permits for their partners. Should we also actively seek to develop green energy, clean tech industries? I believe so. The Island needs to be adaptable, remain attractive to inward investment and would benefit from existing business leaders becoming ambassadors for growth.
The debate over our future has well and truly commenced during this election campaign and needs to be fully explored by the next administration at the start of its five year term. If Theresa May can hold a brainstorming session for post-Brexit strategies, so too should the Isle of Man on that and the other major issues facing us today. If the next House of Keys can agree an overall strategy and targets we can begin to plot the route map to achieve them.
The new government will have to quickly determine its targets, not only its economic strategy and rate of population growth but also its aims for the future position of the Isle of Man in terms of its outward image, future trading requirements and business incentives.