Mr President, Today marks a significant moment in the future of the Isle of Man’s economy. Today we are presenting – for the first time – a comprehensive analysis and review of the Island’s current economy, an evaluation of our future opportunities, and a draft road map to bring more prosperity and security to the people of the Isle of Man.
Within the last two years our Island responded to a pandemic that changed the very fabric of how we did business and how our economy functioned. We used this time to take a step back and review the Island’s economy and where our future recovery could take us. This led to development of an ambitious and wide-ranging project to develop a new Economic Strategy – the likes of which the Island has not previously seen.
Today is a key point in this work.
Today we are publishing our draft Economic Strategy which sets out a vision for the Isle of Man to develop a strong and diverse economy, which is sustainable, ambitious and built on firm foundations to provide economic success, rewarding career opportunities and prosperity which positively impacts all residents on the Isle of Man.
This vision demands that we make changes.
It demands that we start putting the needs of our residents first.
It demands that we take bold steps to bring more confidence for private investment.
And importantly it demands we escalate our Climate Change commitments and ensure sustainability is weaved in all our economic practices going forward.
The Isle of Man has achieved a lot over the past few decades. Our exceptional financial services and digital sectors have created wealth, expertise, and an economic performance that we should be proud of, supported by a hard-working domestic economy and supportive public service. We are also a safe and secure place to live and do business, we have many successful, world-recognised companies here, and many of our residents are successful and able to find a good quality of life.
However, the world is changing and our current trajectory is no longer conservative or risk free.
In line with other western nations, we are facing a demographic challenge, with an ageing population and longer life expectancy. While these should be celebrated, it also presents serious challenges to the sustainability of our essential public services. In addition, the Island is not as attractive to young workers as it could be, and we see many of our young people leaving to pursue opportunities elsewhere.
Looking at the shape of our economy, we can see that while some sectors have grown others have unfortunately stood still or declined. The COVID pandemic highlighted that many businesses were in a poor and weakened financial state and were operating day-to-day. Furthermore, ongoing consolidation means the Island’s economic success is increasingly in the hands of a small number of businesses.
This results in additional pressure on Government finances and the services that are funded by them, leading to a squeeze on our financial reserves and on the existing tax base.
And finally, we are grappling with numerous global issues and Climate Change is a major part of that. At present, our economy is not sufficiently decarbonised, nor are there yet firm commitments to businesses that are based here that we can facilitate their own ambitious targets.
Simply put, carrying on managing from year to year in responding to these challenges and balancing our priorities will not be sustainable.
So how do we navigate these challenges and ensure the Island’s prosperity and security into the 2030s and beyond?
Firstly, we need to set out a series of economic aspirations and shifts. These are bold, high-level, and represent substantial commitments for Government and Council of Ministers do recognise that we will need broader debate and input over the summer before bringing the Strategy back to this honourable Court for a full debate in November.
In order to ensure the Island’s economy and public services are sustainable and on an upward trajectory, we are today making clear our ambition to grow the Island’s Population to 100,000 residents by 2037.
What is clear from all of the evidence is that our current demographic trends are a big threat to the future sustainability of our public services.
As more people retire and leave the workforce, the tax burden for public services will fall upon a shrinking economically-active population. We currently have a substantially higher dependency ratio than our peers and while we have made progress to shift our dependency ratio, this has in fact been driven by a reduction in children and an increase in older workers. Without generating an increased proportion of economically active people we are facing an increasingly unsustainable demographic structure whereby our dependent population will be costing the Island more than our working population can support.
If we do not change our approach we will end up with an increasing tax burden on a dwindling number of economically active workers. Working age people and businesses will leave the Island as we become increasingly unattractive, and we will face a very challenging future.
So how do we stop this from happening? This is not a case of tweaking a few policies, attracting a few additional workers, or incentivising a few more young people to stay. This is a critical situation that demands proactive, sweeping change to ensure that we have the workers our businesses so desperately need, the teachers, doctors, nurses, and police required to keep our essential services going, and a better-rounded population that can support improved amenities for the benefit of us all.
The Economic Strategy aims to change the shape of our population to give security and prosperity to our Island and our people for the future.
This will be driven by increasing our economically-active population, encouraging our young people to stay and go into rewarding careers once they leave education, while also encouraging people to move to the Island and take up productive jobs. This will cross a wide spectrum – data scientists, engineers, doctors, nurses, and teachers. The Island is desperately in need of skilled, ambitious people to make this an attractive and prosperous place.
We must also change the shape of our economy. We have a diverse range of sectors in the Isle of Man, ranging from our enabling sectors, to our established key sectors, all the way to the development of new and pioneering sectors.
Each of these three levels in our Economic Strategy play an important role and we must look at them in totality. To adapt and modernise those sectors that enable Island life to function. To protect, nurture and grow the key sectors that provide most of our international facing jobs, and to develop new sectors that are emerging and developing rapidly on a global scale.
We need to develop the infrastructure of the Island, while investing in the productivity of our businesses and workers, and exploring and facilitating innovation into new markets. As a result, we set out ambition to continue to drive strong growth in numerical terms, reaching a GDP of £10bn by 2032, and creating and filling 5,000 jobs over that timescale.
It is clear that we must also change the profile of our public finances. Currently Government income which is necessary to support day to day Island life, is largely funded by people – through VAT, Income Tax, and National Insurance. This places pressure on our tax base in a situation where the retired population is growing. While raising the economically active population will help to an extent, we also need to explore the prospects for new revenue streams, while bringing forward a comprehensive taxation strategy that will ensure a fair deal for our people and our businesses, while ensuring we can afford to provide great public services. Our ambition is therefore to generate £200m of additional annual public income by 2032.
And finally, by setting out clear objectives for the decarbonisation of our economy, we will strongly signal to business that the Island is a responsible place to locate and can support them in their net zero goals. Through the decarbonisation of the energy supply, we will support a substantial decarbonisation of the large services sectors on the Island by 2030.
Making these things happen will not be easy – it will require a number of crucial changes within Government and in how we interact as an Island.
We need to look beyond year to year plans and have a sustained commitment to the strategy over short, medium and long term with measurable results and accountability.
We need to have sustained commitment to economic policy – appraising the economic, social, and environmental cases for projects in a systematic way.
We must be joined up as Government, yet also take responsibility within Departments for the delivery of this Strategy and be efficient in everything that Government stands for.
And ultimately, we must ensure that we make best use of private sector investment, effectively leveraging it for the benefit of all.
To that end we expect that Government will need to make substantial investment in the economy to ensure these sea changes come about – but we are confident that if we do, the benefits to the Island in the long term will far outweigh the costs.
Our ambition is to have a £1bn long term public and private investment programme, supported by an initial £100m Economic Strategy Fund to help stimulate economic shifts and develop supporting initiatives.
Mr President, I fully appreciate that there will be a lot of questions about the detail – the how, the when, and the where.
Today we are publishing a draft, high level strategy based on a large body of research and discussion, but of course there is a large amount of further exploration and research to be done.
Some of this is already underway and other areas will be ramping up in the following weeks and months alongside ongoing public consultation.
As part of the Island Plan we have set out a broad-range of initiatives, some of which will directly support the ambitions within the Economic Strategy. There will be a number of sub-strategies brought forward to address some of the key challenges.
Amongst these will be a Workforce and Skills strategy which will seek to fully understand our skills needs both now and into the future, exploring how to maximise the opportunities for our residents to participate fully in the economy, identifying how we can improve access to learning and skills development, and continuing the important task of attracting skilled workers to our Island in areas of ongoing shortage. Recognising the critical nature of this important piece of work, the Department for Enterprise will publish a draft strategy in this space towards the end of July, for consultation over the summer ahead of bringing it back to Tynwald for debate in the autumn.
Government will also be issuing a consultation on a new Offshore Energy Strategy over the summer. A key part of this strategy will relate to offshore wind development, and how we can achieve a potentially significant income stream from seabed leasing for windfarm sites. The proposed strategy also covers the possible future of hydrocarbon exploration in our waters, the broader role of energy exports for our Island and how we can develop an integrated framework that enables us to sustainably manage and reap the benefits of our territorial seas.
Today I will also be making a statement on the Built Environment Reform Programme – a clear commitment to drive improvement across the built environment and align planning policy and development to the Island Plan and ambitions in the Economic Strategy.
It is the ambition of this government to bring forward true change. The Island Plan outlines our commitment to making the Isle of Man a more vibrant, secure and sustainable place for our people.
Each of these individual strategies or initiatives I have mentioned are important in their own right, and follow on from commitments in the Island Plan. But they cannot be taken forward in isolation. They need to be joined up.
The Economic Strategy is not just another strategy but is THE strategy which will help align all of our ambitions and importantly help fund the changes we want to make, and importantly the changes we need to make. It gives us the overarching direction in which to aim, and the tools to select from.
Mr President, We have always prided ourselves on our ability to adapt and as an Island, we have so much to be proud of.
But we have reached a point in our economy where we must evolve again.
We must not stand still while the world changes around us.
We must not stand still while our public services continue to buckle under the pressures of an ageing population.
We must not stand still while our young people demand new job opportunities and attractive facilities.
We must instead bring forward an ambitious and bold series of initiatives and policy changes that will ensure the future resilience, sustainability, and prosperity of our people and our Island.
The draft Economic Strategy will now be the subject of wide-reaching and engaging consultation over the summer and a key feature at the Government Conference in September, with an updated version brought back for debate in November this year and I look forward to engaging with members more broadly over the coming months.
Thank you, Mr President.
