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Island on course for a good year, the 2024 Conister Bank sponsored Three Ministers Event is told

31 January 2024

The Island’s business community received a cautiously upbeat message at the 2024 Isle of Man Chamber of Commerce Three Ministers Event, sponsored by Conister Bank.  

It’s the second year running in which Conister have thrown their support behind the Comis Hotel gathering, which featured speeches by the Chief Minister Alf Cannan MHK, Treasury Minister Dr Alex Allinson MHK and Enterprise Minister Tim Johnston MHK. They each provided progress reports on the ‘Our Island Plan’ economic strategy. It was hosted by Chamber of Commerce President, Kristan McDonald, who stated that the Island’s economy wouldn’t function, produce goods and services, pay wages and bring investment into the Island, without the influence of those attending.

Bold decisions

Addressing the audience, Chief Minister Alf Cannan, said the current administration had reached its half-way point, which was a good time to talk about progress made to date and to provide an overview of the priorities identified for the coming 12 months. He said the Island’s ‘Our Vision’ should been engrained in everyone’s minds, which were to create 5000 new jobs, a £10 billion economy and a 100,000 Island population target.

 He emphasised that by 2026, the Island would have:  

  • filled 1800 new jobs
  • welcomed 2500 new residents
  • built 1000 additional homes
  • improved health outcomes
  • produced a new quality assurance scheme for education
  • created an additional £75 million of Government income from two key brownfield sites using private sector leverage
  • delivered 20MW of onshore renewable energy. 

He said the targets were ambitious but achievable and would provide a further 15 years of economic growth. “This Government is putting in the foundations for long-term success,” he declared, adding that it would make the Island a better place to live and work for everyone across society.

Mr Cannan said the annual economic report, given to Tynwald earlier in the week, gave a strong sense that the Government was on course to deliver its headline targets and that positive growth indicators remained - despite “the strong headwinds being faced.”

The Island was growing its residential base, working population, delivering on brownfield site commitments and critical infrastructure requirements. This was happening despite Covid hangovers, inflation spikes, global security concerns, public sector strikes and “the next-to-nothing economic growth of our biggest trading partner (the UK).”

On Island, he said that whilst pay and conditions still remained a challenge, disputes had been successfully resolved with the industrial and registered teaching unions. The Government was actively looking at improving culture and workplace performance across the public sector. Action was being taken to create the economic foundations that would “build an Island that is fit for the future.” He said they would continue “to promote the Island as a secure, vibrant and successful place to live and work.”

Government issues needed addressing

But the Chief Minister admitted that were a number of internal “housekeeping” issues that needed addressing, to keep the forward momentum.

Firstly, it was an absolute requirement to instil fiscal discipline across all Government departments, in order to operate within budget. Covid, inflation and pay increases had all contributed significantly to an increased deficit. This continued to manifest and current reserves were running “dangerously low.” This meant departments would need to act efficiently and to prioritise spending.   

Secondly, it was essential to remain committed to delivering the economic strategy. “The headline targets are not changing,” he said. The Department of Enterprise would need to lead from the front. Departments would need to make tough decisions. “This may cause some negativity but it is absolutely in the national interest that we regain control of public spending and protect our reserves for the future,” he said.

Thirdly, it was important to make progress on renewable energy commitments and energy supply security. Although it was a moving picture in relation to new technology “we have to set clear targets for our on-Island supply.” But more policies would need to be developed as far as offshore capabilities were concerned, given the amount of private sector interest being shown and also on matters around grid capacity.   

Fourthly, housing and health were big priorities. The Government had made commitments to tackling the housing crisis. He said housebuilding had continued apace over the last year. Furthermore, 723 new homes had been given planning approval for development in the near future. Brownfield sites, not just those going through the Manx Development Corporation, were also incentivising developers to use the Island’s Infrastructure Scheme. Supported by the Economic Strategy Board, the Scheme had, in principle, supported three new developments comprising 93 new apartments and mixed-use facilities for commercial, retail and leisure use. These developments had been leveraged with substantial private sector investment in the region of £50 million.

On social housing, the Council of Ministers had instructed the Dept of Infrastructure to investigate the feasibility of establishing a National Housing Association, to provide comprehensive housing for people at every stage of life. This would “improve the experience of tenants and those looking to progress up the housing ladder”.           

Departmental reforms

Actions and reforms first instigated in 2022 to improve service delivery, accountability and performance in the public sector had included overhauling the role of the Chief Secretary, to become CEO of the Isle of Man Government. Further changes were made to the roles performed by departmental CEOs and within the Cabinet Office. Mr Cannan said it was important to modernise the structure of the Civil Service and the way it interacted with Departments. “I have no doubt that these changes will assist in embedding the principles of open government, as set out in the Island Plan,” he said.

Furthermore, in July 2023, Tynwald had agreed the idea of having NEDs within departments and asked for a Code of Practice covering their rights and responsibilities.  This had been completed and positions were now being sought and filled across the Government, including the Major Projects Board, the Operations Performance Board and the Department of Infrastructure. This would provide “valuable external challenge, perspective, experience and oversight for large capital projects.”

Travel and connectivity issues

The Chief Minister conceded that the Island had been beset by travel problems and connectivity. The Government had worked hard to address these challenges by recruiting and training more air traffic controllers. But it had also required the careful handling of staffing matters during threats of industrial action. Issues surrounding Island connectivity remained a high priority. “These have a marked effect on a small nation like ours,” he said. For this reason, close attention was being paid to destination management and he admitted that public money continued to be used to fund airline services, in order to support local business and industry. This wasn’t ideal but it was necessary to stay in line with the long-term economic strategy. But he warned: “We do not want to become a cash machine for airlines.”

International standing

Two major financial issues of international significance were of concern - Moneyval and Beneficial Ownership - both of which impacted the overall economy. An initial Moneyval inspection had taken place in 2016 but a further examination was imminent, amid fears of tighter regulation. “Successfully passing the Moneyval inspection means that we remain on the white-lists and, with it, no challenge to our core banking structure,” he said. The Island’s Moneyval team had been working hard to ensure compliance. Separately, Beneficial Ownership had been through a more intense negotiation in recent months. Mr Cannan said that an EU court ruling last year, stating that open registers which infringed basic human rights privacy, had thrown open registers into doubt. The Isle of Man had come “under significant pressure from UK ministers to stick with original timetables.” He said he’d worked closely with Jersey and Guernsey to reject that position but confirmed the Isle of Man’s intention to respect the EU court ruling. But he admitted that current discussions around the subject were fraught but “I am determined to fight our corner.”

He finished with three clear messages. Firstly, that although mid-term periods were tough for any Government, progress was being made. “We have a Vision and a Plan and our major headline targets are on course to being met.”  

Secondly, the priority remained to quietly get on with reshaping the Government internally, to make it fit for the future. Proven leaders being introduced to key departmental positions “will eventually start to make a difference.”

Thirdly, he stressed that the Isle of Man remained a safe, secure and successful place to live and do business. “This Government and Council of Ministers are on your side,” he said, adding that 2024 would see tangible results towards building a secure and sustainable future.

Ensuring economic prosperity

Finance Minister Allinson said the first annual report on economic progress, presented earlier in the week to Tynwald, showed considerable success and forward momentum, to take the Island through the next decade. This would ensure economic prosperity not just in business sectors based locally or planning to relocate here, but also for members of the community born here or who had recently arrived.

Recent years had thrown up many challenges, namely Covid, wars in Ukraine and the Middle East, as well as various financial shocks and inflationary pressures. These had caused concern throughout the local community. “But we are no longer by-standers to fate,” he said. The Government had moved quickly and decisively to protect the nation, resulting in a strong and diverse economy, which had shown impressive resilience and adaptability. Despite financial pressures, this year’s Budget would stay on track to continue providing the necessary support for education, health, social care and frontline services, which all acted as a foundation for society.

There was also investment in climate mitigation, as part of the wider common aim of tackling global warming, along with increased energy security and reliability. Investment had been made in developing urban brownfield sites that had been dormant for decades, as well as to encourage business expansion and new, innovative start-ups.   

The Economic Report showed support for areas as diverse as insurtech and the newly expanded mountain bike trials, all of which made “a positive   contribution to our community and business sector.” But he warned: “We must constantly scan the horizon for threats and opportunities. The finance sector was still the Island’s major income driver, which underpinned Government spending and consumer confidence. 

In respect of Moneyval and money laundering, it was important to prosecute financial crime and to protect the Island’s credit rating and international reputation. This would foster the right environment for growth and wealth creation. It was essential to grow the working age population and to increase training and skills, which meant encouraging inward migration and making the Island more climate friendly. This would form the foundation for the next generations. Ensuring that the retail and hospitality sectors had access to the right skilled workers was also fundamental to the Island’s vibrancy.

Maintaining the Island’s safety and security whilst cherishing local heritage, culture and biosphere status was also vital “in protecting our unique and invaluable way of life.” He recognised the need to listen to people and the business sector. Reliable and accessible transport was key to the Island economy and the Government would continue to support air and sea routes.  “The key to this Government is the long-term strategy to support you, your businesses and our Island,” Dr Allinson concluded.

Positive action on jobs

Minister for Enterprise Tim Johnston focussed on the key measures that the Department of Enterprise used to demonstrate the progress of the Economic Strategy Report. There had been a substantial increase of 1500 full and part time jobs and a two per cent increase in the number of people employed.

 A total of 588 new net jobs had been recorded during the last quarter of 2023, close to the initial target of 600. Praising the work of the business community and the collective work of four agencies, he said this was complemented by Locate Isle of Man actively promoting the Island as a place to live. Efforts had been increased to attract business migrants, with 48 applications in 2023. There had been further growth via Enterprise Support, with 126 jobs created during 2023 and 150 people trained through the migrant support scheme. The Department was equally focussed on ensuring business remained vibrant. “We must do all we can to support our existing economy to ensure it is viable and vibrant,” said Mr Johnston.  

It was essential that the Island had the right infrastructure and services to attract the right people. Through the Island Infrastructure Scheme funding, three separate projects had been approved to revitalise brownfield sites, with private sector leverage, with the long-term target of generating £1 billion of private sector investment through initiatives supported by the Economic Strategy Board.

 Alongside this, in 2023 the Business Agency had helped support 18 applications which, when approved, would see 800 new homes built, supporting 300 jobs. This was mainly through private sector investment.

Strong showing by many business sectors 

There were now 84 eGaming licences in place “showing continuous steady growth in this established sector.” And he revealed that there was also a substantial pipeline of eGaming related business. Separately, the TT Digital brand strategy had seen social media channels grow by 276% since 2022, with a combined audience of 1.1 million. This showed that the TT was a worldwide phenomenon which “generated important income for the Island.”

Meanwhile, the Fintech innovation Challenge had garnered global interest, with around 80 applications, helping to position the Island as a prominent jurisdiction. Visit Isle of Man had reported 300,000 visitors to the Island during 2023 - almost back to pre-pandemic levels. Their aim was to increase numbers by a further 10% in the coming years. And Locate IOM had encouraged 300 individuals to meet with 60 businesses. This had resulted “in real offers made to young people.”

Mr Johnston said it was imperative to gain access to the right skilled workers and he recognised that this remained of concern to local businesses. The DofE had linked up with the Education Department, the Treasury, Chamber of Commerce and industry professionals to create a Skills Board. “This will enable us to fully understand skill requirements across the Island and align with priorities, to allow inward migration and upskilling for the future,” he commented.  

Locate IOM would continue to develop the skills base and to promote available opportunities across all business sectors. Their portal had attracted 12,500 registrations and over 250 businesses had actively enrolled. Furthermore, targeted marketing would take place throughout 2024, starting this month with the showcasing of engineering and financial services opportunities across the Island, to an international audience. The Finance Agency now had a dedicated resource in post in South Africa, building on strong existing connections, whilst efforts would continue to promote the Isle of Man as a leading financial centre.  

Meanwhile, Digital Isle of Man would be looking to exploit the data and knowledge industries, as well as a specific AI position for the IOM. They would also be seeking to develop and protect sectors and grow existing digital sector,s such as fintech, eGaming and eSports. During 2024, The Business Agency would also be looking to bring forward two strategies focussed on the local economy, both of which were data driven and aimed at driving economic growth.

In addition, building on existing fintech and insurtech successes, the Digital Business and Finance agencies had launched the 2024 Innovation Challenge, uniting the three themes of Cleantech, Fintech and AI. This had positioned the IOM as a frontrunner in innovation, with businesses being invited “to develop leading-edge products that would benefit the Island.” Mr Johnston said a number of businesses had already responded to these Challenges. Bringing these to fruition would require close cooperation with the Government and experts in the field. The Island’s success hinges on our collective actions to develop a diverse, vibrant and sustainable future,” he added.

Q and A

During a Q&A session, Kristan McDonald asked what the biggest challenges were, that could throw the economic plan off-kilter. The Chief Minister said financial discipline was absolutely imperative and that global security events shouldn’t be taken lightly. At the same time, it was important to keep focussed on the bigger picture and not to get bogged down on smaller issues. Dr Allinson said fiscal and political stability was key. But politicians had to be mindful that they needed to think locally, nationally and internationally. 

In respect of immigration and progress on pay review, Mr Johnston said discussion had taken place with the Chamber around access to skills and registration, but he recognised there were concerns working towards a one-stop shop. Whilst the registration process needed to be made efficient to ensure access to skills, immigration was a challenge and had to be in lockstep with border security. Mr Cannan said that immigration processing times currently stood at 56 days, due to a short-term backlog, but that the target was to get it down to 30 days. Dr Allinson said it was important to avoid toxic rhetoric around immigration. It had to be used for the Island’s economic benefit and it must be made easier for people to relocate to the IOM. “We want to encourage people to come here and stay,” he said, adding that measures were also being taken to simplify work permits.

On the subject of handing out punitive fines for financial offences, Mr Cannan said this was directly linked to Moneyval and the increased scrutiny that the Island was subjected to. He said he was concerned “about the way it was going”, especially providing hard evidence of misdemeanours and taking punitive action. Whilst it was important that the Island stayed on track with international demands, it was incumbent upon the FSA to work closely and effectively with businesses, who were coming under increasing pressure in areas such as compliance.

On any changes to tax policy to help rebalance the public finances, Dr Allinson said that whilst it was correct that people paid tax, it was also important to ensure the Island remained an attractive place to recruit and retain people. On Government debt, he said there was an organised drawing-down on reserves in the short term, to balance Government revenue. He warned that this year’s budget would be difficult and unpopular but was necessary to assure long term financial stability.

Asked about how much of a drain on finances was due to the Government’s final salary pension scheme and whether the money would run out, Dr Allinson said demand for revenue had plateaued and it was manageable. He also said it was hard to recruit good quality public sector staff.

The Ministers were asked if there was more that the private sector could do to help the Government achieve its plans. Mr Cannan said that increased digitalisation in the public sector was vital and he was keen to hear of any technological advancements that would enable the Government to become more tech savvy. Encouragingly, there had been 36 applications from the private sector to fill two senior vacancies within the Enterprise and Operations Performance Boards, with two high profile appointments being named shortly – both of whom had strong digital and technology backgrounds. This could be of great benefit to help improve Government services. Dr Allinson said that more online processing of social security, tax and employment matters would help free up staff to deal with other issues.  

They were also questioned on the rising costs associated with hospitality and the number of businesses folding. Mr Johnston said that whilst it was always disappointing to see businesses close, there was now a move towards fresh operators coming in with higher standards. It wasn’t the role of the D of E to get directly involved with individual companies, but the Department was always available to offer free professional advice. Dr Allinson said the sector couldn’t expect to have dependence on the Government, as had been the case over the last three years, but it was also evident that consumer habits were changing and spendable income had also reduced. Mr Cannan said that an Island population of 85,000 was not enough to sustain the hospitality sector, which was why it was crucial to increase the population “to give businesses a greater chance to succeed.” This was why focussing on the big picture was essential and why the minimum wage committee was struggling to set a level. It was essential that people were paid good wages.

Finally, the Chief Minister said that the Island offered investors and businesses real opportunity. The wider world was a dangerous and insecure place and the island provided greater safety and security. “Keep the faith,” he said, adding that he had no doubt 2024 would be a very successful year for the Isle of Man.