In a little over 115 pages, Chief Minister Alfred Cannan set out what looks set to be not only the guiding light for this administration but beyond that into the future.

As well as the much-anticipated economic strategy, the government this week also published its climate change plan and a programme of reform for the planning system.

Among the plans, the government is seeking to commit to growing the island’s population to 100,000 by 2037, complete decarbonisation of our electricity supply by 2030 and diversify the economy.

In Tynwald Mr Cannan outlined why the government wants to implement the strategy, telling members ‘our current trajectory is no longer conservative or risk-free’. In essence, if we don’t change, then the Isle of Man will face stagnation or even decline.

Like many developed countries, the island has significant demographic issues, mainly that we’re getting older which brings challenges around tax and infrastructure.

Another big issue has been that while previous governments hoped that the island’s population would reach 94,000 by 2026, that just simply isn’t going to happen. The island’s population actually dropped between 2011 and 2016 and only recovered to around 84,000 by 2021.

The report said that the island is ‘particularly attractive when it comes to the inward migration of individuals who are not economically active’ – essentially we’re more attractive as a place to retire than we are a place for people who want to work.

Unlike other jurisdictions, we don’t make it harder for non-economically active people to move here.

To tackle this, the government wants to ‘re-adjust the island’s offering to target new younger workers and families, while encouraging our young people to stay and build their futures on the island’.

This includes creating more affordable housing, better career opportunities and improved leisure infrastructure.

At present, while we have low taxes, the cost of living on the Isle of Man is currently eroding that financial advantage for many low to medium-income households and is only really of benefit to those on higher incomes.

The accountancy company KPMG, which compiled a report on future possibilities for the island for the government, has suggested that the government needs a new tax strategy that includes ‘significantly increasing personal allowances to increase take-home pay for those on lower to middle incomes’.

It is proposed by KPMG that this could be at least partially offset by ‘tapering away personal allowances and other relief for those on high incomes and, potentially making modest increases to the headline rate of income tax’.

But the government is also suggesting that it could act to disincentivise non-workers from coming here by considering health insurance requirements, minimum levels of savings and preventing access to property markets.

CANNABIS

In the Our Big Strategic Economic Framework compiled by KPMG, the firm advised the government to ‘develop the island as a location for cannabis-based tourism from neighbouring jurisdictions’.

KPMG added: ‘While recreational use of cannabis in the UK and Ireland remains illegal, liberalisation of the law on the island would attract visitors.’ However, that recommendation didn’t make its way into the government’s 44 page summary of its strategy.

This does come at the same time as the government commissioning Liverpool John Moores University to launch a review into the harms caused by illicit drugs on the island that, amongst other areas, will look at where cannabis has been decriminalised.

ECONOMY

To grow the population, the report says that the island needs to grow and diversify its economy.

To this end, the government is aiming to reach a gross domestic product of £10bn by 2032, create 5,000 new jobs, generating over £200m of additional income to reinvest in services for the island.

The island’s growth has been driven by a narrowing group of sectors, with insurance and e-gaming each worth more than double business services, information and communications technology and banking. However, this imbalance is putting future growth at risk, leading the government to seek new sectors.

To resolve this, measures would be put in place to invest in skills, productivity, infrastructure and business sectors to deliver a more diverse economy.

In essence, this requires investment in infrastructure, growing export sectors and pursuing new opportunities. Some of this is already happening, with the island looking to move into the medicinal cannabis market.

This would, for example, mean that the enabling sectors of the economy such as retail, hospitality, culture and leisure, property, infrastructure and transport and energy would need to adapt and modernise.

The current key sectors of digital, financial services, production and the visitor economy would need to be maintained and grown, while the new sectors, being the green economy, data and knowledge would need to grow by pursuing new opportunities and considering where the island can leverage existing advantages.

Part of the new sectors the government is keen to explore is the knowledge economy. The KPMG report recommends that there should be an island campus working in collaboration with other small islands to offer a curriculum that is ‘relevant to industry requirements and future employment’.

As well as providing an opportunity for Manx students to study on-island, the KPMG report says that ‘large volumes of off-island students could be an economic initiative in its own right rather than just an educational option’.

KPMG has also recommended the establishment of an academy for space skills on the island.

It said: ‘Demand outstrips supply for space sector skills. The island could seek to develop a centre of excellence from which high-quality space education could be delivered or exported through online channels.’

The strategy says: ‘An island campus would offer students a unique range of experiences, reducing challenges with the retention of graduates and delivering to island businesses young professionals with the skills that they need.

‘It would be attractive to both on-and off-island students and help to support the wider objective of attracting more economically active people to the Isle of Man.

‘As an additional benefit, a large student population would be able to support more diverse and vibrant leisure and hospitality facilities, both on the demand side and through seasonal complementary working.’

PUBLIC FINANCES

About two-thirds of the government’s income is from us, either through income tax or the things we buy.

This means that government finances are vulnerable to changes in population, incomes and consumer confidence.

Further to this, due to the island’s zero-ten tax strategy, while GDP has grown, this has not been matched by a growth in taxation income. This means that society is not benefiting as much as it could from the island’s economic activity and puts pressure on investment in public services.

The solution to this, according to the draft strategy, is to grow and diversify revenues with a broader range of sources for long-term sustainability. This would be done by developing new income streams, such as the monetisation of resources and the growth of new economic sectors.

The ambition for this is to deliver more than £200m of additional annual income by 2032, which the government says would be available to ‘reinvest in services and quality of life’.

SUSTAINABILITY

As well as plans for the economy, the government also presented its Climate Change Plan, which will commit the island to the complete decarbonisation of our electricity supply by the end of the decade.

Currently, 84% of our electricity comes from burning imported fossil fuels. The government plans to cut this to zero by 2030 whilst ensuring a balance of security, affordability, and sustainability.

Doing this would not only reduce emissions from burning fossil fuels to make electricity, but it would also allow for clear power for low-carbon heating and transport.

Another key aspect is an interim target of cutting all emissions by 35% by 2030.

Mr Cannan said: ‘‘We must do everything in our power to limit the effects of climate change and future-proof our economy, so our island can thrive in a changing world. This plan will ensure we stay on track to reach our ultimate goal in 2050.

‘Achieving an orderly transition, which maximises the benefits of change and protects the vulnerable will require incredible tenacity, innovation and community spirit from the entire Island and I strongly believe we can do it by working together.’

Chair of the island’s Climate Change Board Daphne Caine MHK said that the plan and new interim target is a ‘real step forward on our climate action journey’.

As part of this plan, the government is also setting a target of ‘at least 20MW of locally generated, renewable electricity to be available by 2026’.

It says it will also be reviewing policy and legislation to ‘support delivery of carbon neutral and renewable energy while protecting the natural environment’.

As well as producing electricity, the government wants to see 15% reductions in emissions from buildings, transport, agriculture, businesses and waste management within the next five years.

Other work planned includes amending building regulations to ensure all new builds are 97% efficient, banning the installation of fossil-fueled boilers in new builds from 2024 and the government is recommitting to banning the registration of new petrol or diesel cars by 2023 and hybrids from 2035, in line with the UK and EU.

PLANNING

As part of the plan, the government is also looking to reform the island’s planning system. This would include simplifying and improving the planning process, aligning national planning policies with the Island Plan and promoting the development of brownfield sites.

Mr Cannan said of this: ‘‘We have set an ambitious goal to improve the quality of our island’s built environment and to deliver on that promise we need to take bold action. This programme of reform will help deliver a key priority for this Government, ensuring that our built environment is both sustainable and capable of delivering economic and social value.

‘Everyone can benefit from transforming unattractive wastelands and derelict buildings into appropriate, affordable, sustainable buildings for residential or modern commercial use. In the process, we can attract new businesses and enable existing businesses to grow and thrive.’

PICKING UP THE BILL

A big question is how is this going to be paid for? The strategy says that the government’s plan is for it to start off the investment to signal that the island will be open for business and external investment.

The draft strategy includes plans for £1bn of long-term private and public investment, supported by an initial £100m Economic Strategy Fund, to help stimulate shifts and initiatives.

It says: ‘Ultimately, targeted spending at the outset will mean this Strategy will be self-funding, with the return on investment after 10 years exceeding the outlay.’

This could also mean that existing capital schemes are not necessarily prioritised and that some of the NI funds and reserves could be allocated to commercial projects on the island.

The report says: ‘This would need to be a commercial investment with commercial returns, such as key public infrastructure with a guaranteed income.’

As the cost of borrowing is currently low, the report suggests that the government could seek extra external funding through the use of loans. Another option is to leverage private sector funding through a government-led investment programme to ‘fund or partially fund a number of projects’.

Furthermore, if the population is increased, then this would also allow private investment to be more commercially viable.

To see the document click here.

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