In 2018 the Scottish Government’s Sustainable Growth Commission published a report ‘Scotland - A New Case for Optimism’.
Using commissioned research, insights and analysis of invited participants and a series of meetings with economically important organisations across Scotland the Commission’s aim was to identify measures to boost economic growth and improve Scotland's public finances.
Its remit was to take into account the immediate situation in Scotland (2018 onwards), the aftermath of the EU referendum as well as looking ahead to the context of a possible independent Scotland (1).
It’s a great read, and the impact of COVID notwithstanding, its findings provide a powerful 12-point series of lessons:
It’s worth examining some of the lessons on this list from a Manx perspective to assess how close our own economic strategy aligns.
Caveat: I appreciate that Scotland and the Island currently have differing core economic models, but given there are arguably numerous headwinds for the Island’s offshore model and the fact that the Commission’s report is designed to articulate how Small Advanced Economies grow there are definitely some sound learnings to be made from a future-proofing perspective.
1/ Quality of governance and disciplined public finances. I think it’s fair to say that governance is is in good health, is robust and functions. Is there room for improvement? Certainly. Greater accountability and management of public finances would be of benefit. Are public finances disciplined? I think many Islanders would suggest the answer here is a definite no. Multiple examples of where, again, planning, management and accountability over finances must be improved to support growth.
2/ Long-term cross partisan strategy. One benefit of the CoMin system of government and limited role for political parties on the Island is there is, at least, a sense of cross partisan collegiality. However, is planning undertaken with long-term outcomes in mind? Less so. And the outsourcing of the country’s economic strategy is a limitation in being able to think and plan long-term. In-housing policy and strategy work would be a huge boost to the stability and policy security of the Island.
3/ Focus on innovation. Not my area of expertise, but it is fair to say that the Island has certainly dipped its toe into areas of innovation. Adopting the ‘follower’ approach arguably minimises risk but also may minimise being part of significant and timely innovation. Another risk, given the Island’s current constitutional ties with the UK is whether this relationship ever restricts or influences what types of innovation are acceptable (or not).
4/ Competitive location for international investment. Certainly true. The only question arising here is: is it always the right type of international investment given the optics for low-tax jurisdictions.
5/ Exploiting [Manx] resource endowment sustainability. Much work to be done here in light of renewables.
6/ Export-orientation. Limitations of being an island notwithstanding the Island has a fairly robust small/light manufacturing industry it’s fair to say that the overall economy isn’t strategically ‘oriented’ towards exporting goods. And this is one area where the island differs significantly from Scotland. Taking into account corporate and administrative services as service exports, then it might be said the island has export-orientation at its core. However, these are arguably not services unique to the island and furthermore, see point 4/ above.
7/ Migration-friendly. This is one area which has likely been negatively affected by the loss of EU travel and working rights. The wider struggle to fill vacancies reflects the UK’s similar challenges, with the wider implications of the work permit system.
8/ Flexible labour markets, progressive workplace polices, active employment measures, etc. While there are certainly policies in place and private sector employers adopting the wider global trend for supporting D&I, high profile tribunal cases from Government raise concerns about the level of progressive employment standards in a one of the island’s largest employer.
9/ Highly skilled workforce. The recent KPMG report as part of its Economic Strategy suggested there are significant skills gaps across all levels. With weak population growth (compared to similar countries) this will only become more of a challenge.
10/ Taxation for economic development; not competing as low-tax location. Er. Outright fail on this one.
11/ Inclusive growth at the heart of the strategy. Hard to assess as currently no available economic strategy. Plus, evidence of rising inequality in society would indicate a lack of inclusivity in growth.
12/ Quality of life as an asset and objective. Fair play here. Much is made of the Island’s quality of life. Although it could be argued that it is somewhat one-dimensional - great if you love the outdoors. Less great if you seek other things.
So, there you have it. A rather rapid take on how the Isle of Man currently stacks up against the Scottish Government’s Sustainable Growth Commission’s 12 lessons for growth in Small Advanced Economies.
There are some strong correlations - and some notable outliers (fully appreciating the Island’s current competitive tax regime).
But it’s a powerful framework to benchmark against and it will be interesting to see how much KPMG’s proposed Economic Strategy commissioned by the Government will reflect it.