Treasury Minister and Chamber of Commerce President warn against complacency in coming months Part 2

Mr Bell commenced by warning that there was the possibility that the Island would be struck by the “back-wash” of the UK’s current economic difficulties; and that there could be a downturn in the Island’s fortunes in the next 12-18 months.

He made it clear that the Island’s VAT revenue was almost certainly to be hit. This is due, he explained, to the UK forecasting a reduction in VAT receipts and under the terms of the VAT sharing arrangements, between the UK and the IOM, regardless of how well the IOM is doing, any reduction, in the size of the pool, will have a knock-on effect on our share.

This he said was more likely to have an impact on the politicians and government expenditure, within departments, rather than on businesses. However, he described this as more a ‘containment’ exercise rather than one of a cost cutting; which was not too far from what Mr Hollis had to say earlier.

Mr Bell is probably correct that the biggest impact will be felt among politicians seeking funding for their ‘pet’ projects but any ‘reduction’ in the growth of government expenditure is bound to have an impact on sections of the private sector who provide goods and services to government.

Mr Bell justified the above inflation rate rise in the minimum wage as he stated that the impact of higher energy and food costs are greater on the low waged; but he admitted a fear that this expectation could spread across all sectors of the economy, including the private sector.

He quite pointedly sent the message out, to the Unions, that government could not afford a 7.1% increase across the board, as this would add £21m to the wages bill.

It is therefore unfortunate that only recently the Chief Minister, Tony Brown, announced on Manx Radio, when discussing public sector pensions, that the Island could afford anything – so he and the Treasury Minister certainly do not appear to be singing from the same hymn sheet.

Mr Bell went on to talk about the ‘sad demise’ of EuroManx, and particularly the loss of the route to London City; which he said is a concern as it causing travel problems for the business sector and government.

Never mind Mr Bell, The Manx Herald is sure that other customers of EuroManx, who, due to the government’s misguided intervention, unnecessarily lost money on tickets they bought for non business or government trips, will be equally ‘saddened’.

In respect of more medium term challenges, Mr Bell raised the spectre of the OECD and stated that they were targeting uncooperative, small finance sectors like the IOM.

The Manx Herald is unsure whether Mr Bell really meant to say that the IOM was an ‘uncooperative’ jurisdiction, as surely this is the opposite of the message that the Treasury has been trying to spread around the world.

He pointed out that one country the IOM had not yet signed an agreement was the UK; and he admitted this is probably the one agreement that many of the local businesses had most concerns about.

However, he made it clear that an agreement would be progressed, albeit consultation with interested parties would be undertaken.

He mentioned that the introduction of the zero rate of corporate tax had got the EU off the Island’s back but, although this was one area that the Treasury had been successful, expressed some concern at the widening of the Saving’s Directive to incorporate areas such as businesses and trusts. This he said could bring the Island back into the spotlight.

He linked this to the problems Lichtenstein had recently faced and worried that the IOM may get caught up in other people’s battles.

Perhaps of greater consternation to Mr Bell was the recently published EU anti-money laundering and terrorist ‘white list’. He seemed disappointed that the IOM had only been granted ‘intermediate status’ which he described as “may be considered equivalent to approval of the quality of our regulations”. He clearly saw the irony that, whereas the IOM was not deemed 100% ‘clean’, Russia was and had been included on the list. In a twisted way he took some encouragement from this, and claimed that the Russian Ambassador had confided in him that he was embarrassed by his country’s inclusion and the IOM’s exclusion.

Mr Bell put this down to politics.

Mr Bell noted that it wasn’t only the politics of Europe the Island had to be wary of, and expressed his concern at an Obama presidency in the USA; stating that Obama was on record as having offshore jurisdictions in his sights.

Whether the threat to ‘shut down tax havens’ is just electioneering rhetoric or a genuine intention will clearly be worrying Mr Bell and the Treasury for the next 4 months.

Referring to the IMF visit, which Mr Hollis had touched on in his speech, Mr Bell said that it was essential, for the reasons mentioned previously, that the Island got a clean bill of health.

Mr Bell informed the audience that, on the 8^th and 9^th July, a deputation is due to arrive from the “lovely” UK. They are investigating the impact that the offshore islands have on the UK economy and Mr Bell said that he had insisted they visit rather than rely purely on written submissions. He said that this would enable the IOM to directly confront any of the perceptions they may hold about the IOM.

Mr Bell was very scathing about the UK Labour party and described the leadership in terms of ‘wounded animals’. He warned that this could spell danger for the IOM as they looked for scapegoats to blame for the “shambles that exists in the UK treasury at the moment”.

Let’s hope for the IOM’s sake the Labour Party, and the leadership, doesn’t have a sudden reversal of fortunes, as if Mr Bell’s words are reported back to Mr (G) Brown and Mr Darling, it is unlikely they will be too forgiving and shrug the slight off that easily.

Leaving the ‘international’ issues and looking at matters closer to home, Mr Bell returned to his favourite local hobby horse – knocking the appearance of Douglas and the quality of its shops, hotels and restaurants etc.

As unusual he compared Douglas to St Hellier, in the Channel Islands, and said the IOM is “light years behind what was being achieved elsewhere”.

This is one issue that the Manx Herald does not totally disagree with Mr Bell. However, the concern is that Douglas could become a ‘clone’ of other ‘finance centres’ and lose its Manx identity – and that is not a price worth paying.

Yet Mr Bell is correct that it will be the ‘working environment’ that will be a major factor in determining whether people wish to come or remain in the Island; but it will be at the Island’s peril if they destroy the unique character of the Island; as what then would there to be to separate the IOM from anywhere else?

In concluding his “rambling” presentation, Mr Bell tried to be up beat, by saying that for all the difficulties the Island was still ahead of its competitors in many areas; but it needs to continue to ‘breaking-away’ from the UK and build new relationships in the wider world.

He continued by saying that the Island needed to look to the emerging markets in the east, and that all players, including government and businesses, needed to raise their game and rediscover the pioneering spirit of the 1980’s. However, “we have to stop believing our own publicity”, he implored, as the IOM is not doing as well as it should.