Stephen Blackman, RBS Group Economics March 2013

1. Stephen Blackman, RBS Group Economics March 2013

3. It was the best of times, it was the worst of times

4. rarely has borrowing to invest been cheaper and this is unlikely to change soon yet rarely have households been so constrained

5. Size of the economy relative to eve of recession (%) 14 12 10% 10 8 6 4 13% 2% 2 0 -2 -4 -3% Typical recession Great Depression Current Recovery Difference from typical recovery Source: BoE; ONS

6. Equivalent of c.£137 billion a year for UK households 13% 18 million UK families Or £7,500 per family Equivalent of typical UK household’s annual tax bill Source: BoE; ONS

7. Monthly household disposable income by decile £7,000 £6,000 £5,000 Income of just £1,700 a month (UK) Income of over £2,000 on IoM £4,000 £3,000 £2,000 £1,000 £0 1 2 3 4 5 6 7 8 9 10 Source: ONS; Isle of Man Government

8. 30%  11%  5.4%  Supermarket Sweep 1.8%  0.9  2.5%  Source: Company Results

9. (How) can the IoM (and the UK) achieve strong long term growth? • Both are already rich & successful countries • Look for options within the existing constitutional settlement Take the welfare system as given • What makes economies grow? • More people in work (and other inputs) • Higher productivity • So, critical question: what will most effectively boost the UK’s and IoM’s productivity? • Humility

10. IoM has more in common with London than the rest of the UK GVA per head in 2011 40,000 35,000 30,000 25,000 20,000 15,000 10,000 5,000 - Y&H UK London Scotland Wales South East North East South West East Midlands East of England UK ex London North West West Midlands Northern Ireland IoM Source: ONS

11. But the demographic challenges are the same Change in key demographic ratios 2010-2015 Source: UN; Isle of Man Government; State of Jersey

12. Migration will play role, but cannot fill the demographic gap Source: UN

13. Stylised evidence on the rate of return to ‘education’ at different ages Source: Heckman

14. Smaller projects generally offer better ‘returns’ than larger ones

15. ‘Planning’ means fewer, more expensive houses • In England, ‘planning’ restrictions increase house prices and, hence, living costs • Relaxing planning constraints would reduce real house prices in England by 35% & boost the size of the housing stock by up to 17%

16. Thank you and questions Inventions of the 1870s The prototype telephone was invented by Alexander Graham Bell in 1876 A version of the light bulb was invented by Thomas Edison The phonograph is invented in 1877 by Thomas Edison

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