Slide 1 Stephen Blackman, RBS Group Economics March 2013

Slide 2

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

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

Slide 5 10% 2% -3% 13% Typical recessionGreat DepressionCurrent RecoveryDifference from typical recovery Size of the economy relative to eve of recession (%) Source: BoE; ONS

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

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

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

Slide 9 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 (How) can the IoM (and the UK) achieve strong long term growth?

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

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

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

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

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

Slide 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%

Slide 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

Slide 17 Thank you and keep in touch! Internet Social

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