Finance Sector Opposition Policy Review

The 1994 AGM of Mec Vannin, held in April, passed a resolution to review its stance on the finance sector. A committee was elected and submissions taken. The following report is the result.


Report of the Finance Sector Policy Review Committee of Mec Vannin, May 1994.

Not surprisingly, given the make-up of the committee and the lack of any submissions in favour of abandoning the current policy of fundamental opposition to the finance sector, the main recommendation that we unanimously make is that Mec Vannin remain opposed in principle to the presence of the finance sector in Mann. The reasons behind this recommendation are laid out in Part One of this report.

Part Two deals with the other task given to this committee at the 1993 A.G.M.: how to lessen our dependence on the finance sector and what alternative economic path to follow.

Broadly, it recommends two things:

1) "Capping-off' the finance sector at its present size as a short term measure to prevent us becoming any more dependent on this industry and:

2) a long term fundamental shift away from using our fiscal independence to entice foreign business and toward using the same powers to give our own people the economic advantages necessary to foster a diverse, indigenous economic base.

The committee appends a comprehensive submission from Mark Kermode that broadly concurs with our findings.

Signed (Greg Joughin)
Signed (Chris Sheard)
Signed (Cristl Jerry)
Signed (Paul Kelly)

WHY MEC VANNIN SHOULD CONTINUE IN ITS FUNDAMENTAL OPPOSITION TO THE FINANCE SECTOR

PART ONE - INTRODUCTION.

Opposition to the finance sector usually focuses on the shady disreputable nature of the business and the damaging, environmental, economic, political and cultural impacts it has on the Isle of Man and elsewhere. After outlining these reasons for continuing to oppose the presence and further growth of this industry, we want to move on and look at an important underlying reason why Mec Vannin, and indeed the Manx people, cannot afford to reach a compromise and learn to live with the finance sector.

GOVERNMENT ECONOMIC POLICY.

The government case for the finance sector is fairly easy to summarise. The government has set itself the ambitious but misconceived and narrow economic goal of maximising the incomes and spending power of people living in the Isle of Man. Its initial aim is to match the standard of living of the U.K and eventually to raise us up to the dizzy heights of the likes of Switzerland. It can only do this in the short timescale it has set itself by handing over free use of the Isle of Man as an offshore base to some high earning foreign industry like the finance sector. The underlying belief seems to be that given the money first of all, we can then buy solutions for all our other social and environmental problems.

1. THE DOWNWARD ECONOMIC SPIRAL.

The trouble with the above view is that the more money we make, the more money we need to tackle the new problems thrown up by runaway economic growth i.e. more finance sector means more people, means more schools, houses, hospitals, sewers, power stations, pollution, stress and crime, means more money, more finance sector, more population growth etc. ad infinitum. This is the madhouse economics of money addiction in which the real quality of life is sacrificed for excessive material consumption.

2. ILL GOTTEN GAINS.

The chief contention here is that the Manx Government's economic policy and the resultant of recent years is founded on a lie. The lie is that the finance sector is now a model of legal reputable and well regulated money making activity for the benefit of the Manx people thanks to the regulations and supervision set up in the wake of the S.I.B. scandal more than a decade ago.

Even if this were a true and accurate portrayal (and given the reactive, rather than investigatory role of the Government supervisory bodies and the smallness of the Isle of Man fraud squad, it is hard to see how it could be), it conveniently ignores the real issue: That is, from where and from what activities do the monies that pass through the finance sector and keep our economy afloat come from, before they broach our shores?

Thus on the one hand we have the visible high profile "smiling face" side of the finance sector consisting of all those off-shore subsidiaries of international banks, building societies, pension and insurance funds etc. which now form the backbone of the tax haven. The main business here is to exploit other countries' tax loopholes in order to aid and abet rich companies and individuals in the avoidance of their tax dues, and to invest the money thus salted away in the most profitable way around the world. Even though mostly legal, the business could at best be described as amoral in character i.e. its sole concern is with the making of maximum profit to the exclusion of all other social and environmental costs and ethical considerations such as the creation of Third World debt and impoverishment.

On the other hand, we have evidence that the smiling face of the finance sector masks a deeper layer of out and out criminal activities. The investigations by the U.S. Government into the Caribbean taxhavens on its doorstep have shown that the self same off-shore mechanisms and secrecy legislation that enable tax avoidance also and invariably provide a conduit and cover for all kinds of dirty money laundering from such sources as terrorism, drugs, fraud and larceny. The Brinks-Matt investigations by the U.K. police which revealed the Isle of Man finance sector involvement in just such a chain of money-laundering, indicates that the Isle of Man is no different. The only difference in this part of the world is that no authority, least of all the Manx Government, has systematically investigated the underworld of the Isle of Man finance sector.

3. MANN FOR THE BANKS.

In the blind pursuit of money and economic growth, and lacking the imagination to find an alternative, successive Tynwalds since the late '60s have allowed and encouraged the finance sector to grow uncontrolled to politically dangerous and economically unhealthy proportions. The finance sector, which is the largest single sectoral contributor to the Manx economy, now generates some 35% of national income directly and much of the remaining economic life in Mann, such as the building industry, is intimately dependent on it.

In theory Tynwald still runs the show, but in practice it dare not legislate against the interests of the finance sector community. In recent years, income tax bills have been withdrawn at the final legislative stage when pressure groups such as the Chamber of Commerce have cried, "foul." More recently the Civil jurisdiction and judgements Bill 1993 was scrapped after a vociferous campaign of opposition from a posse of leading finance sector institutions who perceived a threat to their tax haven autonomy from an extension of European law to the Island. Normally, such public outbursts are unnecessary as the realities of political power and mutual interest are obvious to all. The Isle of Man is but one of a plethora of tax havens in the highly competitive world of off-shore finance. We now depend on them far more than they on us.

If we have not already passed the point of no return, further unfettered growth of the finance sector will make a mockery of our cherished "home rule" and cancel out the constitutional moves to greater autonomy from London. The real decisions will increasingly be made by and for the interests of the largely foreign owned finance sector companies with Tynwald providing the appropriate political window dressing.

YN GORLEY MANNINAGH: THE MANX DISEASE.

The foregoing arguments have tried to show some of the reasons why the finance sector is a user-unfriendly industry for the Isle of Man. However, to direct all our attacks against the industry itself rather than the underlying thinking that brought it into being, is to treat the symptoms rather than the real cause. That is to say, the finance sector presence here is an expression of the values and assumptions of Manx decision makers brought up in a tradition of collective cultural inferiority. This sense of inferiority stems ultimately from the collapse of the crofting way of life in the 19th century and was given a new lease of life by the so-called "spuds 'n herrin" slump of the 1950s.

The assumptions are that the Isle of Man has no innate resources on which to base a successful economy and that the Manx people are economically backward and incapable of shaping their own economic future.

The concomitant to this line of thinking is that all capital, ideas of economic development and expertise (the economically active person) must be imported from the "advanced" countries around us. Hence the reason why the Government has handed over the creation and running of the economy to foreign financial and industrial interests, and why the Manx as a living cultural entity are on the way out if present trends continue.

If Mec Vannin puts its anti-finance sector campaign onto the "back-burner" to gain some sort of immediate political acceptance and supposed electoral credibility it will, in effect, signal its acceptance of this political philosophy of Manx inferiority.

PART TWO - HOW TO LESSEN DEPENDENCE ON THE FINANCE SECTOR AND WHAT TO PUT IN ITS PLACE.

INTRODUCTION.

There is no easy "off the peg" answer to the question of finding an alternative to economic reliance on the finance sector. What is clear, however, is the necessity for a small cultural entity like the Isle of Man, which wishes to survive and develop in its own manner, to retain overall control of its economic life. To do this it must guard against any one economic interest group, especially one, in the main owned and run from outside the Island, from rising to dominance as its paymaster-general.

DAMAGE LIMITATION.

A prerequisite, therefore, to any search for alternatives to the finance sector has to be the limitation of further growth in this area. This sub-comrnittee believes this could be achieved by "licence capping" the industry i.e. by restricting the issue of new banking and insurance licences to keep the sector at its present level. New licences would be issued only to replace business lost through natural wastage. Instead of scrapping the industry altogether, which would cause economic dislocation and distress, the intention would be to contain it while real efforts are made to develop indigenous industries, both traditional and new.

It is also the opinion of this subcommittee that, in general, no one sector of the economy, be it tourism as in the past or manufacturing and finance today, should be allowed to grow to the point where its contribution to national income exceeds a certain proportion - say 15% for argument's sake. This is based on the principle which Manx history teaches that the stability of a small island economy depends on diversity.

WHAT TO PUT IN ITS PLACE.

It is dismaying how little support from our own government is available to Manx people trying to make a decent living for themselves in their own country. Instead, the government makes life doubly difficult for its own people by making strenuous efforts to attract economic activity, personnel, ideas, in fact nigh on the whole economy from abroad. As a result of this lazy man's economic policy, responsibility for economic affairs is handed over to foreign businesses and Manx people have to compete with people from all over Great Britain and Ireland, and sometimes beyond, for work and jobs in their own land, jobs at all levels such as farrier, road safety officer and building tradesmen as well as most of the "high flyer" positions. In this free-market-free for all the Manx people are reduced to the status of a cheap, flexible workforce for incoming entrepeneurs; passive recipients of employment, rather than active participants in shaping their own independent future. Mec Vannin, we believe, should continue to campaign for an end to this destructive trend and its replacement by economic policies which empower and protect the Manx people.

THE MEANS

Much the same ways and means which Tynwald has used with such effect to make the Isle of Man an advantageous place for the finance sector and others to do business could, instead, be redirected to favour those who want to live and work in Mann for its own sake. We foresee at least two essential elements for such an alternative development plan:

1. A fiscal framework favouring the people here.

2. The economic empowerment of ordinary people through access to capital, knowledge, advice and training.

1. Fiscal Measures.

With its virtual fiscal autonomy in domestic affairs, Tynwald has the power to create an economic microclimate here in which home-grown enterprise could flourish. For instance, the Isle of Man used to be a significant centre of shipbuilding in the 19th century because until 1866, the duty on imported timber was less here than elsewhere. A whole range of activities including a modern leisure-boat building industry could prosper given the right cosseting by government through fiscal and tax preferences.

2. Economic Empowerment.

Measures of economic empowerment would be vital to allow ordinary Manx people to take advantage of the above. These measures might include a non-profit making community bank or credit union from which low interest, long term loans would be available to those with little or no capital; grants from government to enable attendance on vocational courses on and off the Island; a free small business advice and resource service; specific training at the Isle of Man College: a co-operative development agency.

The overall aim would be to stimulate economic growth at the grassroots, an area relatively neglected at the moment by government in favour of attracting and aiding up and running medium to large scale concerns from outside. In order to benefit Manx workers, rather than encouraging more immigration, the availability of grants, loans and training would have to be restricted according to some definition of Manx citizenship, the nature of which is outside the scope of this discussion.

WHAT KINDS OF ACTIVITIES?

In spite of current government policies, we can already see some examples of the kind of diverse, small scale activity we would like to see as commonplace e.g. farmers converting redundant outbuildings to holiday accommodation and running farm shops to supplement their incomes; hoteliers providing special interest holidays for those interested in birdwatching, rambling etc; an independent brewer providing real ale.

In addition we would suggest that there is scope here for the development of an energy conservation industry, a boat building industry as aforementioned; an ethical investment industry; an education industry centred possibly on a Manx University.

The government might claim to be identifying and supporting such initiatives already. The difference compared with our approach lies in the fact that the government searches far and wide across the world to attract an up and running business to fill an economic opportunity here. What they ought to be doing if they were really nationally minded is to make the opportunity available first to the people here even though this might take longer and involve investment in training and acquiring skills.

It is often stated (overstated infact) that this is a land deficient in resources. The chief resource which is lacking at the moment, we feel, is a belief by the government in the resourcefulness and worth of its own people.

END.



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