NEWS FROM THE CELTIC LEAGUE
I wrote to the Economic Development Minister, Laurence Skelly MHK, in late November expressing reservations about the £50 million Economic Development Fund drawn from the Manx government reserves.
The Minister has responded comprehensively. I don’t intend to comment on the response you can judge it for yourselves.
A link to my original query is at the foot of the article.
I should say that this is a scanned hard copy so any text errors that may have occurred are down to me.
Finally my thanks to the Minister and his staff for the prompt reply – text below:
Thank you for your letter dated 27th November relating to the Economic Development Scheme that was recently approved by Tynwald.
Before I address your specific points relating to transparency I would like to outline why I believe that this scheme provides an excellent opportunity to build further economic growth for our Island.
Although we have recorded continuous growth in our economy for over 30 years and unemployment has fallen by over 10% over the last year, we need to generate more new jobs for the future. The Island’s working population has fallen in the last few years which has also coincided with the growing proportion of our population who have reached retirement age and are enjoying increased life expectancy. This will of course put pressure on Government’s ability to keep funding public services particularly state pensions and health services. I believe that we still provide – and should continue to provide – a high level of public services in the Isle of Man. Therefore we need to create an environment which will enable even greater jobs growth to drive increased Government income to support these high levels of public services.
The Enterprise Development Scheme is an important initiative as part of Government’s efforts to accelerate economic growth. The Department conducted significant research into how similar scheme have worked in other comparable jurisdictions therefore we have gained some valuable insights into how they can help to attract valuable investment and create jobs while at the same time ensuring there can be appropriate oversight in this use of public funds.
It is important to remember that the scheme will be making investments in businesses – not grants or other forms of non-repayable assistance – so the fund is expected to grow over time while stimulating growth. Treasury already invests our Reserves in businesses on behalf of the taxpayer. While this has delivered a good return historically, most of the businesses concerned were not in the Isle of Man. We believe by investing in businesses locally we can encourage investment and job creation locally while also delivering a good return on the investments made.
Our research indicated that access to funds was limiting the growth of some businesses. By investing in growing businesses, we can attract more such businesses and support their growth – and also encourage private investment in local businesses too. Our research indicated other jurisdictions around the British Isles and beyond were successfully using similar schemes to help attract investment and job creation. The Department engaged in extensive consultation which indicated strong support from the private sector for such a scheme. Council of Ministers and Tynwald considered the Department’s proposals and the consultees’ comments and both Council and Tynwald gave strong support for the Enterprise Development Scheme’s creation.
In terms of transparency, I want to assure you that our Department and Isle of Man Government are fully committed to ensuring appropriate transparency and accountability when it comes to supporting business. There will be annual reporting on performance of the Scheme to Tynwald specifying the names of businesses which have been awarded support and information on the economic benefits of financial assistance given and the value of assistance invested through the Scheme. This is similar to the report that is currently provided to Tynwald in respect of the Financial Assistance Scheme in that the names of supported businesses will be published but not the specific amounts of assistance given to each.
The scheme will be managed by a regulated and experienced third party investment manager who will ensure the funds are invested impartially and for the greatest benefit to the Island, including jobs and Government income. There will be no political involvement in any of the decisions by the scheme manager. The process of selecting the scheme manager is currently underway and we expect to make an appointment in January 2016.
We have always acknowledged – and I have been public on this – that investment brings risk and not all supported businesses will succeed. You are correct in stating that similar schemes in other jurisdictions have a substantial percentage failure ratio. We will have businesses on our scheme that fail. The research phase of this project also showed that the schemes in the British Isles and Ireland that experienced the greatest success were those with no direct political involvement. This was due to several reasons including decisions were made on sound financial evidence by experienced professionals; this was also due in part to the fact that they were judged fairly and appropriately on aggregate performance not individual failure.
In the research that was conducted, I am informed that no successful scheme anywhere in the British Isles and Ireland required any investment to be subject to prior notification as you put it. We do not believe this would be workable nor add value. Also it would deter potential investors who require appropriate commercial confidentiality when seeking and securing funding.
We are putting safeguards in place to ensure that our Enterprise Development Scheme will protect and recognise taxpayers’ interests as much as possible. For example the scheme manager’s mandate has been set by Tynwald and there was much debate and scrutiny of the scheme proposal before it was approved in October. Additionally, Government will never be a majority investor in any supported business and it will be principally private sector funding at risk.
I am confident that the Enterprise Development Scheme will help to create valuable new jobs in local companies and will be key in enabling the Island to maintain its status as a growing, diverse economy, as well as providing a financial return to Government in the long term.
Lhiuish dy firrinagh
Hon. Laurence Skelly MHK
Minister for Economic Development”
Link to our query here on Celtic News:
Issued by: The Celtic News
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