This is not a drill: Concrete proposals for saving the Manx economy in response to Coronavirus

I attended a meeting of local Manx small businesses the other night (Wednesday, 18 March) – and hearing the stories from the small business operators, it became quickly that the way things are currently heading, this is not going to be an ordinary recession.

This economic event is not a repeat of the 2007 financial crisis. This is not a repeat of the recessions of the 1970s or the 1990s. This is an entirely different order of magnitude. Manx small businesses are not talking about their business turnover dropping 2%, or dropping 5%, or even 10%. Their turnover is dropping 80% and 90%.

Italy’s GDP is forecast to contract by 33% in the next three months.

This is not a recession level event. This is a World War 2 level event.

As Matt Ridley has written:

There are no good outcomes from here. Many people will die prematurely. Many will lose their jobs. Many businesses will go under. Many people will suffer bereavement, loneliness and despair, even if they dodge the virus. The only question is how many in each case. We are about to find out how robust civilisation is. The hardships ahead are like nothing we’ve known.

Matt Ridley, Spectator, 21 March 2020

The list of around 30 suggestions below are mostly proposals that will have little or no cost to the Manx Government, but rather, will empower Manx businesses to adjust to the new environment. They have been sourced from many small businesses on the Isle of Man, and are certainly not an exclusive list – if you think anything should be added, please let me know and I can update this list as appropriate.

Up to now

Last month, the Manx – and global – economy was humming along relatively well, like a cyclist riding a bike. It wasn’t perfect, but it was moving forward. The wheels were turning, people were, broadly speaking, doing ok, despite a lack of wage growth over the preceding ten years. Despite a boom of new technology, productivity in the Western world was sapped by a huge volume of hidden taxes in the form of onerous compliance departments and lawyers to enforce a whole swathe of new rules and regulations. At the same time, relatively poor jurisdictions such as Bulgaria and India were flooding the professional world with an increase in labour supply – and as we know, when supply increases, prices drop. This was very evident in the case of the western labour market, with many workers in professional industries competing against workers from developing countries for the first time. Like manufacturing workers forty or fifty years ago, professional workers have not benefited from much real wage growth for at least a decade.

Our cyclist economy, however, has suffered from someone shoving a stick in the spokes. It has collapsed, with our cyclist hitting the pavement.

Address the medical emergencies first

The first and most important to response to this crash must be to act on the medical emergencies. Before anything else can happen, we need to take emergency action to address the medical situation. I argued for the immediate quarantining of people from affected countries a week ago, but at least the Manx Government has (belatedly) implemented such restrictions now. Because the Manx Government failed to conduct enough tests early on, and failed to establish travel restrictions early enough, the disease is already on the island, and it is a matter of when – not if – it gets out into the community. The medical responses are essential, and they must come first.

I’ll leave the medical responses to others – but building on the ideas of Manx people, here’s a set of policy proposals to re-start the Manx economy. After the medical issues are addressed, these are a series of ideas to get the Manx economy back onto the bike, and then to slowly recover speed and to start riding forward again.

The economic logic: Money needs to move

These ideas are designed for the context of the Manx economy being derailed. They recognise that the economy is in the process of stopping – and that big, emergency, action is needed to get money moving on the island again. They are based around a recognition that government handouts of a few thousand pounds to businesses are trivial and a waste of time. Such handouts make no sense, because they fail to recognise the magnitude of the problem.

The challenge here is not the amount of money that people have. The challenge here is the velocity of that money – we need to re-start the economic cycle, so that money is able to circulate in our community again.

The only sustainable way to have Manx businesses to pay wages to the people of Mann is for Manx business to have customers. The Manx community – and not just the Government – needs to get people out of hibernation after the medical emergency has passed. This is because the farmer who can sell his potato will then spend his money to get a haircut, and the hairdresser will send his dog to the doggy-day care service, and the dog carer will then be able to spend her money at the osteopath, and the osteopath will be able to spend her money at the coffee shop. Money needs to start circulating, so that people can earn – and spend – money, so that others can earn and spend money. It can be a virtuous cycle, and we need to get that cycle moving again.

Speed is of the essence

After the medical emergency, we need to get money moving in our economy quickly, and to give people confidence that they can pay their immediate needs. Speed is of the essence. We need to get people spending money quickly so that businesses do not collapse – because every business that collapses is much harder to restart. In normal circumstances, we would want to be very careful to target the money carefully – but this is not a normal circumstance. This sort of distribution would not make sense in normal circumstances – but this is not a normal circumstance.

There is already a surge in job losses in the Isle of Man (such as mine!) – and as people lose jobs, their neighbours and friends become fearful of losing their jobs. This causes people to wind back spending, because they are nervous about making their money stretch in a world where they have no job.

At Wednesday night’s meeting with small businesses, the Manx Government promised to publish proposals within 48 hours. That commitment has obviously been broken – and because of these delays, more Manx jobs will have been lost. It’s important that the Government change their tune here and go hard and fast, because until now, they’ve been soft and slow.

We need people to be confident in their future income, because then they will spend their money – and when that happens, the need for the wage subsidy disappears. The more confident that people are in the Government response, the less the response is needed.

Immediately duplicate the UK Government’s wage subsidy and other economic proposals

While the Isle of Man Government has been slow to respond here, they should replicate the British Government’s leadership here. The Manx Government should:

• Provide taxpayer grants to cover 80% of the salary of retained workers, up to a total of £2,500 a month per staff member. Backdate this to 1 March, and include businesses which have already laid off staff this month to re-employ them under the same conditions they were employed under;
• Duplicate the ‘Coronavirus Business Interruption Loan Scheme’ as described on their website, and make it interest free for one year;
• Confirm that Manx businesses can defer the next quarter of VAT payments, so no business will pay VAT from now to mid June. Afterwards, Manx businesses should have until the end of the financial year to repay those bills;
• For those people who have lost their jobs already, increase the Jobseeker allowance in the same proportion as the British increases;
• Defer the self-assessment payments* for self-employed workers until January 2021; and
• Increase the welfare payments for recipients who rent in the same proportion as the UK increases.

(Update 16:48, 21 March: *To clarify, the payments otherwise due in April)

Hire skilled Manx construction workers to expedite the construction of Douglas Promenade and other key infrastructure developments

Despite immediate financial responses like the wage subsidy proposed above, there are still likely to be many people, especially self-employed people, who will lose their work and income. One key area of self-employed people are construction workers who are highly skilled professionals.

Douglas Promenade

Given that the TT has been cancelled for 2020, the Manx Government should now expedite the construction of Douglas Promenade by funding the recruitment of additional workers to get the project completed faster. Not only will that help the self-employed construction workers of our island, but it will remove a key stress for Manx businesses that have been disrupted by the Promenade works to date. In addition, we will have a key infrastructure asset for the island completed on time (if not on budget).

TT Access Road

Fully duplicate the TT Access Road this year, ready for TT 2021. The current plan of not getting this done until 2022 is too slow.

Treat self-employed and small businesses people generously

Obviously, Manx small businesses are amongst the hardest hit already. Thus, I’ve made a particular effort to listen to the feedback and ideas of small businesses to allow them to cope with the challenge.

These proposals are for those businesses which are primarily operating in the Isle of Man, in both B2B and B2C sectors. They should be exclusively for those businesses which employ staff on the Isle of Man (including the owner/operators) and not merely for shell companies which are based in the Isle of Man but which primarily own property and/or operations outside the Isle of Man.

These businesses should:

• be exempted from business property rates & utility rates for the 2020/21 financial year;
• Receive direct cash payments to all self-employed people equivalent to Jobseeker so they can afford the basics
• be exempted from the annual return fee for Manx businesses

Free access to Government-owned outdoor public spaces for self-employed and small businesses

Gyms and other venues have been closed. This will harm personal trainers, yoga teachers and other personal services operators who have lost their space to conduct their business. Consequently, they should be immediately allowed to operate their businesses in safe circumstances in our public parks and other Government-owned outdoor spaces, without a need to pay the ordinary booking/rental fees to governments.

Obviously, the Manx weather is not always conducive to such efforts (it rains! it is cold!) but this will at least give those businesses a space to conduct

Provide training and equipment to allow skilled tradespeople to work in people’s homes

Many skilled tradespeople and services are provided in people’s homes. They are at risk of catching the coronavirus while working in the homes of different people, and they are at risk of carrying the disease from one house to another. They should be given with personal protective equipment and training – funded by taxpayers – to allow them to work in a manner which is safe for them, and safe for others.

Save dozens of tourist accommodation businesses by hiring their rooms and beds for people who need to self-isolate, but have no symptoms

Currently, we have a group of people (people arriving on the island) who need to be self-isolated.

We also have a group of people who have empty rooms.

Match these people together, by allowing people who have no indication of the Coronavirus in these facilities the option of staying in the otherwise empty hotel rooms on the island – and have the taxpayer pay for this. The tourism industry has been hit particularly hard, and this can be a small measure to reduce their pain while helping to keep people safe.

Allow Manx workers and businesses to respond creatively to this situation by:

We know that the Manx economy is going to be substantively disrupted here. Therefore, we need to allow people to adapt creatively to the new normal, and get the economy moving again.

This is a massive disruption to the economy, and Manx businesses should not need to ask for permission to adapt: Manx businesses should make the reasonable and safe changes that they need. In the unlikely case that someone is harmed by such changes, anyone harmed will still have redress to the ordinary compensation and court systems.

Instead of being a permission-first economy, we should be fast adapters. This current crisis is unlikely to be fixed in days, but rather, the tide is likely to be turned many months from now.

Grant “Manx worker” status to anyone who was living on the island on 13 March 2020

Imagine, a young man from Liverpool who has been working in a coffee shop for four years. Coffee shops have no credible chance of continuing to employ him with the Manx Government advice against congregating in groups. However, there is a new need for delivery drivers, cleaners, and other jobs that adapt to the new situation.

We should allow these people to move jobs.

These are people who are already here in the Isle of Man, and who are already working on the island. Allowing these people to move from their current job, to a new job, will unlock their productive potential, and keep them off benefit queues. It will allow Manx businesses to get the workers that they need to adapt to their new business models.

Allow all businesses to operate by delivery

All rules restricting businesses from delivering their services directly to consumers (or other businesses) at their homes should be suspended. In some cases, the business premises might change from being a physical location to a mobile van or other vehicle. All rules restricting this should be suspended indefinitely.

Open up zoning laws to allow residents to operate businesses at home as long as they do not cause significant harm to neighbours

Many office workers are already working from home. As long as businesses do not harm neighbours, we should allow as many businesses as possible to do similarly.

Empower Manx businesses to hire suitably skilled workers by relaxing occupational and business licensing

The Manx Government has already begun to implement my previous proposal to recruit Manx medical students to assist in medical roles appropriate to their level of completed study and training by using them on the new Manx Coronavirus helpline. The Manx Government should allow other workers to adapt to what they can do – and to trust Manx employers to hire the best people for the job, regardless of pre-existing certification.

Not only will this help in the emergency medical response by allowing medical professionals to get to work (such as by employing staff qualified from elsewhere, or who have had qualifications lapse) but also by allowing otherwise under-employed staff to work as babysitters without the ordinary certification. With the continued operation of schools at risk, parents in some roles need to be able to get to work outside the home. The people hiring such staff can make their own appropriate judgments about who is best to look after their children, for example.

There is a whole range of restrictive licensing here which limits the ability of Manx businesses to adapt. For example, the Manx Government should allow any one form of licensed alcohol seller to sell alcohol in any other form. For example, a wholesale cider seller is currently required to sell at least two cases per sale. This made sense in the 2019 world of selling to bars and pubs – but in the post-virus world, the Manx Government should allow this business to sell in smaller volumes directly to consumers. Since they have already satisfied tests for the responsible sales of alcohol, they should be allowed to adapt and change their business to the new reality.

Allow Manx businesses to re-tool to produce relevant medical supplies, such as by waiving all alcohol duties on distilleries used to make hand sanitiser and other key products

This requires no explanation – the alcohol duty was designed to tax alcohol for ingestion, not alcohol for cleaning supplies.

MAKE LEMONADE OUT OF LEMONS!

Yuuuge hero is @Jaffer22915438: given a shortage of hand sanitizers so he went looking for idle factories, found one, got the products & is now shipping 18,000 units/day.

Think how instead of hunkering down you can get aggressive.#Antifragile
1/n https://t.co/fTjXS5NnF2

— Nassim Nicholas Taleb (@nntaleb) March 19, 2020

Lift restrictions on hours, overtime and working on weekend

Life is disrupted – and different businesses need to respond in different ways and at different times to the new situation. We should lift restrictions on hours, overtime and working on weekend to allow Manx people to adjust as they see fit.

Faster payments for Small Business

Copy the policy of the New South Wales Government in Australia and pay small businesses faster:

The Faster Payment Terms Policy for small businesses means that participating agencies will pay registered small businesses within 5 business days. Additionally, goods and/or services valued under $10,000, can be paid instantly by credit card.

New South Wales Small Business Commissioner

Stop paying the BBC license fee to the United Kingdom, and use an equivalent money of general revenue to support local media outlets

The local media on the Isle of Man has been outstanding. They have displayed remarkable professionalism. Meanwhile, while there has been some Manx coverage on the BBC on the Coronavirus, much of their reporting excludes the Isle of Man since we are not part of the United Kingdom.

In addition, the BBC license fee is an unfair and regressive tax, slugging poor people and rich people the same. With many people likely to suffer income drops, we should empower Manx people to support local media outlets instead.

The BBC license fee for televisions should be made voluntary, and further, Manx people who choose to pay the license fee can continue to pay it to the BBC – or they should be allowed to direct their money to local Manx media outlets.

The performance by local Manx media outlets – @ManxRadio and @iomnewspapers and @3FMradio and @EnergyFMNews and @paulmoulton – has been outstanding in providing local coverage to the Manx public during this pandemic.

They show the value in local people producing local news. https://t.co/n4dzxdtfRZ

— Michael Josem (@MichaelJosem) March 18, 2020

Allow environmentally-sensitive investments such as bikes and e-vehicles (cars, vans, etc) to be partially income tax deductible

As a result of the economic impacts of the Coronavirus, many people may defer non-essential investments – leading to sales drops in local businesses. At the same time, we need to adjust to the risk of global climate change. Currently, some people are able to purchase bikes (electronic or not) through the Government’s cycle-to-work scheme – but not everyone can take advantage of this. Not only do only some businesses provide it, even the Manx Government itself only offers it to certain employees (permanent staff).

This excludes many people on the Isle of Man, especially self-employed people, and people who work at small businesses which do not have the capacity (or willingness) to participate.

Thus, instead of this being conducted as a benefit-in-kind support, it should operate as an income tax deduction, so that it is more accessible to more people on the Isle of Man, with the same current limits.

Not everyone is able to cycle – for either personal physical/fitness reasons, or for lifestyle reasons. Consequently, the same income tax deduction should be allowed for other vehicles which can help to reduce carbon emissions, such as electric or hydrogen cars, scooters, and other new vehicles.

Liquor licensing fees

Hospitality, food, beverage and catering businesses have borne the brunt of economic damage already. Consequently, liquor licensing fees for the last twelve months, and (at least) the next twelve months should be immediately refunded – but their licenses to serve alcohol shall remain in effect.