Today Tony Brown, Chief Minister of the Isle of Man, made a statement to Tynwald on the serious situation in which the island finds itself after HM Treasury had reviewed & modified the Revenue Sharing Arrangement between the IoM & the UK. [full statement in pdf file here]
The decision made by HM Treasury was non-negotiable and means that the IoM will lose revenue of £90million next year & £140million in subsequent years. This equates to an annual loss of revenue in the order of a massive 24%.
The Chief Minister says: "there will without doubt need to be a change of mindset politically..", a statement that he repeated at least 3 times in answering subsequent questions from MHK's.
The financial services industry is the lifeblood of the IoM economy. The position that the Isle of Man now finds itself will have a marked affect on the way the world now views the island as an offshore financial services centre. An accelerating loss in confidence which started with the collapse of the Kaupthing bank could see a massive hemorrhage with money flowing out of the island and deposits & investments drying up. Rapid surgery is now needed.
Dare it be hoped then that this "change of mindset" will now include a courageous political decision to bring about a just & honorable settlement of the Kauthing bank fiasco by a government commitment to restore 100% all deposits lost when the bank went bust due to the actions of the directors, supported by the FSC?
Taxpayers need not be called upon to achieve this. The government with its new mindset must have the political courage to secure the money either through the banks or it should go to HM Treasury & obtain a loan, involving thr IMF if necessary. In either case the loan would be repaid progressively from recovery of the assets, estimated to be approx 83% gross. The shortfall could be made up from & commitment on the part of Iceland to honour the parental guarantee given by the Kaupthing parent bank. Properly negotiated, the IoM Treasury could end up quids in on such a settlement.
The Isle of Man government now has an urgent need to shore up confidence in its banks so as to maintain & sustain the financial services industry that makes up 37% of GDP. The benefits of resolving the festering Kaupthing debacle would far outweigh the cost of failing to do so.
It's time to put the Kaupthing debacle to bed so that depositors & the people of the IoM can all sleep better & look forward to a brighter tomorrow.