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%

-4

-2

0

2

4

6

8

10

12

14

Typical recession Great Depression Current Recovery Difference from typicalrecovery

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

£7,000

1 2 3 4 5 6 7 8 9 10

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 settlementTake 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

■Lond

on

■South

Eas

t

UK

■Scotla

nd

■East o

f Eng

land

■South

Wes

t

■UK ex L

ondo

n

■East M

idlan

ds

■North

Wes

t

■Wes

t Midl

ands

■Y&H

■North

ern

Irelan

d

■North

Eas

t

■Wale

s

■ IoM

GVA per head in 2011

Source: ONS

Slide 11

But the demographic challenges are the same

Change in key demographic ratios 2010-2015

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!

Internetwww.rbs.com/economics

E-mailwww.rbs.com/economics/registration

Social media@rbs_economics

Slide 18

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