- 12/11/2024
New president of the IoM Chamber of Commerce Claire Watterson and immediate past president Kristan McDonald talk about the challenges of skills shortages, AI and the size of government
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00:00So we're here with Claire Watterson, newly elected President of the Ironman
00:07Chamber of Commerce, and Kristen MacDonald, immediate past President. Claire, you join
00:14at an interesting time, I think. We had the political drama in the Quays last week,
00:19got pressure on public finances, squeeze on household incomes, skills shortages,
00:28firms closing, you know, there's a lot going on. What do you see are the major challenges facing
00:34the island, and challenges that you feel that the Chamber feels should be being addressed?
00:41It is a very interesting time, as you say, for both ourselves, our government and our members.
00:47At the moment, the three main topics that are arising on a regular basis are the skills
00:53shortage on the island, the size and scope of the Manx government, and also the integration of AI
01:00as an upcoming technology on the island, and how this is going to impact on the
01:05businesses that are offered, the service sectors that are going to be required, and skill sets.
01:12So shall we run through each of those in turn? The skills shortage, which has actually been
01:18an issue for quite a long time now, hasn't it?
01:21If you look at, I think we went back through some of our old Chamber papers
01:24last year, and a lot of the topics that were raised several, you know, tens of years ago were actually
01:30the same kind of topic. Skills shortage has always been a problem on the island.
01:34I think the challenge now is different to it's been in the past. We're seeing the evolution of
01:40skills and types of skills required changing. You've gone from it being much more
01:47vocational, trade-based, or academic, and now it's more about things like problem solving,
01:53critical thinking. It's some of those softer skills, or they've traditionally been called
01:58softer skills, I guess, but they're actually skills which give you a much better broad base
02:07of ability, rather than being narrowly focused. You know, this idea maybe 20, 30 years ago of a
02:13job for life, it's just not there anymore. People have multiple careers throughout their lives,
02:18so the important thing is that ability to be able to continuously learn, and having the environment
02:23to support that continuous learning, I think, through that. That's one of the big things
02:29around, and then obviously there are specific technical skills shortages, and how we deal with
02:36those, either via inward migration, and making the island a better place to live and work,
02:41or whether it's via on-island training, and upskilling programs, things like that.
02:49Because skills shortage is something that doesn't just affect the firms concerned, it has a wider
02:55impact on the on the Manx economy, doesn't it? Yeah, yeah, definitely. The impact is profound,
03:03and that's again probably where some of the AI stuff comes into it, as we were talking,
03:08all three of those topics are interlinked between skills, AI, and science of government, and a lot
03:12of them come back to productivity, which is the thing that Western society has been grappling with
03:17for quite a long time. We're not unique in struggling with this particular aspect,
03:23but AI definitely has the potential to improve that. I think where it comes is that starting
03:30to reshape, you know, we're losing some of these traditional vertical sectors, and the lines
03:37between those are being blurred as AI comes in, and a lot of businesses are becoming, you know,
03:43more tech enabled, and have been. This is now really starting to spike, as we see that we need
03:48to kind of prioritize the human capital bit of us, and developing the tech literate workforce,
03:53which then enables some of those productivity gains, both in public and private sector,
03:58which then help the whole, you know, the whole economy. Can the island be a leader in this
04:03particular field? Very much so. It's making sure we're ahead of the curve, identifying the types
04:09of jobs that AI is going to impact, and how we support the people in those jobs, in the training
04:15and retraining, but also looking at the education that's been provided to, in our secondary schools,
04:20in UCM, but how we are equipping the people coming out of these schools, and UCM,
04:31to provide the businesses over here with the skill and the talent that they are going to need,
04:36and to equip the children with the ability to meet the jobs that we're going to have available
04:42in these sectors. We're a small kind of agile jurisdiction, you know, if we can, the thing that
04:48the islanders has been good at in the past, has been proving it's something, a technology, a way
04:54of working, and then exporting it around the world. You know, we were the first place in the
04:59world to get 3G, I think, many, many years ago, if you remember that. One of the first places to
05:04get proper broadband. That, those kind of things, we've lost that edge on being the first in some
05:09of this now. We can restore some of that. We've got the ability to write our own laws, we've got
05:15the legislation in our hands, we've got the ability to change some of this. It's within our grasp
05:21to get ahead of some of this, if we've got the willpower, and if we can really manage that.
05:26Do you think the government are on board with that? I think they're coming around to that. Yeah.
05:31We have some very collaborative discussions with government. They are very positive
05:38about these things. I think they see very similar problems, unfortunately, that we do
05:43with some of the barriers that are coming into these things. You're looking at the historic
05:49legislation, but being a small jurisdiction, we have the ability to change these things as we go
05:54forward. It just takes the enthusiasm and the motivation to tackle these things. That key word
06:01is collaborative, I think, is the key word, is that we can't have decisions being made in isolation
06:07where one department's making one decision or the other one, or the private sector's making
06:12decisions that doesn't necessarily correlate with what's going on inside government and the
06:16direction of political travel. It needs to be a much more kind of collaborative and joined-up
06:21approach. I know everyone wants a joined-up government. You hear that from
06:26jurisdictions all around the world, but again, because of the size of us and almost the unique
06:31way we can access our political structures, we should be able to do that better than we do at
06:36the moment. There's opportunity there, definitely. We're all looking for the same outcome. We're
06:40looking for a prosperous economy where our population want to live, our businesses want
06:46to grow, and our children have a positive future here. We're all aiming for the same destination.
06:51It's just making sure that we're working collaboratively together and tackling those
06:56barriers head-on to make sure that we can get there. The key bit around that is trying to define
07:00what that realistic and compelling vision is for the islands as a collective rather than being a
07:09particular political manifesto piece or something that's being driven by a group in the private
07:15sector or something like that. There's certain things everyone can agree on. We want
07:19good health care and we want better education. Those are almost a given,
07:24really. At the moment, I think it's fair to say we're publicly struggling with
07:29both of those, especially the health care aspect of that. There's a lot of debate and
07:34a lot of talk about that, but if we can get the right willpower behind it to
07:42actually make some of the decisions needed around that, we've got the opportunity to
07:46again prove the way of working for some of this and then demonstrate that to our neighbours,
07:52other countries. We don't have to be the world leader in any of this stuff.
07:57We have to be better than where we are now. An important part of that perhaps leads us on to the
08:01third strand, which is the size of government and whether government can act nimbly in seizing
08:08these opportunities. I think the last time I saw the size of the government shrink was after the
08:15VAT bombshell. Since then, the size of the public sector workforce seems to have risen inexorably.
08:24What's your view on that? I think part of it is we're asking government to do more is one thing.
08:32There's a lot of, oh, we need government to do this, we need government to do that. There's
08:37many different strands to it. I think, yes, the ratio of public sector to private on the island
08:44is larger than most of our jurisdictional comparators, so that makes it hard. You've got a
08:50smaller tax base having to pay for a larger public sector, which is difficult. We're
08:55burning cash at the moment, we're spending our reserves to keep the island afloat.
09:03There's a finite length of time we can do that for, so we have to look at radically changing the
09:10size or the scope of government or both. Chamber has mentioned in the past about
09:16government almost competing with the private sector in some aspects. That's got to
09:23be something that we look at and how we have those conversations, I think, is the important
09:27thing. Again, coming back to the collaborative point, I think that's where we need
09:31to do some work on. Traditionally, I think, the Chamber of Commerce was seen as singing
09:38on the same hymn sheet as government, but in recent times you've been quite critical
09:45of government and government policy. What's changed? Our relationship with the government is
09:51important to us. We meet regularly with ministers and senior civil servants to discuss the concerns
09:58of our members. I think the best narrative that we can say is that we're a critical friend.
10:06Somebody has to ask those tough questions, somebody has to ask why they make the decisions
10:11they're making, so that we can pass this back to the businesses on the island, so they can
10:15understand why these decisions are going to be made, because obviously it does impact our businesses.
10:20So it's making sure that if the government are making decisions that aren't agreeable or are
10:27hard to be understood by our members, that we're getting as much information as we can about why
10:32these are being made, and making sure that we have proposed other ideas. Yeah, I think one of the key
10:36points around that is that these aren't personal views being expressed by individuals.
10:42All of this comes from our members, so the criticality or the critical voice is being
10:50given to us by our members. They're the ones telling us these are causing us problems, this
10:55is what's coming through. The roles that we have as individuals is to
11:01collate all of those and be able to pass those on and try and deliver them in a
11:07prioritised and coherent way, but ultimately all of the views that we're bringing forward are ones
11:12that are being expressed by member businesses. Yeah, I think one of the key points around
11:17some of that is the fact that it's not the voice of a couple of individuals that's being
11:23critical of government. This is information that comes back from our member companies
11:29through our forums that then gets collated and prioritised, and it's up to us as individuals
11:36to pass that message on to the ministers or the senior civil servants that we're meeting with.
11:40It's also important though that we collaborate with other organisations
11:46in a similar role to ours, and it's probably one of the first times that we've had that cross,
11:55I guess, industry body representation in agreement, so both employer and employee
12:03representative bodies have given a lot of similar messages to government.
12:08And I think that gives you a sense of the fact that we're not, this isn't some kind of
12:15individual personal thing that's been voiced here. This is a collective message that's coming from
12:22business, both from an employee and employer kind of direction.
12:27Can you give me an idea of your membership? Who do you represent? The size of the firms?
12:32We represent the broadest possible spectrum we can. One of the things we always want to try and
12:36do is increase the membership, so we're increasing our representation of the working population,
12:43of the island and our economy, but I think we represent around 80% of the working population,
12:52something like that. That's about 450 businesses, which represent about 25,000 individuals who are
12:59in the working population. And those vary in size. The vast majority of our work, our economy is made
13:05up of very small, one to nine employee kind of sized businesses. I think traditionally change
13:10has been seen as just representing the larger corporates. We've worked probably over the past
13:17six years maybe to really change that, actively engage the broadest possible spectrum. So we've
13:24got forums now that cater for wellbeing. We've got charity forums specifically.
13:30We've broadened out the church, I guess, to try and get a wider representation
13:38and a much more balanced voice and view of what's actually happening in the economy.
13:43A number of the concerns you've raised include the minimum wage and the government's
13:50goal to try to get parity between that and the living wage. Perhaps you can just outline your
13:57concerns over that? I don't think there's any of our members and ourselves as well who
14:04wouldn't want to be able to bring in the living wage. I think the discussion has been around
14:11recently about the speed that that's going to be brought in, the clarity, how quickly this is going
14:17to move. And also when this was originally discussed, it was prior to the COVID-19 pandemic,
14:24the war in Ukraine and the increase in the price of utilities and general cost of living. So those
14:30have all had a huge impact on businesses within the past five years. So to bring this in as well,
14:36businesses are looking for a good lead time and to understand the steps that they're going to
14:42need to take and the timeframe over which it's going to be required to be able to adapt to this
14:47and how it's going to impact what they're doing at the moment and what they can afford. I don't
14:54think we've had any feedback whatsoever that our members wouldn't like to be able to pay their
14:59employees the living wage. Everybody is on board with that idea and the ideal. It's the
15:05practicalities of how this is going to work and how we can adopt it. Thank you. Also, we also need to
15:10look at, and it's not a topic voiced very often, but why the living wage has to be where it is.
15:17We all know the cost of living is high on the island. Are there things around that that can be
15:23done to mitigate that, that then reduces where the increases need to get to? If we
15:30follow through where the increases are going to end up, we're going to have the highest minimum
15:34wage in the world from what sort of research we've been able to do and what we need to do
15:40is have a proper conversation around it rather than it being just a purely dogmatic thing at
15:44the moment, which is how it feels. We've said we're going to do this and we're just rigidly
15:48sticking to it and we're ignoring the other factors around it and we're ignoring, again,
15:54why it has to be quite so high. Is there anything around cost of living that can be done on the
15:59island or should be done? Because firms are struggling at the moment. We've seen quite a
16:04few closures, haven't we, particularly in hospitality. Is there a reason for that?
16:11It's tough out there. As ambitious as every business is facing, your overheads have increased,
16:15your utility costs have increased, the difficulties in obtaining the staffing and
16:21the cost of those staff and the compliance with requirements. Having access to the staff that you
16:27need, being able to provide those staff, that resource, the place of business.
16:37It comes back to the skills shortage as well. You have to pay a high wage to get the staff you need
16:44because there's competition for the roles, which then makes all of your costs go up and you need
16:50to put your prices up or that kind of thing. The local economy is a hugely important part of our
17:02island. It's what we all feed into and that's ultimately what drives what happens here.
17:07It's a very difficult operating environment where our energy costs are high and getting
17:14stuff to the island is not cheap either. Your input costs are very high and then when you've
17:20got an extremely high wage burden as well, it's hard. Does government get that?
17:28Understand the issue? I think it does. It does understand it. I don't think
17:33it's just not a very easy thing to solve. There's a very complex set of...
17:39Again, it comes back to having a more joined up and more collaborative approach on some of this.
17:43We need to be able to have some of those discussions on a more holistic basis rather
17:49than it being quite so dogmatic as it is now. Now, I think you gave evidence to a
17:54Timord committee fairly recently where you were quite critical of government's
18:03ambitions to secure population growth and particularly that fabled 100,000 figure.
18:12Perhaps you could just set out your concerns in that area, either you or Claire.
18:17Yes, I think it is a number that has brought a lot of controversy on the island, hasn't it?
18:24We're actually able to support, presently, a population of that size.
18:29We understand that what the government is looking for is an extra 5,000
18:35roles. It hasn't been stated whether these roles are off the island or on the island,
18:41so that could potentially be an advantage, particularly with matters coming in sort of
18:48AI, how these things are evolving. Are there going to be people who are being freed up,
18:52retrained, which could potentially move into these roles? However, if it is an additional
18:595,000 people to the island, we need to look at how we are going to adapt to that.
19:07Obviously, our infrastructure, our healthcare, our housing stock,
19:11is all under a lot of stress at the moment. Supporting our local population with that
19:17is proving to be difficult over the last couple of years and has become very vocal
19:22over certainly the last couple of months. I think that's where people are seeing those
19:29difficulties, where they're upset about bringing these additional people to the island who are not
19:36currently maintaining the infrastructure that we require as a population. It's working again
19:42with the government and trying to put those heads around the table. How can we look at solving
19:47these problems? Has anybody quantified what these jobs look like? Where do you see them being
19:53required? How can we address them? Where are these people coming from? Are they school leavers from
19:59here? Are they from UCM? Are there people who will be freed up through the AI transitions,
20:05whether that's in government or whether that's in private sector, or are these actually off-island
20:09jobs that we're going to require bringing in additional population? If so, how do we meet
20:16that challenge? Have we sat down and thought about, if we bring in 5,000 additional taxpaying workers,
20:24what that impact has? Is that 5,000 extra cars? Is that 5,000 extra people
20:32requiring hospital care, medical care? It's having those conversations around these figures.
20:38Where were they seen to be coming from? Where were these jobs? It's just understanding the
20:44full picture. Yes, it comes back to the size and scope of government as well. We need that
20:49increased tax base to be able to pay for better quality public services. If we can increase that
20:59tax base but without having to increase the population, that's almost the ideal there.
21:05If we've got people who are out of work at the moment who could be working, or again,
21:10if you look at public sector, if there's going to be displacement out of the public sector through
21:15gains in productivity or digitalization, that's ultimately a good thing for the economy because
21:22those people come back into the private sector. There's plenty of jobs there. No one needs to
21:27lose their livelihoods or their homes or anything like that. There's jobs available all over the
21:32place. Our unemployment rate is incredibly low and remains incredibly low and has been for a very
21:39long time. That's one of the challenges is that that drives up, as we said before, the cost of
21:46having to recruit. If we can try and deliver some of those additional jobs through increasing the
21:55workforce with our existing population base, that really is the ideal. People get fixated on this
22:01100,000 number. It's not the conversation, ultimately. The conversation is how do we create
22:12a sustainable tax base. How can we afford the services that we want our government to provide
22:18at the end of the day? We have a government that provides a lot to us, but unfortunately,
22:23to provide a lot to us, it costs a lot of money. The only place that you're going to get taxed from
22:29is, unfortunately, the taxpaying population. If we are requiring the government to provide those
22:34services, we have to pay for those services. It's working out that balance between what we want to
22:42provide or what we want provided to us, how many it takes to provide that to us, and how much we
22:48can afford to pay as a working population and how that balances in the middle to see whether
22:54it's possible. I think that's the discussion at the moment. 10, 15, 20 years ago, we were in very
23:01good times and the government could provide all of the services that the population required.
23:06Unfortunately, as things have changed, our working population has decreased. Our taxpaying
23:12population has decreased. The burden on the government services has increased. How do we
23:19marry these things in the middle because there are only so many sources of revenue for the
23:24government to pay for these? These aren't necessarily specifically Isle of Man problems
23:28either. The West in general is struggling with that demographic shift to an ageing population
23:34where there's a larger base that require an increased medical care or something like that
23:44who aren't able to work and then supported by a decrease in the birth rate, which then
23:50skews your demographic. That's not a purely Isle of Man thing. Yes, we're further advanced than
23:55some other areas, but that's something that the West in general has been struggling with
24:00for a long time. Some of these problems aren't unique to us. Again, the macroeconomic
24:05environment is something that's done to us as opposed to something that we can actively
24:10particularly influence, but there are lessons out there that we should be learning and we should
24:16be looking at. Again, coming back to one of our earliest points around the agility and that
24:21sort of thing, we could be solving some of these problems and showing everybody else how to do it
24:25and what works and what doesn't. Okay. Another issue that, again, it's not unique to the Isle
24:33of Man and that's an issue that's made headlines recently is about migration and visa abuses and
24:41allied issues about human trafficking and modern slavery and such like.
24:46What does that say about issues of reputation for the island? Yes, hugely concerning that ultimately
24:54no one, we are dependent on certain sectors, so to have one of them or several of them
25:02implicated in problems like this is potentially damaging to what has been an excellent reputation
25:09that the island has had for a great many years. So, yes, there's concern there that
25:15our legitimate growth businesses could be impacted through some of this.
25:21What we need to be seeing is to be tackling head-on, working positively, making sure these
25:26things can't happen again and making sure that any damage to our reputation is minimised.
25:31And that the word being put out there is how we've tackled them, how we're going to make sure
25:36these things don't happen again and making sure that it's a blip for us, that it's a one-off,
25:45that the process and procedures that are going to be coming in off the back of this are going to make
25:50sure that, you know, we have a very clean record going forward. Okay, now we saw a vote of no
25:57confidence against the Chief Minister in the House of Keys last week. What was your view on that?
26:04Members are entitled to bring whatever they want. I'm not sure. Ultimately, the thing that
26:12business hates most is uncertainty. So, for a business environment where you've got an uncertain
26:19political landscape, that doesn't help growth, which is the thing that ultimately we all want.
26:24We want a growing economy. We need that stable political environment to be able to do that.
26:30So, you know, from a purely business perspective, I think things like that, whereas, you know, we've
26:37got an election coming up in a couple of years, people are going to be starting to jockey into
26:39position. Yes. It's not necessarily what we want to be seeing, I'd say, at this point.
26:46And finally, as far as the current administration is concerned, what score would you give it?
26:54That's a good one. In terms of effort, I think there's a good score there. I do believe
27:04the current political will and desire to improve is there. I think they get it. I think they see
27:11the problems. I think, and we've said this in the past, it's the execution is where we really
27:18struggle to deliver. You know, it's not for want of trying that some of this stuff doesn't happen.
27:22And look, you know, some of this stuff isn't easy either. We're asking people to solve very big,
27:28complex questions. They're complex questions that are being asked across the rest of the world.
27:34Yeah. And the size of our government compared to the size of some of the governments who are
27:38also trying to tackle this. Ours are doing well. They are trying their best. Yeah. But there is
27:44sadly room for improvement, though, I think, in terms of how actually that was like my report
27:48cards from school. Could you better? But again, we have a very open dialogue with the government.
27:54Yeah. So there are areas that, you know, we do sit down and discuss with them. We've said
28:02quite openly over the last at least a year that throughout our membership, we have a lot of
28:10very entrepreneurial, very intelligent, you know, we have a large membership base of
28:18diverse thinking, diverse businesses that we can't get round a table with. These are problems
28:23that face the whole of the Isle of Man. They don't just face the government. So they're
28:28challenges for everybody on the Isle of Man. So, you know, we should be meeting them as a collective,
28:34not just requiring the government to solve them on our behalf.
28:38Claire, Kristen, thanks very much. Thank you.
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