Huge fiscal toll of the Pandemic revealed
The Isle of Man is heading for a forecasted deficit of £74 million – just a year after Treasury Minister, Alfred Cannan told Tynwald of plans to achieve a £12 million surplus.
By Simon Richardson
The reason is of course, the Coronavirus Pandemic, which has cost the Island an estimated £200 million. Announcing his latest Budget package to Tynwald this morning Mr Cannan stated: “We have been focused on stabilising our economy. We have been focused on protecting jobs and businesses. We have been focused on protecting public health and the NHS. And we have been focused on structuring our finances to provide both reactive and proactive support to our nation and our people in their hour of need.
“That focus, that protection, that support means that the £12 million surplus forecast last year is today a forecasted £74 million deficit and is part of a total additional COVID pandemic cost to the Government finances of over £200 million pounds.
“That focus, that protection, that support has meant we have reduced our cash balances by £146 million, seen our forecasted income reduce by over £80 million and spend over £100 million in direct financial support to our economy and our people. These figures may cause some to draw breath but Mr President at what price the health of the nation? What price the protection of jobs and business? What price the protection of critical national infrastructure? And what price our economic stability for the future?”
Despite the huge sums swallowed up by dealing with the Pandemic, the Treasury Minister stressed his Budget was not one of gloom but one of resilience: “A budget that yes reflects the fiscal toll of the past twelve months, but also a budget that reflects the fundamental structure and strength of our Island Nation and its people on all its economic, fiscal and social fronts.
“This budget is one that will continue to stabilise our economy, protect our people, support our public services and exercise responsible financial management whilst ensuring that we continue to invest in our future.”
The Minister outlined the huge sums paid out in a host of support schemes over the past year, and whilst unable to save every job or account for every loss, they had, he said, stabilised the economy.
His focus, post Covid, will be on economic stimulus, spearheaded by the recently formed Economic Recovery Group, which has commissioned a new Strategic Economic Framework to provide the platform to drive forward the Island’s economy over the next 5 to 10 years: “This core piece of economic analysis and assessment will let us truly understand how each part of the Island’s economy functions and interacts with Government and other sectors.
“The point of this strategy will be to be bold, to look across a wide range of opportunities and identify the opportunities where the Isle of Man can take advantage, or even lead the way on. It will draw on experts across a range of sectors, bringing views and analysis to help the Island find its place for the next 5 to 10 years and beyond,” Mr Cannan told Tynwald.
Despite the huge economic hit there was some good news about government’s reserves: “Our reserves, despite the pressure, have stood up particularly well and with market values increasing by 13% since the market crash in March 2020. The market value of our reserves stands at £1.6 billion which is broadly at the same level pre the pandemic.”
Looking ahead the Minister said there were clearly many unknowns facing the Island in the coming year, but he sounded a note of optimism: “The key assumption in this scenario projection is that by 2023/24 public sector revenues will broadly recover to the planned level set out in the last budget.
“The core assumption is that income tax revenues will fall in 2021/22 as impact of the pandemic continues to be felt, but will then return to previous expected levels by 2023/24. The basic assumption being there is no permanent scarring to our economy.”
Mr Cannan said that despite the huge pressure on the Island’s finances he would not be raising taxes or cutting personal allowances: “Now is not the time for tax rises. Instead our focus must be on continuing to support our economy and our recovery. No news on tax rises is good news for jobs, investment and economic stability and is a testament to the strength and good management of public finances.
“I should also point again to the increases to personal allowances up until last year which, I would suggest, have helped many cope with short term income reductions. Under this Administration the £3,750 increase in personal allowances from £10,500 to £14,250 has meant that a single person pays up to £550 less tax per year and a couple up to £1,100 less tax per year. We have put money back in people’s pockets and helped improve living standards,” said the Minister.
There was though a strong hint that the Island’s National Insurance will be subject to change – though no precise timetable was given: “I can confirm that a review has been undertaken and that I intend to bring the Report back to this Court for a policy debate in the coming months.
“A change to a national insurance regime that has been in place since the 1940’s is not something I intend to do without Members input, or without a public consultation. Therefore following the Tynwald debate, I will issue a public consultation on the various options for change. It is vital that our system of taxation remains fair and is appropriately designed to meet our commitments.”
Despite the pressures there was good news for pensioners from the Minister: “I have decided to continue to follow the United Kingdom’s “triple lock” uprating of state pensions, for the time being. Therefore, the rates of the Manx state pension up to the “full amount” and basic rates of State Retirement Pension will increase by 2.5% from the week commencing 12th April. This results in the full rate of the Manx state pension increasing from £191.35 per week to £196.14 per week and the rate of a full basic state retirement pension increasing by £3.35 a week, to £137.60 per week. Rates of the “Pension Top-up” are also increasing by 2.5%.
“Protected amounts” of the Manx state pension and the additional state retirement pension – commonly referred to as “SERPS“ – are being increased by 0.5% from the week commencing 12th April, the same as they will be in the United Kingdom.
“Overall, the cost of these increases in the Island is estimated to be £3.6 million per annum, which will be paid for out of the Manx National Insurance Fund. Once again Mr President This is good news for our pensioners.”
Further measures unveiled:
· £15 million more for health
· Over £17 million for climate change and its impact
· Capital projects reformed
· An Economic Recovery Group delivering increased training and reskilling
opportunities, investing in high speed fibre and the local economy
· A new Manx Development Agency to develop brownfield sites
· Contingency funding and plans to deal with uncertainty
· A new economic framework on its way
- · £600k for charitable causes through the Dormant Assets Act
- · And Mr President despite the pressures no tax increases bringing stability to
household incomes and businesses in equal measure