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Budget 2015: rebalancing plan on track

 

Treasury minister Eddie Teare has confirmed his strategy to re balance public finances after the loss of £200 million of VAT income, has been achieved.

Presenting his fourth Budget, Mr Teare said the government's promise to end the use of external reserves to fund public spending by 2015-2016 has been honoured in plans for the forthcoming financial year.

And the objective is set to be achieved with room to spare, with a predicted surplus of revenue over net spending of £2m. 

Work will now begin on replenishing depleted internal cash reserves.

Future tax proposals to help low paid

While keeping a firm rein on public spending, which is to increase by just £1.6 m or 0.3% to £545.2m, the Budget includes plans for far-reaching reform of the Island's taxation regime.   

Mr Teare has unveiled proposals to abolish the lower 10% tax band in the financial year 2016-2017 and increase personal income tax allowance to £14,000.

The move, leaving a single rate for individuals of 20%, is designed to lift more than 10,000 low-paid workers, around a quarter of the working population, out of the income tax net altogether.

The strategy, described by Mr Teare as 'one of the most adventurous for many years' will be subject to consultation and depends on Tynwald acceptance of today's Budget in its entirety. 

Taxation strategy 2015-2016 

There will be no change to personal allowances or the lower and higher rates of taxation in the year ahead.

The 'zero-ten' corporate tax regime, described by Treasury as a 'cornerstone' of the Manx economy, is unchanged.

However, company tax paid on income from local land and property will increase from 10% to 20%.

Looking ahead, Mr Teare wants to impose National Insurance on earnings for those working over the state pension age, from 2016.

Capital projects

Spending on capital projects is up by 6% on last year, at £78m.

Around £60m is earmarked for construction projects, including extension of the IRIS scheme, the Henry Bloom Noble primary school in Douglas and a new facility for adult psychiatric patients. 

Carers gain in benefits changes

Among other key features in the Budget, acknowledgement of the role played by the Island's army of full-time carers.

Carer's Allowance will almost double, up from £61.35 to £112.10 per week, a rise of almost 82%, at a cost to the public purse of £850,000.

Eligibility for means-tested Child Benefit will be further tightened, as thresholds are reduced by £10,000.

It means full benefit will only be paid to families with annual incomes under £50,000.

Reduced claims are planned for those on between £50,000 and £80,000, while benefit will end for those earning above £80,000.

The basic state pension will rise by 2.5% in line with the UK.

Free TV licences for the over 75 age group will be means-tested while Personal Allowance Credit will be reduced from £500 to £400 and restricted to the elderly or disabled.

A new National Insurance 'holiday' will be available to firms which take on a person who has been unemployed or sick long-term, or recently released from prison. 

A £5000 increase in the 'tax cap' will take an individual's maximum liability to £125,000 for new entrants. Mr Teare says the policy would benefit the local economy to the tune of around £125m over five years.

The amount Homestay providers can earn tax-free is due to rise from £1500 to £1800. 

Teare serves 'steady' Budget with 'adventurous' outlook

In a Budget billed as focusing on 'fairness and the future' Mr Teare declared: "This is a budget that firmly puts in place the structures to help us achieve long-term affordability and sustainability in the public finances."

"We must continue to support the economy and more effectively deliver our services at no extra cost."

He went on: "We will seek reform to drive down our long-term liabilities, not least in terms of pension and welfare costs. Only then can we claim to be truly living within our means." 

 

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