BUDGET 2023: What do you need to know?

The main points from the 2023 Budget, all in one place

The Isle of Man's Budget for 2023 has now been unveiled in Tynwald by Treasury Minister, Dr Alex Allinson.

Whilst last year's was announced in the long shadow of the previous three years, now Covid-19 has seemingly been replaced by the cost of living crisis as the topic on everyone's minds.

So what does this year's Budget reveal? Where is the most money going? And who is funding it?

We take a deep dive into some of the key revelations.

Introduction to the 2023 Budget from Treasury Minister Dr Alex Allinson:

"The last three years have seen global events cause significant disruption to the way we lead our lives and have led to instability and uncertainty. The Isle of Man Government and Tynwald have taken decisive action to support our community and economy.

"Throughout the pandemic and the financial pressures of 2022 we continued to adjust and adapt to meet the challenges we faced together. But this has come at a cost; physically, emotionally and financially.

"The Chief Minister, the Honourable Alfred Cannan MHK, has been quite clear that 2023 will see us all having to face further challenges, but also that significant opportunities will present themselves as we look past the short term difficulties and take a more strategic view of where our island sits in the world.

"Our Island Plan, now incorporates the ambitions and aims of the Economic Strategy and seeks to set out an agenda not just for this administration, but for those which follow. It has never been harder to predict the future, or try and calculate Government revenue and expenditure, but this Budget sets out to invest in Our Island Plan.

"To invest in our people, front line services and infrastructure. It marks a significant change in the way Treasury interacts with other Departments, giving greater responsibility and financial accountability to those providing the services to our people.

"The capital programme has been overhauled so that it is more responsive to change, and regular democratic scrutiny is enhanced on how Government spends our people’s money.

"At a time of global instability and uncertainty it is Government’s role to provide clear leadership and direction. Now is not the time for austerity measures and cutbacks, but we have to be honest about the use of our reserves to invest in economic growth, productivity and improve the prosperity for all those who call our island home.

"This year’s Budget initiates a strategic review of our taxation system, and the long term viability and purpose of our National Insurance system. It sets out a five year plan to create a more diversified and sustainable economy which will benefit all our community. It supports all those working in our front line services such as health, education, social care and our emergency services whilst investing in the future of our island.

"I am very grateful for the advice, help and support offered to me by all the staff at Treasury. They are a talented and committed team of people dedicated to public service and to the long term economic security of our island. With their help and yours I hope this budget will act as a catalyst for positive change, inspire trust in our future potential and confidence in our collective ability to build a secure, vibrant and sustainable future for our island."

Risks and Challenges

Treasury has highlighted a number of risks facing the Island's economy at the outset of this year's Budget.

These include a skills shortage facing the employment sector, the ever-challenging need to fund health and social care appropriately, and inflation - which has been subject to much fluctuation in recent months, and hit a high of 10.8 per cent in August last year. 

Meanwhile, much emphasis has been placed by the Treasury Minister on reducing the reliance on using our reserves going forward.

Health gets a shot in the arm

There is an overall budget increase for the Department of Health and Social Care included in this year's Pink Book of £20.5m.

This includes £8.5m of the investment income generated by the Manx National Insurance Fund, which will be utilised to assist with funding the mandate to Manx Care.

In the 2022-23 financial year, this was also the case and was touted as a one-year solution.

Dr Allinson says he is "breaking that promise".

Capital Programme - Design and Feasibility

Following a full review of government's Capital Programme, a change to the capital approval process is to be introduced.

Currently, Departments submit bids for capital funding in August or September for consideration and inclusion within the budget applicable for the following financial year.

This provides Departments with a single opportunity in the year to receive approval for capital schemes, and means changes in project requirements and costs have led to business cases not reflecting the final project requirements.

Treasury Minister Dr Alex Allinson says it has become a "farce" that Tynwald will "vote on hundreds of millions of pounds worth of projects and only about 50 per cent of them will actually be delivered".

To address this issue, there will now be a quarterly approval process for capital schemes in February (as part of the annual budget), June, September and November each year.

Schemes that have successfully proceeded through the design and feasibility process would be eligible to request approval, subject to concurrence from Treasury’s Strategic Assets and Capital Investment Committee, Treasury Board, the Council of Ministers and by Tynwald as appropriate, subject to agreed limits of approval.

A number of schemes are currently expected to be presented for consideration within this revised process.

These include (but are not limited to):

• Access works at Ballakermeen High School
• Extension to CAT3 Laboratory, Pathology at Noble's Hospital
• A new ambulance hub in Braddan
• Older Persons Residential & Resource Unit North
• Redevelopment of Emergency Department at Noble's Hospital
• Combined Emergency Services Headquarters
• Airfield Drainage
• Airport Fire Station
• Airport Training Rig
• Douglas Harbour Strategy
• Douglas Promenade Walkway
• Peel Marina Works
• International Arrivals facilities
• Port St Mary High Street
• Ramsey District Cottage Hospital
• System modernisation for the Civil Registry
• Peel Marina & River Neb catchment long term works
• Strategic bus replacement

Details on what these schemes entail are not available in the Pink Book.

Capital approvals

Meanwhile, a number of capital schemes have been already been approved within the 2023 Budget.

Indeed, the capital programme commits more then £230m over the next five years in approved Central Government schemes.

These include:

• £495,000 to purchase two new double mobile classroom units to provide further short-term accommodation at Castle Rushen High School and replace the mobile unit at Willaston Primary School that is at the end of its useful life
• £605,000 for catchment management works targeted at reducing the levels of heavy metals entering the River Neb through management at source and reducing the level of sediment entering the river
• £780,000 to support the replacement of radiology equipment at Noble's Hospital
• £2.3m in further funding for the Sexual Assault Referral Centre (there is now an increased cost due to changes in specification as a result of updated compliance requirements around standards of forensic evidence)
• £3.36m in additional funding for the King Edward VIII pier in Douglas (on top of the amount approved during the 2022/23 budget setting process, due to reflect increased construction costs)
• £420,000 for the replacement of equipment for the Police and the Fire and Rescue Service
• £370,000 for Ambulance fleet replacement

The Climate Change Adaption Fund will also receive a further £5.4m to help protect the Island and its infrastructure from the effects of changing global weather patterns.

Investment in the Island's highways will see £6.125m committed to improvements and refurbishment as part of a rolling scheme, and £1.155m will be available for structural maintenance.

As aforementioned, only active schemes have been included in this main programme, and those that require further feasibility studies and design have been redirected to the Project Development Fund.

How will these projects be funded?

This year’s Budget "initiates a strategic review of our taxation system, and the long term viability and purpose of our National Insurance system".

In short, taxation rates remain largely unaffected for the majority of people, with the personal income allowance staying at £14,500 for individuals and £29,000 for jointly assessed couples, and the 10 per cent band fixed at £6,500.

A change has, however, been introduced for higher earners whose personal allowance will be reduced by £1 for every £2 above an income of £100,000, or a jointly assessed couple's whose total income is above £200,000.

The Treasury Minister said: "In essence, this means that a person with a total income of £129,000 or over, or £258,000 or over in the case of a jointly assessed couple, will have their personal allowance reduced to zero. This progressive measure means that those who have more, pay more."

Elsewhere, the National Insurance Holiday Scheme - designed to attract workers and returning students to the Island - will continue for another year "with further improvements".

There are no changes to Class 1 and 4 National Insurance rates for 2023-24.

The lower earnings limit for employed contributors will remain at £123 per week, but adjustments are being made to certain thresholds and limits.

You can find out more about how the Budget affects you and your family HERE.