On Air Manx Radio Breakfast Ben Hartley & Sian Cowper | 7:30am - 9:30am

IoM Budget: rebalancing on track but squeeze continues

 

A further round of belt-tightening and efficiencies inside government are on Eddie Teare's budget prescription for the year ahead.

The treasury minister says his three-year strategy to re balance the budget is on track, after the Island lost a third of its annual income in the VAT renegotiation.

Towards achieving that, public spending is to reduce by £4.3 million in 2014-15, resulting in cuts to the budgets of all but one government department.

A total of £543.6 million will be spent on public services amounting to nearly £11,000 per year for every man, woman and child in the community.

That sum includes £11 million from reserves and in percentage terms represents a drop of 0.8% on last year's overall sum of £547.8 million. 

However, Treasury's figures need to be read in the light of the transfer of functions from the now defunct Department of Community, Culture and Leisure to other departments.

Net spending at the re-formed Department of Health and Social Care will rise by £3.9 million, up 2%, while another £2 million will be set aside to implement recommendations of a quality review at Noble's Hospital.

Universal benefits will continue to be squeezed, with the minister signaling further unspecified changes.   

Gross spending on benefits will rise by £6 million, with the basic state pension due to go up by 2.7%, just above the current inflation rate.

The Christmas bonus paid to those on a range of benefits will be cut by more than half to £40 per year, a move Mr Teare admitted could earn him the nickname Scrooge.

But in a budget he says is designed to support jobs and workers, there's respite for hard-pressed tax payers.

The minister has sanctioned the first increase in three years in income tax personal allowances, which will rise 2% to £9,500 for individuals and £19,000 for the jointly-assessed.

That move is expected to remove 250 people from the tax net altogether and benefit working families on low incomes the most.

However, better-off older people will be expected to contribute more, when the Additional Personal Allowance for over 65's is halved to £1,000.

There's no change in the higher and lower income tax rates, of 20% and 10% respectively.

Other allowances and reliefs remain unchanged and the Personal Allowance Credit stays at £500 per head.

The tax cap remains at £120,000, but in future wealthy individuals will be required to sign-up to the regime for a minimum five years, in a new tax cap 'election'. 

A slimming-down in staff numbers will see 153 posts shed across government over the coming year. 

Together with measures such as the centralisation of a range of shared services, the Treasury aims to deliver on an internal efficiencies target of £10 million by 2015-16.

The government's capital projects programme is worth an estimated £72 million in the coming year.

Of that £50 million will be spent on construction schemes including £17 million on local authority housing.

Looking ahead, while the deficit in public finances has been addressed with government on target to re balance its revenue budget by 2015-16, Mr Teare has warned there is more pain to come.

He has promised a new fiscal strategy next year 'to achieve truly sustainable public finances' in the longer term. 

That strategy will deal with the rebuilding of the government's capital fund and the growing cost of pensions, health and social care, the result Mr Teare says, of the ageing population. 

 

More from Isle of Man News