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Budget support for jobs and workers

Tuesday, 18 February 2014

The importance of employment, and the pressures being felt by the Island’s working population, were key themes when Treasury Minister Eddie MHK presented his thirdBudget to Tynwald today (Tuesday February 18, 2014).

Recognising that people in work have seen a steeper decline in living standards than those on pensions and other benefits, Mr Teare announced the first increase in income tax personal allowances for three years. 

The two per cent allowance rise to £9,500 for individuals and £19,000 for the jointly assessed will remove more than 250 people from the tax net. Combined with a move to exempt Employed Persons Allowance from income tax, the measure will be particularly beneficial for working families on low incomes. 

The Minister said work was the common thread running through his Budget message:

‘Government needs to work through its fiscal challenges. Our economy needs to grow and provide our community with opportunities to work, especially for the young, and we need to reward work by retaining low and competitive rates of taxation.’ 

To support employment, he announced:

  • Continuation for another year of the National Insurance holiday scheme, which has created 1,100 new jobs over the past two years
  • £1m for a new engineering training centre of excellence at Hills Meadow in Douglas
  • A 14% increase from £44m to £50m in the construction element of the capital spending programme
  •  A new scheme to secure the ‘tax cap’ contribution to employment and revenue,
  • currently estimated at 360 jobs and £34m in wages, ITIP and NI 

Mr Teare said Government is putting its own house in order by cutting running costs to minimise impacts on the public, and by centralising internal support functions to protect front-line services. He revealed: 

  • For the coming year gross Government spending is £4m down, and staff costs are £3.6m lower, compared to last year’s budget;
  • 600 actual jobs have been lost since 2010, 8% of total staff, comparable to UK
  • public sector shrinkage of 8% since 2009
  • Holding down the salary bill (at £312m this year) is saving £50m this year and
  • £60m next year, compared with inflation
  • Gross Government spending relative to the overall economy has fallen from 25% to 20% of GDP in the past four years (UK is 46%)
  • Centralisation of internal support services will save £4m in the coming financial
  • year, and the target of £10m a year savings on overheads will be met by 2015/16

Government is prioritising spending on Health and Social Care, with a two per cent or £3.9m increase in net expenditure and the creation of a new £2m fund to make provision for quality review recommendations that may be made in relation to Noble’s Hospital. 

Mr Teare said the benefits system needed to be reformed and all benefits would be reviewed. 

The Minister confirmed that Government is on target to rebalance its revenue budget as planned by 2015/16, but he warned: 

‘I am not assuming that the job will be done at that point. In the longer term we must achieve truly sustainable public finances. I will develop and present to Tynwald next year a new fiscal strategy which will set us on that path. It will need to deal with the depletion of our internal funds, the rebuilding of our capital fund and how we are to meet the growing costs of pensions, healthcare and social care provision mainly brought on by the ageing population. 

‘I believe that we need a national debate about these issues, as they are complex, and the potential solutions will be seen by some as divisive. But we cannot ignore the ever increasing cost pressures on public services. The Government plays a vital role in the wellbeing of the whole community, but it has limits, and we need to be open in discussing where those limits will be.’ 

Key features of the 2014-15 Budget include:

  • A reduction in gross Government expenditure of £4.0 million (0.4%)
  • We have reduced spending by £4.3 million (0.8%) in cash terms (3.7% in real terms, after inflation).
  • Comparative staff costs are £3.6 million below last year’s budget.
  • Staff numbers are reduced by 153 posts next year. 

In addition to these savings we have accommodated -

  • Gross spending on benefits of £268 million, £6 million (2%) higher than last year, including £165 million on the State Pension and Pension Supplement.
  • Net spending on health and social care up by £3.9 million (2.0%) with a further £2.1 million set aside for quality review recommendations.
  • A Government Capital Programme of £72 million. £50 million of construction schemes including £17.0 million Local Authority Housing Programme. 

In respect of Taxation –

  • Income tax personal allowances increased to £9,500 for single persons and £19,000 for jointly assessed couples.
  • Additional Personal Allowance for over 65’s is reduced to £1,000
  • No change to income tax rates or thresholds:
  • The income tax lower rate for individuals remains at 10%.
  • The income tax higher rate for individuals remains at 20%.
  • The threshold at which the higher rate for individuals becomes payable remains at £10,500.
  • Personal Allowance Credit remains at £500 per person

Further information from:

Caldric Randall, Chief Financial Officer

The Treasury

3rd Floor

Government Offices

Bucks Road

Douglas

Isle of Man

IM1 3PZ

Telephone:+44 1624 685666

Email:Send Email

 

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