Support for working families was a key theme when Treasury Minister Alfred Cannan MHK unveiled his first Budget in Tynwald today (Tuesday, February 21, 2017).
Mr Cannan announced the largest ever single increase in income tax personal allowance and the first rise in child benefit payments for seven years.
‘Now is the time to recognise the contribution of working families and individuals who have been asked to tighten their belts over the past few years’, declared the Minister.
There was also more funding for health services and additional support for meeting the cost of nursing care. At the same time Mr Cannan announced the tax cap would be higher in future, saying he fully supported the scheme but an increase was ‘both morally and financially justifiable’.
Describing his Budget as one of ‘optimism and confidence’, the Minister set out a five-year plan to secure sustainability in the Island’s public finances. This includes finding additional annual savings totalling £25 million, and there will be an online portal for members of the public, as well as Government staff and Tynwald Members, to suggest ideas for cost reductions.
Main features of the 2017/18 Isle of Man Budget include:
- Personal income tax allowance increased by £2,000 to £12,500, making more than 44,000 individuals better off and lifting 3,300 out of the tax net.
- Child Benefit to rise by 2%, the first increase since 2010.
- Additional £11 million annual funding for health services.
- A £25 per week benefits increase for individuals paying for residential nursing care, plus an increase in the maximum tax deduction for nursing expenses from £9,300 to £12,500.
- Tax cap for new entrants to the scheme to increase from £125,000 to £150,000 in 2018/19, to £175,000 in 2019/20 and to £200,000 in 2020/21.
- New cross-Government savings and efficiencies team, tasked with finding additional annual savings totalling £25 million, will be asking Ministers and Chief Officers for cost reduction options. Other Tynwald Members, Government staff and the public will be able to submit their savings suggestions through an online portal.
Other key points:
- Five-year capital investment programme of £388 million, including £298 million of engineering and construction projects, supporting the public service infrastructure, economy and employment.
- Continuation of the £50 million Enterprise Development Fund and 0/10% corporate taxation regime for business.
- Five Year Financial Plan to secure a sustainable reserves position by 2021/22. Use of reserves in 2017/18 is budgeted at £80 million, including £50 million of investment income. Value of reserves today is £1.6 billion, projected to rise to £1.66 billion by 2021/22.
- Government’s employer contribution to public sector pensions held at 15%. Public Service Pension Reserve to be depleted by 2020/21, leaving £58 million shortfall to be met from general revenue.
- Continuation of 1% cap on budget for Government staff pay awards.
- Basic state pension to rise by 2.5%.
- £1 million to establish a new Brexit Fund, for issues arising from the UK’s departure from the EU.
- In line with the UK, abolition of Class 2 National Insurance contributions for the self-employed with an increase in their Class 4 contributions from 8% to 11% from April 2018.
- Maximum tax deduction for interest paid on loans and mortgages reduced from £7,500 to £5,000.
- New benefit in kind incentive to encourage cycling to work.