Calculations regarding the Final Expenditure Revenue Sharing Arrangement (FERSA) with the United Kingdom Government have been finalised, Treasury Minister Alfred Cannan MHK informed Tynwald this morning while announcing the Budget for the forthcoming year.
FERSA was agreed in 2016 with the aim of ensuring a stable and secure basis for the long-term future of the Customs and Excise Agreement between the UK and the Isle of Man.
Mr Cannan said:
‘I am able to confirm to you today that we have finalised the required FERSA calculations and agreed them with Her Majesty’s Government in Whitehall.
'These agreed determinations mean that we can now be confident that the methodology applied in 2016 to calculate the Island’s estimated share of VAT and Shared Duties was broadly accurate.
‘As a result of this agreement, I am today able to release the money from our cash reserves that we have prudently held back over the last three budgets to deal with any negative outcomes from this valuation.
‘In short, the determination of our final share together with our prudent approach means that I am allocating £44m into our general reserves from where this money can be used to target our priority areas, including funding for Health and Social Care and the Climate Change Action Plan.’
‘I would like to thank HM Treasury for their detailed and professional approach together with Officers both in Treasury and the Cabinet Office who have worked in such an efficient manner to reach this conclusion.’
FERSA is based on final expenditure by households and businesses and is designed to provide the Isle of Man Treasury with the revenue due to it from the consumption of goods and services in the Island, whether purchased on or off the Island, including those bought over the internet and by mail order.
The Economic Affairs team in the Cabinet Office conducted a Household Income and Expenditure Survey and a Business VAT survey during the 2018-19 financial year which provided data from 1,000 families and more than 400 businesses.
In addition to finalising the calculations with HM Treasury, a new indexation rate has been established and is valid for the next five years, up to 2025.