Treasury Minister Alfred Cannan MHK today announced a £100m Economic Recovery Fund and unveiled measures to protect jobs, secure investment and enable growth as part of the Isle of Man’s financial fightback from coronavirus.
He confirmed a new cross-government Economic Recovery Group has been established and will start work immediately to co-ordinate action and reaction to the economic conditions.
Minister Cannan told Tynwald Members:
‘We will continue to invest in our businesses using direct and indirect support. We will invest in our people by expanding the opportunities for developing core skills, and standing ready to create up to 1,000 additional retraining and employment opportunities, if needed.
‘We will invest in our island by accelerating investment programmes and schemes to improve our digital capabilities, speed up national high-speed broadband, accelerate climate change commitments and improve core infrastructure – being ready to support up to 1,000 jobs and taking our Island forward to a greener, cleaner future.
‘We will invest in our economy, seeking and developing opportunities for our local businesses to grow and develop. We will invest in our future, moving towards an inclusive digital, green and safe Island by exploring ideas and accelerating delivery of major initiatives that might take a little longer but can deliver economic benefit for years to come.
‘We will look to capitalise on the opportunities our response to the pandemic has given us – through enhanced marketing of the Island as a great place to live for entrepreneurs and business leaders. We will look to accelerate initiatives already underway to improve our national infrastructure, and we will actively invest now to support the development of new sectors of our economy.
‘We will plant the seeds now that will bear fruit in 2021 and beyond.
‘Finally, we will invest in our future economic strategy, seeking to understand the changing world around us, how this is likely to challenge us and where it may also present us with opportunities.’
During this morning’s sitting of Tynwald, Minister Cannan delivered a comprehensive update on the Island’s economic outlook in light of the challenges facing the public and private sectors in the immediate aftermath of the pandemic.
An appraisal of the Island’s fiscal position included reassurance on the robust state of Government reserves, as well as action being taken to enable businesses and workers to look to the future with confidence.
Minister Cannan laid before Members Budget Update 2020, a document which includes revised income and expenditure estimates following the Government’s sudden and swift response to the coronavirus pandemic.
In a foreword to the report, Minister Cannan says:
‘[Since setting out the Budget in February] the Island has faced a challenge the likes of which are, fortunately, rarely seen. The public and businesses rose to that challenge and I am pleased that the Government, including the Treasury, was able to move quickly to support our community when it needed it.
‘The cost to the public purse is likely to be significant, a change expected to be seen mostly through a reduction in revenue. At this stage it is too early to predict with any certainty the level of this reduction.’
Additional net spending across all Government departments is forecast to reach a combined total of just under £25m. Departmental targets will not be amended, but budgets will continue to be rigorously scrutinised.
To accommodate this forecast and enable further flexibility in the coming months, Treasury sought authorisation from Members to approve a further £17.5m transfer into the contingency fund, topping up the £40m transferred earlier in the year.
In addition to revised Departmental estimates, the amount will be used to cover the Government’s immediate response to the pandemic, most significantly the range of financial support packages created for businesses and workers.
Spending on multiple support packages as an initial response to the pandemic remains ongoing as activity resumes and they are gradually phased out. The Budget Update 2020 includes details of how the cost currently falls significantly short of the amount forecast when the measures were put in place.
Mr Cannan says:
‘Our challenge now is to provide a platform for economic recovery and to provide transitional support as the economy moves towards the new normal. To do so we are extending the Salary Support Scheme for certain sectors through to September, providing further direct support to the hard hit travel, tourism and fisheries sectors and making available working capital loans to help businesses restart.’
A review of the capital programme has been undertaken, with increased focus on an acceleration of schemes that support the economy. Departments were asked to identify projects that could be delayed or deferred to ensure funding is channelled towards helping the Island’s recovery.
An additional £900,000 will be spent on five projects while £6.2m will be brought forward to accelerate progress on nine more.
Acknowledging the level of uncertainty that surrounds financial planning, Treasury intends to access short-term borrowing facilities in order to provide liquidity and maintain the ability to act quickly. In accordance with the Loans Act 1974, permission was sought from Members to support Treasury’s intention to enter into a revolving credit facility which could provide up to £250m of alternative funding, if required.
Minister Cannan says:
‘Whilst I recognise this is the first time in a long time that Government has taken this approach I believe it provides an important element of flexibility as we continue to meet the immediate financial challenge and then look to invest in the future.’
At the same time as revising expectations for the current financial year, Budget Update 2020 looks ahead at the economic outlook and maintaining the Island’s fiscal strength over the medium and long-term.
Minister Cannan says:
‘The task of maintaining our economic position will be neither easy nor quick and will require renewed long-term focus on investing in and supporting our wealth-generating businesses while continuing to look to the family heartbeat of our society.
‘This Budget Update therefore proposes, on top of the immediate support schemes already implemented, to create an Economic Recovery Fund by transfer of £100m from the general reserve.
‘This will be used to fund a range of measures to ensure we can move forward quickly to invest where needed, to ensure support is available if required and to build a platform for an economic fightback.’