The Isle of Man Government’s Detailed Accounts 2020/21 will be laid before Tynwald at this month’s sitting.
Commonly known as the Light Blue Book, the document presents the financial outturn of the accounting period for the year ended 31 March 2021, and includes the financial impact of the coronavirus pandemic.
The accounts show the financial impact of the pandemic for the last financial year to be approximately £246m, split between £111m reduced Government revenue, £109m in direct support costs and £26m in other costs, for example the purchase of personal protective equipment.
The final position for indirect taxation receipts (VAT) will be determined in the near future and will be reported as part of the Statutory Accounts (the Dark Blue Book) which are expected to be finalised during August.
Treasury Minister Alfred Cannan said:
‘The cost to the public purse of dealing with the pandemic will not be a surprise but it is well within the worst case estimates that I presented to Tynwald in July 2020.
‘In order to meet our costs, a total of £57m was transferred from the Contingency Fund to cover pandemic operational costs, £78m was transferred from the National Insurance Fund to cover additional benefit costs and £111m of reduced Government revenue was funded by reduced costs and the residual deficit from the Net General Revenue Account (£60.5m).
‘However, despite this activity our reserves remain strong and indeed the market value of our externally invested reserves grew by £37.3m over the year, standing at £1.84bn at the end of March.’
Minister Cannan added:
‘It is further worth noting that capital expenditure for the year was just under £72m, close to last year’s level despite the pandemic, and that most Departments remained within their revenue budgets and actively managed the revenue impacts of the pandemic by approved fund claims and reducing costs, where possible.
‘While the pandemic has undoubtedly affected our financial position, these accounts provide continued evidence of the strength of our finances and will provide a platform for future economic recovery.
‘I remain resolute that the actions that we have taken and the financial support that we have delivered to protect jobs, businesses and individuals has been both necessary and appropriate.’
The Treasury intends to introduce a new-style annual report combining the Light Blue (Detailed Accounts) and Dark Blue (Statutory Accounts) books for the 2022/23 financial year end.
Light Blue Book in brief
How much did the pandemic cost?
Roughly £246m up to 31 March 2021, but costs remain ongoing since then. This was split between £111m in reduced Government revenue, £109m in direct support costs and £26m in other costs.
The final position for indirect taxation receipts, ie. VAT, will be determined in the near future and will be reported as part of the Statutory Accounts (the Dark Blue Book) which are expected to be finalised during August
How has it been paid for?
From Government’s internal reserves, which include the Net General Revenue Account, the Contingency Fund and the Economic Recovery Fund.
What about reserves? How much was used because of the pandemic?
The external reserves position actually increased by £37m compared to the opening market value position in March 2020, closing at £1.837bn.
A total of £57m was transferred from the Contingency Fund to cover pandemic costs, £78m was transferred from the National Insurance Fund to cover additional benefit costs and £111m of reduced Government revenue was funded by reduced costs and the residual deficit from the Net General Revenue Account (£60.5m).
There were two large drawdowns from the reserves which were not related to the pandemic: a planned transfer from the Public Sector Pension Reserve to support pension costs, and a drawdown from the National Insurance Fund to re-balance the National Insurance Operating account.
The stock market recovery since the closing position of 2019/20 has been positive, and has enabled Treasury to move cash previously managed on deposits to be reinvested by its external investment managers.
What has been the impact on our financial standing?
The Island’s issuer credit rating was reviewed in May 2021 by Moodys and reconfirmed as Aa3. The review referred to the Island’s very strong public finances as an important credit strength.
How has the performance compared to our budgeted position – is it worse or better?
The financial position showed a deficit of £60.4m, compared to a budgeted surplus of £12m.
The budgeted position was published in mid-February, before the impact of the pandemic became apparent, and the deficit was due to lower than budgeted Treasury income and Departmental revenue.
Departments managed their costs, where possible, to lessen the impact of reduced income alongside transfers from internal reserves to offset COVID-19 expenses.
Treasury income was lower than budget by £78m, which was due to lower than budgeted VAT and Income Tax receipts contributing in the most part to the overall deficit position.
Why was more spent on staffing costs than was budgeted for?
Higher staffing costs were incurred to meet the challenges of the pandemic, notably in the Cabinet Office and the Department for Health and Social Care.
How much was spent on benefits and support schemes?
A total of £370m was spent on benefits in 2020/21 compared to £285m in 2019/20.
£78m of this total was linked to support schemes created in response to the pandemic, such as MERA.
£4.7m was due to increased income support and Jobseeker’s Allowance, and a further £2.8m was on retirement pensions.
How much was spent on the capital programme?
Capital expenditure remained broadly the same as 2019/20 at £72m. Percentage delivery compared to budget was, however, 10% lower at 44% against a delivery target of 55%.