Tynwald committee warns against systematic reliance on reserves

A Tynwald scrutiny committee has warned the Isle of Man’s government could face “significant repercussions” if it does not end its “systematic reliance” on financial reserves.

The Economic Policy Review Committee (EPRC), led by three MHKs, looked at the roles of the island’s Treasury, its structural deficit, and the use of financial reserves.

Its report also said the island’s deficit – currently about £100 million – had seen the island’s spending bloated beyond what the island’s taxpayers could sustain.

The committee’s recommendations will be debated by Tynwald members in March.

Along with 10 other recommendations, the report has called for an increase in both personal allowances and tax thresholds in and attempt to “stimulate the economy” during the ongoing cost of living crisis.

The findings, penned by MHKs Jason Moorhouse, Kate Lord-Brennan and John Wannenburgh, argue the Treasury should take an “active interest” in reducing government costs to ensure value for money for islanders.

The size of government should therefore be reduced, as at present it “consistently overextends its services” beyond what was affordable, according to the report.

The rise in the minimum wage from £12.25 to £13.46, scheduled to take effect in April, was merely “a tax on businesses”, the report said.

It added that the planned hike, which has been hotly debated amongst islanders, was not as beneficial to the lowest paid as first hoped due to their tax contributions having risen.

The setting of tax policy should be taken out of Treasury control and instead developed by the Council of Ministers, according to the EPRC’s report.

It states the 10-person cabinet which forms government policy was better positioned to ensure tax decisions were made with the interests of the island’s wider priorities.

The findings also point to the Cabinet Office developing a more “cost effective” structure for government, which “maintains robust lines of accountability”, as something to be considered after the 2026 House of Keys general election.

The committee highlights that size of the island’s public sector could threaten the private sector, arguing the recruitment control framework should be updated to reflect such a risk.

It calls for the sustainability of public finances to be restored, adding efforts previously taken to control such finances by the Treasury were “limited and hands-off”.

In response the government said an “operational performance and change board” had been established to “strategically analyse the size and scope of the public service”.

“Treasury have been working with all departments to enable them to remain within their budgets, publishing quarterly management accounts,” it said.

“The government will consider the committee’s views, review the evidence offered, and respond in full through the parliamentary process.”