TREASURY Minister Eddie Teare today held a news conference to set out the island’s economic position.
He said difficult changes were necessary to complete the rebalancing of government’s budget as scheduled by 2016.
‘The budget rebalancing process is on target and so far it has had a relatively limited impact on services and staffing, which may have led to a degree of complacency,’ he said. ‘But we are not out of the woods yet, and there are still some big issues to be resolved before we can finally say we have put the island back on course for the future.’
One such issue, he added, was the extension of means testing in areas of social policy, currently the subject of a consultation by the Department of Social Care with which he urged the public to engage.
Providing an update on the budgetary process, Mr Teare said Treasury had now received departmental spending bids for the next financial year. Those submissions were being reviewed and meetings with departments would continue throughout the summer.
‘It is fair to say that, as expected, a gap exists between the total spending projections of government and the reality of what is available,’ he said, ‘There is no easy way of bridging that gap, but we have to do it.’
Mr Teare said that the largest department in terms of gross expenditure was Social Care, at £321 million in the current financial year, followed by Health at £184 million.
The largest category of gross spending by type remains employee costs at £312 million, followed by benefits at £255 million. Gross spending on universal services such as Health and Education cost £318 million, and universal payments (such as the state pension) cost £210 million.
Mr Teare said that in looking at government budgets it was important to understand the difference between revenue spending - ongoing commitments funded by tax income - and capital spending - one-off expenditure on specific projects funded from a central internally generated pot.
The main fiscal challenge facing the island as a result of the VAT-sharing changes, he explained, was in relation to revenue spending – staffing costs, for example, and the payment of benefits.
The minister added that in addressing the fiscal challenge the government had to make the necessary changes while avoiding a ‘slash and burn’ approach that could destabilise the island’s economy, which was still showing positive growth.
He concluded by noting that at present he was content that the £55 million required from reserves in 2012-13 would not be exceeded, and that as such the rebalancing of government’s finances remained on plan.
‘Income is holding up in line with projections and even after the rebalancing government’s reserves will still be substantial’, said Mr Teare.
There will be more coverage on Mr Teare’s comments in next week’s Examiner, on sale Monday morning.
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Weather for Isle of Man
Saturday 18 May 2013
Temperature: 8 C to 11 C
Wind Speed: 12 mph
Wind direction: North west
Temperature: 8 C to 13 C
Wind Speed: 10 mph
Wind direction: East