Government reserves will be raided to the tune of almost £153m this year to support public spending.

Treasury Minister Dr Alex Allinson said there was no choice but to draw down heavily from reserves if cuts in services were to be avoided.

He told a pre-Budget press briefing said: ‘There are some very carefully calculate risks involved in this.

‘I don’t like to draw down on reserves but the alternative would be across the board cuts in services, particularly health and education, predominately where we spend taxpayers’ money, particularly at a time where people are struggling with high levels of inflation driven by energy prices.

‘So this is pragmatic way now to deal with this year’s Budget. Half-way through the financial year we will be reassessing where we are.’

The 2023-24 budget relies on the use of £152.9m of reserves, compared to an estimated use of £97.4m in the current financial year, to bridge the gap between income and expenditure.

This additional use of reserves will fund increases in department spending and a bolstered capital programme.

That figure of £152.9m reflects the government’s underlying structural deficit.

The deficit had risen to an unprecedented £217.4m in 2020-21 due to the impact of Covid lockdowns and restrictions but reduced to £95.6m the following year as the Manx economy recovered from the pandemic, only to rise again to a probable £144.5m in 2022-23.

Biggest winner in this year’s spending rounds is the Department of Health and Social Care which will receive an extra £20.54m.

The Department of Education, Sport and Culture will get an extra £11.52m, the Department of Infrastructure an additional £4.66m and the Department of Home Affairs will get £2.16m more.

Some £8.5m of investment interest income from the National Insurance Fund is being used to meet the health and care funding shortfall in the 2023-24 budget, but that gap is still expected to reach £57.8m by 2027-28.

Government’s total revenue expenditure after the use of reserves for 2023-24 is budgeted to be £1.204bn, while income is forecast to be just under £1.205bn, providing a small net surplus of £0.9m.

Reserves, which currently stand at a healthy £1.79bn, will continued to be relied on each year to reduce the deficit until at least 2027-28, with the draw down gradually falling away over the four years – dropping to £84.9m next year and then £51.7m, £31.1m and £3.5m in subsequent years.

Dr Allinson said: ‘Going forward the reason the draw down on reserves will get less is because government income will go up.

‘That’s not from taxing people though – although we are getting more income tax from people who are earning more than £100,000 – it is from growing the economy generally.

‘It is a way of balancing income and expenditure in the short term while we concentrate on our economic strategy. Not growing our economy is not an option anymore.’

Dr Allinson said Treasury will be looking at a taxation strategy that would include big multi-national corporations based in the Isle of Man being taxed to an agreed new international standard.

An increase of 6% has been applied to pay budgets for the 2023-24 financial year.

Funding for any pay awards above this level will be expected to come from within overall departmental budgets.