Treasury Minister Chris Thomas has warned that although the Isle of Man Government’s reserves continue to grow, increasing reliance on those funds to cover spending pressures is placing strain on public finances.

In order to balance the latest Budget, £126m is set to be drawn from the reserves - a whopping 54% more than the amount of £82.2m forecasted for 2026-27 within last year’s Budget.

Drawdown of reserves are now planned to be reduced each year to £93.9m in 2027-28, £76m in 2028-29, £55.6m in 2029-30 and £35.8m in 2030-31.

The total value of reserves is expected to rise overall over the next five years due to strong investments, with the current total amount of £1.95bn expected to rise to £2.22bn by 2030-31.

However, that overall figure does not present the full picture.

A substantial proportion of the island’s reserves is earmarked to provide long-term security for state pensioners and to underpin the social security system, as well as to support the health service in the coming years.

As a result, not all reserves are freely available for general expenditure - with Treasury looking to crack down on reserve overspending.

At present, reserves are being used to cover both revenue expenditure and capital maintenance, which the Treasury Minister described as ‘not healthy’.

‘This year, the position in terms of using the reserves is worse than it was at this time last year,’ Mr Thomas said.

‘We’re using more reserves than we had hoped to be using now because of healthcare overspends, increasing building costs and things like that.

‘This coming year, disregarding the investment returns and the growth in the funds, we will be drawing down reserves by over £120m, whereas we had only actually forecasted it to be £82.2m.

‘The reserve position isn’t healthy - we’ve got to avoid drawing them down, except where absolutely necessary. The reserves are precious.’

In recent years, the government has budgeted for higher reserve use than has ultimately been required. Mr Thomas said they hope to continue that trend, limiting withdrawals where possible.

‘The more that we spend from reserves, the less we have to earn interest on and get shared stock market returns on,’ he said.

‘We have been using that interest and some of the reserves for revenue expenditure, and that’s not a good position to be in.’

Figures for use of reserves to balance the Budget can be used as an indicator for the Government’s underlying structural deficit - the difference between Government revenue and expenditure.

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.

It rose again to £103.1m in 2023-24 and then fell again to £10.7m in 2024-25 thanks to a favourable VAT settlemen. It rose to £72.5m last year’s Budget and this year’s Pink Book gives a provisional figure of £97.8m for 2026-27, this falling in the following years to £70.2m, £50m, £41.8m and £37.6m in 2030-31.