Mr President,

Today I am delivering a budget of confidence in this island. Not an ill-conceived or misplaced confidence, but a confidence built on the solid foundations that have been put in place in the previous two budgets of this administration.

But confidence should not be misinterpreted as complacency for there are many challenges ahead of us, perhaps more than at any other time in our recent history.

But that in itself is not a cause for retrenchment or caution and I have long supported the mantra that with every challenge comes opportunity. This island and its people have consistently proved that we can change and thrive in new circumstances.

Indeed the list of external challenges is somewhat long and distinguished.

The global economy is full of possible permutations, international stock markets unpredictable and country debt in some quarters alarming. Closer to home not only do we have the uncertainty of Brexit but other closely aligned matters concerning our relationship with the EU and the international community on tax, substance and financial services.

And at home we have many hurdles to clear; a major review into our Health and Social Care delivery mechanism, a significant debate on Public Sector Pensions, the Post Office, Education, the Steam Packet, growing our working population, growing and diversifying our business and industry, tackling the cost of living, providing for the disadvantaged, improving the mechanisms for delivering public services to name but a few and that list is also long and distinguished!

But Mr President, rather than view these many and difficult matters with a sense of foreboding, we should be meeting them with a sense of optimism.

Optimism because tackling each represents a better and more progressive future for this island and optimism because we have the foundations in place to meet these challenges head on.

In my first budget in 2017 we set out a Five Year Financial Plan to instil confidence in public finances and in this, my third budget, there is credible evidence that we are creating a sustainable base for the future.

That five year plan set out our plans to meet the shortfall in Public Sector Pension payments when the Pension Reserve Fund is depleted in 2022, ensuring minimal risk to public services and the economy.

That five year plan set out strong cost controls.

That five year plan set out to control pay in a reasonable and fair manner.

That five year plan set out prudent financial forecasts

That five year plan set out not austerity Mr President, but prudent requirements for departments to deliver their public service commitments in a focused efficient manner.

We have also taken quantified risks Mr President. We have moved to increase personal allowances at a greater rate than ever before despite the potential cost impacts.

We started to increase support to our working families through Child Benefit and Employed Persons Allowance, we have invested in early years education; we have invested in targeted public spending and we have also managed to cope with the deficit spending from the Health Department investing an unplanned additional £21 million in the nation’s health since this plan was put together without distracting from our overall financial objectives.

And where are we Hon Members? Let me take you to the bottom line. The budget last year forecast a surplus of £10 million. Today, as a result of the success of our economy, the hard work of our citizens, our commitments to control spending, we are forecasting a surplus of just under £28 million. That’s right Hon Members, £28 million - that’s £18 million more than was estimated, generated by better than expected income receipts, more people in work, more spending in our economy and the majority of departments sticking to budgets.

I must recognise that the recent announcement by the DHSC and other spending pressures particularly in the DHA may require some additional support, but this extra funding can be found from the contingency subject of course to Tynwald approval. But £18m more than forecast gives me 18 million reasons to bring forward a budget of confidence. And let me start the ball rolling by getting straight to recognising and supporting the people of this island who should inspire us with their commitment and hard work to improving their lives.

Two years ago personal allowances stood at £10,500. Today it is £13,250. In April Hon Members I am proposing that it will rise again to £14,000 with no change to the tax bands.

We are retaining the 10% band at £6,500 and this measure will therefore again ensure that all taxpayers are better off and should see 1,500 people removed from the scope of income tax. Individual Taxpayers will be up to £150 better off or up to £300 better off for a jointly assessed couple.

The cumulative impact of these three increases has been to remove over 6,500 individuals from paying income tax putting as much as £500 back into the pockets of individuals and £1,000 for jointly assessed couples, maintaining our commitment to support the hardworking families of our island.

Hon Members we can be confident that we are an island that is inclusive and caring.

Our focus remains on supporting our working families and building an inclusive society but in doing so we remain adamant that welfare spending is appropriately targeted and fair, both in terms of the criteria for receipt and the recognition of our need to provide support to key groups.

In general terms our benefits payments will be increased by the rate of inflation at the customary reference point for benefits uprating which was 2.4% at September 2018. This is the same rate of increase as the UK.

But we are not stopping with the family heartbeat of our island here.Not only will personal allowances help but I am proposing that we increase child benefit for the third budget in succession - this time by 5% which is more than double the rate of inflation. This is at a time when the UK Government has frozen its rates of child benefit for the fourth successive year.

This increase will give parents the benefit of an additional £57.20 per year for the first child and £36.40 per year for other children. From April, parents on the Isle of Man will be £98.80 a year better off than those in the UK for the first child, and £62.40 for additional children.

Last year we also gave support to our working families with younger children by committing an additional £1.5 million for pre-school credits but this Government also recognises that it is increasingly more difficult to help support Manx students attending Universities and Higher Education in the UK. I am therefore announcing that we are committing an additional £1.5 million to the Department of Education, Sport & Culture to use in a scheme to help parents and families support those students. That money is ring fenced for this purpose and the department will announce full details of how this funding is to be applied as soon as possible.

These measures will benefit the low to middle income earners on the island and I am proposing to go further to help the lower paid by increasing the basic allowances for Employed Person’s Allowance by half a per cent above inflation to 2.9% to ensure that working families on low incomes will benefit from the increase in the primary earnings threshold for National Insurance contributions from April, as other workers will. And I will explain further about the National Insurance changes in a few moments.

Supporting the vulnerable in our communityI also wish to do more for the working disabled in our community. For disabled workers I am increasing the Employed Person’s Allowance by 5%.

Additionally, I am pleased to announce that the rates of disability living allowance and attendance allowance for our carers will generally be increased above inflation to 3.4% from April and that the amounts of the disability premiums for each of the income-related benefits will be increased by 5%.

And I want to give greater support to vulnerable people – particularly the elderly on low incomes to help them meet their winter fuel bills. Therefore I am increasing the amount of the Winter Bonus from £300 to £350. This represents a 17% increase and the first time this allowance has been increased for 10 years.

This Government is taking steps to support the more vulnerable in the community.

The elderlyAs I announced last year, we will continue to follow the UK’s so-called triple lock uprating of state pensions for the lifetime of the current UK Parliament.

Therefore, I can confirm that - as will be the case in the UK - basic state retirement pensions in the island will increase by 2.6% from the week commencing 8th April 2019. For those with a full basic pension this will mean an increase of £169 per year. Furthermore, the additional state pension will increase by 2.4% from April, in line with prices inflation. Overall, the cost of these increases in the island is estimated to be £3.7 million per annum.

New Manx state pension

Hon Members, as planned the new single-tier Manx state pension will be introduced in April this year.

I can confirm that the full rate of the Manx state pension will be £184.15 a week on its introduction. This is in accordance with a resolution of this Honourable Court made in July 2016 for the new single-tier state pension to be £170 a week, revalued in line with increases to the basic state pension since that date.

Some people who have accrued significant amounts of additional state pension up to 5 April 2019 may get more than this amount, whilst others who have been in contracted out employments for considerable periods of time will most likely get less than this amount.

The officers from the Income Tax Division will be on standby to offer advice and guidance to those who need it.

Manx Pension Supplement

As agreed by this Honourable Court in July 2016 the value of the Manx Pension Supplement for new pensioners will gradually be diminished over a 20-year period starting from this April.

It would therefore seem inequitable to increase it for existing pensioners. So I propose that the current rates of the Manx Pension Supplement will not be increased from April.

As has happened in previous years, the Pension Supplement Scheme has been amended in order to avoid what would otherwise be an automatic increase.

Bereaved Families

In April 2017 we introduced the new Bereavement Support Payment, which provides for a very straightforward and easy to satisfy contribution condition and standard rates of allowance payable for a fixed period of 18 months.

Following recent representations, I have decided to give more help to bereaved families with very young children. I can confirm that I shall be bringing an Order to this Honourable Court next month which will - where relevant - extend the period for which this benefit can be paid to the 6th birthday of the youngest or only child in a bereaved family. I believe extending it until a child’s 6th birthday will give their parent the additional support in adjusting to these difficult circumstances.

It Pays to be in Work

The increase in the Isle of Man minimum wage rate from 1st October last year resulted in a welcome widening of the gap between the maximum jobseeker’s allowance payable to a single jobseeker and the amount of take home pay a worker would have at minimum wage levels. For an individual aged 25 or over, based on a 40-hour week that gap is now over £67 a week, whilst for an individual aged between 18 and 24, again based on a 40-hour week, the gap is almost £88 a week.

Incapacity benefits and Funeral Payments

Last year this Honourable Court agreed to significant changes to incapacity benefits and funeral payments, intended to simplify and rationalise provision in those areas and I am grateful to Honourable Members for supporting those changes.

Social Housing

We are continuing to support the vulnerable with investment in Social Housing. We have £2 million set aside in our capital programme for further works at Clagh Vane in Ballasalla and £1.9 million for minor capital works to refurbish and repair the existing stock.

National Insurance Measures

In my budget speech last year I announced that Class 2 National Insurance Contributions that are paid by the self-employed would be abolished from April 2019.

In September last year the UK Chancellor announced that the abolition of Class 2 had been postponed to at least after the next election in the UK.

I have considered that given the nature of the current reciprocal

agreement that operates between the island and the UK it would not be practicable at this time for the island to abolish Class 2 contributions as the UK have not, and therefore I can announce today that Class 2 National Insurance contributions will continue to be paid by the self-employed for the foreseeable future.

The 2017/18 tax year once again saw steady growth in National Insurance contributions and this trend has continued into the 2018/19 tax year. I therefore expect receipts to be £4 million above estimate.

I again therefore propose to freeze the rates of National Insurance paid by employees, employers and the self-employed for the 2019/20 tax year so that the island continues to remain a competitive place to do business.

The Lower Earnings Limit (LEL) is the point at which an employee starts to build up entitlement to National Insurance funded benefits, in this current tax year it is £116 per week. The UK has announced that from 6th April it will increase to £118 per week and I propose that the Isle of Man should continue to keep the same level as the UK and therefore the Lower Earnings Limit will be increased to £118 per week in the island from 6th April 2019.

The earnings threshold is the point at which both employees and employers start to pay National Insurance and is currently £118 per week. I propose to increase this amount to £125 per week saving all employees £40 a year in National Insurance and employers £46 a year for each employee.

As a result of this increase the starting point at which a self-employed person starts to pay Class 4 National Insurance will rise from £6,136 to £6,500 saving them £29 a year.

Mr President, we are demonstrating our commitments to an inclusive and caring society and we can also be confident that we are a healthy and safe island.

Last month this Honourable Court received the interim progress report from Sir Jonathan Michael with the final report to come in May 2019. This will provide Tynwald with a number of options that will shape the future of our Health and Social Care system.

I confirmed in Tynwald last month that Treasury has already approved funding from the Healthcare Transformation Fund in order to address some of the immediate change requirements and some £4 million will be available to act on Tynwald’s support or otherwise in respect of the Michael recommendations. I want to thank everyone who has and is inputting into this report and I look forward to that debate in May. We can and we must get behind our health professionals in finding a new and exciting way forward for the delivery of integrated care on this island.

In terms of the actual budget for Health & Social Care next year, alongside a 2% increase for pay worth £2.1 million, we are providing an additional £3 million to further support staffing and additional pharmaceutical costs. In total that is an additional £5.1 million in additional funding for DHSC which brings our three year total of additional funding (including overspends) to over £42 million.

Our NHS would be nothing without the staff it employs and I want to thank all of the staff in that department for their continued dedication and hard work and for their support during the independent Health and Social Care Review.

Within our capital programme we are investing a further £13.6 million of funding within Health and Social Care including £550,000 per annum over the next 4 years for new radiologyequipment.

The issue of poor Mental Health is an increasing concern in today’s society. People with mental illness also bear a disproportionate burden of physical ill-health related to lifestyle factors.

We must continue to tackle mental health and we are allocating £1.7 million to Geddyn Reesht and £1.5 million to Grianagh Court for infrastructure improvements designed to help, treat and support those who need it.

Introduction of ‘Sugar Tax’

Last year I announced that the introduction of the Soft Drinks Industry Levy had been postponed on the Island until 1st April 2019. This postponement was due to the fact that the UK needed to introduce legislative changes to allow for the movement of dutiable soft drink products between the UK and the Isle of Man without the need to treat the goods as imports or exports. We are confident that these changes, which are included in the UK Finance Act 2019, will receive Royal Assent before April 1 this year and that the Isle of Man will able to introduce the duty on 1st April as planned.

Income raised under this duty is estimated to be £300,000 in 2019/20 and will be ring-fenced to be utilised by the Department of Health & Social Care who plan to use it initially for weight management in children and families, breastfeeding initiatives and the promotion of oral hygiene.

£3.4 million additional budget for the Department of Home Affairs

We live in one of the safest places in the world. Our quality of life is envied by many and our low levels of crime are a significant factor in attracting new businesses to our island. The safety and security that we enjoy are precious, but we must not take them for granted.

I know that Honourable Members have often spoken about their support for the Isle of Man Constabulary in the work that it does to keep us safe. I fully share and endorse these views and I recognise that the Constabulary is facing many pressures that now need addressing.

I am therefore providing the Department of Home Affairs with £3.4 million of additional funding next year which includes an additional £2.5 million to be invested in our Police force to help keep our island safe now and in the future.

Although this will not mean a return to policing levels of 10 years ago, it will give the Chief Constable the means to tackle new and emerging threats to our safety in imaginative ways. Neighbourhood policing will be redesigned and modernised, with extra officers being provided to tackle offending and anti- social behaviour across the island. It will also provide more effective support to vulnerable people.

Additional officers will be put into the fight against serious organised crime.

There will be more officers in place to target the importation of Class A drugs and to help take the profit out of drug dealing.

There will be extra officers in place to investigate serious sexual offences and to provide support to victims of abuse.

In January the Government’s road safety strategy for the next 10 years was approved by Tynwald and in this budget we have provided £227,000 for 4 additional roads policing officers that will allow the Constabulary to fully deliver the strategy.

Ensuring our officers are equipped now and in the future to deal with the challenges of 21st century policing is a priority. That is why we have also committed to a major investment in police training and development.

Funding for the Fire & Rescue Service and Probation Team

On top of these additional funds for policing, the Department will receive funding for Fire Service training and for additional staff within the Community Service Team which will then ensure that adequate alternative sentencing options are available for the judiciary.

DHA Capital Investment

From our capital programme we will be investing a further £4.6 million in our safety and security next year. Part of that investment is funding to help in the fight against financial crime, with £707,000 set aside for new technology to allow the Economic Crime Unit to become even more effective. In our 5 year capital programme we have £6 million set aside for the renewal and replacement of equipment, and £7.5 million for emergency vehicles to ensure our Police and Fire and Rescue Service have the resources they need to ensure the island remains a safe place and that we live our lives free from crime and danger.

Additionally, an investigation continues to try to identify a long term and multi-disciplinary solution for a new emergency services Douglas Headquarters with £475,000 set aside in 2019/20 for this as well as support to assess the scope and condition of the current Police Headquarters.

Hon Members we are investing in the safety and security of our island.

We can also be confident that we are an Island of Enterprise and Opportunity.

If we are to be successful we must have a diverse economy where people choose to work and invest. I can report today that we are delivering on that objective and can assure business that we have plans to continue strong economic growth.

In a 2018 opinion on the island’s credit profile, Moody’s Investor Service said they consider the island’s economic strength to be ‘high’, underpinned by high wealth levels and a track record of strong economic growth. They report that our economy has a comparatively higher degree of diversification than many other economies of a similar size, and it is this diversification, which has been supported by specific government policies, that has proven to sustain our economy during the financial crisis.

We are seeing positive growth in our exporting industries and encouraging stability in our domestic sectors.

Our e-Gaming, Insurance, and ICT sectors are still expanding with double figure growth this year. Our banking sector is also showing healthy signs of growth, with the Alternative Banking Regime leading to the first new banking licence in the Island for over 20 years.

The Department for Enterprise’s new Executive Agencies are taking charge of a productive private/public partnership, delivering a number of new initiatives and committing to a range of strategic actions designed to support this administration’s Programme for Government objectives and the wider economic needs of our Island.

This budget allows the Executive Agencies to deliver the objectives through the utilisation of the Marketing Initiatives Fund and Economic Development Fund. It is early days for the agencies but in this coming financial year their contribution must be significant. Their role is to grow jobs and income for the nation, they need to have ambitious goals and their performance needs to be measured so we can monitor progress.

Digital Isle of Man

Supported by Digital Isle of Man, the island’s digital sectors are leading the way in regards to GDP and employment. E-Gaming has now overtaken Insurance as the island’s largest sector and is continuing to grow and evolve with new businesses, products and markets regularly coming to fruition.

This year the Isle of Man has committed to a strategic direction in the area of blockchain technology, putting us back on the map as a jurisdiction for the development of innovative solutions for modern technology and business needs.

In October Tynwald approved a new telecoms strategy; today we are committing £2 million to the continuation of this, subject to negotiation with potential private sector providers. It is clear that Government will need to finance some of the roll-out of super-fast broadband where it is not commercially viable to do so.

Finance Isle of Man

Finance Isle of Man has instigated an international campaign for the life insurance sector, reaching countries around the world with a clear message of strength, stability and security.

Financial and Professional Services remain an essential part of the island’s economy, with over 40 years of experience in supporting an international client base. It is encouraging to see the continuing innovation in this sector with projects moving forward this year regarding Digital ID and V, crowdfunding and new savings products for the Isle of Man.

The island’s domestic economy has faced some challenges in recent years, but signs are encouraging for a shift of fortune particularly in the catering and hospitality sector. It is clear domestic businesses can prosper if they deliver great service.

Uncertainty around Brexit remains a potential threat to both our aerospace and manufacturing sectors, though the sector has been taking positive steps to build relationships with our closest neighbours in the UK and Ireland to secure supply chain opportunities and implement strategies to overcome potential external changes.

In support of this, local business can apply for a grant from the Business Improvement Scheme of up to £5,000 towards the cost of the transitions required for Brexit.

Visit Isle of Man

Our visitor economy has been the subject of much interest this year, with increased visitor spend bolstered for 2019 by further investment in our hotel and accommodation infrastructure.

Visit Isle of Man will be taking forward a number of new initiatives this year, working hand in hand with industry to build a visitor economy that not only attracts more visitors but that also underpins the quality of life we take for granted here in the Isle of Man through the development of restaurants, bars, events and activities across the Island.

Business Isle of Man

The Isle of Man continues to impress with the innovation and dedication demonstrated by our local business community. Be that in small start-up enterprises or large scale developments, >our ethos for being an Island of Enterprise and Opportunity is carried through our whole economy.

We continue to support this entrepreneurial spirit through our enterprise support schemes, all of which have been reviewed and upgraded last year. Whatever funds are required to help our economy develop will be provided if they can generate a return to the Exchequer. Support has helped 120 businesses start up, 56 businesses grow and created 140 new jobs since the start of the financial year, and interest in starting a business is at record levels. The budget this year makes available £6 million for financial assistance to island businesses and potentially up to £9.5 million in the Enterprise Development Scheme.

As part of the 2016 Budget, the Enterprise Development Fund was created with an initial £10 million, supporting the £50 million Enterprise Development Scheme. We have now reformed and opened up the Scheme to allow local investors and businesses to work together with the Department for Enterprise to focus on job creation and to strengthen the requirement for co-investment. Whilst it is difficult to predict what impact these changes will have on overall levels of investment in future years, both DfE and Treasury are committed to supporting businesses that will create jobs in the local economy through a range of financial support options

Supporting Inward Migration of Employees

Locate Isle of Man

The work of this government has seen an increase in personal income, increase in job opportunities and an increase in thediversity of our business sectors - but unemployment remains low, and skill shortages persist.

Therefore we will continue to support this government’s commitment to growing the economically active population of the Isle of Man through the launch of a comprehensive Locate strategy to attract more skilled workers, encourage the return of Manx graduates, help local businesses and recruitment agencies source and retain talent, and attract more investment into the island and £0.5 million is made available in this budget to support this initiative.

NI Holiday Scheme

To encourage people to come to the island to work I am introducing a National Insurance Holiday Rebate scheme for employees.

This scheme will be introduced in April with a proposed NI holiday for certain individuals who move to the island for employment. These individuals will need to be new residents to the island or have been non-resident for at least 5 years, and must be employed by an Isle of Man employer with a salary of at least £21,000. In addition and in order to encourage students back to the Island to work, the scheme will also be extended to students who were resident on the island and complete their full-time course outside the Isle of Man, if they return to the island within 5 years. Anyone meeting the conditions will be able to apply for a refund of National Insurance Contributions they have paid during a 12 month period of up to £4,000.

This scheme sits alongside the relocation rebate scheme for employers to assist in business costs in offering relocation support to new employees.

Work Permit Reforms

Additionally, our work permit reforms continue to help reduce bureaucracy whilst protecting the local workforce. Over 75% of businesses requesting permits are now satisfied with the system and around 85% of applications are processed the same or next working day.

Continued Low Unemployment

Mr President, the island is continuing to enjoy an exceptionally buoyant labour market. Our unemployment rate is the lowest in Europe, standing at just 1.8% at the end of December 2018, compared to 4% for the UK and 6.6% for the EU more generally.

As a result of these low unemployment figures, spending on the associated benefits is low, and overall spending on revenue funded benefits is expected to be around £8 million lower than budget. Given these figures we have been able to re-profile the budget for 2019-20 and expect that £5 million less will be required for job related benefits next year.

Airport Technology Gateway & Jurby Development Initiative

Mr President, I can announce today that we intend to provide funding of £2.1 million from the Economic Development Fund for our colleagues in the Department for Enterprise to enhance the development of the Airport Technology Gateway and will support the Department of Infrastructure with an investment of £1.8 million for the Jurby Development Initiative. Both projects demonstrate our willingness to work across government to invest in infrastructure to allow small and new business to thrive, to attract larger employers and to support communities by using government support to sow the seeds of growth for a sustainable future.