A stronger than expected Manx economy has given Treasury Minister Alfred Cannan a Budget boost.

Giving his second Budget today, Mr Cannan announced increased funding for frontline services, a further increase in the personal income tax allowance, and a redefined capital programme that includes a replacement Castle Rushen High School.

He also unveiled long-held plans to introduce pension freedoms.

Last year, the structural deficit was forecast at £79m, met by £50m from interest from reserves and £30m from the reserves themselves.

But thanks to the strength of the economy, with a record number of people in work, income tax receipts up and fewer people claiming benefits, the deficit is now estimated at £39m - £40m less than expected.

This current year, the Manx government posted a £18m surplus, £15m better than budgeted for, even after including this year’s £9.5m supplementary vote for the Department of Health and Social Care.

Some £13m of that was from better than expected income tax receipts.

This next financial year, Treasury is forecasting a £10m surplus.

In his first Budget last year, Mr Cannan announced an unprecedented £2,000 increase in personal income tax allowance, lifting 3,300 out of the tax net.

This year, he’s raising it again, by £750 to £13,250, lifting 1,700 people out of the tax net and making the remaining taxpayers up to £150 a year better off.

Child Benefit and Employed Persons Allowance will both increase by 3.3%. The basic state pension will rise by 3%.

An additional £13.8m has been allocated to spending on essential public services, including an extra £5.5m for the cash-strapped DHSC, £1.5m on pre-school support and £1.1m to address the deterioration of the roads network.

Aside from these extra targeted payments, department budgets are more or less at standstill.

Over the next five years, there will be £428m programme of capital funding including a new Castle Rushen High School, refurbishment of the swimming pool at the National Sports Centre and construction of a new Liverpool landing stage for ferry services.

National glens and footpaths will also be improved.

Mr Cannan told Tynwald: ’This is a Budget of substance for an island of substance.

’We are investing in the Isle of Man’s future with confidence by pursuing progressive, affordable and sustainable policies to help all sectors of the community.

’A responsible approach to public finances is still and absolute priority but we are also working hard to put more money in people’s pockets and to improve their personal circumstances.’