In addition £87,000 has been allocated to the Cabinet Office for a Policy Advisor to advise and support on the development of AML/CFT and related financial crime legislation to ensure we comply with the recommendations of MONEYVAL.

Mr President that is an additional £1.5 million to ensure we meet our international obligations.

Strong Regulatory and Legislative Framework

Moody’s assessed our institutional strength as ‘very high’ given our robust and transparent institutional framework. They further noted that we have established a good regulatory framework for our e-gaming sector and in support of that we have provided £145,000 to the Gambling Supervision Commission to ensure it retains the necessary expertise to continue to develop appropriate regulation and ensure compliance with that.

To support our ambition of excellence in regulation and compliance, we have provided an additional £93,000 of funding for the Financial Intelligence Unit to help improve the depth and scale of investigations it is capable of undertaking and £157,000 to the Information Commissioner to support his offices in their growing workload following the island’s implementation of the General Data Protection Regulations.

Treasury has been working closely with key stakeholders to deliver on the objective of strengthening our legislative framework. This not only delivers credibility to the wider world, but creates certainty for our local businesses and opportunities for growth. For example, work continues to modernise Civil Debt Recovery, add further stability to our banking sector and enable money held in dormant bank accounts to be utilised for local good causes. Legislation has either already been

introduced for scrutiny or is due to be brought forward for consultation in the coming months.

To ensure we can continue to deliver well-regulated and efficient services post Brexit, we will top up the Brexit Fund to £2.5 million. This will allow Departments to bring forward the necessary regulations for trade and other services to continue after Exit Day.

Mr President, our results to date and those set out in our 5 Year Plan demonstrate we are Financially Responsible.

Next year we again expect strong income tax receipts. The budget assumes income tax receipts of £230.5 million next year, with total income exceeding £1 billion for the fourth year in a row.

We must remain mindful of the challenges that lie ahead, in particular the depletion of the Public Sector Pension Reserve which is forecast in 2021/22 where we must realign our finances to cope with an additional revenue cost of £45 million. And of course, we must take care with our forecasting, in that respect Prudence is a rather attractive virtue.

NI Fund & Contracting Out

The Manx National Insurance Fund is held by Treasury and as at March 2018 had a book value of £794 million, an increase of £37 million from the previous year. The National Insurance Fund remains and will remain an important National Asset.

The interest from investments from this fund and increases to NI receipts has enabled Treasury to cover the shortfall in recent years between income from National Insurance contributions and benefits expenditure.

In March last year this honourable Court approved a significant piece of legislation that introduced into the Island the new Manx State Pension. As a result the contracted-out rate of National Insurance will cease from April 5 and all workers on the island will start to contribute to the new Manx pension. For employees who are currently in Contracted Out pension schemes this will mean a small increase in the amount of national insurance they contribute. This includes the majority of public servants who, from April, will incur an additional 1.6% increase in their NI contributions. However, with these changes in place, our actuarial projections now predict that the NI fund, which was predicted to run out in the 2050’s, is now set to run until at least 2072 and possibly beyond. We will await the next actuarial report with interest but it would be remiss of me not to acknowledge that workers in the public sector are having to go through a significant readjustment to their take home pay and conditions as they face higher contributions to their public sector pension and higher contributions to their state pension. I thank them for their patience and understanding as they invest in their long term pension security.

With low unemployment levels, in the current year, our National Insurance Income is significantly better than budget and spending on the state pension which is funded from that income is also reduced. Therefore we are expecting to have a surplus of more than £11 million on the NI operating account, most of which will go back into the NI fund for future generations, further sustaining the longevity created by these changes we have made.

Pay Awards

There are still challenges remaining. Whilst the budget includes an allowance for 2% for pay awards, this is below inflation and representative bodies are seeking a higher award for their employees. Balancing the cost of pay awards within the overall budget is a challenge for both Treasury and the Departments. The pay award for public service employees has been announced and is above the level of budgetary allocation. For 2019/20 departments will be expected to meet these additional costs from within their existing budgets.

Priority Based Budgeting

Last year I said we would be introducing a new approach to budgeting by looking at Priority Based Budgeting. That process is well underway but in order to be effective it is taking more time than anticipated due to the detailed and complex nature of the work. The Department of Education, Sport and Culture has been able to dedicate a resource to this project and expects to be in a position to use their analysis for the 2020-21 budget.

Additionally work has begun in the Treasury and in Home Affairs with plans for other Departments to follow early in the new financial year.

A Stable Environment

Mr President, we have succeeded in providing a solid foundation for a stable environment. Moody’s confirmed our credit rating as Aa2 Stable. They noted that unlike many jurisdictions we have no outstanding debt and substantial reserves. We’re in a good position for the future but we can’t afford to be complacent. Many uncertainties exist.

Prudent Budgeting of our VAT Income

Since the agreement of the Final Expenditure Revenue Sharing Arrangement (or FERSA) in March 2016 the island’s share of VAT and other common duties has been based on the amount of irrecoverable VAT (also known as sticking VAT) that is paid by householders, businesses, public and third sector organisations when consuming goods and services in the Isle of Man.

The level of this non-recoverable VAT was initially determined through the household, business and tourist surveys that were conducted over a 12-month period starting in January 2013.

The results of those surveys established the island’s provisional share of duties for the years’ 2014/15 through to 2017/18. During this period the island’s share of VAT and other common duties amounted to £1.2 billion.

However, the FERSA agreement requires the expenditure survey process to be repeated at least every five years and since April 2018 the Treasury has been working closely with the Cabinet Office to complete a new series of surveys.

The outcome of these surveys will be used to rebase the island’s share of VAT and other common duties for the years 2014/15 to 2016/17, and to determine the island’s provisional share of indirect taxes for the years 2018/19 to 2022/23.

The results of the current surveys won’t be fully known until later this year.

Securing Added Value and Efficiencies (SAVE) Programme

Mr President, the Securing Added Value and Efficiencies Programme, or ‘SAVE’ programme, continues to work within departments to improve the efficiency of our Public Services.

A number of external reviews have already been completed and projects are underway within departments. But this journey isn’t an easy one, we continue to challenge our service delivery models in an attempt to reduce the cost of our services whilst increasing the efficiency of our services.

From our policy decisions to the point of delivery, SAVE has identified a number of areas which will deliver tangible savings. The Integrated Transport Strategy under development by the Department of Infrastructure should drive forward with £1 million of savings within the revenue budget over the next three years. This will include clear tangible measures to demonstrate the effective and efficient use of government funding to deliver our local bus and rail needs.

We remain committed to investing in our infrastructure as our capital programme illustrates, however by improving the transparency and accountability of our transport services there will be revenue savings to be realised which remains essential to ensuring our public finances continue to be sustainable in the forthcoming years.

Later this year the Department of Education, Sport and Culture will continue along a pathway to consolidate higher education services on the island. The SAVE Sub Committee of the Council of Ministers continues to support this project, providing governance to the Council of Ministers. This work aims to grow the student population, thereby supporting an increase in our economically active population. This is a challenge we need to address where young people may choose to experience life and education off Island. We are committed as outlined in our Programme for Government to provide an education system which matches the island’s skills requirements now and in the future. This includes a commitment to ensure value for money from higher and further education. We recognise in order to realise savings of at least £1 million within our higher education provision that in order to provide education and training to meet both local business and individual student needs a new, modern innovative higher education partnership working model is essential.

By securing and improving ongoing learning pathways in our community, online and through the University College Isle of Man we are committed to continue to secure the best opportunities for our students.

As I have recently advised this Honourable Court we continue to support the work of the Legal Aid Committee to ensure that the provision of Legal Aid in the Island is efficient, effective and sustainable, now and in the future. We recognise Criminal and Civil Legal Aid fall within the overarching principle of “Access to Justice”, which is a fundamental cornerstone of our society. By extending this project’s remit to become one of “Access to Justice” we will have the opportunity to review the island’s Legal Aid provision as a whole and whether any aspects could or should be changed or improved. The overarching principles of access to justice and quality of service should be in place, and if there are potential efficiencies and savings to be made, this project will seek to identify them.

The SAVE Programme and its process of appraisal and identifying opportunities for change has been focussed on facilitating reform whilst identifying savings and efficiency improvements. This is an ongoing challenge for us all. Informed, evidence based decision making will continue to underpin our commitment to deliver savings when necessary. Treasury continues to improve the budget process to identify priorities and work with Departments to evaluate and improve our understanding of our budget allocation to our services.

If initiatives such as the SAVE programme are to be successful, then departments need to be ready and willing to accept new ideas and implement change. If those ideas and implementation are blocked, then there will be no progress.

2019 will see the SAVE Programme refocussing on a collaborative roll out using priority based budgeting to inform our spending priorities across the public sector, to address our competing need for spending within a climate of ongoing revenue spending scrutiny.

Fairness and equality in accessing government services remain key principles throughout our Programme for Government and we must ensure our budgeting approach, financial accountability and continuous service improvement, where possible, deliver savings and efficiencies. Honourable Members, there is an unidentified £15 million of savings written into the Pink Book. We are carrying risk but overall performance is negating that risk.

But, I have said it before, I will say it now and I will say it again. There is no room for complacency and Departments cannot be allowed to sit back and relax controls and executive Government must be pushed to think innovatively about service delivery. Treasury will not be releasing the handbrake when it comes to bids or spending plans.

Mr President, we can be confident that we are a sustainable island.

Continued Capital Investment in Infrastructure

The continued investment in our infrastructure remains a strategic priority for Government. We have prioritised our capital spending programme and this budget, for the next five years, contains £479 million of capital spending on infrastructure, healthcare, schools and our heritage and leisure industry. This Government is investing to secure our transport and communication links as well as supporting schemes to stimulate sustainable economic benefit to the community.

From an infrastructure perspective we will invest in ensuring that our transport links are maintained and enhanced. In the 2018 Highway Satisfaction Survey 57% of our Island residents said they are satisfied with the condition of our roads.

However, we recognise that investment must continue in order to at least maintain or improve that statistic. There is therefore, significant investment planned in our roads network. Over the course of the next 5 years we have almost £48 million of capital investment programmed in with a further £20 million for future years.

Many of our visitors’ first impressions of our island will be formed as they leave the Sea Terminal or the Airport.

Colleagues will have seen the commencement of works for the Douglas Promenade project and this budget year sees £3.1 million forecast of the overall £21 million four-year investment. Additionally, a £1.9m further investment will be made to bring the Promenade Walkway up to a standard that will match the adjacent areas, including storm protection.

Investment of £1 million will also be made to improve the construction and safety of the A5 at Santon, this being a primary link to our capital from the Airport.

A further £5.6 million is planned for 2019/20 to ensure that our airport is compliant. Projects at Ronaldsway focus on safety and efficiency as well as ensuring that the infrastructure can support the increasing size of aircraft preferred by the carriers who provide the services to key destinations.

We will hear in the coming months about the progress made with the Liverpool Ferry Terminal project and there is a £30 million provision within the budget to deliver this scheme.

For our on-island transport I have made provision of £7.3 million in this budget for the ongoing replacement of the bus fleet to ensure that we have a modern and efficient public transport network that minimises revenue costs and maximises fiscal and environmental efficiency.

The budget also identifies funding to ensure that our island continues to be a special place to live and work, as well as supporting our wellbeing and the visitor economy, with the continuation of funding of £3.4 million for Active Travel and a programme of enhancements to our National Glens, hills and forests.

In order to support our heritage and tourism offering, a number of schemes have been combined to provide an annual consolidated fund of £4.5 million for our heritage transport. Whilst on the theme of tourism and transport we will support the investigation and evolution of schemes to update Douglas harbour and make provision for a cruise berth and pleasure craft pontoons.

Additionally, funding of £250,000 has been allocated for the investigatory stages of the Department for Enterprise’s wish to review the provision and potential increased use of the Grandstand.

To ensure we meet our national and international obligations and support the goals of the Programme for Government, this budget includes £23.5 million for the next phase of the Regional Sewage Treatment Strategy, a range of refurbishment and treatment solutions and £1.7 million for a new special waste facility to replace Wrights Pit North and provide a strategic solution for the future.

We have provided £1.9 million to provide a long term solution to deal with the silting of Peel Marina. The proposed solution not only ensures the Marina can be used effectively, but aims to establish a long term solution for the storage of the removed material which it is hoped will be able to be used to remediate areas of historic mining damage.

Our seas and rivers offer much to our economy, environment and our transport links but we also need to invest to ensure that we are protected from them where climate change may cause a threat to life and property. This budget sees planned investments in 2019/20 of almost £3.3 million of design and construction work prioritised through studies involving private consultants, DEFA, DoI and MUA.

In the last two budgets we have brought support totalling £3 million into our education budget, money that will provide support to young working families through pre-school credits and now support for families with students in higher education.

Of course education is also about planning for the future. That is why £2.3 million will be spent in the next year preparing for the new Castle Rushen High School, £400,000 will be spent preparing on works connected to the Science Technology Engineering and Maths (STEM) Block at QE2 and St Marys is also scheduled to have £600,000 spent on an extension scheme.

Investing in technology – Digital Strategy Fund

The Digital Strategy Fund continues to enable large change programmes across Government.

As the first programmes complete their delivery phase’s new initiatives have been started including extending Digitisation in the Department of Health and Social Care to include Clinical Notes and Electronic Prescribing, initiatives in the Department of Infrastructure including a central platform for the management of Public Sector Housing, and the creation of the Smart Services Programme.

In total to date approximately £7 million has been committed from the Digital Strategy Fund on projects that will deliver cashable benefits of over £12 million and indirect benefits and efficiencies estimated in the region of £25 million.

On top of this we have almost £9 million of technology schemes within the capital programme including the £2 million investment in the Fibre Optic Network I referred to earlier.

New Community Fund supporting our UNESCO Biosphere Status

The Isle of Man is rightly proud of our UNESCO Biosphere recognition and as part of this year’s Budget Treasury has made £250,000 available to assist with the development of community projects that are in keeping with this recognition.

It is intended that this fund will be administered by the Manx Lottery Trust and will provide a maximum grant of up to £25,000 to match fund costs associated with projects that can demonstrate a clear community benefit in line with our UNESCO recognition. In essence the three stated pillars of Conservation, Development and Learning will form the key assessment criteria but the exact interpretation of the requirements will be the responsibility of the Trust.

The key target is supporting community projects that develop and enhance our environment or help with the provision of community services. These would be one-off clearly identifiable capital or revenue costs and set against match funding of 70:30 for registered charities and 50:50 for all other organisations.

Agricultural Support

Mr President, in discussing our environment and sustainability, it is right that I explain why this budget is bringing forward almost £1 million of additional revenue support for farming over the next three years and why a further £1 million is set aside to aid and support the transition of the meat plant.

The importance of agriculture, food and the land economy should not be underestimated and, if you forgive the pun, it remains a challenging landscape. Nevertheless, it is when major political and economic change takes place that the value of our food production comes to the fore. Whether we like it or not, we need to have sustainable agriculture and we need to support our farmers to achieve it. DEFA will have their budget increased by £1 million over the next three years at £350,000 per annum to support and reform the Agricultural Development Scheme.

Similarly, if you produce meat, you need to have the facilities to slaughter it. It is absolutely right that we demand the meat plant operate as efficiently as possible, but in order to provide some security further funding is made available to support the changes and to give confidence for the industry.

We are investing to ensure that we are a sustainable island.

Summary

Mr President, this budget has been designed to support the Programme for Government objectives. It has also been assisted by the focus groups who attended the public meetings in Ramsey, Douglas, Peel and Castletown and it has been refined by Parliamentary input. I thank all those who have contributed.

Hon Members, I welcome the publication yesterday of the Commons Select Committee Report into Fake News and Disinformation that has become so rampant on social media, disinformation being defined as the deliberate creation and sharing of false and/or manipulated information that is intended to deceive and mislead audiences.

Well, I am pleased today to reach out beyond the purveyors of disinformation to tell you that: We should be confident that we are creating an inclusive and caring society.

* An additional £6.6 million of welfare payments to support the less well off in our society

* £13.7 million in healthcare facilities

* A £5 million commitment to support the changes recommended by the Health and Social Care Review when that report is published later in the year.

*Personal allowances up to £14,000 – helping families tackle the cost of living

*Child Benefit up by 5% - more support for the family heartbeat of our society

*Our National Insurance Receipts in surplus by £11 million

I am pleased today to reach out beyond the purveyors of disinformation to tell you that.

We should be confident that we support an Island of enterprise and opportunity.

Despite the backdrop of continued international, political and economic uncertainty, the island is demonstrating remarkable resilience.

*Unemployment below 1%

*Income Tax receipts up

*Numbers registered for taxation up

*£6m millions of pounds in business support schemes to diversify and build an economy for the future

I am pleased today to reach out beyond the purveyors of disinformation to tell you that.

We should be confident that we remain financially responsible.

*This budget includes a further £11.8 million for funding public services for next year and a commitment of £479 million of capital investment for the next five years. These investments are building for future and providing jobs and security for thousands of families

*And even with all this being delivered our plan to meet the budgetary shortfall caused by Public Sector Pensions support and create a platform for future sustainability is on track to deliver.

Hon Members, the environment around us is changing; but with change also comes opportunity. We must recognise that we have solid foundations on which we can adapt to meet our challenges. But in a year that promises international political and economic uncertainty there is no room for complacency.

But there is room for confidence and Honourable Members, this Budget provides a platform for that confidence in our island, in our economy and most of all in our people.