Turning now to Capital spending, the budget proposes a full budget of £182 million of expenditure for the year, including some £15 million of cost for new Schemes. I will go into more of the detail of this later but Members will of course be aware of the challenges we have faced to fund and deliver our Capital programme for some time and, in particular, Government’s ability to successfully manage and deliver large complex capital projects.

In common with recent budgets our financial planning assumes that we cannot and will not deliver the forecasted pink book spend at a level of £182 million.

It is untenable to continue to budget on this basis and it is now time to address the fundamental issues of capital planning, delivery and financing.

The consistent under delivery of planned expenditure combined with new scheme approvals has led to a growing wave of unspent approvals being carried forward from one year to the next. This problem is even more acute this year as the pandemic has further delayed the delivery of the capital programme and has resulted in this unachievable £182m of Capital works

This is not a satisfactory position and we cannot allow this situation to continue.

The Treasury will now lead a Strategic Infrastructure Needs Analysis to form the basis of our medium and long-term capital planning with a target delivery date of the autumn of this year.

The objective of this is to enable us to reset our capital programme to fully understand and prioritise our capital investment and maintenance programme over the medium to long term. From this position we can then determine an appropriate strategic financing plan. At present we deliver as much of the capital programme as we can and on average this is a substantial £70 million of investment each year, however we must improve our understanding of whether this is sufficient or indeed that we are applying this appropriately.

This budget proposes therefore that, as a first but crucial step, we introduce a new means to finance capital for central Government with the introduction of the Capital Financing Reserve to replace the existing capital loan charges mechanism.

The existing mechanism will remain for financing capital schemes outside of the central government, where monies must be tracked into and out of General Revenue, but for those schemes where the internal Government loans are just a means of accounting for purely internal transactions, the new reserve represents a much needed and overdue simplification of the process.

The budget proposes a transfer of £25 million in the year from revenue to assist to build the balance on the Reserve, the amount of this transfer also helps to reduce the pressure on the revenue account next year.

As I have said, this is a first step. If approved it will enable the treasury to develop simplified, and modernised, capital approvals and reporting processes so that we can all better understand and scrutinise this significant area of public expenditure.

Mr President we are ripping up the credit card and introducing a more transparent and accountable process for future strategic investment spending.

The pink book outlines the capital spending that is proposed for this year and in particular I would bring to the court’s attention the ongoing schemes which are being developed, including the Liverpool landing stage, Douglas promenade works and the new older persons residential unit at Summerhill.

As a prudent measure and given the level of uncertainty that exists next year, the budget includes an increased level of funding within the capital contingency budget of £6 million for next year. This allows for timing changes, minor increased costs and importantly unexpected emergency works that may arise in the year.

Mr President, Determining our strategic capital needs is a vital element of our capital CHANGES, but we must also ensure that we have the necessary expertise AVAILABLE to deliver complex capital investment and maintenance.

The Council of Ministers has determined that that a new Major Capital Projects Board and Unit will be created within the Cabinet Office. This function will take responsibility for the oversight and delivery of all major capital projects with expenditure of £3 million or more and will be in place early in the new financial year.

In addition, responsibility for the remaining capital investment projects and property maintenance will be centralised within the Department of Infrastructure. The Department has a wide range of responsibilities and we will review the capability and capacity of this department for this delivery requirement.

Looking more widely at the use of Government owned land and property, I am sure honourable Members will agree that we have to ensure we obtain value for these assets, ensuring that, where appropriate, development is encouraged and facilitated to benefit our Island, addressing amongst other matters the issue of undeveloped sites in our Town Centres.

It is time to move forward with more direction and to that end the economic recovery group has been working on proposals for an Isle of Man Development Corporation and i intend to bring a motion to this Court in March, setting out the detail of how such a Development Corporation would operate.

Honourable members, I said in the summer that the Treasury was undertaking an in-depth review of the means by which we fund and account for capital expenditure, I also said that there as a possibility of a sovereign debt issuance as part of a longer term financing strategy. The work to examine alternative means to fund capital and other long-term investment requirements is still underway and will continue to be developed with the forthcoming analysis of our strategic needs.

Whilst this year has been one of unusual challenge, we have not allowed it to divert us from continuing to move our agenda forwards. During the year, the implementation of the Dormant Assets Act 2019 has continued and I would like to thank the cooperation of the local banks.

It is intended to lay the first annual report before this Court next month but I can share that we have received payments into the reserve of over £4 million this year, meaning in accordance with the agreed policy I expect over £600,000 to be available to release to the Manx Lottery Trust early in the new financial year for onwards distribution for charitable purposes. Another good news story from a good news treasury.

Conclusion

Mr President, this year’s budget will, I expect, be like no other in modern times, reflecting as it does considerable forecasted losses and expenditure whilst bringing forward short-term forecasting based available assumptions.

We know this pandemic will bring, and indeed has brought, global economic challenges that will need addressing and we cannot, and must not, be complacent in the management of public finances or indeed in the management of our economy. But in the face of adversity this nation can still advance with a go forward budget:

· £15 million more for health

· Over £17 million for climate change and its impact

· Capital projects reformed

· An Economic Recovery Group delivering increased training and reskilling opportunities, investing in high speed fibre and the local economy

· A new Manx Development Agency to develop brownfield sites

· Contingency funding and plans to deal with uncertainty

· A new economic framework on its way

· £600k for charitable causes through the Dormant Assets Act

· And Mr President despite the pressures no tax increases bringing stability to household incomes and businesses in equal measure

We are stabilising the economy, we are protecting jobs and we are investing in our future.

Mr President this budget encapsulates the resilience of our public finances and planning in the midst of a global health and economic crisis. But also Mr President this budget is primarily built upon the ethics of hard work, determination and integrity demonstrated by the people of this nation in tackling the pandemic. Their actions in fighting the virus, their determination and focus on supporting the domestic economy and local businesses has given our economy a fighting chance and indeed delivered a platform for stability in this budget today. It is, Mr President, a budget of resilience built on the hard work of our society – indeed a budget of resilience for a resilient nation and I heartily commend it to this Honourable Court.