Chief Minister Howard Quayle has defended the use of the higher RPI measure of inflation to set a 6.4 per cent increase in water rates.

But other Ministers appear to have been less than impressed by Manx Utilities’ decision.

The MUA announced last week it will freeze electricity tariffs this year, but will increase the water rate in line with the retail price index measure of inflation.

The 6.4 per cent rise is aligned to December’s RPI figure and below the 6.9 per cent recorded in January.

But it is far higher than last month’s 1.6 per cent inflation rate as measured by the consumer prices index (CPI).

Onchan LibVan MHK Julie Edge described this is a ’stealth tax’.

But the Chief Minister insisted: ’This is not a stealth tax but an inflationary increase. A stealth tax is one that people are unaware of.

’When you’ve lost a third of your net income you are going to have to make savings somewhere.

’The water authority has been using RPI since 1999 when they set up a bond for £75m.’

He pointed out that LibVan’s founded Peter Karran had set up the bond during his time as Water Authority chairman.

Mr Quayle said that for the average home, the increase worked out at an extra £26 a year.

He said changes to the personal allowance announced in the Budget would make a working family £400 a year better off. ’We are doing our best to help people,’ he said.

But he added: ’We accept and recognise that there is confusion caused by the use of different measures of inflation.’

The Chief Minister said that the government was looking at bringing in a standard policy on which inflation rate would be used for different areas.

He said this would not mean just one measure of inflation would be applied in all areas, however.

Treasury Minister Alfred Cannan, a former chairman of the MUA himself, was more critical.

He said: ’This unforeseen development demonstrates exactly why we have commissioned a full review into the MUA debt and financing.

’That review will commence in the next few weeks and I intend to report back to Tynwald with recommendations as soon as possible.’

Policy and Reform Minister Chris Thomas said he was ’surprised’ to hear of the 6.4 per cent increase.

Mr Thomas said: ’I was surprised this was announced in this way at this time.

’We need a policy for how charges and fees are set. It’s entirely for the board of Manx Utilities how they set their own rates. But there are some issues arising from that I want to take part in addressing.’