Treasury Minister Alfred Cannan will deliver his second Budget today against a background of an economy that’s performing well – but with challenges ahead, not least on the international front.

The EU has given the Manx government a year to prove that economic activity in the island is not lacking in substance – or face being blacklisted.

Mr Cannan will no doubt set out the case that our economy and his Budget have real substance.

And with buoyant tax revenues reflective of a strong economy with more people in work and fewer claiming benefits, it’s likely he will unveil more measures to improve the lot of working families.

There is also an expectation of an announcement on pension freedoms, a policy which Mr Cannan has long championed.

The gimlet eye of the EU code group is just one of the challenges facing the Quayle administration now in its second year.

Spiralling costs of providing health and social care is another.

But the real elephant in the room is how to deal with public sector pensions, which are due to face a £50m shortfall by 2021.

Mr Cannan admitted to being a little frustrated at the failure to date to address the legacy pensions issue.

But he added: ‘I recognise that when we bring proposals forward we have to be accurate with our forecasts and realistic about how these are delivered.

‘I will be very disappointed if this is not debated thoroughly by the end of this parliamentary year in July.’

Mr Cannan’s first Budget last year unveiled an unprecedented £2,000 increase in personal income tax allowance to £12,500, lifting 3,300 out of the tax net.

He said: ‘That was the single biggest rise in a decade, providing support for working families.

‘The budget so far is on track. Things have gone relatively smoothly, with the obvious exception of the health and social care overspend.

‘The indications are that the economy is performing well and tax revenues are up. The economy is holding up well and in some areas it is growing.’

This will place Mr Cannan in a position to make positive announcements around targeted support for families.

‘There is a lot of evidence that government policy, financially, is working for the benefit of society and we need to build on that,’ he said.

Turning to the commitments made to the EU code group, he said: ‘We need to make progress on the issue of substance. I feel confident that a lot of measures already taken will provide us with a strong platform for a successful outcome.’