Government Reserves Revealed - £1.28billion

[WTF]

All the various proposals are probably worth considering over the longer term but the problems are immediate.

 

It will take a while to un-build the various empires and to carefully put in place the structural reforms which are probably required.

 

The immediate answer is to increase income tax pro rata to cover the full amount. Better to pay a bit more tax than to lose your job.

A bit more tax? The whole of income tax only generates £127 Million. Are you saying up it by a third? Half? Double it?

 

In the first financial year, much of what I outlined above can be achieved, in two years - all of it.

 

 

on point 7 i would assume you can only retire those that are eligable? and those that are eligable for early retirement will only take it if they have something else lined up, also 1 and 5 seem to contradict each other, in 1 it's get rid of the contractors you can, and then in 5 have less government staff and effectively use contractors? to save money when you already have pointed out that contractors probably earn a bit more than staff??!

[Gladys]

Also, redundancy relates to the post not the person. So, last in, first out is attractive, but should not be the criteria.

[Albert Tatlock]

The immediate answer is to increase income tax pro rata to cover the full amount. Better to pay a bit more tax than to lose your job

 

A bit more tax? The whole of income tax only generates £127 Million. Are you saying up it by a third? Half? Double it?

 

In the first financial year, much of what I outlined above can be achieved, in two years - all of it.

 

Won't income tax go down?

 

The focus on 0%/Zero/10 means we either go to no corporate taxes - in which case income tax reduces or we tax corproate profits and economic activity reduces, a lot, and income tax reduces.

There are 2 unknowns. We are being bullied into introducing corporation taxes, and there are rumours of a VAT increase next year. Both might help us substantially, they may not.

 

If we can set corporation taxes at a low enough level i.e. there is EU pressure for 10% or 12.5% versus 28% in the UK - companies may be unlikely to move to other juridictions. That is not guaranteed though, as those services that can hop jurisdictions might well do so. But if they pay no tax and employ only few people e.g. hedge fund admin, would we really miss them that much in the big scheme of things? The real people to worry about are the larger employers likely to be impacted, as they directly impact VAT collected mainly from their employees living/spending here. However, even if some companies left, some new ones may arrive thinking that the EU/UK pressure and uncertainty on the island has been sorted and things are much more stable. Lower CT and stability could be a unique selling point for the island.

 

If VAT goes up, say, to 20%, and we get a rise in share payments it will lessen the pain, by around £80M a year - but if, and only if, all of the proceeds of the increase are handed to us. The share agreement is effectively secret, so who knows how much of that we would get.

 

All uncertain IMO. And so we must cut our cloth now. You can't suddenly introduce a tax without sufficient notice, do that and they will all go, because they'll think you will do it to them again.

[Gladys]

You can't suddenly introduce a tax without sufficient notice ......

Hmm, seems familiar!

[Albert Tatlock]

All the various proposals are probably worth considering over the longer term but the problems are immediate.

 

It will take a while to un-build the various empires and to carefully put in place the structural reforms which are probably required.

 

The immediate answer is to increase income tax pro rata to cover the full amount. Better to pay a bit more tax than to lose your job.

A bit more tax? The whole of income tax only generates £127 Million. Are you saying up it by a third? Half? Double it?

 

In the first financial year, much of what I outlined above can be achieved, in two years - all of it.

 

 

on point 7 i would assume you can only retire those that are eligable? and those that are eligable for early retirement will only take it if they have something else lined up, also 1 and 5 seem to contradict each other, in 1 it's get rid of the contractors you can, and then in 5 have less government staff and effectively use contractors? to save money when you already have pointed out that contractors probably earn a bit more than staff??!

Yes retire those eligable for retirement, and non essential.

 

Contracting is a form of outsourcing and can be much cheaper. You don't have to pay the same rates, or pay for the benefits and pension etc. It can knock 25% off the bill for the same role if it goes to the private sector. E.g. drivers. You can also negotiate contracts e.g. in I.T. and instead of paying people to sit on their arse waiting for something to go wrong, call someone in when it does go wrong. There are plenty of IT companies and specialists on the island to negotiate reasonable contracts with. Also IT projects eat money, so all projects need to be assessed as essential and non-essential too.

 

Some of the contracts I am talking about though, are the £40K a year heritage specialists etc. Nice to have, but not 'need to have' at the moment - especially when someone's gran doesn't get that cancer treatment next year when we still pay that wage. As I said, some WILL be essential, but the priority should be to replace the majority of them with existing staff wherever we can via redeployment, and get rid of any non-essential role, even if that is done at the end of the current contract.

 

These things do not happen overnight. They happen over specific financial years i.e. by the end of this year (Mar) for next year, and the year after. A year is a long time to plan and assess these things, two years, enough time to enact them.

[WTF]

Look at the government's own pink book. This 'reserve', is pretty much exactly the same £1200M figure as the current Civil Service pension 'liability'...a 'liability' currently growing by £100M a year.

 

How do you feel now?

 

it maybe going up, but people do die, and we don't tend to pay dead people. what would help would be a less grandiose pension for government staff, and the practice of promoting folks for the sake of it in their last year of employment just to boost their final salary pension!!

[pongo]

The whole of income tax only generates £127 Million. Are you saying up it by a third? Half? Double it?

 

Whatever it takes to make up the difference over what can be practically achieved immediately. Increasing the revenue is obviously about more than the rate.

 

The focus on 0%/Zero/10 means we either go to no corporate taxes - in which case income tax reduces or we tax corproate profits and economic activity reduces, a lot, and income tax reduces.

 

That is not the immediate problem. But yes the island has an over sized economy on the success of an industry which may be unsustainable. A challenge for govt may be to try to manage the gradual (rather than sudden) shrinking of the economy.

[Claudie]

Manx Radio News

 

Probably the best thing to do would be to divide this amount by £140, 000,000 (the amount we are losing off the UK in the VAT palava) and so we could make up that amount each year.

 

I know this doesn't seem a very good thing to do but if you think about it, it would be ok for quite some years, in my estimation.

 

I find this odd on the basis of the Foot Report confirming that:-

 

"3.25 None of the Crown Dependencies have, however, taken on significant levels borrowing. This is a measure of the economic resilience achieved by pursuing a policy of building up reserves during a period of rapid economic growth to provide a cushion during a downturn. The reserves range from £582 million (at 31 December 2008) in Jersey to £221.3 million (at 31 December 2008) in Guernsey. The reserve fund in the Isle of Man stood at £337 million at 31 March 2009."

 

So how do we get from reserves of £337m to £1.28bn?

 

The fact is that most of the money in the MR report is not in 'reserve' but allocated against specific government liabilities its not rainy day money.

 

Tynwald 28/10 reserves reported as being

 

Government Reserves as at 30 September 2009

 

External Fund 30 September 2009

£ million

National Insurance Investment Account 533.3

Reserve Fund 378.8

Public Service Employees’ Pension Reserve 214.5

200 Hospital Estates Development Fund 50.3

Media Development Fund 55.9

Notes Issued Fund 31.5

Economic Development Fund 14.7

Total 1279.0

 

 

See http://www.tynwald.org.im/papers/early/keys/epk271009.pdf

 

I don't think you could say this figure is wrong but you could wonder if it means anything. I often hear the figure of 1bn plus of reserves and it sounds quite a lot BUT the Govt. Balance Sheet as at 31 March 2009 was

 

IOM Government Balance Sheet

31 March 2009

 

£m

Fixed Assets and Investments 2,334

Net Current Assets 750

 

Long term Liabilities (371)

 

2,713

 

 

 

General revenue 53

Capital fund 776

Capital discharged 530

External Reserve funds 1,199

Internal funds and Reserves 155

 

2,713

 

So reserves could be said to be 1.2bn or even 2.7bn if you include the other funds. But this is not spendable money. Current Assets less liabilites comes to 380m. You could add in 840m of Investments and Debtors included in Fixed Assets but you should then deduct the 1,311m pension provision not provided for and you end up just about even!

 

NB Accounts are qualified due to the (non) treatment of pension liabilities.

[jimbms]

Also, redundancy relates to the post not the person. So, last in, first out is attractive, but should not be the criteria.

How true, especially if someone who has been there years is useless and the newer member does twice the work, also consider anyone taken on now is not subject to final income pensions. On top of this you may find they lay a few off and take them back on via agencies as temps, afterall with NI, sickness and pension considerations it does actually work out cheaper to take on temps long term as I found out several years ago when for a time I was in position of being the employer. Please note I have stated this not as personal opinion but more factual so if you disagree I would appreciate comments sticking to facts not ideals.

[Claudie]

If we can set corporation taxes at a low enough level i.e. there is EU pressure for 10% or 12.5% versus 28% in the UK - companies may be unlikely to move to other juridictions.

 

 

No, no, no.

 

Life Companies, Captives, Ship and Yacht owning companies, Funds, Aircraft owning companies and the clients of the Trust Companies are the engine of the economy, they comprise the bulk of the 30,000 companies resident here. Tax them and they will go. This will then knock on to Banking, accountancy and legal services which will then reduce demand for housing, plumbers, joiners, newsagents, taxis etc....

[Gladys]

I'm with Claudie.

[localyokel]

No, no, no.

 

Life Companies, Captives, Ship and Yacht owning companies, Funds, Aircraft owning companies and the clients of the Trust Companies are the engine of the economy, they comprise the bulk of the 30,000 companies resident here.

 

... and the bulk of those employed. The life industry alone employed over 2,000 people at the last census. That's 2,000 individual tax payers employed by a handful of zero tax paying entities. It is commercial suicide I'm afraid to suggest that suddenly we tax them because business is considerably down for many of the insurance companies and a change to the tax basis would give them a really good excuse to just shed staff costs. We do really have to tread carefully in these times.

 

(edited)

[Albert Tatlock]

We are all with Claudie. But read the Foot report; look what the EU is eventually likely to force us to via the UK; look at what the G20/OECD are all pushing for; and face up to this possible reality. The same pressure is being placed on all the offshores. And of course, look at our own income position.

 

However, it might not be that bleak. 10% CT here is still much better than the 28% CT in the UK - gets everyone of our backs, stabilises the situation (politically and economically) and that stability as a result may attract new business here.

[oldmanxfella]

We are all with Claudie. But read the Foot report; look what the EU is eventually likely to force us to via the UK; look at what the G20/OECD are all pushing for; and face up to this possible reality. The same pressure is being placed on all the offshores. And of course, look at our own income position.

 

However, it might not be that bleak. 10% CT here is still much better than the 28% CT in the UK - gets everyone of our backs, stabilises the situation (politically and economically) and that stability as a result may attract new business here.

 

To me its all wasted effort anyway. As you say likely the outcome is to move to a 10% CT rate which is not unduly onerous and to be fair as I understand it recent tax changes in the UK mean that most IoM subsidiaries can remit dividends back to the UK with no tax to pay so having profits taxed at 10% here would not be a deal breaker. However, we are on a hiding to nothing with anything we do.

 

The zero/ten initiative was deemed to comply with the EU's code of conduct now, possibly, it doesn't. In a few years a flat 10% corporate rate would be found not to comply for some other equally spurious reason. They just don't like the fact that they can't completely control us and anything we do (bar surrender our constitutional status) is never going to pass muster with the UK or the EU in the current economic climate.

 

We are all now fiscal pariah states that will spend the next few years punch drunk as we duck and weave successive attacks against the fact that we exist.

 

The whole world is bust and its easier to say its those filthy offshore centres with their secretive economies that have sucked out our wealth that did it, rather than admit (like Gordon Brown should do) that his own gross incompetence, complacency and arrogance fucked up UK Plc. As the Foot Report shows the net tax loss the Dependencies represent to the UK Gov is about £2bn a year ... its hardly worth getting angry about when your a trillion pounds in debt like the UK.

[Gladys]

Well said.