TREASURY Minister Eddie Teare may have insisted it was a Budget that struck a fair balance.
But given the cuts to pre-school places, libraries, front line emergency services and Child Benefit – while the super-rich see their tax cap raised by just £5,000, is that really the case?
Closure of the mobile library, restrictions to Child Benefit payments and mortgage interest tax relief, and cuts to benefits for the under-25s, will disproportionately hit the elderly, families, those struggling with their mortgage repayments and the young jobless – at a time of rising unemployment.
Yet the tax cap, which has now been increased from the current £115,000 to £120,000, benefits fewer than 100 high net worth individuals. This 4 per cent increase in the cap will raise £375,000 in extra tax revenue.
But at a budget press conference, the Treasury Minister told reporters: ‘I feel overall we’ve been fair and equitable.’
Ruling out a further raise in the tax cap, Mr Teare said this would ‘destablise our proposition’. He added: ‘We have to recognise that the Isle of Man is in a very competitive position. We can’t act in isolation.’
‘We have to recognise that those on the tax cap do bring tangible employment benefits. The amount of money they inject into the economy is quite impressive.’
Outlining how the Budget helped the less wealthy, he pointed out the pension had been raised by 5.2 per cent and the nursing care contribution increased by £40 to £100 a week. ‘And that does cover some of the very old and vulnerable,’ he said.
He said benefits had been uprated and the cuts in Child Benefit for two or more children had been offset by compensatory payments to those on low incomes.
In his Budget speech, he said: ‘My objective in compiling this year’s Budget has been to be fair.
‘Fair to the taxpayer who expects us not just to put up charges to deal with government’s problems, but to be more efficient. Fair to the person on average earnings who does not utilise the same level of generous levels of tax reliefs that some have come to enjoy, and most of all fair to those on low and fixed incomes who need our assistance – but not to a point where they can earn more on benefits that they would get in work.’
The Budget brings in no changes to income tax rates, personal allowances or thresholds.
But it does bring to an end higher rate tax relief on mortgage and loan interest and on charitable, private medical and pre-existing educational covenants, so that all such relief is at 10 per cent.
This will save about £4.5 million.
The Treasury Minister said that with interest rates continuing to be at historically low levels, he did not expect the cut to mortgage interest relief would make a significant impact on the average home owner who would see their repayments increase by less than 0.5 per cent.
Cuts in Child Benefit could make a difference to many families.
In his Budget speech, Mr Teare announced that Child Benefit payments for the second and subsequent children will be reduced from £20.40 a week to the UK level of £13.50. This is part of a move away from a universal to a more targeted approach to benefits and will save about £2.5m a year.
Mr Teare pointed out that one quarter of families with Child Benefit earned more than £70,000 a year, costing about £3m per annum. He said: ‘It cannot be acceptable for the state to pay universal benefits to those people who are well off.’
• The Budget was passed by Tynwald with all nine members in Legislative Council for and in the House of Keys 22 for and just two against – they were Brenda Cannell (Douglas East) and David Quirk (Onchan).