USE of reserves to balance public finances is very much a last resort, Chief Minister Allan Bell told Tynwald.
He said the only alternative would be a slash and burn approach to public expenditure which would risk destabilising the economy.
Some £92 million – about a quarter of the reserve fund – is being used to rebalance public finances in the wake of the VAT bombshell over the next three years with the biggest draw, £55 million, being made this financial year.
Zac Hall (Onchan) said: ‘In light of the fact that reserves are diminishing to prop up the Budget, does the Chief Minister believe all other measures and options were exhausted?’
Mr Bell replied: ‘Obviously the use of reserves is very much a last resort.
‘The alternative, though, to taking this particular action would have been a very drastic slash-and-burn approach to wider government public expenditure. We have to have a measured approach, a balanced approach, to ensure that in the process of rebalancing our Budget, we do not destabilise the economy as a whole and create the misery which we see in parts of the UK for our workforce and our people.’
He said the current level of government reserves stands in excess of £1.5 billion.
Mr Hall said it was disingenuous to say the island has substantial reserves and no external debt, given that reserves are being ‘raided’ to support ‘unbalanced budgets and speculative share purchases’ and there was about ‘£200 million of off-balance sheet debt in the name of local authorities, £400 million or so in the name of the MEA, and approximately £2 billion in actuarial liability for public sector pensions’.
Mr Bell replied: ‘Of course we have these other liabilities but they are covered in other forms.’ He confirmed that reserves available to draw on totalled £300-400m.