Chief Minister Writes On Fiscal Challenges Facing Manx Nation

[pongo]

Not sure if this one has been posted before:

 

Isle of Man holds breath for Bell’s budget in February

 

Nothing new in the article but from a slightly different perspective.

[manshimajin]

He's unlikely to prejudice the budget, though is he? Nor are we ever likely to get a big list of all the cost-savings that have been made at a division, board and departmental level. The consultation thing seems to largely be a sop, and since we know that costs are already being cut (eg. ward closures at the hospital), I can't see that it would delay anything other than major changes (such as pension reform, redundancies or pay cuts).

 

The revenue falls are obviously based on previous VAT revenues and will be subject to change depending on how the Island's GNI moves.

 

One move that might be interesting is, as part of a move to unit-linked pensions (which could easily be administered by one of the many companies on the Island with the facility to do so), a fund was created that would invest in the construction of public buildings and then rent them back to the Government. This would supplement falls in capital spending and ensure that more of the substantial amount of capital invested in public sector pensions were invested on-Island, rather than gambled on the London Stock Exchange. Its not my idea though, its Richard Murphy's.

Triskelion you are correct that he cannot announce the budget in advance but my underlying query is whether they will be able to fill the £90 million hole in year 1 without recourse to taxation changes because of the timing of 'savings'. As you say consultation will only delay the major changes, which are the ones that are likely to make the big difference. We have to remember that in year 2 there is another approx. £50 million to find if that is the way the VAT calculations work out. No doubt this why the Treasuer is making comments about using reserves in the thread posted by Pongo.

 

I agree with the idea of trying to use some of the pension funds to support the Island rather than the City of London. This of course needs to be an appropriate balance between property, cash, fixed interest and share investment to spread risk.

 

Given the attitude of the UK Government it would be nice to divert a significant proportion of investment activities away from London say to the IFSC in Dublin. Mind you most fund managers here seem to be cash collection points for UK businesses.

[Albert Tatlock]

He's unlikely to prejudice the budget, though is he? Nor are we ever likely to get a big list of all the cost-savings that have been made at a division, board and departmental level. The consultation thing seems to largely be a sop, and since we know that costs are already being cut (eg. ward closures at the hospital), I can't see that it would delay anything other than major changes (such as pension reform, redundancies or pay cuts).

 

The revenue falls are obviously based on previous VAT revenues and will be subject to change depending on how the Island's GNI moves.

 

One move that might be interesting is, as part of a move to unit-linked pensions (which could easily be administered by one of the many companies on the Island with the facility to do so), a fund was created that would invest in the construction of public buildings and then rent them back to the Government. This would supplement falls in capital spending and ensure that more of the substantial amount of capital invested in public sector pensions were invested on-Island, rather than gambled on the London Stock Exchange. Its not my idea though, its Richard Murphy's.

Triskelion you are correct that he cannot announce the budget in advance but my underlying query is whether they will be able to fill the £90 million hole in year 1 without recourse to taxation changes because of the timing of 'savings'. As you say consultation will only delay the major changes, which are the ones that are likely to make the big difference. We have to remember that in year 2 there is another approx. £50 million to find if that is the way the VAT calculations work out. No doubt this why the Treasuer is making comments about using reserves in the thread posted by Pongo.

 

I agree with the idea of trying to use some of the pension funds to support the Island rather than the City of London. This of course needs to be an appropriate balance between property, cash, fixed interest and share investment to spread risk.

 

Given the attitude of the UK Government it would be nice to divert a significant proportion of investment activities away from London say to the IFSC in Dublin. Mind you most fund managers here seem to be cash collection points for UK businesses.

Consultation...delay...discussion...election...forced actions ignoring consultation.

[pongo]

Given the attitude of the UK Government it would be nice to divert a significant proportion of investment activities away from London say to the IFSC in Dublin. Mind you most fund managers here seem to be cash collection points for UK businesses.

 

Two things.

 

1. Money isn't going to get diverted places for political reasons. It just follows the business.

 

2. Have a read Chinahand's post here on the KSF thread and what-if Ireland into the scenario.

[manshimajin]

Given the attitude of the UK Government it would be nice to divert a significant proportion of investment activities away from London say to the IFSC in Dublin. Mind you most fund managers here seem to be cash collection points for UK businesses.

 

Two things.

 

1. Money isn't going to get diverted places for political reasons. It just follows the business.

 

2. Have a read Chinahand's post here on the KSF thread and what-if Ireland into the scenario.

On point 1 - that's the reason for my last sentence. Most of the guys here are part of UK businesses.

 

On point 2 - businesses that operate in the IFSC in Dublin are not 'Irish' but international which reduces risk associated with a possibility of Ireland going bankrupt (though in fairness they are acting strongly to prevent this unlike some other EU economies).

 

I fully understand that managers here will invest the money where Head Office tells them to - and that means mosty via UK fund managers despite the much wider choice theoretically available.

[P.K.]

... Bell hinted that the island’s zero-10 corporate tax regime was likely to be spared the axe – at least for now.

Which is the problem. A great deal of the businesses on the island require very little infrastructure to function. I would also be surprised if there was a critical mass of local knowledge driving them forward. In other words they are extremely portable and an increase in CT could move them elsewhere very quickly.

 

Now the various gov depts have identified savings of some £30m without reducing headcount. If that means consultants are currently costing millions then that's a scandal in itself. So approx £110m to go IF they need to make good the full amount to function. From the appalling wastes of money in the past I suspect they don't. I would be interested in Bell's sums though - show all working please.

[triskelion]

Its not clear whether agency staff count towards 'total staff numbers.'

[Albert Tatlock]

I would be interested in Bell's sums though - show all working please.

Bells calculations are not that involved...

 

O = Overall position

 

E = Economic growth

W = Wasted Money

A = Amortisation

R = Reserves

F = Fiscal drag

U = Unemployment

C = Capital Spending

K = Kondratieff wave position

D = Debt

 

O = W * E¹ *R *E / F* U* C* K* E* D

[bluemonday]

http://www.manxradio.com/newsread.aspx?id=42006

 

Welfare benefits review on the way

 

Fees could also be imposed for services which are currently free, from a sewage charge to an end to free parking.

[P.K.]

Welfare benefits review on the way

I wonder if that will include controversial and unpleasant means testing?

 

Fees could also be imposed for services which are currently free, from a sewage charge to an end to free parking

So they're going to charge you for parking on land which, in theory at any rate, you own anyway...

 

I would like to see their estimated revenue/savings from these initiatives

[Albert Tatlock]

Welfare benefits review on the way

I wonder if that will include controversial and unpleasant means testing?

 

Fees could also be imposed for services which are currently free, from a sewage charge to an end to free parking

So they're going to charge you for parking on land which, in theory at any rate, you own anyway...

 

I would like to see their estimated revenue/savings from these initiatives

That's the way in British and Manx financial crises - those that can afford the least, and those least able to stand up against such measures, always end up paying for it. Easy targets.

 

In the meantime fat golden pensions and masses of overpaid civil services will continue to be the norm.

 

It would seem we are already paying Brown umpteen £thousands a year for sewage.

[bluemonday]

Yes all these wonderful measures circle carefully around the nub of the problem

viz

fat golden pensions and masses of overpaid civil services

On a side issue, granted that the source is wiki

http://en.wikipedia.org/wiki/Local_governm...the_Isle_of_Man

The structure of local government in the Isle of Man has been recognised as unsatisfactory since before the Second World War, but no consensus on how it should be reformed has been achieved. Proposals for reform were made by the Local Government Board and various committees in 1934, 1949, 1963 and 1967.[22]

 

A Select Committee of Tynwald in 1985 recommended a thorough review,[23] and an interim report of a further Select Committee in 1986[24] led to a consultation document Time for Change containing proposals by the Department of Local Government and the Environment, issued in December 1991. Two interim reports[25] were succeeded in 1994 by a final report by the Department making recommendations for reorganisation, itself incorporated in a report by the Council of Ministers,[26] which however failed to endorse those recommendations.

 

No progress was made by 1999, when the Council of Ministers admitted that it had been unable to agree on proposals, and Tynwald set up a further Select Committee which reported in 2001 with a scheme to reduce the local authorities to 4.[27] However, it merely "received" the report, declining to approve its recommendations.[28]

 

The next set of proposals, also for 4 local authorities, were made by the Department of Local Government and the Environment in 2004,[29] but were shelved because of opposition from the existing authorities.[30] An alternative plan, which would have preserved the existing authorities but transferred their waste collection and housing functions to joint boards, was produced shortly afterwards but also abandoned. The Department revived its previous proposals in 2005,[31] but shelved them again for lack of support.[32]

 

After 30 years, the only step taken towards any reorganisation of local government, apart from the mergers in Onchan and Michael (above), has been to confer on the Department power by order to merge 2 or more local authorities with their consent.[33] The power has not been exercised.

 

Possibly now might be a good time?

[oldmanxfella]

[One move that might be interesting is, as part of a move to unit-linked pensions (which could easily be administered by one of the many companies on the Island with the facility to do so), a fund was created that would invest in the construction of public buildings and then rent them back to the Government. This would supplement falls in capital spending and ensure that more of the substantial amount of capital invested in public sector pensions were invested on-Island, rather than gambled on the London Stock Exchange. Its not my idea though, its Richard Murphy's.

 

That is economic suicide. They cannot 'force' people to invest their pension money back into Manx infrastructure or the Manx economy. In fact that would be entirely inappropriate - nothing short of what bankrupt governments like Argentina did when they ran out of cash. If you take away the final salary pension it will be essential for any trustees appointed to appropriately diversify the money away from any one area to protect the members long term interests - they would have to diversify the investment risk. It would be completely inappropriate to force all the money to be unlocked to support local investment because if the IoM implodes you've just wiped out the pensions of every government worker and the board of trustees would get its ass sued from here to kingdom come. Its a completely worthless stupid idea. If it got to this stage then there is no hope for anyone.

[Albert Tatlock]

I propose a far simpler solution. Just extend the retirement age of all civil servants and MHKs to 132 years of age, and in return treble their final-salary-pension.

 

Everyone wins - vote winner!

[Theodolite]

The Isle of Man Public Sector seem intent on early retiring as many high earners waged as possible. If for some reason they can't manage early retirement there is always the "health grounds" option.

 

The teaching 'profession' seemed to get in on the act quite early, a coupla decades ago.

 

Very conservatively speaking, even at a pension of say 50% of salary with a 10% contribution, work 25 years - to retire 25 years, can't possibly stack up. Except on the Isle of Man where there is surely, surely a limitless supply of dosh.