The 3 overriding objectives are probably not in too much doubt, and these or similar will be evident in most countries:
- Grow the economy
- Make Government finances sustainable
- Protect the vulnerable
The above are easy to say of course but far from easy to implement. There is a policy to grow the economy and also to protect the vulnerable, although there will always be debate about how this is done and is it effective enough. There is not yet a policy in place to make Government finances sustainable although of course the main issues have been well documented and relate to public sector pensions, the Health Service and balancing the budget for the medium/long term. This article briefly sets out some of the major obstacles in the way of achieving these main objectives:
Some key obstacles
International pressure from the EU and elsewhere will continue to add pressure to the finance sector and how it conducts its business. The Government has signed up to reform to meet EU ‘substance’ provisions. This does seem quite bizarre given that the meaning of this term has yet to be defined and the Isle of Man has been at the forefront of recent transparency changes and well ahead of some jurisdictions who are not being asked to change. The Government continues to work in this area and making sure there is a level playing field must be the top priority here.
The availability of banking facilities is a real issue for many businesses and in particular new start-ups. Many, if not all banks, appear to adopt a tick box approach to business acceptance and too often what appears low/medium risk business is declined. Some businesses are now forced to seek banking facilities off-island. We understand that significant efforts are being made to attract new banks to the island.
New industry on the island will be needed to sustain the services we both aspire to and in some cases demand. Some potential new industries may not be universally accepted, but may be necessary. For example exploiting any natural resources such as gas in our waters (I should declare a personal interest in this!).
Finally, it is well documented that the Island faces a skills shortage and as well as recent work permit reforms we shall need fresh ideas to attract talent to our beautiful island.
It is now clear that public sector pensions and the Health Service are both not financially sustainable in their current guises. One must assume that there must be some legal obligation to provide the proposed pensions to the public sector and so major restructuring of benefits would seem impossible in the short term at least. However, a sustainable scheme for new starters is long overdue. We are told the fund to pay the pensions will run-out within five years and so clearly someone or people will have to fill the void after this time. Clearly this will need to be a combination of the public sector employees and the taxpayer i.e. you and me. An ever increasing storm is on the horizon regarding this with no obvious end in sight!
With regard to the Health Service it has been reported in the UK press that many UK politicians with relevant experience (which have the same problems as we do but arguably worse) share the same view behind the scenes but will not admit this publicly. There are two ways to go in addition to continually look for efficiency savings: Continue with the status quo which is to reduce the scope of the service to being for acute care only. The second option (which is arguably the preferred one) would require politicians to stand up and admit that more money is needed but as the Government can’t afford it then the taxpayer will need to pay more taxes and/or charges will need to be introduced and the latter would clearly need to be means tested so that the most vulnerable do not suffer. The latter option is the only long term solution given the very high annual increase in costs in running the service. However, this should be dealt with via firstly an open debate about the issues and then a proper consultation on the proposed response. The year to year fudging that currently occurs must stop
Best wishes to everyone for 2018 from the team at Harding Lewis Limited.