The latest news from the UK Treasury is that UK tax revenues have fallen significantly this year (down 12.9%) - due, in particular, to
- a drop of 4.7% in the size of the total UK economy (as the impact of the "credit crunch" of late 2008 hits economic activity and outputs),
- a major fall in income tax revenues (with the increase in unemployment, and willingness of private sector workforces to accept pay and bonus cuts, or work part-time),
- a fall in corporation tax receipts (with falling company profitability),
- and a fall in VAT revenues (with the cut in spending power and consumers paying back their debts).¬†
These are necessary and easily anticipated adjustments given the current stage of the UK economic cycle, and the fall-out from the "credit crunch" - but there are obvious repurcussions on the Isle of Man, with the fall in overall VAT revenue presumably causing a reduction in any payout under the sharing arrangement with UK (and not just from the cut to 15% rather than17.5%).
Has that been officially recognised or acknowledged by¬†the Manx Treasury as yet ?¬† And what are the Treasury's projections for both revenue and expenditure for this financial year ?¬† And if there is a forecast shortfall in revenue, what measures are the Government proposing to ensure a balanced year-end outcome ?
And again, given the cut in the VAT sharing arrangements which start to impact upon the Manx¬†economy in 2010/11, just how does¬†the Manx Government¬†justify the belief that the¬†local economy will continue to grow at the 7.5% explicit in its future public sector pension arrangements ?¬†¬†When¬†even the optimistic Mr Darling is only hoping for 1.5% UK economic growth (from the low point of 2009).
So ..... lots of questions to be answered in coming months, with a public sector hoping to avoid cut-backs and redundancy programmes,¬†a private sector hoping to avoid tax increases, and a Finance Minister stuck in the middle, trying to square the circle......¬† we live in interesting times¬†indeed !¬†