The Budget was pretty much what I expected. I sensed that income tax receipts would have continued to be healthy (exceeding forecasts for the second year running) which, together with the “breaking news” that the FERSA (ie VAT sharing agreement) discussions with HMRC had been favourably concluded, meant that the Treasury Minister had a modest surplus to work with. Much of this surplus has been earmarked (in his post-budget presentations Mr Cannan was at pains to point out that this was not spare cash) and the rest set aside for a future rainy day – and you can be sure there will be plenty of those!
Whilst it would undoubtedly have been gratifying to have, for example, increased the personal allowance by £500 rather than £250, the Island is still recovering from the shockwaves of all that has happened over the past decade, including a global financial crisis, heightened scrutiny of the “offshore” world and seismic changes in the international tax environment (not to mention Brexit). That we have managed to keep our heads above water is down to a combination of good fortune and sound financial management. The current level of income tax and VAT receipts has contributed to this and should come as no surprise to those of us who drive regularly – once upon a time the Island’s roads were busy at “rush hour” and otherwise quiet: nowadays they are busy constantly, which I take to be a sure sign of economic activity. But as the Treasury Minister has emphasised, we need to bank the fruits of this activity now.
One elephant in the room is of course public sector pensions, and whilst this has been acknowledged as a problem and steps are being taken to limit the damage, many believe there is much more which can be done – such as putting in place “defined contribution” arrangements for new public sector employees.
Mr Cannan has branded this budget as a “Budget of Focus”. The word “consolidation” would have been far less exciting but that’s what it is. And in the circumstances, nothing wrong with that, I say….
