Printed (by Authority) by CORRIE Ltd., 48 Bucks Road, Douglas, Isle of Man. REPORT OF PROCEEDINGS OF TYNWALD COURT Douglas, Tuesday, 18th March 1997 at 10.30 a.m. Present: Income Tax (Capital Relief) (Commercial Buildings The President of Tynwald (the Hon Sir Charles Allowance) Order 1997. Kerruish OBE LLD (hc) CP). In the Council: the Attorney-General (Mr J M Kerruish Q C), Mr B Barton, The Registration of Business Names (Fees and Duties) Hon C M Christian, Messrs D F K Delaney and E G Lowey, Order 1997. His Honour A C Luft CBE, Hon E J Mann, Messrs J N Radcliffe and G H Waft, with Mr T A Bawden, Legalisation of Documents (Fees and Duties) Order Clerk of the Council. 1997. In the Keys: The Speaker (the Hon N Q Cringle) Companies (Fees and Duties) Order 1997. (Rushen); Mr L I Singer and Hon A R Bell (Ramsey); Hon R E Quine OBE (Ayre); Mr J D Q Cannan (Michael); Non-Resident Company Duty (Amendment) Hon H Hannan (Peel); Mr W A Gilbey (Glenfaba); Regulations 1997. Mr S C Rodan (Garff); Hon D North (Middle); Mr P Karran, Hon R K Corkill and Mr J R Kniveton (Onchan); Messrs J R Houghton and E A Crowe (Douglas BUDGET SPEECH — MINISTER FOR THE North); Hon D C Cretney and Mr A C Duggan (Douglas TREASURY — DEBATE COMMENCED South); Mr R P Braidwood and Mrs B J Cannell (Douglas East); Messrs J P Shimmin and A F Downie (Douglas The President: At this stage, hon. members, I advise West); Hon J A Brown (Castletown); Hon D J Gelling you that, in accordance with the resolution of this Court, (Malew and Santon); Sir Miles Walker CBE LLD (hc), Manx Radio has again chosen to broadcast the budget and Mrs P M Crowe (Rushen); with Prof T StJ N Bates, debate in its entirety. Clerk of Tynwald. I call upon the Minister for the Treasury now to move item 2 on the order paper. The hon. member for Onchan. The Chaplain of the House of Keys took the prayers. Mr Corkill: Mr President, I beg to move: APOLOGIES FOR ABSENCE That the Budget proposals for the year ending 31st The President: Hon. members, we have apologies for March 1998 be received and necessary action be taken to absence from the Lord Bishop, who is representing the give effect thereto. diocese at a conference in London. I rise to present this, my first budget, with a mixture of emotions, emotions which I am sure accord with those of ORDER PAPER NO. 2 - hon. members: excitement at the opportunity available to PAPERS LAID BEFORE THE COURT us to make our Island a more prosperous place to to live and work and to protect and enhance our quality of life, The President: Now, in keeping with standing orders but tinged with a degree of trepidation at both the enormity 2.2(4) and (5), we now turn to the order paper number 2 of the tasks we face and the volatility of the global economy and I call on the learned Clerk to lay papers. within which we must increasingly live and work. I suppose those emotions coalesce into a determination to do the best The Clerk: I lay before the Court: I can for the long-term benefit of our Island and its people. I emphasise the long-term benefit because I believe there The Isle of Man Budget 1997-98. will be times when we will face strong pressures to take a short-term or narrow view. Income Tax (Deductions) (Prescribed Cases) I am grateful for the range of private sector bodies who (Amendment) Order 1997. have provided me with submissions for consideration in formulating the budget: bodies such as the Trades Council, Income Tax (Car Fuel Benefits) Order 1997. the Chamber of Commerce, the Institute of Directors, the Apologies for Absence Order Paper No. 2 — Papers Laid Before the Court Budget Speech — Minister for the Treasury — Debate Commenced T228 TYNWALD COURT, TUESDAY, 18th MARCH 1997 Fund Managers'Association and the Association of Manx almost 2,000 over the last five years and with employment Bankers. in a range of sectors from banking and insurance to As my predecessor used to say, all budgets involve manufacturing, to transport and communications, all seeking an appropriate balance between competing showing significant increases. pressures. It is only in seeking that balance that one realises One area in which I am pleased to say there has been how difficult a task it is to produce. It will never be possible negligible employment growth over this period has been to produce a budget which fully meets the aspirations of public administration, as defined in the census. This is hon. members or outside bodies. However, I hope and testimony to the last administration's tough controls on believe that in the budget I present today I have produced government employment, a policy that will be continued. a budget which hon. members will be willing and able to The immediate outlook is for continued economic support. growth of around 6 per cent, although government's central To my mind the Isle of Man budget's purposes are: to planning assumptions do build in a slow-down towards put into financial terms the plans and priorities of the next millennium. We can therefore expect a further government as defined in the policy report; to seek tightening of the labour market. We should be concerned Tynwald's authorisation to those financial plans in terms if the consequence of this is simply higher wages paid in a of both spending and taxation proposals; and to provide few sectors and a rise in demand for imported labour. If, an opportunity to focus attention on both the need to give on the other hand, labour market conditions serve to make priority to the raising of revenue through economic employers even more efficient and effective in their development as a precursor to spending decisions and, on deployment of labour and other resources so that labour the steps government continues to take, to put into effect becomes even more productive, then the outcome can only the development and diversification of the economy. help to improve the competitiveness of the Island's I must stress, hon. members, at this point that whilst I economy. Regulations will be introduced this year appreciate that a general election took place in November, extending income tax relief on vocational education and the Council of Ministers has not yet had an occasion to training. These will add to the initiatives already established present Tynwald with an opportunity to debate policy. and aimed at easing labour market pressures. Consequently, departments have had to frame their Whilst government's central planning assumptions spending requirements on existing Tynwald policy and the concerning economic growth and population change have Treasury has had to budget accordingly. Obviously the been borne out in recent years, the assumptions concerning Treasury will take into account subsequent changes in tax revenues have been less accurate. The translation from policy in future budgets. economic activity to tax receipts is neither automatic nor I intend to break my speech into four sections dealing straightforward. Many reasons can be forwarded for this: with, firstly, the Island's economic situation in the context for example, the time lags between company revenue of the global economy; secondly, government finances and generation and the subsequent payment of resultant tax spending proposals for authorisation by Tynwald; thirdly, liabilities; the generosity of our capital and tax allowances; direct taxation proposals; and finally, the budget in the and the scale of tax exemptions provided to a number of context of government's objectives. key and expanding sectors. Accordingly, government Firstly, then, the economic outlook. There can be no cannot afford to relax its control over public expenditure; doubt that the Island's economy is in its best shape since indeed, there is a need for extra caution to ensure that the end of the previous decade. This budget is presented current planned expenditures do not over-commit us in against a background of sustained economic growth, low future years. It is a case of recognising that element of and falling unemployment, price stability, and low interest income that might be classified as core income and is rates. Unemployment currently stands at a rate of just 2.7 relatively assured against the more volatile elements of per cent of the economically active population, a rate last our tax sources. It must be wrong to plan all spending on seen in 1990. Annual inflation is presently running at below the basis of projected or actual total tax receipts. Rather, 3 per cent and has now been below 31/2 per cent for over spending should relate to core revenues only. four years. Interest rates also remain at low levels not seen Similarly, the use of the tax system to encourage in the last 30 years. business investment and economic activity must be Treasury estimates current annual economic growth to responsible, affordable, and likely to generate its own be around 6 per cent. This is satisfying in itself, confirming stream of revenues in the future. Whilst, as with the recent the achievement of the objective of a sustained and exemption from VAT for fund managers, tax measures will manageable development of the Island's economy. But always be a consideration in attempts to stimulate extra equally satisfying is the achievement of the diversification economic activity, I feel it is going to be more productive objective of economic policy, for whilst the financial for the Island's economic development and future security services industry continues in the vanguard of the Island's that we look towards other aspects of the business and expansion, growing by an estimated 7 per cent in 1996, commercial environment.