S T A N D I N G C O M M I T T E E O F T Y N W A L D C O U R T O F F I C I A L R E P O R T

R E C O R T Y S O I K O I L B I N G V E A Y N T I N V A A L

P R O C E E D I N G S D A A L T Y N

ECONOMIC POLICY REVIEW COMMITTEE

TREASURY MINISTER AND CHIEF FINANCIAL OFFICER

HANSARD

Douglas, Friday, 30th June 2017

PP2017/0122 EPRC-T No. 1/16-17

All published Official Reports can be found on the website:

www.tynwald.org.im/business/hansard

Published by the Office of the Clerk of Tynwald, Legislative Buildings, Finch Road, Douglas, , IM1 3PW. © High Court of Tynwald, 2017

STANDING COMMITTEE, FRIDAY, 30th JUNE 2017

Members Present:

Chairman: Mr M R Coleman Mr T S Baker MHK Mr J R Moorhouse MHK

Clerk: Mr J D C King

Assistant Clerk: Mr A McQuarrie

Contents Procedural ...... 3 EVIDENCE OF Hon. A L Cannan MHK, Treasury Minister and Mrs S Lowe, Chief Financial Officer . 3 The Committee adjourned at 4.08 p.m...... 23

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Standing Committee of Tynwald on Economic Policy Review

Treasury Minister and Chief Financial Officer

The Committee sat in public at 2.30 p.m. in the Legislative Council Chamber, Legislative Buildings, Douglas

[MR COLEMAN in the Chair]

Procedural

The Chairman (Mr Coleman): Welcome to this public meeting of the Economic Policy Review Committee, a Standing Committee of Tynwald. I am Michael Coleman MLC and I chair this Committee; with me are Mr Tim Baker MHK and Mr Jason Moorhouse MHK. We also have our 5 Clerk to the Committee, Mr Jonathan King, who will participate fully in this session. Please ensure that your mobile phone is off, or on silent, so that we do not have any interruptions. For the purposes of Hansard, I will be ensuring that we do not have two people speaking at once. The Economic Policy Review Committee is one of three Standing Committees of Tynwald 10 Court established in October 2011 with a wide scrutiny remit. We have three Departments to cover: Cabinet Office, Treasury and DED. We also have a scrutiny remit for the Gaming Commission and the Financial Services Authority. As part of our general scrutiny role we invite the Ministers of our three Departments to come in once a year with their Chief Executives and give oral evidence in public. Treasury last 15 appeared before this Committee on 6th May 2016 with the previous Treasury Minister, Mr Teare. Today we welcome the new Treasury Minister and the same Chief Financial Officer.

EVIDENCE OF Hon. A L Cannan MHK, Treasury Minister and Mrs S Lowe, Chief Financial Officer

Q1. The Chairman: Welcome. For the record would you please state your name and office and how long you have been in that office? 20 The Treasury Minister (Mr Cannan): Alfred Cannan, Treasury Minister, seven months.

Mrs Lowe: Sheila Lowe, Chief Financial Officer, two years.

25 Q2. The Chairman: Thank you. Minister, would you like to make an opening statement?

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The Minister: I think it is a pity this meeting was not a week later, because you would have been able to have seen the Light Blue Book which will be laid before Tynwald when the Order 30 Paper comes out. But what I can start by doing is just giving a very quick summary of what that Light Blue Book will say to you and the public. I will be reporting for the last financial year a revenue surplus of £24 million, which has been achieved through better than expected direct and indirect taxation results and some of that is clearly attributable to strong business performance in our key business sectors, notably ICT and 35 e-gaming. The contribution towards that figure is also clearly identified from lower than expected Social Security spending. We have achieved £11.4 million lower than anticipated and I think primarily much of that is reflective of the drop and lower levels of unemployment. So I think those factors will provide a good indication of the strength in some key sectors of our economy. 40 We do continue to draw on reserves and most notably the Public Sector Pensions Reserve which you will see drew down £31.4 million from the Public Sector Pensions Reserve last year. Of course we also had an overspend with DHSC, £11.1 million was the supplementary vote; but we did not have to draw on reserves for that, we were actually able to pay that out of the surplus figure. So in actual fact had we not had that, we would have had a £35 million surplus to 45 report. The market value of our external reserves has also increased significantly during the financial year. I think that is slightly misleading in that they started from a very low point – obviously, we take the market value of a given point in time. It was quite low at that time and over the year we have seen an increase in the stock value, and there has been a good recovery and performance 50 generally in terms of the investment performance. But I would like to just conclude by saying that whilst there is some positivity there in those figures you will be able to digest more in depth when the Blue Book is released, there is absolutely no room for complacency. We have got to be very mindful that at the end of this term, 2021, we will have a drop of an expected £50 million from that pensions reserve which will 55 cease – the Public Sector Pensions Reserve – and will go into our revenue. We need to achieve the savings that we have set out and as yet undefined but will be reported on in the SAVE programme. Of course the other aspect that we all need to be mindful of is the international environment at the moment and any impacts that may have in terms of the decisions that are currently being 60 discussed, and are likely to come down the road. I am mindful of any impact that might have on the Island’s economy and our business sectors, and indeed our ability in some areas to conduct business successfully.

The Chairman: Okay, thank you for that. 65 Mr Baker?

Q3. Mr Baker: Thank you, Minister. Could you give us any early views on the current financial year and the general state of the economy and particularly tax receipts to date? I know it is very early in the financial year. 70 The Minister: It is but I did speak to the Assessor of Income Tax before I came here today. She is actually waiting for her first quarterly figures to be finalised, but all the indications are that we are on track, as we have predicted, in terms of our taxation receipts and our Customs and Excise VAT receipts. 75 Q4. The Chairman: Do you have a projection of what sort of deficit we are going to have, if any, at the end of the 2017-18 year?

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The Minister: The first year we put in an £80 million figure, measuring in terms of the deficit. 80 Bear in mind, Chairman, obviously that is the first time Treasury has actually set out to formally state what we regard the deficit as being.

Q5. The Chairman: So you are sticking with it, you think it might be £80 million at the end?

85 The Minister: Well, that is the Budget. It is too early to tell at the moment, we are only really coming to the end of the first quarter. There is not always consistency in terms of receipts throughout the year, as you will probably well be aware there are various dates that are important and tax receipts obviously flow in at certain points throughout the year. But as it stands at the moment I do not have an undue 90 concern about our receipts in terms of what has been forecast and what we are gathering in at present.

Q6. Mr Moorhouse: With regard to the Budget process you have dropped some interesting hints either by direction or other ways about things like all fees going to the budget process and 95 the possibility of a utilities tax with regard to Manx Gas. How do you actually see the future of the budget process and alterations?

The Minister: Well, you are right. I think to be fair to the previous Treasury Minister he did start off the year before by trying to make the Budget forecast more transparent. We are trying 100 to take further steps in doing that, hence the measurement that we saw of the deficit. You will know from having read the Budget we are trying to make understanding the figures more accessible for the layman and we are going to continue that process in terms of general layout and format. How that will specifically play out I think we have to wait until we actually produce the document, but we will be examining that as we go along. 105 Also, the Director of Finance has got a review underway at the moment within Treasury in terms of what else we could do to improve our approach to the Budget, and we will be getting a formal report on that. The other aspect of course is that I will be, as I have already indicated, engaging for the first time I think in such a way individually with MHKs towards the end of the summer. I will be inviting everybody, if they want to come and have a meeting with me in 110 September, to do so and I will be seeking to listen to any suggestions or ideas that they may have or may feel should be included in the Budget. And obviously whilst there will be no guarantee, that process of engagement will happen.

Q7. Mr Moorhouse: Given the change and the transparency you are going for and that open 115 invitation you are sending out, is there a need for more than one Budget a year? Does there need to be some kind of interim statement?

The Minister: I think what I am going to try and do this year, particularly with the Light Blue Book, is give a bit of commentary around it. Clearly if you are going to declare a revenue surplus 120 my view was that people need to understand what that actually means in real terms and where the challenges are still lying within public finances. So I do not think at this time there needs to be a double-up or an interim Budget, but it is right that when you deliver the final accounts – and we have got the Light Blue Book and the Dark Blue Book at the moment – that some form of commentary should accompany that. And of 125 course as you know, we are also examining at the moment – and it is only an examination – how we can get the reporting into one book if it is possible. There are certain challenges obviously between our fully audited accounts which is the Dark Blue Book, and what you might regard as our management accounts in terms of the Light Blue Book which you will be able to examine once you get your Tynwald Order Paper.

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130 I think it would be helpful if it was possible to put that into one report, but there are some challenges around that and so we are just looking at that a bit more carefully.

Q8. The Clerk: Can I ask, since you invited me, Mr Coleman, to participate: a few years ago there was a Private Member's Bill in the to amend the Treasury Act to make it 135 possible for MHKs to propose amendments to the Budget. Is that something on which any work has been done?

The Minister: No, in short. It is not necessarily something that I would encourage without giving it some consideration. I am hoping that the process we are going to do in terms of being 140 approachable at the beginning of the Budget process in the autumn will alleviate that. Of course as far as I know an MHK can bring an amendment, but as with all things financial in terms of preparing a Budget I think there are significant implications about someone trying to amend a Budget in such a manner, and I think that –

145 Q9. The Clerk: To be clear, the advice the Clerks would give a Member of either Branch today is that they cannot amend the Budget. The Budget Pink Book is produced by the Treasury and Tynwald is invited to say yes or no. Occasionally Members ask if it would be possible to propose amendments and they cannot. They can amend the motion –

150 The Minister: Sorry, I misunderstood what you were actually saying to me.

The Clerk: We advise that they can amend the motion so that Tynwald approves the Budget and refers a certain question for further consideration, or something like that. But they cannot actually amend the Budget because it is a fairly fixed process. 155 The Minister: And I think that is sensible as it stands at the moment.

The Chairman: If I may, one would presume that the various lines in the Budget are so interlinked that just picking one piece and making an amendment to it, you would have to model 160 the whole thing again. (Mrs Lowe: Yes.) So I think that you can always put a motion once the Budget is in and say, ‘Can we please change this?’ But it is a model and changing one bit of it would be very difficult. So we accept that.

165 Q10. Mr Baker: One of the key elements that was introduced in the latest Budget was the SAVE scheme, with a £25 million target. Obviously I appreciate a lot of work has gone in to date on that. I just wonder, Minister, if you could give us an update on the current status and expectations around that process?

170 The Minister: Yes, I think we have had a very successful engagement with the public – some 1,400 submissions were received and they have been individually reviewed, sifted and prioritised. There are workstreams currently going on at the moment and obviously we need to get a report put together. We also need to validate some of the cost implications and understand exactly how much some of these ideas that are going to be contained within that 175 report would actually save in terms of the impact on the public purse. So there is a lot of work going on at the moment to do that. I am expecting to see that report by the end of July, and I would hope in terms of expectation that report will be in the public arena for examination by Tynwald as well by October, by the first sitting of the next parliamentary year. 180

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Q11. Mr Baker: And that has brought together the submissions from individual members of the public and the Government Departments and Members of Tynwald all into one process?

The Minister: Absolutely, we have had to sift that, consolidate it, and try to draw the ideas 185 into the relevant workstreams. I have not seen the initial drafts that are being prepared at present, I simply know we are trying to understand and assess the cost impacts of these suggestions, and as I said right at the very beginning I have given a very clear remit that nothing was to be left off the table in terms of examination. So any ideas that the public have given us, if they are valid and real, are receiving proper 190 attention. And what will happen once that full report is prepared with full ideas, is it will clearly then go to Council of Ministers first. I expect if there are areas that are deemed out of kilter with our Programme for Government then probably they will be sifted out and then I expect there to be some form of Tynwald sifting process when we come with recommendations. But I think it is far too early for me to speculate with you what is going to actually be in that 195 report at this stage. I think to do so would not be wise or indeed fair on those people who are actually now working hard to get this together.

Mr Baker: Yes, I was not expecting –

200 The Minister: Sure, no, I think I was just mentioning that as part of it.

Q12. The Chairman: I have a question on this particular SAVE scheme. Obviously suggestions will be coming in which say, ‘We should stop doing this’ – which is a straight saving. But others will be coming in saying, ‘If we spend some money here, then we will 205 save in the long term’ – almost like the Health Improvement Fund used to work. I just wonder with that where the funding, where necessary, will come from. Do you actually have a budget for the SAVE scheme implementation for those ones where they say, ‘If we spend £50,000 we will save £100,000 within two years’, or something like that?

210 The Minister: First of all, any suggestions that have involved expenditure to effectively save – and indeed I am very aware that there have been some suggestions in about ways that Government should be raising revenue – so anything like that is being given the consideration and being discussed with the relevant Departments where practical, and we will assess the report. 215 I think if there is a need to create a fund once that report is assessed and the recommendations reviewed, and Tynwald and the Council of Ministers have reached their conclusions, then I would expect, Chairman, that it would not be unwise to create such a fund to see the recommendations through if necessary. Clearly, there could be all sorts of implications and again I need to be careful about any 220 speculation about what is in that report, but I think there is validity to what you are saying or suggesting.

Q13. The Chairman: Which actually brings me on to just a general question about the Capital Contingency Fund: has it been used and what sort of thing is it being used for? 225 The Minister: Yes, in short, it has been used. It is a useful fund for us to have to cover sudden eventualities, particularly weather-related. So, for example, there has been expenditure for Laxey Glen river wall repairs and Laxey Bridge. There has been some funding on the Snaefell Mountain Railway. I can give you the full breakdown of expenditure. 230 Mrs Lowe: It is there, the Departments draw on it, they have to come to Treasury; and I think it is something we should continue to have.

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At one point capital projects used to contain a contingency sum in them. One of the things was that previously sometimes those contingencies got used for – I am going to call it ‘extras’ – 235 so a proportion of those sums was removed in 2012 and they set up a £I million contingency fund to help meet those. That has been rolled into that, so there is anything for projects as well. I think you always need a contingency because there are always unknown things that can happen. Those of you who have been in business, I am sure, know suddenly things happen out of the blue and they need to be dealt with, and I do not think it would be very prudent not to 240 have a contingency.

Q14. The Chairman: Is there not also an Emergency Fund as well? I am thinking of situations for instance where we have to bring people over to look into a murder enquiry which we did –

245 Mrs Lowe: No, we have got different reserves. That is the Capital Contingency Fund which sits in the capital account; but then in our Reserves Fund as well we have a legal cost reserve which if we had to bring over specialist QCs or specialist type of people for certain cases we might take it out of there. We have also got a contingency fund in that which we would call a revenue contingency fund. 250 That type of expenditure that you are talking about would be a revenue contingency. So we have got something there as well. And that is where you get the real uncertainties around revenue, because anything can happen during the year.

The Chairman: I don’t know how many murders we might have! 255 Okay, Jason.

Q15. Mr Moorhouse: I think you made reference to the positive investment returns and falling cost, which is really positive. However, we are currently at a point where the stock market is pushing towards new highs on a regular basis, and we have got this real world uncertainty in 260 terms of things like Brexit and the UK election which have added a lot of potential issues in the near future. Is the investment strategy reflecting those possible changes?

The Minister: We have a regular review of our investments, we have an Investment 265 Committee chaired by , MHK, who does that on my behalf, and we are constantly and consistently reviewing where our investments are put and of course their performance. So as it stands at present I am not aware that we are changing the emphasis of our investments. I think the stock market, as you say, has performed incredibly well. Could it be at a peak? Is there a dip on the way? It is possible, but I have to leave that really to the experts to 270 advise that committee. We are targeting on average about base plus 3% for our returns and the performance last year reflected that.

Q16. Mr Moorhouse: Yes, because of Brexit there is a lot movement and a lot of change in the funds. Has that been repeated recently or is it continuing? 275 Mrs Lowe: Our investment managers manage the funds that we have, we do not actively get involved in the management – we put those out to the funds and they provide a report. They move them around based on their advice, they are specialists in it. If you actually look in the Government audited accounts, that is the Dark Blue Book, they actually give full details of all the 280 mandate, the level of risk, how it is assessed and a lot of information that is given to the managers to work round. They then produce a report and those reports for each fund will tell us how much is in overseas equities, UK equities, bonds and different types of holdings. The managers move it and you will see … sometimes you have got one quarter which is this and they will have moved it

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285 because they think it is that. That is their job, they are not just managing our money, and touch wood they have done a good job for us so far.

The Chairman: Can I point out just for information purposes, that unless you have within your organisation a professionally qualified investment manager you cannot manage funds 290 which are essentially on trust, which is what these are really. So as we do not have investment professionals … we have people who know about investments but I do not think we have investment professionals who are used to doing this. I know on the Water Authority when we created the contingency portfolio, because none of us on the Department had an investment qualification we were not allowed to actually manage 295 it. We could give them what we would wish to have under recommendation as the asset mix, but not stock-picking or bond-picking or anything like. That has to remain arm's length.

Mrs Lowe: And if you have a look in the book, there are a whole lot of things that helps give things; and you are right, Chairman, we can alter that, the risk profile and things and that is what 300 we would talk to them … well, the Investment Committee would discuss it themselves and then we would go back to our fund managers. It gives the details and the ratings of the type of people we place cash deposits and things with as well.

305 Q17. Mr Baker: Looking at the other side of investment – the raising of funds to allow us to invest in Capital Projects – there has been talk in the fairly recent past about the potential to use bond finance. I just wondered if you could, Minister, expand on the current thinking around the potential for that and whether there is any work underway at the moment to look at it?

310 The Minister: I think it is something that is under very real consideration for Treasury. The capital funding that we have got at the moment in terms of Government’s plans over the next five years have clearly been built into our budgets. So there is no specific need, as it stands at present, to go and raise a bond. But I think it is fair to say there are a number of workstreams underway at the moment within Government, which may require us to think about a bond 315 possibly in the future. So it is there and we are very conscious that there is a demand from the public and from savers, for Government to have some form of bond at the moment. I think for us we need to be clear about what that money is going to be used for. In an ideal situation you would also be seeking a return from the expenditure for Government in some respects. But it may be as we go 320 further forward in this financial year we will be in a clearer position, I think, to understand what and how and where Government might take the favourable market opportunities that exist at the moment to launch a bond.

Q18. The Chairman: I think especially as there could well be a projected base rate increase 325 fairly shortly.

The Minister: Yes, I am mindful; there is some talk about that. Again, we know the Bank of England, obviously the recent vote has just taken place and the base rate has remained, but it was a closer vote than it has been for a while and we are mindful that some of the language 330 coming out from the Bank of England is that an interest rate rise is a real possibility in the next period of time.

Q19. The Chairman: One of the ‘no’ voters has indicated that he is going to change for the next vote, so it may well change again. 335 I was partially involved with the bond issue from the Water Authority and I would caution against the costs of it, you might just as well pay for it yourself.

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Anyway, who is it now? Me! I am afraid I do like to keep track of the Sefton as I was on the Committee that did the report for it, and I just wondered what sort of receipts and how much it has earned us by keeping it 340 floating?

Mrs Lowe: We get income from the loan – you know we get interest from the loan – and that is up to date. The interest was fixed at 5%. We get income from the Middlemarch site and that works out at about a 5% return. Then we 345 obviously get Income Tax receipts and VAT receipts in, but as you are aware we would not disclose taxpayer information from that.

Q20. The Chairman: So it has not been that bad a deal, then?

350 Mrs Lowe: We probably had a better return for some of it than maybe sitting the money in the bank with low interest rates.

The Chairman: Well, 5% and 5% on a lot of the money.

355 Mrs Lowe: Yes, and the loan is due for repayment next year.

Q21. The Chairman: Is that when the option is going to be exercised?

Mrs Lowe: That would be when the option is – yes, it is five years. Where has the five years 360 gone?

The Chairman: I was a callow youth when I started on that!

Q22. Mr Baker: Just moving to more internal matters. Obviously the business of Government 365 is big business and it needs real financial discipline and it is always a challenge to keep improving on that. Is there any thinking around using a Finance shared service model to support the Departments, effectively by Treasury staff providing financial management services to the Departments? 370 Mrs Lowe: You know that we provide central finance processing already and we do all that centrally? We do provide a level of support. Treasury has got three financial management advisers who assess business cases and things with the Departments. We have talked with Departments on how we should move things going forward. Certainly 375 Health has a finance function, as have all the others at the moment, and I think for the larger Departments you certainly need some of it embedded. We have been trying to streamline some processes when we produce monthly information and things like that. I think there is a way to go and there are conversations with the Department to ensure we use our resource most efficiently. However a lot of the finance directors in Departments – and 380 even though they are called finance directors they do not just put accounts together – do a lot of other functions as well. And I think some of the difficulty sometimes when you move something out, is that you can actually end up having more staff, because who is going to do that job? So we have to make sure anything we do is done for the right reasons. But yes, we are looking at it and we have got to constantly look at it because we have to try and get more 385 efficient and better.

Q23. The Chairman: May I just ask a general question?

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Over the years there has been quite considerable questioning over Axapta. Are you quite happy it is the tool that you want to go forward with in the future? 390 Mrs Lowe: We have spent a lot of money ... It is ‘AX’ now – and I keep getting into trouble for calling it Axapta, so I will call it AX. I think we have seen a lot of improvements over the last two and a half years. We have seen far better reporting and we have got some better reporting tools out of it. I also think we have 395 seen where perhaps we are starting to … sometimes we thought the system should just fit the way we did things, but sometimes you have to change the way you do something to fit the system and I think we are getting a bit better at that as well. Axapta is an accounting system and most accounting systems have great similarities – you put debits and credits in, and you reconcile banks and things. I think some of issues we had were 400 because of our model and the way we were using the system for different Departments. We put a security model on top of Axapta – it came out of the box one way and we altered it. I think a lot of that has settled down. I think actually the cost of coming up with putting in another system or something ... I think Axapta does the job relatively well. I do not think it is perfect but there again I do not suppose 405 any other system would be perfect for an animal like Government. I think with our security thing, because each Department is a separate legal entity it cannot see another Department’s data, there are all sorts of layers of security on it. I think it is a lot better than it was; a lot better.

410 Q24. The Chairman: Is it the system for 10 years’ time?

Mrs Lowe: I don’t know, technology might have changed in 10 years’ time. So will it be the system for 10 years’ time, I don’t know! I think things could change. I think we will be seeing people going to cloud-based systems and 415 they may be totally different. I also think some of it may depend on how the structure of Government moves. There are things about single legal entity, and if scope and structure comes up again all that might affect what we do with the accounting package.

Q25. Mr Moorhouse: With regard to the departmental business cases, some Departments 420 have become slightly frustrated by the actions of the procurement process. The FD8 waivers give the Treasury officials the opportunity to put forward their thoughts on the process. In terms of adding rigour to the process that is good, but actually in terms of the running of the Departments there are occasions where the Department feels that all their expertise is not being fully utilised into the process and not always been listened to with enough effect. 425 Would it be possible to tweak the system slightly to get around those questions?

The Minister: Could you just clarify a bit more what you are actually – ?

Mr Moorhouse: Okay, so in terms of areas like transport, if there was to be a specific deal 430 identified with one company from across that has got a specially unique deal that can go forward, when that goes through procurement because there is only one specific example on the table that the Department is pushing, it has a disadvantage. You then have a further disadvantage that the people in Treasury, who are looking at it and who are bringing the rigours into the process, may not be doing it from the practical transport 435 knowledge base. It is a good process but in terms of getting the best deal at the best time it can be an issue. It can slow things down and result in the best deals not being left on the table.

The Minister: First of all, there will be a debate in July on procurement as a result of Mr Baker’s motion last October. As you might recall I agreed then, and Treasury agreed, we

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440 would go away and review the procurement process. So we are actually coming back with some clarity there and some suggestions for improvement. I think to answer your question, I appreciate that there may be some frustration from Departments but at some point there has to be challenge on expenditure, and proper challenge, and I think that – and I can only speak from my term as Treasury Minister – what we have done, 445 and tried to do, is to make sure that we have properly examined departmental spending and assertions around why that spending needs to take place. So whilst I can appreciate that may cause some people some frustrations, our job is to make sure that the public is absolutely getting best value for money and these business cases are properly justifiable. And yes, often we come at it from a layman’s perspective but then the 450 answer should be crystal clear to us. I think without that happening we will get back into a position where Departments could effectively run away with spending, without this added accountability in it. I would be loath to remove that process from the procurement process.

455 Q26. Mr Baker: Are there things the Departments can do that help their chances of getting what they consider to be the right answer from this kind of process? Clearly nobody would challenge the need for a robust interrogation of expenditure, but equally sometimes the unintended consequences of delays, or whatever, can have adverse impacts in the Department. Are there things that you observe that work well, that Departments could adopt to actually 460 get to the right answer that gets everybody comfortable more quickly?

The Minister: The cases that I have seen, in terms of the ones where we at Treasury have challenged them, have often provided a weak explanation as to why the procurement process has not followed its correct course – sometimes weak explanations as to why there is only one 465 supplier who can deliver certain work. So absolutely I think I would say to Departments at the moment we are challenging spending requests and we are challenging FD8s that come through for large expenditure items. We are seeking to ensure that the public is getting the best value and what we are trying to do, clearly, is to get people to think about how they are spending the money and to find out whether there are potentially other ways to do so. 470 I think I can probably give you a clear example of that. We had, it would appear, a solution to some capital spending that was required on the Lezayre Road which would have involved a significant business impact and significant traffic delays as traffic was rerouted. I think as a result of challenging that, it appears that a different solution now has been found in terms of the infrastructure work that was required – rerouting of water pipes – and as a result the whole 475 process is going to be concluded in a matter of weeks rather than a significant matter of months, spreading out well over a year. So I think those kinds of challenges are right in the current environment, especially when you are considering the savings targets that we have set ourselves and the absolute need this time to achieve that. I think whilst it is a source of frustration, what we are doing achieves a couple of 480 purposes: it challenges the status quo, it is obviously seeking the best value for public funds, and I would like to think it helps the Department officers to perhaps think of what other alternatives might be available to them in each case. But you are asking, what is the advice to say how do we make it more efficient? It is really all about presentation and, not all the time, but certainly we have seen business cases in my time 485 that have come through to the Treasury board where you get the impression that the Department has almost thought, ‘Oh, just sling it up to Treasury we are going to get a yes; of course they are going to agree for that new piece of machinery, or capital spending on a road’. Well, that is absolutely not the case at the moment and credit to my officers, but also particularly the political Members, who have adopted a very proactive, challenging approach, 490 and ultimately for the right reasons rather than just being obstructive.

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Q27. Mr Baker: So your guidance would be for the Departments to step up and make sure that they have thought the proposition through properly and really articulate it, and presumably focus on the presentation interactively with – ? 495 The Minister: I think yes absolutely, I would wholeheartedly agree with that. But in light of the questions around procurement and in light of making sure that the economic benefit remains on the Island as much as possible, and in light of our requirement to build the economy as well, we genuinely do want to understand why, for example, there is only one bidder for a 500 contract, and is that correct? Are we getting the full message out? Secondly I think it is incumbent on us all within our Departments, but also outside, to ensure that the public's funds are being spent as carefully and properly as possible. And I believe that. So we are setting out with the best intentions but yes, absolutely, we need a proper explanation and a proper understanding of why the procurement process has not been followed in those 505 exceptions where it has not; and of course an understanding that the alternatives have been looked at where there are actually alternatives that could have been considered.

Q28. The Chairman: How is the financial review going on at the MUA? Have you any feelings? We both have an interest in this. 510 The Minister: Yes, Chairman, I am sure you have, given your background. What I can tell you is that the report has just, literally yesterday, been delivered to Treasury. I have not read that report in its final form. I did see an early version some weeks ago and again that report will be laid before Tynwald for debate in October. 515 So it is absolutely on track and, without speculating, I think it is going to deliver certainly what I wanted it to deliver but I expect for those who were keen to see this happen as well. I am hoping that we will have a well-written, clearly understandable report with some recommendations alongside it.

520 Q29. Mr Baker: One of the other subjects which obviously had a lot of airtime around the Budget was the Health Department, and there was the supplementary vote last year and then an increase in the budget for this year. Is there any indication of how the Department is progressing so far this year? Again, I do appreciate it is very early but there were a number of Members, including myself, who felt that 525 there was quite a high chance of another supplementary request coming in due course.

The Minister: I will probably ask the Chief Financial Officer to add in a minute to my views on this. First of all we are very cognisant, absolutely, that the Health Department is under significant pressure. We are very aware of the reasons for that, particularly the staffing issue and 530 the high cost of contract doctors and nurses. And of course tied into that are the issues we are aware of in terms of society. So we, certainly from the political side, have made it very clear to the Health Department that we are there to work with them. We have now had full reports and discussions at least twice since the Budget with senior executives from the Department of Health, including the 535 Chief Executive and his Chief Financial Officer. I would think that we are tracking matters very closely, very carefully, and we are trying our best to provide as much support in terms of suggestions and input – but most importantly understanding what potential requirements are going to be if they are needed this year.

540 Q30. The Clerk: Can I just ask if Mr Cannan could say what he meant by the issues ‘we are aware of in terms of society’?

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The Minister: The ageing population issue; the increased longevity of our citizens, shall we say. But again that is another debate by itself. 545 Q31. Mr Moorhouse: How are we actually adapting to those pressures in terms of pensions and an ageing population?

The Minister: Pensions, which is a separate subject, and as you know in 2019 we will have a 550 new single state pension and the proposition has been approved by Tynwald. We are currently working towards that date and of course we are mindful of the actuarial reports in respect of the National Insurance Fund, and hence the proposed rises in the state pension age which have also been brought in recently as well. We are very conscious of it and I think the new state pension offering is actually a good one 555 and should offer people an enhanced, better return than their existing state pension scheme offers. But alongside that we need to be mindful of that fund and the potential expiry date for the National Insurance Fund, and we need to be careful in terms of our tracking as to what measures might be necessary in the future.

560 Q32. Mr Moorhouse: With regard to the population, does your data on things like Income Tax registration and National Insurance registration support the suggestion that the population is now growing again?

The Minister: The Assessor confirmed to me that at the end of the last financial year we had 565 600 more taxpayers registered and contributing, than we did the previous year. So all I can say from a taxation perspective, and particularly in the last six months of the year, is that with 600 more taxpayers you can correlate that to some economic improvements and increased jobs. That is also reflected on the other side of the coin by the unemployment figures which are now down to 1%; and of course the figure that I mentioned earlier about how that has actually 570 helped us achieve £11.4 million savings from budget in the Social Security area.

Q33. The Chairman: May I just go back to the Health issue again? It is my understanding, and please correct me if I am wrong, that if a Department is going to go over its budget and requires a supplementary figure they now have to let you know during 575 the year, rather than not waiting until the end of the year for it to be coming as a surprise. I suppose, if you can answer the question from a protocol point of view rather than whether you know or not, has that advice been given to you that they will be over at the end of the year?

The Minister: As I said, we are engaging very carefully and closely with the Department. I 580 think it is fair to say – and bear in mind, Chairman, we are at such an early stage in the year that financial patterns can change. I think it is safe to say we recognise this continues to be a challenging situation. There has been no formal notification from the Department of Health at present that there will be a need for a supplementary vote. I think the pressures that were being applied last year are still for the most part being 585 applied, although clearly as you will know the Department of Health is presenting plans to get itself back into a more financially sustainable position.

Q34. The Chairman: And you are comfortable that those plans are progressing well enough to make it such that they will not need to come to you for more money? 590 The Minister: I think the Chief Executive and the Minister are working incredibly hard to find the areas that they need to change to deliver the efficiencies or the improvements they need to deliver. I think they have identified the need to permanently recruit staff, more permanent recruitment, rather than reliance on the contract staff, for example. But these things take time.

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595 It is all very good declaring that on a piece of paper, but then the implementation is not always quite as smooth. And the Isle of Man is not in isolation on this, we know that. As I said, we are happy that the Department is working very seriously and is taking the matter extremely seriously, and we are very happy that the finance team in the Department of Health is working with us in a very transparent manner and that they are reporting regularly in terms of 600 the position. In overall terms I expect in another three months we will have a much better understanding of how this is likely to play out in terms of any necessity to come for supplementary votes.

Q35. The Chairman: Would three months’ time be the deadline for them to be able to tell 605 you during the current year, or could they tell you up to December?

Mrs Lowe: Yes, they could tell us up to December. Part of it is obviously for us to manage within the resources we have, but also if we had to get something in December it is then a process of a couple of months to get it to Tynwald – you do not get told one day and it goes the 610 next, there is a procedure to go through Council approval and things. So yes, in December we would still be able to get it there for March, probably.

Q36. The Chairman: I think some of them in the past have been retrospective, haven’t they?

615 Mrs Lowe: Yes, that was last year when Health became aware it was definitely going to be required, and we decided the most transparent way was to do it up front; and as soon as you become aware of it do something about it.

Q37. The Chairman: You have done some work on enabling people to take pension pots and 620 move them into other schemes. I have been doing some reading recently where, in the UK, they have made it possible to preserve certain benefits of the final salary scheme into the scheme that they are going into. (The Minister: Right.) I just wondered if you were (a) aware of that, and (b) had looked into it and see it as a viable option possibly over here? It is still early in its life in the UK so I think it might well be a way for 625 people to try and protect themselves for the future.

The Minister: What I can tell you, Chairman, is that in July I will be making a statement connected to pension freedoms and what solutions that we are bringing forward. Again, because I would suggest this is not the right time, but with that statement will be a consultation 630 document and of course I will be making a proper declaration about the contents of that consultation which will be launched in the summer. But during that time of course they will be open for further suggestions and improvements, and I do not know enough about what you are talking about at the moment to be able to comment either way, but certainly there is an opportunity coming up very soon for people to be 635 able to look at this issue in much more detail. I hope we will be able to get some better progress in terms of the availability of schemes and the type of scheme.

The Chairman: Well, that is what I would imagine, that you would look at the current legislation being proposed in the UK and see whether it is appropriate here and to see whether 640 it is worthwhile doing here. So I would make that assumption; thank you.

Q38. Mr Baker: One of the subjects that again has generated a fair amount of discussion is that of domestic rating – and I appreciate it is not directly a central Government matter but 645 clearly that is one way of raising revenue for local services.

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Has there been any consideration of the idea of replacing the scheme with something completely alternative, such as a local income tax?

The Minister: Not as far as I am aware; that is not on the agenda. 650 The Cabinet Office and the Treasury at the moment are working in respect of rates reviews, as outlined in the Programme for Government, but I do not have any more detail to give you at this precise time.

Q39. The Chairman: Back to me again. 655 I think we have come back to the situation of the drip – and I think you have used the expression, the drip, drip, drip of increased charges for people, in a period of pay restraint as well, certainly. You mentioned in one of your speeches that you are going to start relating increases back to the Budget. I hope I have not got that wrong? 660 I just wondered if you could explain that.

The Minister: I am very conscious of the statements I made in the last few years about the process that is being followed and the impact of this this drip effect of charges coming from Government. It is my intention that at the next Budget I will work with the relevant Departments 665 and Ministers to include in that Budget the impact from what is in front of you in terms of the Budget book, what that means in terms of charges and how they are going to be applied in that forthcoming year. In an ideal scenario, that means that I will be talking in the Budget about road tax, for example, possibly prescription charges, or any charges that might be delivered by that 670 Department in that year, and I would like it to be explained clearly, upfront to Tynwald and to the public as part of the overall Budget measures so that everybody is clear as to what that Budget means for them in that given year. I think, to be perfectly honest, it is right from a transparency perspective that that is done and I think it is more helpful as well because it will paint a better picture for people in terms of 675 the Budget. I think it will help in terms of understanding why Government is bringing forward whatever increase it is bringing forward. That is not a policy statement; that is a view that I have taken informally with the Council of Ministers – a view that Ministers have so far nodded their heads in approval at and I hope that we will deliver it. It is certainly my intention to deliver that as part of the Budget. 680 Q40. The Chairman: Would that extend to utilities as well: gas and all the others? Rate increases?

The Minister: I think as you know, obviously, the utilities are a Statutory Board and their 685 increases, as it stands at the moment, are set primarily in the autumn. I will have to discuss that. I had not given enough consideration to the utilities, Chairman, to properly understand whether we would or would not include that as part of the Budget, but I am certainly willing to discuss that and understand how that would work from the Manx Utilities Authority’s perspective.

690 Q41. The Chairman: And to keep the organisation viable, long term? (The Minister: Yes.) I think that the utilities, including rates, is one of the drip, drip which is probably the most common complaint at the moment – you know, when Mr Baker spoke about rates generally. It is the one which is hitting people quite hard.

695 The Minister: And, Chairman, I acknowledge that. That is why we wanted this report done; that was why I was very keen to have this – as you know, it was in the manifesto for Chief Minister.

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It is important that we get some resolution and more understanding around the cost to the resident ratepayers of our utilities and why the charges are where they are and what can be 700 done about it. I think we will have a proper and full discussion about that in October.

Q42. Mr Baker: So, just fast forwarding to the next Budget then, if I am understanding correctly there will be much more detail around what each of the individual Departments are proposing to do through the coming year in terms of the changes to their charges, effectively, 705 which obviously is going to bring quite a bit of debate if we look at what has happened in recent times when every Department has come forward with a tax change. Will the approval process of the Budget need to change to reflect that or will it still be one effective vote on the whole Budget?

710 The Minister: No, I think, as the Chairman suggested before, picking and choosing is going to be very difficult in a Budget. My vision, really, is to improve the process. I think it is not helpful to the public, it is not helpful to Tynwald, to have a consistent debate every two months or so about charging. I think we need to have a proper Budget debate in February and I expect it to be a lengthier Budget 715 debate. We need to also clearly define and understand why charging is happening as part of that Budget process and what the public are going to see in return, or what have been the underlying factors that are being forecast for those charges to be set or increased as relevant. I do not see that we are really in a position to therefore start to then pick and choose the Budget as a wholesale Budget, but clearly … I mean, the interesting part about doing it that way 720 is that – and I will have to get clarification on this – then we will have to move the relevant orders for that to happen and whether then are we proposing to put – this is the technical side – those orders through at exactly the same time or whether we move them in the March or possibly the April. Anyway, I need to understand that a bit more from a technical, parliamentary process perspective. 725 But of course it is entirely feasible that someone may choose then to vote against one of those orders, but the important thing is that we have had a proper debate and we have engaged in a much more holistic or rounded way, I think, about the Budgets that are being delivered.

Q43. Mr Baker: Just moving onto the tax cap that was amended in the most recent Budget 730 and the effect that was effectively phased in: have you seen any significant impact from the changes that you announced, and in particular has there been any sense of any of the people who are covered by the tax cap deciding not to remain on the Island as a result?

The Minister: No, we have not seen any negative effect. In fact my initial understanding is 735 that we had a lot more enquiries about the tax cap as a result of that announcement, and of course I will be able to provide clarity in terms of numbers of tax cappers in the very near future. But as it stands at present, I have absolutely not been made aware of any negative effect at all. There has been a bit of concern expressed to me from the financial services sector, some people, but in general terms I stand by the decision to do what we did. 740 Q44. Mr Baker: One of the other topics that has obviously received a lot of profile, clearly, is VAT for the obvious reasons. Again I think in the Budget speech you explained that there is a spending assessment coming in 2018-19, and that has both a forward impact and to some extent a retrospective impact, was my understanding. Is there anything to add at this stage in 745 terms of your perspective on it and confidence to supply?

Mrs Lowe: The survey will be undertaken during, as you say, the 2018-19 year and we have started work on that already. It is important to do things, get it planned – the time runs away with you.

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750 We will be looking at that. I think we did say in the Budget – the Minister made it clear – that the current agreement has a level of growth in it. We have not taken all, we have been prudent, which I think is the correct thing to do.

Mr Baker: I would agree, yes. 755 Mrs Lowe: And we will be working hard to ensure that survey is conducted by people who have had full training to get the information that we need; it is important. When we deal with it and we have got to give that information to the UK, we want it to be as accurate and as correct as possible. 760 We have got people and we have started the process. We are appointing somebody to lead the team to do that and I think we are starting this time, earlier than last time.

Q45. Mr Moorhouse: With regard to National Insurance, in the Budget speech you made reference to the removal of NI Class 2. Have there been any impacts of this? 765 The Minister: Have there been any … sorry?

Mr Moorhouse: Repercussions of this?

770 The Minister: Well, there were in the UK! But no, at present there have been no repercussions. It is still our intention that we will abolish Class 2. We have yet to confirm the rate that will apply in terms of the new contribution rate for those who are currently making those Class 2 contributions or the self-employed.

775 Q46. Mr Baker: This will be my last question for the session – and I must declare I am a member of the Manx Credit Union – I would appreciate an update as to the current status. There has been a consultation process on new credit union legislation. Is that envisaged to be coming forward in the near future or –?

780 The Minister: As you know, we have been as supportive as we can of the Credit Union. The FSA’s consultation on the Credit Unions (Amendment) Bill ran from March 2017 to April 2017. It is our intention to write to all Members of Tynwald, formally actually, to notify you of the delay. There has been a delay to bringing forward the actual legislation. It is anticipated that we will have this legislation through in the next parliamentary year, but we are working as hard as we 785 can to deliver on that, with a fairly heavy workload in a number of other areas; but we remain supportive and I am hoping that we will come up with the right piece of legislation.

Mr Baker: Thank you.

790 Q47. The Chairman: Me now! I am afraid it is one of those things I always annoy you with, which is the availability of commercial banking. At the function that we were both at last night, I was again harangued by members of the corporate service providers about the difficulties that they are having getting accounts for prospective clients. 795 We did the report to Mr Teare a while ago, although as a precaution we did not publicise it because it is basically saying, ‘You might have a problem if you go to the Isle of Man.’ (The Minister: Yes.) If we want to grow the Isle of Man, we have got to put banking in. Do you have any plans at all for trying to encourage them, or are you beating these banks over the head, or what are we doing? 800

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The Minister: What I will say, Chairman, is that clearly we are very aware of this issue and very conscious of this issue. It does cause some problems in our e-gaming industry and in our financial services industry. I think I have now had the opportunity to meet all the heads of the major retail banks 805 represented on the Isle of Man, and on each occasion this has been the primary discussion point. There are a number of factors at play that do not just affect the Isle of Man which are much more broadly applied, including aversion to risk and alongside that and tied into that the interpretation of the regulatory requirements that are being applied; and of course much more attention is being paid these days to criminal activity, prevention of criminal activity, money 810 laundering and terrorism. Once you then factor in the additional risk for, I guess, what you might call the American factor, particularly when it comes to e-gaming, where senior directors believe themselves to be potentially at risk in terms of international travel, then you can see how this is impacting down the chain. 815 What I will say is that the banks themselves recognise there are problems in the system and, whilst they make the right sort of noises in terms of saying that they are keen to try and help, we have not really seen anything particularly credible coming from the banks in terms of resolution here. One of the possible positives coming forward is actually the implications that will happen 820 from the Vickers reforms that are due to take place next year, when the retail and investment banking arms of banks will be separated out. The implications for the Isle of Man are that the retail banks will be outside the ring fence and that may present some opportunity for us. They will have, it appears, the ability to review their risk profiles and possibly the ability to review their lending; in other words, they will have more autonomy with this separation. 825 In fact in general terms, there is some indication at the moment that this could be quite positive for the Island in terms of actual jobs, as the implications for some account holders in the UK is they will find themselves caught in the , if you like, between the retail and the corporate or investment arms. It may well be – and this is very early stage – that some business therefore is going to be transferred to the operations in the overseas territories. 830 That is as much detail as I can really give you at the moment, other than to say we are engaged with the banks, we discuss this with the banks, we keep looking as much as possible for opportunities to get resolution. If we are presented with ways that we can help do that then we will. I have asked Bill Shimmins to engage with DED from Treasury’s perspective on this issue, to 835 communicate more with the Bankers’ Association and their representatives to see whether there are actually any areas that we can unblock from a legislative perspective or regulatory perspective that might assist.

Q48. The Chairman: Do you think the creation of a working group with industry and 840 Government on this would help? Rather than do it piecemeal, talking to people, have a group who can look into off-the-wall options?

The Minister: Well these discussions are normally led by the Department of Economic Development. My understanding is they are in communication with the industry. We merely 845 offered Mr Shimmins’ experience in terms of his banking background and also now his political role to try and give some guidance in those discussions that are taking place. I have not got a specific detail. You are probably going to ask me about how often the meetings take place and when they are taking place, but as I said the Department of Economic Development will be managing that process. 850 Q49. Mr Baker: Can I just add to that, on a related matter?

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Personal banking and the consolidation of the banks on the Island, so that those who are in the fortunate position of having cash to invest have got less choice and therefore they have to perhaps put more with individual institutions: what is the current position on the depositor 855 protection framework on the Island? Are we happy that we are giving the right degree of protection to our depositors?

The Minister: I think as it stands at the moment, yes. There has actually just been a consultation undertaken with the banks around the Depositors’ Compensation Scheme and we 860 have that under review at present. Do I think it is working in its current format? Yes. Does it need to be looked at? Absolutely. Risk profiles change, the structure of banks change and we need to make sure that we are on top of that. But I have not got any cause for alarm other than to say that I am aware this consultation is taking place and I am expecting to see, this year, if there are going to be any 865 proposed changes then I expect those to come through. I do not think there is anything that I am aware of that has given me any cause for alarm. I am happy that the FSA is getting the required regulatory information, financial information, from the banks and that they are meeting their funding requirements as it stands.

870 Q50. The Chairman: If I may? On that particular subject, my understanding was that Europe specified €100,000 for depositor protection, which is the reason why it has gone up to £85,000 in the UK, because they have looked at the exchange rates and that is just what happened, okay? With the problem that savers have … And I have had to open accounts off the Island just to 875 get depositor protection, and it was so easy to do it was unbelievable. The option for people who want to save in the Isle of Man and leave their assets in the Isle of Man where they can be used is to raise the Depositor Compensation Scheme, so that they can have £75,000 in each bank, rather than taking a risk on an extra £25,000. When you look at the Depositors’ Compensation Scheme, would you consider that it is an 880 attraction for keeping assets on the Island rather than sending them away?

The Minister: I would need to get some more factual understanding around that, Chairman, to come back and answer you properly. I would like to know the actually numbers of deposits –

885 The Chairman: You need to model it.

The Minister: – and who is … That level of understanding, to be able to come back and answer you with some very specific facts is quite detailed. I would have to try and get that information. I do not even know whether it is available, to be perfectly blunt. 890 The Chairman: Okay.

Q51. Mr Moorhouse: Recently there have been a lot of initial legal restrictions and requirements placed on CSPs. It appears that the banks now want to see this documentation. Do 895 you have any thoughts on the actual way in which banks are now requiring to see things that have been prepared for the regulator?

The Minister: Again, I do not have that level of detail in terms of the specifics you are actually talking about and how that is being presented. I have not had any feedback recently or any 900 views expressed to me from industry directly that they have got a concern. Clearly, I know the administrative levels and the regulatory levels that these organisations are having to go through, and I think we have covered that in terms of our initial discussion about the problems with the banking sector.

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Whilst Treasury is absolutely happy to understand what is going on and understand what 905 levels are being applied by the banks, it is not always crystal clear that this is a uniform standard or whether this is the bank’s decision to interpret regulations or to go that extra yard themselves, or whether it is actually something that has emanated out of the FSA. If I can get more specific clarification in terms of the specific examples or the types of documentation that is being asked for, then clearly I will be able to make a judgement as to 910 whether that is then something I might wish to address with the regulator at one of our regular meetings.

Q52. Mr Moorhouse: Thank you. I will give you that information later. With regard to regeneration plans, you mentioned it in the Budget as an area that you saw 915 going forward. How many sites have been identified which could –?

The Minister: Right, so this is now tying very much into a planning reform project that is currently underway with the Council of Ministers. I would hope that in the near future some reforms are going to be proposed to Tynwald for discussion about ways to improve the 920 efficiency and effectiveness of our planning system primarily in order to both enhance the process, but also to help encourage more economic growth. Key amongst that is actually to use the development order process that we have already got in place to be more effective, and some suggestions have already come forward into that process about possibly having, for example, some form of third party managing enterprise zones 925 or these development orders. In general terms, I am still very keen to ensure that we get in place some form of proposition to help the process go through. Clearly, from my own constituency perspective, I am very aware of the need to deliver that in Jurby – the industrial estate in Jurby – which is ripe for that kind of progress; and also we can do more, for example, in the Ronaldsway area as well. There has 930 already been some progress – as you will know from your constituency – down there, but we need to get the mechanisms in place to deliver that. I would suggest to you that it is something we are very mindful of and continue to try and deliver a proposition that will actually work to achieve these sorts of proper outcomes, primarily for economic growth. 935 Q53. Mr Moorhouse: Is there a timetable in place or any key dates that we can be looking towards?

The Minister: I think that within this year … I have made the commitment in the Budget that I 940 was going to come forward with some propositions, so early in the next parliamentary term I would hope to be able to bring forward some propositions to help enhance the specifics that we are referring to.

Q54. Mr Moorhouse: Moving on to Brexit, you created the Brexit Fund. Has any of that been 945 used to date?

Mrs Lowe: Not yet.

Q55. Mr Moorhouse: Right. Will the focal point be just European or will it go beyond to 950 territories like the Philippines where we have got a huge Filipino community and their growth is exceptional? Could that fund be used for more than the European angle?

The Minister: Well, the Fund was there for the purpose of responding to any need resulting from the Brexit negotiations. The situation, as it stands at the moment, is the landscape is 955 incredibly difficult to understand. The Chief Minister obviously is setting a wise course, in my

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view, by engaging with as broad a range of politicians as possible, but as it stands at the moment, until we actually see some initiatives or proposals coming out from these negotiations, we are not really in a position to be able to respond, hence why we have not used the money. That resource was really there for Government’s purposes to be able to draft in any response 960 that we needed, whether we needed skilled legislative staff, for example, or expertise in specific areas. I think the importance of what is happening on the international front cannot really be overestimated at the moment – or underestimated, certainly – because the significance across the whole spectrum of everything that goes on in the Island could be impacted. We know there 965 will be impacts on fisheries, for example, agriculture, financial services, possibly. It is possible that people have a different view during these discussions on the place and purpose of the Crown Dependencies and overseas territories; and of course, as you know, we have been under significant pressure from the OECD and from Europe in general in terms of our tax position and our financial services industry, in particular. 970 We have met everything that has been put to us in terms of international standards but that pressure has not gone away. There is a concern that somehow that may come under renewed pressure as part of the Brexit negotiations, so we need to be absolutely on our mettle when it comes to trying to understand what is happening, and the only way we can do that at the moment is through communication. 975 In fact I would urge all parliamentarians actually that we need to be very conscious of what is going on. When you get the opportunity to meet with MPs or parliamentarians from the European Union or Great Britain then we need to make sure that we are properly delivering them the understanding of the Isle of Man’s position. But it remains to be seen whether that £1 million will or will not be spent this year. I have no 980 idea.

Q56. The Chairman: Can I just ask whether the Fund will also be able to handle reaching out to countries which are not in the European Union at the moment, where we might wish to consider them as trading partners? If people want to go and try … whether we start reaching a 985 bit further. I know we have got hurdles to jump over, but I would imagine that there are lots more trading countries out there than in the European Union.

The Minister: I think, Chairman, the answer to your question is I have no idea what requirement will or will not be needed in terms of funding until we can actually see some form 990 of proposals in outline as to what this Brexit deal is going to start to look like, and the implications therefore for the United Kingdom in terms of how they will be proposing to reach trade agreements. As soon as we get some clarity then I think we will be in a position to respond and to understand how, and where, and whether we need to engage from an Isle of Man position. One 995 thing is absolutely clear in my mind though, Chairman: if I feel that Fund needs enhancement, I will be coming to Tynwald as soon as I recognise that to get the clearance for whatever funding is deemed appropriate and necessary at the time.

Q57. The Chairman: Okay. 1000 I think as far as I am concerned, this is the last question that I shall be asking. The soft drinks levy: where are we with that? What progress has been made, or has it been deferred, or what?

Mrs Lowe: We are in discussions with the Collector of Customs and Excise who is continuing to discuss with the UK, I think. 1005 Q58. The Chairman: So we can just bring the stuff in already paid?

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Mrs Lowe: Yes, we would like it to be a shared duty and for us to put something else on would be quite difficult. So, yes, he is continuing to talk with the UK. 1010 The Chairman: Okay, that is fine. Gentlemen, anything?

Mrs Lowe: I have got a copy of the terms of reference for the Brexit Fund here for you, 1015 because I thought you would like that.

Q59. The Chairman: Thank you. Well, thank you very much for answering our questions so far – candidly, and guardedly where necessarily. 1020 Is there anything you would like to say to us?

The Minister: I do not think so, Chairman. I think there are a number of items you have mentioned today which will be on the floor, so to speak, for more proper discussion in the very near future – a couple of items in July’s Tynwald and of course those very significant reports, 1025 both the SAVE report and the Utilities report that I trust Tynwald will see at an opportune moment in the new parliamentary year.

The Chairman: I would like to thank you for your time this afternoon, and the time you have obviously put into researching what we let you know we would be asking. Once again, thank you 1030 very much.

The Committee adjourned at 4.08 p.m.

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