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 Tynwald website: www.tynwald.org.im/business/hansard Published by the Office of the Clerk of Tynwald, Legislative Buildings, Finch Road, Douglas, Isle of Man, 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 __________________________________________________________________ 2 EPRC-T/16-17 STANDING COMMITTEE, FRIDAY, 30th JUNE 2017 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? __________________________________________________________________ 3 EPRC-T/16-17 STANDING COMMITTEE, FRIDAY, 30th JUNE 2017 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? __________________________________________________________________ 4 EPRC-T/16-17 STANDING COMMITTEE, FRIDAY, 30th JUNE 2017 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.