The government’s strategy of capping public sector spending increases below inflation is becoming unsustainable, Treasury’s Chief Financial Officer has admitted.
Caldric Randall told the Public Accounts Committee that departments have faced a “general reduction in real terms” while still being expected to deliver the same level of service.
“It’s reliant on the goodwill and hard work of the people that work for the government,” Mr Randall said.
He described the cumulative impact on departments as “death by 1,000 cuts”.
Deficit
The admission came as Treasury defended its plan to tackle the structural deficit, a strategy that has been in place for approximately a decade.
Mr Randall said the approach has been to grow income quicker than expenditure.
However, expenditure has consistently kept pace with income, with healthcare absorbing the majority of revenue growth in recent years.
Treasury Minister Chris Thomas pointed to Manx Care’s mandate as evidence of a tougher approach.
The structural deficit in 2025-26 is budgeted at £72.5 million, an improvement on previous years’ outcomes which have consistently been better than budgeted figures due to prudent forecasting.
Mr Randall said the structural deficit calculation itself “needs to look at that again” as it does not always represent a deficit in practice.