Treasury Minister Dr Alex Allinson has rejected a proposal from the newly formed Local Economy Forum that would see the island’s minimum wage twinned with the UK’s and the difference topped up by government tax credits.
The proposal was presented at the forum’s inaugural meeting in November.
In Keys, Dr Allinson said that “Treasury considers this approach to be problematic to implement”.
He outlined several key concerns, stating that employers do not currently record the necessary hours-worked data, meaning “this information would have to be created by employers, collected by income tax, and validated to ensure there were no errors or potential abuses of the system”.
Lower Wages
Dr Allinson also warned the plan would distort the local labour market, with “a lower end of the pay schedules determined by earnings in the UK, rather than the economic situation on the island.”
He further cautioned that “the use of selective rebates for low paid workers risks incentivising businesses to pay lower wages, knowing the government would be topping up the difference.”
While the Minister acknowledged the forum’s motivation, he concluded the proposals would contradict established Tynwald policies, be very difficult and complicated to introduce and risk distorting the labour market on the island.
He confirmed that both Treasury and the DfE have offered to meet with the forum to discuss their concerns and alternative ways to support the local economy.