Lawrie Hooper’s bid to have the higher rate of income tax cut back to 20% in next year’s Budget was rejected by Tynwald members.
The Lib Vannin leader had sought support to push the Treasury into dropping the rate, introduced as a temporary measure, from next year.
Mr Hooper had told his colleagues that the temporary nature of the rise to 22% had appeared to have “gone out the window”.
He also criticised the claim that the additional money had been ring fenced for the NHS, calling it a “clever political slogan”.
“Put simply, it’s nonsense,” he said. “Government spending went up by about £100m pounds last year, none of the revenue increased to match the spending gets ring fenced anywhere.
“Money goes into Treasury, Treasury allocates the money outside into departments. What ring fencing means is, if the tax generated more money than was expected, that money would go to what it was ring fenced for, that’s not how our budgets work.
“If the Treasury forecasted £20m from this tax rise, but actually raised £25m ring fencing, that money would mean the NHS gets the extra £5m, I’m not aware that that’s happened, I’m not aware that there are plans for that to happen. That money has not been ring fenced.”
Election Year
Mr Hooper also used his speech to criticise the idea that the government could introduce the new tax in the Budget after next year’s, saying it is unlikely a new, likely unpopular, new tax will come into force in an election year.
Responding to Mr Hooper, treasury Minister Dr Alex ALlinson said: “For clarity, when I raised the higher rate of income tax, I said it is my ambition that this increase to the higher rate of income tax will only be in place until we have investigated and introduced the NHS Levy.
“In my financial update to this honourable court in October this year, I confirmed that bringing forward a levy is still my intention, but that more work is required with both treasury and wider government to deliver a viable, sustainable funding provision.”
He also warned against Tynwald pushing through the measure when, just four months from a Budget, that money, would still have to be found somewhere, offering only stick as he warned that services would have to be cut if the money was removed from the Budget.
Instead, Dr Allinson moved a motion that said the higher rate of personal income tax should continue to be reviewed in line with the taxation strategy, something which Mr Hooper said the Treasury is failing to do.
Inconsistent
Kate Lord-Brennan (Glenfaba and Peel), fresh from her choosing to swap life aboard the good ship CoMin for one on the back benches, said that the motion was inconsistent with Mr Hooper wanting to see more funding for the island’s health and social care services.
Chris Thomas (Douglas Central) was less kind, saying it was a “pointless motion, unfortunately, except to raise the debate”.
As members moved on to how the Budget is set, Onchan MHK Julie Edge said: “I think what the public are wanting to see from any tax changes or from any government right now, and particularly on the Isle of Man, if you’re talking to the people on the street, we’ve got to make sure there’s key structural change to the way we’re spending our budget.
“And without that, we’re not going to see any improvement in anything and that’s not about as the Treasury minister said the public wouldn’t like because cutting services, no, because the services shouldn’t be cut to the public if they’re important services.
“But if they’re services that have just been created over a number of years by departments, because thought was a nice thing to do. Yes, they should be cut.”
She added that until structural reforms are made across government, budgeting will continue to be a problem in the future.
Result
Using his closing remarks to continue attacking the Treasury’s failure to introduce a health levy, or make any real progress on tax reform in the last year, Mr Hooper said that “lower income working families” are the people hit hardest by the tax rise.
He concluded: “I think government, when they brought in this tax, made it quite clear to people it was going to be for a year.
“It is quite clear that is not going to be the case. I think government has made it quite clear there are other options on the table that could be considered that they’re not willing to consider.
“And I don’t think that’s fair either.”
In the end, MHKs backed Dr Allinson’s motion by 10-9, with the result 5-3 in LegCo.
Put to a full vote, the motion as amended, it passed 10-9 in Keys, with 7-1 in LegCo.
Responding to this, Manx Labour Party leader Joney Fragher (Douglas East), said: “Disappointed this wasn’t supported today. Whilst it’s clear we need to raise revenue, this should be done fairly instead of further burdening normal working people.”
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