A Tynwald committee has issued a stark warning that the government’s use of the National Insurance Fund to support healthcare spending risks the sustainability of the fund which pays for state pensions.
In a damning report, the Economic Policy Review Committee found that an increased “NHS Allocation” is effectively subsidising day-to-day government expenditure, threatening the pensions and benefits of future generations.
The report highlights that the government raised the allocation from the National Insurance Fund to the DHSC by £10 million in the last budget, a policy change described as “a short-sighted measure that plugs a revenue gap in the short term at the expense of the long-term sustainability of the NI Fund”.
This forms part of a broader pattern of financial mismanagement, the committee said, where overspending is now treated as “normal and routine”.
Structural
The structural deficit has persisted at around £100 million annually since the pandemic, with the committee concluding “the problem is structural; the scale and cost of Government… has grown beyond what the economy and the island’s taxpayers can sustain.”
The EPRC was highly critical of Treasury oversight, stating its efforts to control spending have “thus far been limited and hands-off”.
It also found that tax policies are harming the economy, arguing that recent minimum wage increases have become “effectively a tax on businesses” because stagnant personal allowances mean workers’ take-home pay does not significantly improve.
Disputed
In evidence to the committee, Treasury Minister Dr Alex Allinson MHK defended the government’s position.
He disputed the characterisation of the deficit, saying: “I disagree with your comment that it is hanging around at £100 million.”
He argued that managing finances involved “lots of variables” and emphasised the administration’s focus on “driving efficiencies”.
On the specific issue of the NHS Allocation, Dr Allinson stated the increase was to “bridge that funding gap” and that advice showed the impact on the National Insurance Fund was “very small”.
Recommendations
The committee’s report strongly contradicts this assessment, concluding that without major changes, the “island’s future generations will pay the price for today’s government’s inability to live within its means.”
Among eleven consolidated recommendations, the committee calls for:
- A dramatic reduction in the “normalised use of reserves”.
- Personal tax allowances to be increased “to reflect cost-of-living rises over the last seven years”.
- A top-down reform of the government’s “silo” structure.
- The establishment of an independent advisory committee on tax policy.
The committee’s report will now be presented to Tynwald in January.