GOVERNMENT will have to make many ‘extremely painful and unpopular decisions’ as it battles to rebalance its finances.
That was the message from Chief Minister Allan Bell as he gave the strongest warning yet about the difficult changes faced by the island if it is to overcome its current challenges – and he suggested that radical solutions would be needed.
In a public message ahead of next month’s Budget, Mr Bell said the aim was to rebalance the Budget – which will have been cut by a third thanks to the UK’s revision of our VAT deal – within just over three years.
He said the government wages bill, currently standing at well over £300 million, would need to be cut by a further 10 per cent within three to four years – and this would make jobs losses inevitable.
Mr Bell told a press conference that his other priority was to promote economic growth that would help create the new jobs that would be ‘desperately needed in the time ahead’.
He pointed out that the government had to be mindful of making savings in one area by cutting jobs only for the costs to be transferred onto the social security bill to pay for those out of work.
‘If we were a private sector company we could simply shed staff off the balance sheet. Government doesn’t work like that. The costs of one person being unemployed for 12 months works out at £15,000 a year. Unless we can provide a stimulus to the business community to create extra jobs, we will have a shortfall which will create problems in the time ahead.’
He said nearly 300 government posts had been lost in the last 12 months. A further 10 per cent cut would amount to further savings of £30m in salaries.
Mr Bell said a twin approach of economic growth and rebalancing government finances was needed and while some proposals outlined in this and future Budgets might seem radical, they would be vital.
He said ‘many difficult and painful decisions’ had to be taken and he hoped a wider debate would be triggered about the level of services that the government could afford in future. ‘This may lead to radical changes in future,’ he said.
‘There will be no sacred cows. These will be nothing that can be ring-fenced. Where savings can be squeezed out they must be squeezed out.’
And he warned: ‘We are probably going to be losing services that many of us grew up with and loved for many years. But that’s a fact of life.’
But Mr Bell insisted that he was not in favour of a ‘slash and burn’ approach to cuts, saying this would only serve to destabilise other areas of the economy.
The Chief Minister said the world had changed and there was no going back to the old certainties. The loss of nearly a third of government revenue meant the Manx economy faced a challenge as big as that of the UK.
But he added: ‘The Isle of Man has been through extremely difficult times in the past. We had much higher unemployment in the 1980s and only a million pounds in reserves. Young people had to leave to find work. The decision was made to take some fairly radical measures to lay the foundations for a new economy. We now enter the present situation in a position of relative strength, a position stronger than many of our neighbours in Europe.’