Budget is a step in the right direction

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18 February 2026

Isle of Man Chamber of Commerce has welcomed Budget measures to boost take home pay for lower earners, but it continues to have concerns about Government inefficiency and continued reliance on reserves.

The Island’s leading business network recognises the challenges facing the new Treasury Minister having been in post for only a few weeks. Chamber welcomes a number of positive measures that were announced in the Budget, including:

The increase in the personal tax allowance by £2,250, raising the threshold to £17,000, is a step in the right direction.
Freezing the basic rate of income tax at 21% provides stability at a time of economic uncertainty.
The decision to retain the National Insurance holiday for returning students is also a positive step to encourage students to return to the island, build futures and contribute to the Island’s future.
Pensioners will benefit from the continuation of the Triple Lock, with the Basic State Pension rising by 4.8% to £184.90 per week and the Manx State Pension increasing to £263.55 per week. That commitment provides welcome reassurance.
National Insurance: The 4.8% increase in Class 1 thresholds will save many working people £45.76 per year. Every improvement in take-home pay matters.
£4.4 million more for the childcare strategy, vocational training assistance and apprenticeships.

However, Chamber also has the following concerns:

Despite the positives in the Budget to help working people (i.e. the retention of the tax rate and increase in personal allowance) the fact is that most are still no better off than they were when the basic tax rate stood at 20% two years ago. The structural pressures within Government remain, and this Budget does not address the underlying cost and size of the system.
The fundamental question about the cost and size of Government remains unanswered. Public sector pay now stands at £605 million, with pension costs of £161million, accounting for well over half of total Government expenditure. Public sector median earnings are 28% higher than private sector earnings, a matter not addressed by this budget.
There is currently a 2% allowance for pay rises built into budgets, yet overspends of £36million on pay are forecast in 2025/26. Planned savings of £10million over five years are not proportionate to the scale of the challenge.

Summing up, Chamber’s view is that…

If the Island is serious about restoring financial resilience, public sector pay restraint must be considered. At the very least, a freeze should be on the table. A 10% reduction in wage costs, or equivalent streamlining in headcount, over time would deliver meaningful reform and allow private sector wages to catch up, restoring fairness between sectors.
The continued reliance on reserves is also a concern. If capital spending exceeds the estimated £50million annual level, or if the £250million five-year programme is accelerated, the Island will either need to withdraw more from reserves or find alternative financing.
With over £1billion already drawn down in recent years, that trajectory is not sustainable. At current rates, the general reserve could be materially weakened within a single political cycle.
There was also little in the Budget to address the needs of single working people or to retain and attract the young, mobile workforce the Island depends on. We cannot build long-term prosperity without them.
However, we have to give credit where it’s due, and this Budget does contain positive measures putting some money back into people’s pockets, which in turn provides short-term stability.
But real, meaningful change will only come from reducing the cost base of Government. That is what will protect reserves and enable the Island to remain competitive in the decades ahead.
Of course, Chamber supports fair pay and strong public services – but they must be affordable. The Island needs structural reform, not incremental adjustments.

February 2026