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IoM Budget Comment | February 2025

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24 February 2025

Chamber welcomes some Budget measures, but says it will have little impact on the main challenges facing businesses

Isle of Man Chamber of Commerce welcomes some measures in the Budget that will help businesses and the economy, but says more could have been done to address immediate challenges.

In summary, the Island’s leading business network – which represents just under 500 organisations on the Island – has 3 main comments:

  1. While some of the Income Tax & NI measures are welcome and will offer some help to employers and employees, Chamber believes more radical reforms could have been considered
  2. Overall, the Budget won’t have a major impact on addressing the main challenges facing businesses and is unlikely to stimulate any significant economic growth
  3. Chamber continues to have concerns about the Government’s plans for financial sustainability, particularly around borrowing, reserve drawdowns, and long-term fiscal planning – and urges Government to continue to explore ways to reduce costs and improve efficiency

 

As always, Chamber is committed to working with Government to address these and other ongoing challenges. Here is a detailed breakdown of Chamber’s views on the Budget.

Business impact

  • The 1% income tax reduction provides a small amount of financial support for working people (e.g. a couple earning £60,000 will only save around £300 per year).
  • Chamber questions claims made about increased disposable income, especially when this is considered in the context of the rising costs of living (utilities, rates, etc).
  • Cutting the higher rate of Income Tax from 22% to 21%, plus changes to some personal Income Tax allowances, NI and Child Benefit thresholds are all steps in the right direction. However, there’s more work to be done to address long-term issues to ensure that the Island is supporting employers and employees in the best way possible.

Tax & costs

  • Disappointing to see no major tax changes for businesses.
  • The continued drawdown on Government reserves is a major concern. Some Chamber members take the view that maintaining reserves is misleading if borrowing is used elsewhere (e.g. the £400m bond).
  • Budget claims that income meets expenditure when £110.6m is still being withdrawn from reserves in 2025-26 need to be clarified
  • Questions remain about long-term financial sustainability given that reserve withdrawals are forecast to continue over the next five years.
  • Chamber calls for more clarity regarding reserves versus total government liabilities, including bonds, housing loans, and civil service pensions.

Skills & workforce

  • The Budget does not address the challenges of recruiting and retaining skilled employees which businesses in many sectors are facing.
  • There are concerns that removing NI incentives for returning Manx students makes the Isle of Man less competitive compared to the UK.
  • While the Budget does include some support for the removal of NI holidays for relocations, it’s disappointing that this was not supported by a broader strategy to attract and retain talent.
  • Looking ahead, issues remain regarding how to address the high housing, transport, and living costs, which continue to discourage young people from staying here and make it difficult for many businesses to attract key workers and skilled employees.

Infrastructure & investment

  • Concerns over lack of action on energy costs and policy.
  • Disappointing that cultural and heritage assets are not better supported, despite tourism being a key growth opportunity.
  • Chamber will wait for more clarity on long-term investment strategy & details about capital investment programmes.

Sustainability & growth

  • The Budget does not support long-term economic growth and is more focused on short-term financial balancing rather than future planning.
  • Concern that the Budget encourages de-industrialisation rather than economic resilience.
  • Key growth factors like wages, transport links, and energy costs were not addressed.

Government spending & accountability

  • Concerns over financial discipline, with scepticism from some members about whether departments will stick to budgets.
  • Lack of commitment to reviewing non-essential activities and reducing costs.
  • Digitisation, which is expected to cost £5m+, is a long-term investment with no immediate impact on efficiency.
  • Chamber wants to see greater transparency regarding Government spending, particularly in relation to reserve use and debt.

Five-Year Plan & reserves management

  • There is a continued reliance on reserves despite previous political commitments to reduce withdrawals.
  • The Budget forecasts reserves growing to £2bn and the NI fund reaching £1bn by 2030, but questions remain about whether this will happen.
  • Chamber wants to see a clearer picture of reserves versus total Government liabilities, including:
    • £400m green bond
    • Local housing loans
    • Other Government liabilities (e.g., civil service pensions)