Mr Speaker,
I do not need to try and educate this house on the scale of the current economic challenge facing our Island at the present time.
Indeed Mr Speaker, Honourable Members will have recognised right from the start of the Administration when they voted through a 27% increase in the cost of Gas, that perhaps a new and different challenge awaited post COVID.
Indeed not the challenge that many of us expected of delivering a smooth post-COVID recovery – no, the challenge today is much greater and indeed more serious than we would have envisaged – a challenge that effects all of us, that impacts across the board, from individuals to business, from the private to the public sector. I cannot hide it from you or seek to deny it – we currently face a cost of living challenge greater than any of us will have seen and perhaps only witnessed by our parents’ generation in the 70s.
The rapid global bounce back from the coronavirus pandemic – as the world moves to an endemic approach to the virus – has seen a surge in consumer and industrial demand. This has come at a time of significant and ongoing disruption for the labour market and supply chains as economies still grapple with the effects of mass layoffs and a surge in COVID cases.
Prices for fuel, for food and for goods and services have increased rapidly as a result. In turn, we have seen inflation rise and the cost of borrowing increase with central banks in the United Kingdom and the United States increasing key interest rates to try and tackle inflationary pressures.
Add to this the Russian invasion of Ukraine – which has caused further supply and pricing pressures, particularly on global energy and fossil fuel prices – and we are facing a perfect storm, Mr Speaker.
And I must be candid with everybody – we are talking about a substantial increase of household costs that is likely to be up to 20% more of weekly incomes that will need to be allocated to basic essentials for lower income households.
These are significant figures Mr Speaker and will bring forward a challenge for many, many household budgets across our Island.
But just because the challenge is far greater than expected and because the key economic drivers lie out with our control, now is not the time for knee jerk reactions or for us to panic.
Indeed Mr Speaker, the Council of Ministers, recognising that the war in Ukraine may have substantial consequences across the globe commenced in mid-march a cross government strategic thought process designed firstly to ensure that the Isle of Man played its part in the international response to the Russian invasion, but secondly and equally importantly to ensure that we reduce or mitigate the impact of the conflict on the Isle of Man, ensuring security of key services and supplies and anticipating the impact of significant inflation.
That strategic thought process has already led to us identifying five key and critical work streams for consideration and action across Food, Energy, Transport, The Community and our Economy.
Mr Speaker, this is not a Government that is standing still or determining action without a strategy. Indeed our actions, planning and strategic thought mean that we have already moved to underwrite and secure air routes to London City and London Heathrow to support our economy and we must remember of course that previous wise decisions already mean that our Island has transport security through Government’s ownership of the Isle of Man Steam Packet Company, our vital lifeline.
Our strategic planning has also meant working with the Manx Utilities Authority to bring in a two phased rise to the cost of electricity. It won’t solve the long term pain, but it brings vital time to adjust for all concerned.
And further pre-emptive decisions meant we were able to immediately react to the announcement of a fifty-eight percent increase to gas tariffs, by announcing support for those on low incomes and those in receipt of Child Benefit.
The new £300 Energy Support Payment is available to households in receipt of income-related benefit. In addition, people whose incomes are marginally above the levels at which Income Support would be payable may be able to claim a proportion of the Energy Support Payment, avoiding a cliff edge scenario. The total cost of this measure is estimated to be just over £1m, benefitting up to 3,500 households.
Additionally, £1.8 million will be available to help more than 6,000 families in our community through a Family Support Payment for families receiving Child Benefit. This will provide all families receiving the full rate Child Benefit with £300 per household, with a reduced rate payable to those whose household income is assessed as being between over £50,000 and who are in receipt of child benefit. Furthermore, an additional £50 will be paid to all families receiving Child Benefit with at least two children, and £100 for families with at least three children. The payments for additional children will not be reduced according to household income.
These new payment schemes are on top of existing benefits and are in addition to the Winter Bonus and the Additional Winter Bonus payments.
And we are not stopping there Mr Speaker. Recognising the most immediate impacts of these rises will affect those with additional mouths to feed I can announce today that the Education Minister, with your support, will re-introduce food vouchers for those on free school meals for the Easter Holidays. And Mr Speaker, I can tell you we are also intending to bring forward more substantial proposals to help our children in the summer holidays – at a time when we expect that the impact of inflation and cost rises will well and truly be felt.
And there’s more yet. Government has already brought in assistance for motorists through the temporary reduction to fuel duty by five pence per litre announced last month. The VAT rate on energy-saving materials and heating equipment has been reduced from five per cent to zero.
And recognising now how much extra a tank of fuel is costing our families, this Government is now considering initiatives for cheaper journeys on public transport, a workable policy initiative that as as well as giving people a viable transport alternative to save costs, also supports our longer term climate commitments.
And talking of climate change, there are other matters that now need urgent attention. I can confirm that we will be meeting the MUA within the next few weeks to give clear policy direction on the acceptance of onshore renewable energy onto our grid.
And the Enterprise Minister is engaged in speeding up and streamlining our plans to insulate homes on the Island, bringing greater heat retention, fuel efficiency and reducing energy costs.
Mr Speaker, as I speak the Government is at work acting and planning our next moves in a series of defined workstreams designed to protect and support our Island.
This includes work on food security, food hunger, Energy initiatives, transport, Ukrainian refugees and further assessment on economic stimulus.
There is more I could tell you but the main points have been covered – that is the main points have been covered less the impact of all on this on Government finances and thus services. Mr Speaker, I am going to leave the gist of that matter to the Treasury Minister and his promised statement to Tynwald in April, but there is now an absolute need to determine cost impacts and service delivery priorities in the light of inflationary pressures and costs on the public purse.
Mr Speaker, the COVID-19 pandemic caused an immense economic shock, and not just here in the Isle of Man; it hit every country around the globe.
Our Island was, in many ways, fortunate. With decisive action and targeted financial and economic support from Government, coupled with the fortitude of the Manx people, our economy emerged in a relatively stable position, although by no means untouched by the pandemic. That is not to say that this was achieved without blood sweat and tears and indeed substantial cost to the public purse but we know the art of the possible.
We have been through relative trauma with COVID once as a society and we can do it again – albeit the scale and scope of the new challenge is fundamentally different. Nevertheless, some valued principles and lessons are brought with us. Cross Government working that is focused and direct, clear communications and an understandable strategic approach, private and public sector joint working and of course a resolve and resolution at the heart of our society to get through the worst and support others in the community.
Once again we need to think and act local. Now it is vital that we support local food producers, that we eat out in local restaurants and we shop in local retail premises. Spending our money locally will not stop inflation, but it will give our economy a stronger fighting chance to get through this. I know of course that many families are having to rapidly readjust budgets and are worried about finding the extra money needed just to feed and heat themselves, but conscious decisions to keep it local will have beneficial impacts for all.
Mr Speaker, I cannot hide you, this house or the community from the naked truth that the cost of living is increasing at a rate that is going to bring hardship and distress to some. I have to accept that we cannot protect everybody and there are those who will suffer – But I can tell you that this this Government is not going to shirk its responsibilities to protect the weakest and those left most exposed to the worst of the inflationary pressures. We are going to find ways to protect the economy, continue to support our international responsibilities, protect critical services and infrastructure, target financial support, where possible accelerate opportunities that will have long term benefit to the Island, where possible help people to help themselves and of course balance this with the need for long term sustainable public finances.
These are the principles we have adopted to guide us. It will not be easy – there will be hard decisions to make in the coming months, but I know that with hard work, determination, considerate strategic thought planning and action and combined with community resolve, we can get through the next twelve months and emerge a stronger more resolute Island than before.
