The 2011-12 BudgetPresentation to the JCC

By Hon A. Craine MHK, Treasury Minister

Date 16th February 2011

Introduction

• Progress on Five year rebalancing plan.• Impact of Increase in VAT to 20%.• Local Economy update.• Tax and National Insurance changes. • International Issues.

Medium Term Strategy - Reminder

Rebalance budgets by 2014-15.Use £114 million of Reserves, with a £35m deficit in 2011-12.

But – Rate of VAT has increased.Savings have been greater than forecast.

Last Year we said the plan was to -

Revised Medium Term PlanMedium Term Rebalancing

£ million2010-11

2011-12

2012-13

2013-14

Capital transfers 24 44 39 39Spending reductions 26 51 54 57Taxation/charges 20 21 21 21Reserves/surplus -2 -2 0 -3

Total 68 114 114 114

Last year 85 142 142 142Improvement 17 28 28 28

Customs and Excise Forecasts

Customs and Excise - Changes in receipts

£ million 2010/11

2011/12

2012/13

2013/14

2010 Budget 338 312 340 370Rise in rate of VAT to 20% 2 28 30 30Arrears/Other 10 2 0 02011 Budget 350 342 370 400

Change 12 30 30 30

Update on Local Economy

Growth of 4-5% in real terms this year. Unemployment has fallen not risen as projected

last year, 1.9%. Inflation remains high on global pressures now

(RPI) 5.5%. Stable level of Banking Deposits (down 2% in

year). Strong growth in personal and Corporate Tax

receipts for 2009-10, paid this year.

Current Year Forecasts

£m Budget Forecast VarianceIncome 520 537 +17Expenditure 535 535 0Transfer from Reserves

15 0 -15

Surplus 0 2 +2

2010/11

Future Year Forecasts

Budget Budget Budget2011-12 2012-13 2013-14

Income 535 574 616Expenditure 533 574 613Reserves 0 0 0Surplus 2 0 3

£m

Departmental Estimates (£m)Department Budget Adjusted

BudgetIncrease/Decrease

%

DCCL 17.4 17.7 (0.5) (2.5)DED 15.0 15.2 (0.2) (1.4)DEC 95.7 96.3 (2.9) (2.9)DEFA 15.3 15.3 (1.0) (6.3)DOH 121.4 123.0 7.5 6.5 DHA 31.6 31.8 (2.2) (6.6)DOI 34.7 35.4 (2.2) (5.9)DSC 136.2 136.2 (0.5) (0.4)Treasury 19.0 16.5 (1.2) (7.0)Other 46.9 45.6 1.5 3.3 Total 533.2 533.2 (1.8) (0.3)

Benefit increases

£10m budgeted spend on benefitsRetirement Pension 4.6%.Income Support, Family Income Supplement

and Job Seekers allowance 4.5%Child benefit remains the same.

Capital Expenditure

83% delivery in current year (£80m).£101m programme next year.£9m for Natural Gas extension, £10m for

Bemahague.£67m of construction, including £32m on

Housing including continued financing of Local Authority Programme.

Existing Reserves

Reserve March Book Bal c/f 11/12 est Dec Market Value

NI Fund £583m £2m £655m

Reserve Fund £356m £0m £426m

Public Sector Pensions £209m (£3m) £243m

Notes Fund £32m - £32m

Capital Fund £78m (£59m)

Housing Reserve £ 13m (£9m)

HEDF £ 44m (£2m) £48m

Economic Development £12m £3m £12m

Other Internal Funds £95m (£21m)

Total £1,467m (£89m)

KSF Update

Current Position - £214m advanced in respect of Early payment schemes and Depositors Compensation Scheme

£163m repaid or held by DCS Manager. All claims now in and vast majority paid.

£51m current exposure. Future liquidation proceeds to reduce this to net £5m by 2017.

£5m written off against Reserve Fund as eventual cost, could be lower.

Taxation and Charges

10%/20% rates unchanged. Personal Allowances unchanged.Further limit on mortgage and loan interest relief

to £7,500 per person per annum (equates to £150,000 of mortgage/loan per person).

Personal Allowance Credit up 8% (£50) to £700 per person, Qualifying limit up to £9,300.

Removal of tax relief on educational deeds of covenant and Class 4 National Insurance payments.

Summary

Have benefited from VAT rate rise to 20%, butHave also brought spending down faster.As a result we have a balanced budget.Have protected spending in Health services,

Social Security and Capital Programme.Have avoided further tax rises (ie National

Insurance).Need to maintain confidence against future

“shocks”.

International Issues

Zero ten applies equally to all companies, and is code compliant.

EU working group have considered ARI (Attribution regime) within personal tax, and have concluded that it does in conjunction with zero-ten give rise to harmful effects.

This could widen scope of code group, or create conflict with EU.

We are proposing abolition of ARI from April 2012.

Budget 2011-12

Any questions ?