A 2% tax rise in the higher rate of income tax “squeeze the island’s working population hard”, an MHK has said.

Rob Callister expressed his concerns during a debate in Tynwald about the Isle of Man’s budget for 2024-25.

Treasury Minister Alex Allinson told politicians the measure, which would generate £20m for heath spending, would affect 39,000 people.

Defending the move, Dr Allinson said the government “must protect our vital services” and could no longer “simply rely on reserves”.

The tax rise from 20% to 22%, which will apply to earnings above £21,000, is the first of its kind on the island since 2010.

Although ultimately backed by Tynwald members, the financial plan, which also included a funding boost of £18m for the Department of Education, Sport and Culture, was voted down by six MHKs.

During a five-hour budget debate, Mr Callister expressed concerns that the rise would hit a large proportion of the working population harder than any budget for the last 10 years.

He said: “These additional costs will without doubt put further pressure on many small and medium businesses in the forthcoming financial year, and at a time when so many businesses, families and individuals are still genuinely struggling with the cost of living.”

Echoing those comments, Jason Moorehouse MHK said they would have a “real impact” on Manx households.

Mr Moorhouse also questioned if the government was “out of touch” with the public as the budget stated the island would continue to offer competitive income tax rates, especially for those on higher incomes.

Meanwhile, Tim Glover MHK said described it as a “champagne budget” for those “who can only afford a bottle of plonk”.

Backing the plans, Chief Minister Alfred Cannan said they balanced the “pain” set to be felt by some residents with the island’s need to invest in public services and grow a “secure and vibrant” future economy.

He said rather than “stand still and freeze” budgets, the government had chosen to invest, but warned there was an “absolute need” for financial discipline to be exercised by government departments over the coming 12 months.

During the course of the debate, some members raised concerns about a growing government workforce.

John Wanneburgh MHK said “precious little appetite” had been shown to reduce headcount, with it instead increasing by 800 people in the last seven years.

Despite the concerns over the tax rise, the budget did gain praise for its 15% uplift to maternity, paternity and adoption allowances and increase in state retirement pension payments.

Extra ringfenced funding for health services was also met with support, but the health minster Lawrie Hooper MHK said members should “not be lulled into complacency by the size of the increase in budget this year”.

He said Manx Care would be tasked to on deliver “tangible improvements that can be seen and felt by patients”.

Dr Allinson said the financial plan “marked the start of a more progressive taxation system”.

He also restated latest tax changes could be temporary as a new tax strategy, set to include moves to explore the creation of a health care levy, would be debated at the March Tynwald sitting.

Source: bbc.co.uk