MINUTES OF ISLE OF MAN MUNICIPAL ASSOCIATION MONTHLY MEETING HELD AT BRADDAN COMMISSIONERS OFFICES AT 7PM ON THURSDAY 18 AUGUST 2016

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1 MINUTES OF ISLE OF MAN MUNICIPAL ASSOCIATION MONTHLY MEETING HELD AT BRADDAN COMMISSIONERS OFFICES AT 7PM ON THURSDAY 18 AUGUST 2016 Vivien Quane Lezayre Commissioners Chairman Raina Chatel Douglas Borough Council President Neal Mellon Braddan Commissioners Betty Quirk Douglas Borough Council Liam Miller Garff Commissioners Robert Moughtin Garff Commissioners Christine Faid German Commissioners Martyn Faid German Commissioners Bob Pilling Malew Commissioners Alison Lynch Marown Commissioners Alex Toohey Marown Commissioners Rob Callister Onchan Commissioners Chris Quirk Onchan District Commissioners Eddie Convery Peel Town Commissioners Andrew Phair Port St Mary Commissioners Peter Gunn Rushen Commissioners Graham Connor Secretary 1. Welcome The Chairman welcomed everyone to the meeting and in particular Treasury Minister Eddie Teare on his last visit to Municipal Association meetings prior to his retirement. 2. Minister Eddie Teare MHK Mr Teare has provided his speaking notes from the meeting which are reproduced at the end of these Minutes. Following his speech Mr Teare took questions on a diverse range of subjects including Brexit, TV Licences for over 75s, Vision 9, Disability Policy and Support, Housing and Foodbanks. Following the session Municipal Association Members passed on their sincere thanks for Mr Teare s frank, open, interesting and informative contribution and offered their best wishes to him for the future. 3. Apologies for absence Apologies for absence were received from Ian Lowey of Arbory Commissioners, Alan Jones of Peel Commissioners, Carol Quine of Castletown Commissioners, Luke Parker of Ramsey Commissioners, Alec Merchant of Port St Mary Commissioners, and Ann Corlett of Douglas Borough Council. Neal Mellon of Braddan Commissioners and Bob Pilling of Malew Commissioners offered apologies in advance of the September meeting. 4. Minutes of July 2016 meeting The Minutes of the meeting held on 28 July 2016 were approved as a correct record and signed by the Chairman. 1 P a g e

2 5. Matters arising from minutes There were no matters arising. 6. Treasurer s Report The report had been circulated and was noted. 7. Secretary s Report The report had been circulated and was noted. 8. Training events for Commissioners and Clerks a) Planning Significant progress had been made with date, time and venue agreed and booked. Refreshments would be provided in the form of a faith supper with contributions from Members and tea, coffee etc. being appropriately provided by Janice Brew. The Secretary would send invitations to ALL Local Authorities and Clerks by the end of August. AP Secretary Members took the opportunity to consider the skeleton delivery plan provided by Jennifer Chance. It was suggested that potential areas for devolvement to Local Authorities be added. If there were any further suggested topics these should be sent to the Secretary asap. AP Members b) Other training events These were now provisionally in place for early in LGU were comfortable with topics and the suggestion that locations should be spread. Speakers for the Human Resources and Financial sessions had been identified and would be contacted shortly. A meeting will be held with the LGU in the autumn to plan both the Statutory requirements session and the others identified above. AP Secretary 9. Richmond Hill Consultative Committee There was nothing further to report at this stage 10. Energy from Waste Pricing and Conduct of Waste Management Meetings There was a long discussion both on the historic issues arising and on the format and content of the draft letter which it was proposed to send to Minister Gawne. Members also considered a letter dated 17 August from the Clerk to Malew Commissioners. It was agreed that the Chairman would speak to Mr Gawne prior to the issue of any letter and report back to Members on the outcome of the conversation and any actions taken as a result at the next meeting. 11. World War I Commemorations There was nothing further to report at this stage 12. Any other business Alison Lynch offered good luck and best wishes to all of those who were standing as prospective MHKs in the forthcoming General Election. The Chairman thanked everyone for attending and the meeting closed at 8.50pm. Date of next meeting: Thursday 29 September at 7pm. 2 P a g e

3 Signed..Chairman Date Eddie Teare M.H.K Municipal Association 18 th August, 2016 SPEAKING NOTES Thank you for the opportunity to speak to you, probably for the last time. This Government has been criticised as being the worst ever, but perhaps you would like to consider what has been achieved? Firstly, Public Sector Pensions Most people have overlooked that the costs have now been agreed with the majority of the unions and most importantly the General Medical Council at 22.5% of salary costs. How it is apportioned does not affect the cost. This can be done in a variety of ways, retirement age, accrual rates for each year worked etc. Our scheme must be competitive to enable us to attract skilled staff in Health and Education. Uncertainty is causing recruitment difficulties especially at Nobles Hospital where we have major problems with eleven substantive posts unfilled. This has necessitated filling the posts with Agency and Locum Staff at double or triple the cost. This is the major reason for the 10M overspend at Nobles last year. It is also hard to recruit teachers in Maths and English. In respect of Doctors, if we have a problem with their union, the GMC they can black border our job adverts in their journal as a warning to potential applicants. With the uncertainty in the UK regarding Junior Doctors now is an ideal time to fill our vacancies, but we need to resolve uncertainty first. Some politicians wanted to defer a decision which would have caused more uncertainty and hampered our recruitment efforts. There is an issue with legacy costs, but this is being managed as part of the Medium Term Financial Strategy. Our problems have been made worse by success in another area, the reduction in the public sector headcount which has reduced by c700 in the last five years. Another factor is historically low interest rates. Each 1% movement in rates affects the pension liability by 600M. It has been suggested that we should move to a money purchase scheme for new starters, but this would make our funding problems worse as we would lose their contributions to the present scheme. The second item is National Insurance Pensions otherwise known as the state pension scheme. Firstly let me make it clear that existing pensioners, and those reaching pension age before 6 th, April, 2019 will not be affected. They will continue with the existing system, although the uprating will be by reference to average earnings. Why did we decide to break with the UK? The system has remained in place since 1948 when the average male pensioner received their pension for one year and for females it was eleven years. Currently the average for a male is 21 years and slightly longer for a female. The common comment that I hear is that we have paid for it. That is wrong! The average person receives back 30,000 more from the scheme than they have contributed ignoring the 20% of contributions paid to health. If you take the Manx Pension Supplement into account that figure rises to nearly 100,000. This is the biggest expenditure item for Government at 176M and we had no control over it. The last three actuarial reports indicated that the date at which the NHI Fund will run out has advanced by 12 years. For the first time more money is being paid out of the fund than received. A major problem is the uprating mechanism, known as the triple lock. Pensions are uprated by the highest of inflation, average earnings or 2.5%. This has resulted in the basic 3 P a g e

4 pension increasing by nearly 10% over the last three years whilst those in employment have not seen their incomes rise. The new scheme will come in on 6 th, April, 2019 and will be a pension of 170 plus the pension supplement of (which started out at 5 pw and if the same uprating had been applied as that for the basic pension would now be 10.50) To qualify for the full basic pension a person would need 35 years contributions records. There is a minimum of 10 Years, but a contribution record in the UK can be taken into account to reach that threshold. The pension supplement will be phased out over 20 years. In 2019 a new pensioner would receive the full supplement but for a person reaching pension age in 2021 would only receive 90% and so on. The basic pension will be uprated by average earnings and there is no commitment to uprate the pension supplement. Anyone who reached pension age after 5 th April, this year, and has a contribution record in the UK for part of their working life will have to make two pension claims, one to the IOM and the other to the UK. The payments made by each country will reflect their contributions made to those countries. We now have the ability to look at other amendments, for example, flexible retirement age, a more gradual increase in the pension age for females. I expect that the scheme will have to be further amended in the light of experience, but our projections indicate that there will be something there for future generations. The third item is Rebalancing. We all know that we lost 200M of income from the VAT sharing agreement. To date we have dealt with 125M and there are plans in place, agreed by Tynwald last year, to deal with the balance over six years. Some felt that we should have been more aggressive in our savings targets, but I did not want to take too much, too soon, out of the economy leading to a reduction in consumer confidence and spending especially at a time when we were conducting a survey of spending for the VAT Agreement. The new agreement is fair! When the original agreement was reached forty years ago the structure of our economy and that of the UK were the same. The distribution of the net VAT collected was determined on a GDP basis. However in the intervening period our economies have diverged especially the finance sector which charges no VAT on its sales or outputs. The new method calculates our share on the so called sticking VAT, that is the tax which is actually paid by us as individuals, and businesses. In 2014 we conducted a household expenditure survey which enabled us to ascertain the sticking VAT and also for 80% of businesses. In effect what we have now is clear and easy to justify. We receive what we would receive if the IOM operated an identical system, but separate from, the UK. We still keep our borders open and industry is able to trade into the UK without customs barriers. In terms of expenditure savings, we have achieved 17M of savings to date including 1.5M in rents as our workforce contracts. We are targeting 3M this year and the new starters package will reduce costs by 1M in the first year rising rapidly as our staff turns over. Finally Risks. The first to mind is that the UK cuts the standard rate of VAT from 20% to 15%. This would cost the IOM over 60M in a full year. Our direct tax income is not growing as quickly as planned mainly due to unprecedentedly low interest rates. In 2013/14 income paid by Isle of Man financial institutions fell by 14% from the previous year. The following year it fell by a further 40%. This is also impacting on the profits of local banks. There are also risks from the exit of the UK from the EU. I think that it is naïve to expect to get a good deal from a club that we have just voted to leave! The new trading relationship between the UK and the EU is very important to us as our manufacturing industry exports to that area. Manufacturing now accounts for 3.4% of our GDP. The reform of the benefit system was one of our plans and the initial work has been done. Failure to follow that through will put unsustainable pressure on our finances. By way of explanation the number of Income Support claimants has risen by 73% in the last decade and the cost is now 36M per annum. I am coming to the conclusion that some employers are 4 P a g e

5 using mostly part time staff to reduce their NI liability. We are currently undertaking research in this area. Additionally some employees are only working enough hours to stay under the limit for benefits and in the next administration the cliff edge between benefits and nothing must be removed. There is also a hollowing out of our society as the middle income jobs decrease. There is now a wide gap between the upper income group and those at the bottom end. The ageing society will impose increasing burdens on our health and social security budgets. Our projections indicate that the number of persons aged over 65 will increase at an accelerating rate over the next two decades. We expect that the number will rise from 17,000 now to 26,000 within that period. That is a rise of 53%. Over the same period the population will have grown by 16% and the number of persons of working age by 2% so that there will be fewer, on average, contributing towards the cost of pensions. As the population has not risen as quickly as expected this will impact on the dependency ratio and this will also affect our VAT take. Finally the negativity of some of our politicians is affecting consumer and business confidence. Am I confident in the future? Yes, but we will need strong nerves and stay very alert to moves elsewhere! Thanks. 5 P a g e