The Treasury Minister has acknowledged that the use of reserves is critical to balancing the budget.

This year’s Budget relies on the drawdown of £110.6m of reserves, compared to an estimated £98.4m in 2024-25.

Drawdown of reserves are planned to be reduced each year to £82.2m in 2026-27, £61.6m in 2027-28, £56.4m in 2028-29 and £49.7m in 2029-30.

And yet in Dr Allinson’s first Budget in 2023, when he announced that he had no choice but to draw down heavily from reserves if cuts in services were to be avoided, the drawdown on £152.9m for the coming year was supposed to reduce to £84.9m the following year and then to £51.7m, £31.1m and £3.5m in subsequent years.

He told Media Isle of Man: ‘I will be honest with you - the use of reserves is higher than I would have wanted. We have a credible plan to reduce that drawdown of reserves.

‘I made the point last year that I do not want to plunge the island into austerity, I do not want to cut back frontline services. However, what we need to do is rationalise them and make them as efficient as possible. Our overall reserves will continue to grow through the medium term financial plan.’

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He said that in 2027-28 and 2028-29 the amount of investment income government is forecasting it will get from its reserves will be more than the amount it proposes to be taken out.

‘So what we are doing is leaving the reserves as they are but using very much that investment income to balance the budget rather than drawdown on the piggy bank,’ he said.

Figures for use of reserves to balance the books can be used as proxy for the government’s underlying structural deficit.

The deficit had risen to an unprecedented £217.4m in 2020-21 due to the impact of Covid lockdowns and restrictions but reduced to £95.6m the following year as the Manx economy recovered from the pandemic, only to rise again to £103.1m in 2023-4.

It is forecast to have fallen again in 2024-25 to £91.4m although this is higher than the budgeted £89.7m.