GOVERNMENT is committed to continue to spend large amounts of money on capital projects chiefly because the construction industry is such an important part of the Manx economy.

That is the message today (Tuesday) from Treasury Minister Anne Craine who has issued a statement to emphasise the importance of Government’s capital spending programme as a means of supporting jobs in the construction industry and maintaining the Island’s infrastructure.

Mrs Craine said it was vital that Government continued to invest in capital projects and that Departments make every effort to deliver the ?96 million programme as set out in this year’s Budget, presented by her predecessor Allan Bell MHK and agreed by Tynwald in February.

“The public may sometimes wonder why Government is continuing to spend millions on capital schemes at a time of financial constraint,” she said. “There are a number of reasons why the capital budget this year, although slightly reduced, is still a significant sum.

“Firstly, the Government is the largest single customer of the construction industry, accounting for about 70 per cent of spending in the sector. Construction employs 3,000 people directly and is an important part of the economy, generating ?140 million or six per cent of national income according to our most recent statistics.”

She added, “We constantly monitor the performance of the capital programme and indeed are now inviting some departments to advance schemes which would be of benefit to the construction sector.

“Apart from sustaining jobs and income in the construction sector, capital schemes are necessary or worthwhile in their own right.  They improve or maintain the infrastructure that supports our standard of living and quality of life in such areas as economic development, housing, the environment, health, education and other public services.”

She added, “It’s important also to appreciate the difference between capital and revenue spending. Capital spending is a one-off investment in a building or new equipment, for example, funded from a central Government pot and paid back by the relevant department over a period of up to 50 years. 

“Repayments are spread over time so the impact on annual budgets is not as great as it might seem. With current interest rates at an all time low and budget constraints forcing the Treasury to minimise the  annual revenue implications of the capital programme the typical cost of a ?50 million scheme spread over 50 years would add an average of some ?1.7 million per annum in loan charges.

“Revenue spending meets ongoing costs year after year, such as staff salaries or social benefits, funded by the annual income or revenue received by Government from VAT and income tax. It is our revenue income and revenue spending that have come under particular pressure since the revision of our VAT sharing arrangement with the UK.”