Oh well done Richard!

So, knickers twisted over the revisions to the Isle of Man GDP figures.

They want to get their hands on our money, certain.

And why have they done this? Well, let me remind you of a little problem the Isle of Man has: it’s called its VAT black hole. In October 2009 the massive VAT subsidy the UK gave to the Isle of Man each year, amounting to  some £180 million to £200 million a year was reduced by £140 million a year by changing the basis of calculation. According to many, including many politicians in the Isle of Man this happened as a result of my having drawn attention to the issue on my blog – and I’ll unashamedly accept credit for that. I was just about the only person to ever write on this issue so it seems highly likely that this story is true.

But it is important to then note how the split of VAT receipts between the UK and the Isle of Man is calculated: I’ve put the sample calculation on line, here.

The calculation starts by comparing national incomes. So what has the Isle of Man done? It’s restated its national income, not just a bit, but by inflating it  enormously. And since the UK’s national income has taken a bit of a hit of late the result will be a massive shift of resources to the IoM.

No, really, they do, the sponging bastards.

The impact on the sample calculation is massive. Just slotting the 2008/09 data into the sample calculation increases the amount payable to the Isle of Man by £62.8 million.

That is £62.8 million that it is not owed.

That is £62.8 million of lost services in the UK.

That is £62.8 million claimed by changing the books.

Now of course, we all know by now that we\’ve got to go and read Ritchie\’s source documents before we take on trust whatever it is that he\’s complaining about.

So here is that source document.

It details the National Income estimates for 2007/08 and 2008/09 under a new, modernised methodology. To allow for comparison with earlier published national income data, the estimates for 2007/08 under both the previous and the new methodological approach and data coverage are also provided.
The Treasury has always placed great importance on the national income accounting process providing a time series of data from which true comparisons can be made over time. Fulfilling this requirement has facilitated like-for-like comparison of national income measures and the contribution of the economy’s component sectors, and has allowed for the calculation of annual growth rates without the distortion that would otherwise have occurred from the adoption of new methods of calculation.
The downside of this approach has been a growing divergence with the estimates produced in other countries. Such disparity has become accentuated by the adoption elsewhere of new methods of calculation on a number of significant aspects of the accounts, as countries keep up to date with the European System of Accounts (ESA), the manual that details best practice in national income accounting.
Over the last twelve months the Isle of Man Treasury has worked with the United Kingdom Office for National Statistics (ONS), the authority responsible for the production of the UK national income accounts, to update its national income methodology using ESA standards and to improve data coverage. The accounts reported here are the outcome of this work.

Ah, no, you see, it\’s not that the new accounts are wrong, it\’s that the old accounts are wrong. They\’re not up to European standards, and it\’s our very own ONS which has been working with them to bring the accounts up to standard.

Which leads to a very interesting outcome indeed. It isn\’t that the Isle of Man has been skimming off too much money from the VAT arrangements at all: it\’s that the UK hasn\’t been handing over enough over the years. For the Isle of Man, as our own government agrees, has been consistently underestimating their GDP and thus the amount that we should be handing over.

We owe them money: and I\’m just absolutely certain that Ritchie is really glad that he brought this to everyone\’s attention.

Well done, pat on the back and lashings of ginger beer all around I suggest.

6 thoughts on “Oh well done Richard!”

  1. I just posted on his blog but surprise surprise it didn’t make it past the censorship. All I said was “Another Crown Dependency conspiracy”.

  2. So these tax havens grow their economies much faster than everyone else by virtue of their low taxes.

    Doesn’t Ritchie know when to give up?

  3. yes…he does not buy the spin although it comes from official figures he would otherwise relish….how can anyone take him seriously?

  4. All very interesting, but why are we giving the IoM money in the first place?

    Tim adds: Because we’re in a customs union with them I think. We collect the VAT on a lot of the stuff that ends up in the IoM. Thus we should hand it over to them.

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