The public sector pension liability has increased by more than £1bn to reach a record £4.8bn.
Details are revealed in the government’s audited accounts for 2020-21, which have just been published.
The ’Dark Blue book’ does outline some good news for government – an apparent operational deficit of more than £231m the previous year has been converted into a £140m surplus thanks to a recovery in the stock market.
But this success is overshadowed by the spiralling pension liability.
Back in 2013, this figure stood at a mere £2.1bn. But the latest accounts show that the liability rose by £1,039m to reach an eye-watering £4,789m.
The figure has fluctuated – having gone up to £4.1m in 2018-19, it reduced to £3.8m in 2019-20.
Treasury insists the £1bn increase in liability is principally due to an actuarial loss of £925m that overturned a £566m gain the previous year .
It says this loss on paper is the result of changes in financial assumptions – specifically the decrease in the discount rate and the expected increase in inflation.
Former Policy and Reform Minister Chris Thomas has played a central role in public sector pensions reform.
He warns that, although cash flow around public sector pensions is ’vastly improved’, there’s no miracle fix for the pension legacy.
Mr Thomas said: ’Last year the actuarial liability figure for public sector pensions in government accounts went down by nearly £0.5 billion and this year rose by £1 billion. Just as nobody boasted about any achievement last year, people should understand that this calculation will continue to go up and down as assumptions change.
’In 2016, the reserve was expected to be gone in 2020 but will still be there in 2023-24 now. The shortfall of £63m by 2021-22 is now expected to be only two-thirds of that.’
This is due to benefits being reduced and contributions going up. Mr Thomas has highlighted the island’s Aa3 stable rating from Moody’s and prudent approach to managing government finances that has resulted in a high level of overall reserves.
He added: ’But the public sector pension legacy – the cost in the future of public sector pensions built up in the past and what the actuarial liability reflects – will need funding as there is no miraculous fix to get rid of this multi-billion actuarial liability whilst public finances remain strong.
’How much will the public sector pensions of older public servants be paid by current ones and the wider public through taxes?’
Aside from the pensions issue, central government accounts show an overall surplus of £137.3m compared to a deficit of £221.7m in 2019-20.
This is primarily due to unrealised gains on investments of £233.8m thanks to a recovery in the stock market which reduced the impact of lower tax receipts resulting from the Covid pandemic.
It is in sharp contrast to the previous year which saw unrealised losses on investments of £123.5m.
Group accounts which include Manx Utilities and Isle of Man Post Office as well as government-owned companies such as the Steam Packet, Radio Manx Ltd and Laxey Glen Mills show an overall surplus of £140.7m compared to a deficit of £231.4m in 2019-20.
Again, this was largely the result of an unrealised gain on investments of £224m compared to an unrealised loss of £118m the previous year which had been blamed on the Covid pandemic.
Treasury described that £231m deficit in the Dark Blue book for 2019-20 as a ’paper loss’ and said there was actually a £68m surplus.
The Dark Blue book also shows that the number of government employees earning over £50,000 has increased again, rising to 1,551 in 2020-21 from 1,436 the previous year. In 2018-19, the figure was 1,207.
There is now one member of staff working for central government who takes home between £350,000 and £374,999.
Figures released in written response to a question from last month’s Tynwald sitting show that the salary bill for government departments increased from £240,980,109 in 2016-17 to £272,855,202 in the 12 months up to August 2020, and to £261,727,250 in the 11 months between September 2020 and July this year.
The Treasury intends to introduce a new-style annual report combining the Light Blue (detailed accounts) and Dark Blue (statutory accounts) books for the 2022-23 financial year end.
lMr Thomas is defending his seat in the House of Keys general election on September 23.
Ann Corlett, Sara Hackman and Damian Ciappelli are also standing in the constituency.
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