The latest inflation figures released by the Isle of Man Government show the annual rate of inflation as measured by CPI for the twelve months to July 2022 has increased to hit new record highs of 10.8%. This new level is far above the previous records amongst the current historic datasets published by the Isle of Man Government dating back to January 2008.
“The consumer price index has risen by 10.8% over the last year. This data reflects the experience that everyone on the Isle of Man knows that family budgets are getting squeezed by higher prices,” said Michael Josem of the Manx TaxPayers’ Alliance.
“The underlying problem is that there’s insufficient goods and services being produced to meet demand, and has been exacerbated by the Isle of Man Government’s high-inflation budget announced earlier this year. Instead of merely “monitoring” this economic crisis, the Isle of Man Government should have taken the advice of the Manx TaxPayers’ Alliance earlier this year and taken proactive action to ease the squeeze on the cost of living,” said Josem
“This Government is asleep at the wheel while Manx families are being driven off the road by this cost of living crisis. As we have been advocating for the past year, the Government needs to take immediate action to ease the fuel, food, supply and labour crises instead of making the problem worse by pumping more money into the mix,” said Josem.
As previously reported, the Isle of Man Government policies are making the problem worse because the Government does not appear to understand the underlying problem at hand. To date, the Isle of Man Government has increased spending to support people in need, without addressing the underlying causes. Because we we have a cost of living and inflation crisis caused by constrained supply (constrained supply of fuel, constrained supply of labour, constrained supply of goods) we need to find better and more effective solutions by addressing the supply constraints, rather than just allowing the Government to pump more money into the economy to fund increased demand.
Government spending was plausible to respond to the global financial crisis of 2008, or the 2020 pandemic, because at those times, we had a fall in global demand. Here, however, we have the opposite problem: we have a fall in global supply. Thus, we need policies that will increase supply, rather than the Government’s currently misguided policies of further increasing demand.
In recent months, the Government has imposed increased taxes on hospitality businesses, announced increased fuel taxes on construction, manufacturing and other businesses while ruling out any cut on aircraft passenger taxes. Manx Government policies restricting the construction of housing are playing a key role in the soaring cost of housing, where supply is wildly outstripping demand. The Manx TaxPayers’ Alliance has led the Isle of Man in proposing a series of proactive positive policies to address the Manx inflation crisis.
Inflation is likely to increase the pressure on Manx households in coming months as the following come into effect:
- the Government’s gas price rises;
- the Government’s increased taxes on the hospitality industry flow through the economy;
- increased fuel taxes on construction and other industries.
- existing home leases come to a conclusion and are re-set to higher levels.
“Fundamentally, inflation is caused by too much money chasing too few goods and services. The antidote to inflation is improving productivity through improving skills, education, training and investment in improved tools, while reducing supply constraints through efficient infrastructure and a low regulatory burden,” said Josem.