According to the Isle of Man Press:

HE happily claims credit for the island's multi-million pound VAT blackhole.

Now arch critic of the Isle of Man Richard Murphy is on the attack again — claiming the Treasury has fiddled its figures and demanding our Customs revenue sharing deal with the UK is renegotiated yet again or scrapped altogether.

It’s pretty strange that the Isle of Man has such a weak democratic process that its arch critic is someone living in Norfolk. But let’s leave this obvious deficiency in its democratic accountability aside and note that the report adds commentary from the Isle of Man Treasury:

But Treasury chiefs insists he has got it wrong — and the big jump in the figures was down to a new method being introduced to calculate national income.

In fact, they say, the figures show national income has fallen, so we won't get a bigger share of the VAT revenue.

Stephen Carse, economic advisor to the Treasury, said: 'He's not comparing like with like. We are not somehow managing to inflate the figures.'

The new method of measuring national income brings the island in line with the UK and with the European System of Accounts and follows 12 months of work which has taken place between the Treasury and the UK Office of National Statistics.

Mr Carse told the Examiner the UK Treasury asked the Office of National Statistics to work with the Manx government on the new formula that matched as closely as possible with the system they used.
'It was certainly with the full agreement of the UK. I would be very surprised if the UK challenged the new figures,' he said.

Until the new formula, the figures for national income had been 'understated', he added.

Mr Carse said the one-off increase in value using the new method — which adds about 30 per cent to the income figure previously reported for 2007/8 — would provide the starting point for the calculation of the pool share in the future.

But Mr Carse insisted this doesn't mean that we should have received more money under the Customs agreement in the past, as under the system operating before the last changes, the share was based on percentage change in growth.

The difficulty for Mr Carse is his position makes non sense at all — as I have shown here. Statistically if the new figures are to have no impact then the assumption has to be made that data from 2006 — which was used as the start point for the current calculations — can be compared with that for 2008 ion prepared using the current data. But statistically that is hard to accept — and makes a mockery of updating the data. Alternatively — if as he says restated data for 2007 on the new basis is used as the basis for claims from now on then those claims will be inflated by 30% (or more in my opinion) — because the data is that much higher, and that’s what the formula that has been published implies would be the outcome. In which case my claim that the data is being used to inflate the VAT claim is correct.

But what is not possible to claim is that the new data will be used consistently and is significantly higher when compared to the UK and yet no restatement of liability is due — unless the formula used for the Common Purse Agreement is being revised.

The Isle of Man can clear this issue by stating the new formula and stating how it will work. The onus is on them to do so. But they haven’t. And until they do I regret to say I do not believe the assurances given, because there is no logical reason to do so. And until that is done all the assurances about working with the UK are, I am afraid, just hollow statements — which do not imply the UK has agreed any new basis for payment — which is the key issue I am addressing and which Mr Carse is ignoring.

But if the Isle of Man wants to prove me wrong — please publish all the correspondence and formulas showing the UK has agreed a new basis of payment which does not inflate payments to the Isle of Man because of the existence of the new data. Until then critic I will be.