Common Purse Agreement - Services Contribution To UK Treasury

Services Contribution To UK Treasury

As with the other Crown dependencies, the Isle of Man makes a payment to the United Kingdom Treasury in respect of the services provided to the island: the constitutional responsibilities are defence, foreign representation (including consular assistance), and ensuring good governance within the Island.

The Islands are internally self-supporting and neither receive subsidies from, nor pay contributions to, the United Kingdom. The Isle of Man, Jersey and Guernsey make annual contributions towards the cost of common services such as defence and overseas representation. —A Guide to Government Business involving the Channel Islands and the Isle of Man, Department of Constitutional Affairs, 2002

This payment was first introduced by the Isle of Man Customs, Harbours, and Public Purposes Act 1866 (An Act of Parliament). This payment replaced a previous arrangement whereby the UK Treasury had retained all surplus Manx revenue – from 1866 onwards this surplus would be paid into the new Manx Accumulated Fund. No specific purpose or justification was stated for the payment.

Subject to the charges aforesaid the sum of ten thousand pounds out of the duties shall be brought and paid into the Receipt of Her Majesty's Exchequer distinctly and apart from all other branches of the public revenue, and shall go and make part of the Consolidated Fund of the United Kingdom of Great Britain and Ireland. —Isle of Man Customs, Harbours and Public Purposes Act 1866, s.7.

The MacDonnell Inquiry in 1911 reported that it had received a request from Tynwald for a reduction in the contribution, which was still at that time fixed at £10,000 per annum. In refusing to reduce the figure, the Inquiry noted that the Island enjoyed 'national protection' and 'manifold national advantages'.

The annual contribution set in the Customs, Harbours and Public Purposes Act 1866 was supplemented by a new formula in the Isle of Man Contribution Act 1956 (An Act of Tynwald). This Act explicitly specified that the payment was for 'defence and other common services', and in the associated Annual Contribution Agreement the amount was set at 5% of the Island's Common Purse receipts, at the time around £100,000.

The Isle of Man Act 1958 (An Act of Parliament) repealed the 1866 Act of Parliament, thereby ending the legal obligation to pay £10,000 that had remained in force until that time.

In 1973, the Kilbrandon Commission on the Constitution stated that the contribution should be considered a voluntary payment.

It seems clear to us that any change in the contribution made by the Isle of Man, should be made on a voluntary basis. The value to the Islands of the services concerned, mainly defence and overseas representation, is not quantifiable, at least with any degree of precision, and any attempt to estimate what the level of contributions, if any, should be would have to take into account the Islands’ capacity to pay. In our view, if this matter is to be pursued at all it should be by means of direct discussion between the United Kingdom and Island Governments. —'Imperial Contributions', Report of the Royal Commission on the Constitution

In 1978, Tynwald halved the percentage of the Common Purse receipts that were remitted to the UK Treasury from 5% to 2.5%. This changed was imposed unilaterally by the Isle of Man without consultation with the United Kingdom, who continued to press for a 5% payment.

The Contribution Act 1956 required annual extension by Tynwald, and this was withheld in 1992.

A new agreement was reached in 1994 whereby a payment of £1,750,000 would be made, to be increased in line with changes in GDP (for comparison, the 1992 payment had been £2,295,247). It was stated that the sum "does not and will not reflect either the range of, nor the net true cost of the respective services mutually provided by the two Governments" and that "the United Kingdom Government accepts such annual amount as a token of appreciation and support by the Isle of Man Government to the United Kingdom Government."