Source:-  BBC News Isle of Man

Added to revenue reductions already projected, because of UK economic performance and the lower VAT rate, the island faces a total £90m loss in 2010 and £140m thereafter.

Government services, jobs and voluntary groups on the Isle of Man will all be hit by the UK government's revision of tax sharing arrangements.

About £300m is brought in every year through shared revenue from indirect taxes, such as petrol duty.

But that is set to drop by £100m a year from April 2011 at the UK's insistence, Chief Minister Tony Brown told Tynwald.

This, coupled with drop in revenue from VAT, has "serious implications" for the island and its services, he added.

Redundancy warning

The new arrangement, which has been signed, will result in an annual loss of revenue of at least £50m from April 2010, rising to £100m from April 2011.

Added to revenue reductions already projected, because of UK economic performance and the lower VAT rate, the island faces a total £90m loss in 2010 and £140m thereafter.

The island's current total revenue expenditure, which funds public services and salaries, currently stands at £572m.

Mr Brown warned that this meant redundancies in the public sector, a reduction in some public services and a freeze in funding for voluntary groups.
   
Some very difficult decisions will have to be made
Tony Brown, Chief Minister

But the Chief Minister said it was too early to predict in which areas the axe may fall.

"This situation is clearly extremely serious for the island and unprecedented in our recent history," he told the Manx parliament in a statement.

"However, I am confident that we will come through this present situation, albeit that at times it will be extremely difficult for us all.

"Some very difficult decisions will have to be made, especially over the coming months and for some time into the future."

Budget deficit

Members of Tynwald, who are sitting for the first time since the summer recess, were briefed on the situation last week.

The Manx government pools its revenue from taxes such as VAT, excise duty and petrol taxes with the UK.

Every year it receives about £300m back through calculations made under the revenue sharing arrangement.

But the UK government last month told Manx officials it wanted to change the arrangement.

The UK is wrestling with a growing budget deficit and total public sector debt now stands at around £825bn.