Budget Address - Minister Joe Bossano

 

Mr Speaker, the 23rd of last month was the 49th anniversary of my election to this  House. On the 10th, I had my 82nd birthday and GBC made a point of congratulating  me as a news item, which I appreciate very much. 

However, they said I was going to be 83 years old, an innocent error which I am sure  does not mean they want to accelerate my aging process. I have also been wished  well by many people not all of whom vote for me, with one person doing so at one  minute past midnight on the 9th to be the first. 

I am grateful for the warmth of all those well-wishers irrespective of whether they agree  with my political views or not. 

Given that I have in the past, some 20 years ago, said I would offer myself as a  candidate to the GSLP until I was 90 I would not want anybody to think that is now  only seven years away, as a result of the mistake made by GBC. 

In fact, I have since then put the record straight and made clear that I could see no  valid reason for throwing the towel in so soon and therefore my offer to my party is  that they can continue to count on me for at least another eight years and hopefully  many more after that. 

I know this will disappoint some sectors of our community who have wanted to see my  name disappear from the ballot paper for a long time but since everything I have done  as a member of this House is driven by what I am convinced is in the best interest of  Gibraltar even those who want to see the back of me stand to gain if I turn out to be  right in my analysis of what is best for us. 

Before I proceed with my analysis of issues that are relevant to this year’s budget, I  want to deal with accusations that have been made outside this house where I have  been the target. I am dealing with them here because those making accusations have  been or are members of this House. 

Mr. Speaker the Honorable Mr. Bossino chose to launch an attack on me in an opinion  published by the Gibraltar Chronicle on 15th March.

 

In it he accuses me of doing a U-turn on my views in relation to Spain of such  magnitude that he says it is the biggest U-turn in the history of humanity since the  conversion of Paul. I will quote what he wrote.  

“The only U-turn, however was in our midst that very night in the mouth of Sir Joe  Bossano who underwent a miraculous metamorphosis last seen on the road leading  to Damascus, when St Paul famously converted to Christianity. 

I had been so struck by what Sir Joe had said that I had to watch his speech again like  a doubting Thomas. The man who had been the incarnation of militant hawkishness  for a generation and more; the man who said: ‘no’ to every initiative at closer co operation with Spain form the Strasbourg process to the Brussels and Airport  Agreements (our very own Maggie with his ‘no, no, no) was here telling us that a treaty  had to be had with Spain because the pressure was too great – we were ‘naked and  crawling”  

“Let me first correct the honourable member’s misrepresentation of where I was in the  past, which incidentally is where I still am today and will continue to be in the future. 

I am the man who created the first initiative on mutually beneficial co-operation with  the hinterland as Chief Minister. This was done together with Pepe Caracao, then  President of the “Mancomunidad de Municipios”. 

However I insisted that the co-operation should be with individual municipalities as  members and not Mancomunidad because the Spanish government had intended that  Mancomunidad should have a Gibraltar seat. 

The “Our Lady of Europa Economic Co-ordination Council” started originally with  Algeciras and Gibraltar as members and then was joined by other municipalities from  the campo and finally with Ceuta. The last meeting was held in Ceuta and after that it  stopped meeting as a result of the implementation of the freeze on old age pension  for the Spanish pre 1969 frontier worker which I will have more to say on at a later  stage. 

At the same time as I was promoting corporation with a nearby neighbours I was  campaigning against the attempted betrayals of our sovereignty in the Strasburg talks  with Senor Oreja in 1976/77, the Lisbon Agreement in 1980, Brussels Agreement in  1984, and the 1987 Airport Agreement. Both of the latter, were then stopped and 

 

boycotted by the Socialist Government that I led between 1988 and 1996 concurrently  with the initiatives on co-operation with no strings attached that I have previously  mentioned. 

The fact that the Honourable Member describes our opposition to these instances of  attempted betrayals of our sovereignty, as saying no to “initiatives at closer co operation with Spain” says a great deal about who is the “Palomo” in this House, him  or me, Mr. Speaker. May I also remind him that eventually the party that he hopes to  lead when led by Sir Peter Caruana also rejected, belatedly, the Brussels Agreement  and the 1987 Airport Agreement. 

Let’s be clear in this House and let the people of Gibraltar be clear what the accusation  against me is. 

If Paul shifted from persecuting Christians to advocating Christianity then the Hon  Member is suggesting that I have gone from no talks on sovereignty to make Gibraltar  Spanish. I will not say the Hon Member is lying. But I am urging him to seriously  consider a visit to a psychiatrist because he seems to have lost his wits. 

If he had been telling the truth it would mean that in accepting the tax deal with Spain  on the basis that in my judgement it represents no risk to our economy and no threat  to our sovereignty, I would have been lying.  

It would mean that I have been lying to the Gibraltarians who have placed their trust  in me for the last 49 years in the believe that I will never put Gibraltar at risk of a  takeover by Spain. 

That is the seriousness of the accusation against me from the Hon Member opposite. 

So when he witnessed this radical change happening how did he react on 25th February, on the day, not 18 days after, on March 15th. He didn’t, no reaction, not a  word. 

I’m not saying that he was lying in the article to deceive the people of Gibraltar. 

I am assuming that he believes this extraordinary nonsense that he has published.  How else can a pious, traditional Christian like him act, other than by saying what he  believes to be true.  

Is he not the equivalent in Christianity of someone with a fundamentalist Faith?

 

Which of course he is perfectly entitled to be and is totally acceptable in our tolerant  society and for which I have not the least of criticism at all, I respect his believes. I am  fundamentalist, too, in saying no Spanish Gibraltar.  

But I ask myself how could someone with those strict believes make a comparison  with the conduct of Saint Paul?  

Is it not almost inevitable to argue that the monumental U-turn of Paul from persecutor  to promoter of Christianity had a great deal to do with the success of Christianity? 

So is that the sort of conversion of Joe Bossano from fiendish opponent to even the  very thought of discussing sovereignty with Spain let alone conceding it?  

Has he undergone a miraculous change to now becoming an advocate for a Spanish  Gibraltar?  

The Hawk has become the greatest Palomo in Gibraltar history, is that what he  believes?  

And if this is all nonsense and this is what he compares to what happened to Paul do  we need now to go back and revise what might’ve happened to Paul on his way to  Damascus after all.  

So is it that the Honourable Member did not listen to me saying that if there was no  deal I would be the one to put the first brick was that the dove going back to being a  Hawk?  

Will Saint Paul be retreating from the road to Damascus and returning to persecuting  Christians?  

That is a matter for Theologians.  

But I will let the House into a secret.  

I had no intention of speaking in the debate but when I arrived I was ambushed in the  anti-chamber by the Honourable member before I entered and he said he could not  understand why I was in favour of the tax treaty and I explained it to him. He then said  it was unfair on Gibraltarians who wanted to live in Spain and I said you couldn’t have  your bread buttered on both sides if some Gibraltarians wanted to go to live in Spain 

then they had to comply with Spanish laws. He then said he understood my position  so I decided this merited that I should explain it for the benefit of other members.  

I have to say that I was not relying on any privileged information that was not in the  public domain and surprised that other members should need my explanation which I  think could have been given by any person that has been following the details of the  events and analysed the reaction that emerged from the EU and Margallo and their  behaviour after the 2016 referendum result was announced.  

I will remind the House how the Honourable Member opposite reacted after the 2016  referendum result was announced. 

This is what I said in the 2016 budget. 

“Last Thursday, Mr Speaker, the former Member of Parliament, Mr Bossino, put  forward a very pessimistic view of the consequences of the decision to leave the EU  and quoted me in support of his views, saying that I had said we would be doing well  if we met my economic growth predictions included in the 2015 Manifesto, but that the  future predicted growth that I had in mind was now out of the picture. Well, Mr Speaker,  I actually thought that what I have said on a number of occasions before the vote took  place or the result known, and what I repeated in answer to a supplementary from the  Leader of the Opposition last week, was actually quite positive for Gibraltar's  prospects.  

Mr Bossino also demanded that the politicians look him straight in the eye and tell him  what the future holds for him. I do not know how many people he used to look straight  in the eye and tell them what the future held for them when he was a politician. Nor do  I understand why he believes that politicians have the power to see the future but that  they lose it when they leave politics, as he has done. However I am, I suppose, one of  the few politicians that has regularly predicted our country’s potential economic future  on a four-year timescale.  

So I am quite happy to look Members opposite in the eye – since Mr Bossino is not  here – and repeat my prediction; or maybe, since one is supposed to speak through  the Chair, Mr Speaker, I need to look you in the eye when I say it. The projected growth  of our economy, calculated and published in 2015, is an increase in our GDP of £600  million by the year 2019-20, being 33.3% of the estimated value for 2015-16.”

 

Well I am happy to tell him now is that my prediction was right as he will see when I  deal with the economy. 

He could’ve followed his own advice and looked me in the eye in the debate instead  of doing it through a newspaper article. 

But I have decided to take his advice and I am here to look him in the eye instead of  producing an article in reply. 

Mr. Speaker what I told Mr Clinton in the debate was my simple explanation of how  the PSOE Government would defend themselves in Spain.  

I said “the one thing that PSOE could not do was to say we are not going to put  sovereignty on the table were are not going to put anything on the table we will go and  ask Mr Clinton will you give us a standard OECD agreement OK and then go back and  say look what a great achievement having got all the aces, having these people naked  and crawling we have extracted from them an OECD agreement!” 

Did Mr Bossino misinterpret or deliberately misrepresent as me saying we are naked  and crawling and have to accept the tax treaty with Spain. 

When the mover of the motion on the tax treaty made his closing speech he referred  to me as follows: 

“I am grateful to hear the Honourable father of the House’s contribution, but let me  start here on this point with him: he said that this debate has been unrealistic in part.  Well, I am not sure if I would concede that to him, but if it has been unrealistic in part.  It has been unrealistic because it has been made by them as unrealistic up until largely  his contribution, because at least in his contribution he recognised that this was the  price for a Brexit transitional deal in so many words.” 

At a later stage the honourable member wrote the following to the media: 

“If the end-game is as reflected in the guidelines, sovereignty will undoubtedly be the  issue. The nightmarish scenario is not only that Spain will hold the lock to our  continued access to the EU single market but the further lock to the UK-EU deal. Talk  about double-lock in the wrong hands!” 

As someone told me recently – ‘yes, we could be British and bankrupt!’

 

This gave the impression that we were being subjected under pressure to a situation  where the choice before us would be to become bankrupt in order to stay British, This  clearly imply that a deal on sovereignty would have to be done if we wanted to survive. 

The very sentiment he now attributes to me. 

So I have no difficulty with the Leader of the Opposition saying that the tax treaty was  part of the negotiations for Gibraltar to be included in the transition period, whether we  agree that the treaty was good or bad is a matter of judgment. 

Mr. Speaker the second issue I want to place on the record of this House is a letter  written by Mr Netto on 11th May 2020 and entitled “establishing historical facts” which  he signed in his capacity as former Minister who served between 1996 and 2011 and  is therefore relevant to the business of this House. 

I will read the letter for benefit of members.  

“In his May Day message published in the Gibraltar Chronicle on Saturday, 2nd of May,  the Chief Minister alludes to Joe Bossano introduction of the Minimum Wage Way  back in the latter’s tenure in Government as something intrinsically Socialist to be  proud. 

As I have repeatedly told Mr. Picardo in numerous times before, introducing the  Minimum wage and keeping it in line with annual inflation rate increases certainly is  something Socialist to be proud. Yet, how the Minimum Wage was a legislated back  then when Joe Bossano was the Chief Minister is nothing to be proud of us a Socialist.  So, once again, let me set the record Correct. 

In August 1989, the GSLP Government introduced the Standard Minimum Wage  Order in Gibraltar for weekly paid the employees only. The only discernible reason for  negating the Standard Minimum Wage generally throughout Gibraltar was that at the  time Civil Service.  

Administrative Assistance hourly rate of pay was £1.68 for a 16-year old person, £182  for a 17-year old person, £2.22 for an 18-year old person and £2.36 for a 19-year old  person. These rates were less than the hourly rate of pay for the newly introduced  Minimum Wage at £2.50. Therefore the GSLP Government designed a Minimum  Wage Order in which the GSLP Government as an employer could use the deliberate 

 

loophole of not applying the Minimum Wage to its employees because Administrative  Assistance were paid monthly. 

So we had a so-called Socialist Government (to whom our current Chief Minister thinks  Joe Bossano is his Socialist mentor), deciding as an employer to keep its  Administrative Assistance below the Minimum Wage. In addition to the above, when  Private Sector Employers found out at the time that by transferring their weekly paid  employees to monthly they could pay less than the hourly rate of the new Minimum  Wage, there was then a movement to circumscribe the legislation. Therefore,  rendering the law almost useless to thousands of employees throughout Gibraltar.  

I am proud that as Minister for Employment, I closed the deliberate loophole created  by the GSLP Government, thus making all employers in Gibraltar comply with the  Minimum Wage both in the Private and Public sector and for weekly and monthly paid.  The amendment to the Order was set as from the age of 16 thereby, closing all the  deliberate loopholes in 1989. 

In all probability, the Chief Minister May Day message for next year will continue to  peddle the line that was a great Socialist party the GSLP is due to having enacted a  Minimum Wage before the UK. Someone ought to inform him that being first does not  necessarily mean getting a piece of legislation right. There are other vital issues for  which the Chief Minister ought to steer away from having Joe Bossano as his Socialist  mentor, but that will have to wait for another day.” 

This letter, is almost a repeat of part of his farewell speech to the house in the 2015  budget which was mainly about trying to convince everyone that I was not a socialist  and in the process demonstrating that he didn’t have a clue about the fact that  socialism is a philosophy not a social welfare program for the capitalist system, in spite  of having managed somehow to get a degree in philosophy. 

Although I dealt with some of the things he said in 2015, I ignored this point so I feel  the need to put the record straight now so that at least people will know that it is all  nonsense if he wants to keep on peddling it. 

It seems that Mr. Netto feels offended that I should be considered a socialist judging  from the content of the letter.

 

I believe Mr. Netto was living in Wales in 1988 when the first Socialist Government  was formed in Gibraltar and decided to introduce the national minimum wage in 1989.  Of course Mr Netto would not have had, the protection of a national minimum wage in  Wales took UK another 10 years to follow the example of Gibraltar.  

The legislation we brought was of course intended to protect workers in the private  sector not in the public sector who were on UK salary scales I said result of the  successful campaign for parity with Uk which I was involved in negotiating so I will now  place on record the historical facts. 

The minimum wage for weekly paid a monthly paid workers other than those on salary  scales was introduced no correction the national The national minimum wage was  introduced for persons age 18 and over was £2.50 an hour on 10 August 1989. 

In the 2001 Budget the Chief Minister announced the changes in the minimum wage  to which Mr Netto refers in his letter saying the following:  

“I think there has been unprecedented progress. By unprecedented I mean, in all the  years that Gibraltarians have been conducting their own affairs, there has been  unprecedented progress in the infrastructural improvement of the working conditions  of thousands and thousands of ordinary working people in Gibraltar. 

The minimum wage has been raised from £3.26 to £3.75 and it now applies to all  workers whether they are paid weekly or monthly subject only to a few logical  exceptions.” 

To which as Leader of the Opposition I replied: 

To raise the minimum wage to £3.75, we are told is an improvement which has had  no parallel since the Gibraltarians started governing themselves, that is since 1945. I  almost thought he was going to tell us it was since 1713 or 1704, but no he will probably  do it in his closing speech, because having thought of it he cannot possibly think he is  the most exceptional human being Gibraltar has produced since 1945, there must be 

something wrong with that, he is being too modest, it must be since 1704, Mr Speaker.  The £3.75, if one is to believe the official statistics of the Government in the  Employment Survey, is hardly going to be obtained by anybody because in the figures  on earnings in the Employment Survey there is virtually nobody with a wage below  £3.75, in October 1998. I do not know what it is now, but in October 1998, which is the 

 

last Employment Survey tabled in this House, if we look at the private sector  distribution of earnings in terms of basic wage and overtime, which is detailed by  sector, there is hardly anybody - I know that there is an average, the fact that the  average is £4.00 or £3.90 does not exclude the fact that there may be some people  below £3.75 and some people above £3.75. It is an indication that there are very few  people indeed in full time employment, there may be some in part-time employment  below that rate and I think in terms of industry the only kind of industry that I know of  that is paying that level of wages below £3.75 are people like Security Guards. That hardly qualifies for the adjective that it is the most important advance that we have  seen in the conditions of ordinary working people since 1945.  

Although the Chief Minister made no contribution to it, other Ministers did make a  contribution to what was, is and will probably .always be the biggest advance in the  working conditions and standard of living of people in Gibraltar in terms of earnings in  employment and that was the battle for parity which took four years. 

To suggest that to put the minimum wage at £3.75 or to remove the different treatment  between industrial and nonindustrial in the Government service, all of which are  welcome improvements, therefore nobody wants to say to the Government that what  they have done is not a good thing, it is a good thing, but it is not the best thing since  sliced bread or the best thing since the Second World War.” 

The Minimum wage Mr Speaker was a flagship policy of the Labour Party in the UK  during their successful 1997 general election campaign and was introduced on 1 April  1999. 

The first rate, set in April 1999, was £3.60 an hour for adults aged over 22, covering  as many as 1.2 million adults, who had an average pay rise of 10%.  

I have quoted how the Chief Minister of 2001 announced in the world did the change  in the National Minimum Wage and as I demonstrated in my reply it did not close any  loopholes because of course there were none to close. 

There was no evidence of private sector employers moving people from weekly to  monthly paid after 1989 and if it was happening then the union should have brought it  to the attention of the government at the time and action would have been taken to  stop it.

 

The last increase under the GSLP was in November 1995. 

Mr. Netto was Minister and in 1996, and it was increased in November 1996. He did  nothing to include monthly paid or change the age. He allowed the so-called loopholes  he has identified in 2015 to continue after 1996 and until he stopped being Minister for  employment before 2001. 

In 2001 it was a late Mr. Hubert Corby who revoked the 1989 Minimum Wage Order  and replaced it by the new conditions announced in the budget. 

So Mr. Netto did not change the conditions and in fact introduce no pay increases for  four years. Very socialist I am sure Mr. Speaker. 

Having dealt with these issues I will now revert to the state of the economy.

The Economy 

Today I will deliver my assessment of the economy of Gibraltar for the 47th time, my  first was in 1973 and it was acknowledged by my dear friend Adolfo Canepa then in  Government, that it was not just my first time it was the first time that an Opposition  Member had provided an alternative analysis of the both of economy and public  finances in contrast to that of the Financial and Development Secretary whose  analysis had never previously been challenged and was taken as if it was written in  tablets of stone up to 1973. 

The second occasion when I missed putting my views to this house was in 2009 due  to having to be absent from the budget debate for personal reasons. On that location  of my colleague the Chief Minister described my absence as impoverishing the debate.  He said: 

“The leader of the Opposition, when Chief Minister, was the first Chief Minister to  deliver the speech on the estimates himself as a politician, and not allow that those  speeches be given by the then Financial and Development Secretary. Today would  have marked his 37th speech in this House, on these estimates, since his first election  in 1972, and I am sure that whether Gentlemen opposite agree with his analysis or  not, the whole of the House will be the poorer for the absence of his analysis.” 

The then Chief Minister obviously did not hold the same view of the value of the  analysis that I had been putting in this House at budget time every year and made it  clear by saying, referring to my colleague: 

“He started by saying that the whole House was the poorer for the absence of Mr  Bossano’s analysis. Well, no, we do not agree, only his side of the House is obviously  poorer for the absence of Mr Bossano’s analysis. We do not agree with Mr Bossano’s  annual analysis on the economy and, therefore, its absence cannot therefore be  poverty for us. But it must be clear to anybody that has heard the debate on this Budget  this year, just how much poverty Mr Bossano’s absence as a Leader of the GSLP  results on that side of the House. We do not regret the absence of Mr Bossano’s  analysis, although we do of course regret his absence, personally, and especially the  reason for it. But we do not think that we are poorer for the absence of his analysis.

Since then, as opposition they seem now to value more the accuracy of my analysis  which is not determined by who is in Government but by my interpretation of what the  indicators are signalling in respect of how our economy is performing, and if that  means being self-critical, so be it. 

That was in 2009 I will come back later to remind members what the GSD was up to  in that year which has some relevance to the question surrounding the decision of the  independent charity Community Care to restore the original conditions for payments  to individuals linked to a role of delivering community duties, applicable when it was  first introduced in 1992. 

The economic challenge and more particularly the public finance challenge of the  combined effect of Brexit and the pandemic lockdown is much much worse than the  challenges we faced as a people with the dockyard closure and MOD run down or with  the 1969 frontier closure. 

This is not just my opinion. 

The International Monetary Fund (IMF) view in 2020 was that “the Covid-19 pandemic  pushed economies into a Great Lockdown, which helped contain the virus and save  lives but also triggered the worst recession since the Great Depression”. 

It described the prospect as a crisis like no other in 2020 and an uncertain recovery in  2021. 

In our case not only is the problem unprecedented, finding a solution is particularly  difficult. 

This is for two reasons one external and another internal. 

The external reason is obvious, on both of those occasions in our past the challenges  were ones faced exclusively by us. No other country was affected by the closure of  the frontier except the small percentage of Spain’s population in the Campo area who  finished up having to emigrate mostly to Germany and the UK and in the second 

instance it was only UK who was affected in that other MOD dockyard towns were also  affected by cuts in the MOD budget. 

In both cases UK provided long-term financial help, the Support and Sustain Policy  introduced by the UK after 1969 paid for almost all of our capital investment. 

With the dockyard closure £30 million was provided by UK for its conversion and many  MOD in assets, especially land, was transferred for civilian use. 

On this occasion the UK itself and much of the rest of the world are facing a huge drop  in government revenues and are propping up there economies by issuing  unprecedented levels of public debt. No country is any longer attempting to keep to  any given ratio of debt to GDP especially since in the last 18 months global GDP has  been shrinking and at the same time global public debt has been growing. 

So what is the internal reason, the other obstacle that we face today? 

It is the attitude that apparently exists in a large section of the electorate that the world  owes us a living. 

I think the Honourable Mr. Feetham was the first to call it the entitlement culture and  say we had to do something about it. 

The evacuation generation did not have an entitlement culture except on the issue that  after the war they were entitled to be brought back home to Gibraltar. 

A campaign led by Sir Joshua Hassan which resulted in live long following for the  AACR. 

The closed border generation did not have an entitlement culture and led by Sir  Bob Peliza they took on a second job to help Gibraltar keep going with a closed  frontier. The two jobs society as some critics called it.

The trade union battle for parity was fought for the principle and we said to the MOD  at the time if you just give us more money then we will reject it. It’s the principle we  want. 

In achieving, the principle of parity with UK, to which we are still fully committed, the  agreement produced from the payroll of the largest employer in Gibraltar, a secondary  multiplier effect throughout the economy that helped us in the fight to survive the  closed frontier. 

The 1988 transformation of the economy was not the result of an entitlement culture  but the opposite, the realization that we had to reinvent our economy and make it  private sector led. 

It was the Gibraltar Government telephone Department that led way by voting in a  secret ballot to accept leaving Government employment and transferred to a  joint venture, which brought to Gibraltar the state of the art technology  that Nynex possessed and created the necessary infrastructure for the financial  services and gaming companies that followed. A secret ballot with only one person  voting against moving and I gave that person a written undertaking that would  guarantee his job in the public sector which was honoured by the GSD. 

Today we do not appear to have that kind solidarity and commitment even though we  are facing, a European economy disrupted by Brexit, a Global economy still in partial  lockdown because of the continuing pandemic, and perhaps most important of all,  the need to relinquish the consumerism that is related to the entitlement culture, if life  on earth is to survive. 

Mr. Speaker, I am happy to report that the impact on the economy of Brexit and the  pandemic lockdown has been much less, than many feared it would be.  

I am of course referring to the Gross Domestic Product or GDP which is the annual  value of the output of our economy.  

I have, in answer to questions in this House, given an indication of my expectations  whilst making it clear that this was not the result of a scientific analysis of the data 

because the relevant data was simply not available. In other words a guesstimate  rather than an estimate. I am happy now to be able to confirm that I was not far out. I  said I expected the GDP predicted for 2019/20 not to be affected very much because  Brexit was delayed and the pandemic lockdown impacted on the final month of the  2019/20 financial year. 

In the 2015 general election I had projected that the economy would grow by the time  we reached financial year 2019/20 to a level of at least £2.4 Billion with the possibility  of achieving an economic output of £2.5 Billion. 

Of course in 2015 nobody could imagine what was going to happen in 2016, and even  less what was to follow in 2020. 

I think Gibraltar must be the only nation on the planet where opposition members and  sectors of the population behave as if these totally unprecedented events of Brexit and  pandemic lockdown, had no relevance for either the economy or the public finances  and we can all happily carry-on as we were doing before and if we cannot, then all we  need to do is blame the Government and then everything will turn out ok. 

In 2019, notwithstanding the 2016 Brexit vote, I predicted for 2019/20 a better result  than the top estimate of 2015. A GDP level of £2.57 Billion compared to the £2.5 Billion  I had originally set as a maximum. An improvement of £70 Million. 

The latest estimate we have today is that the economy attained a value of £2.566  Billion in 19/20. 

£66 Million more than the top expectation I had predicted in 2015 but just £4 Million  short of the figure calculated in October 2019. 

In 2019 I also set out our growth targets for 2023/24 at a GDP level of £3 Billion  representing an improvement of £390 Million from a level of £2.61 Billion, or £500  Million from the original estimate of £2.5 Billion. 

At present we are looking at a base line before the impact of the lockdown of £2.566  Billion instead of £2.61 Billion and a drop of 4.9% to £2.44 Billion for the second half  of the 24 month financial period just ended. This is instead of a projected 2 1/2%  increase from £2.61 Billion to £2.68 Billion.

So we are estimating in terms of the performance of our economy a result as at March  2021 which is £60 MIllion less in output than we were originally targeting without the  pandemic lockdown of 2020. 

This level of difference in most nation’s projected GDP would be considered an  acceptable error in estimating, even without a pandemic. 

At question time sometime back, when the UK published a drop of 10% in their GDP I  told parliament that I had no solid data to calculate the GDP impact but my gut feeling  was that it would could be half the UK rate. The estimate we now have is that we have  done slightly better than that with a drop of 4.9% instead of 5%. 

So our economy has done much better than others in the context of the projections  that we had for the post Brexit growth but not the sort of growth we experienced in  previous years. 

So does this mean that we have no problems?  

On the contrary, Mr. Speaker we have a very serious problem because it clearly  provides evidence of what I have identified as a problem of perception on innumerable  occasions in the past. 

The size of the economy is not the same as the level of revenue that the government  receives

Economic output is £60 Million less that we expected but our public Finances have  gone from surplus to a deficit of £138 Million. 

Although a growing economy as a general rule produces higher Government revenue  this is not based on a fixed proportion. 

This is one of the errors that features as one of the factors in maintaining the  entitlement illusion, which now affects all members on the opposition benches.  

This phenomenon which is that so long as you believe you are entitled to something,  whether you are or not, and whether the money to pay for what you want exists or not,  all you have to do is paint a few placards with what you believe you are entitled to,  then march up Main Street and then after that your entitlement illusion will become  reality and all your wishes and aspirations will be satisfied.

I’m afraid Mr. Speaker in the real world it doesn’t work quite like that, and therefore I  can tell Hon Members it ain’t gonna happen. 

Hon Mr. Clinton may not understand much about economics but presumably he does  understand about finance having been a banker and he is the shadow member for the  Minister of Finance. 

Indeed he has given every indication that he does understand exactly how badly public  finances have been hit by the lockdown.  

In the public interviews that he’s dealt with the subject, he has done so to the extent  but I don’t think it could’ve been explained better by him if he had been in Government. 

Indeed I have even commented to my colleague the Hon Finance Minister that the  Hon member was doing a better job of explaining it than he was. 

Which did not surprise me since he had often been briefed on the financial impact in  greater detail than I was. 

So when I say we can protect the economy of Gibraltar and we can continue to grow  and that it is possible for me to aim at delivering the growth targets we set ourselves  in 2019 I am not saying anything that indicates that the public finances are in a good  shape, which they manifestly are not, just because the economy, in my view, is. 

In my new responsibility for restoring financial stability which is closely linked to my  previous responsibility for public sector efficiency I have of course a fundamental  interest in ensuring that we maximize the use of our resources in terms of physical  and human assets and use these in the most efficient way possible so that we can  restore the application of the Golden Rule that I introduced as Chief Minister after  1988. This members know is that living within our means requires that we do not  borrow to meet the operating costs of public sector. 

We were there before the pandemic but we’re not there after the pandemic and it is in  the interest of every Gibraltarian citizen in the public and the private sector, in  education, employment or retirement, that we get back there as soon as possible so  that we can restore the stability that is vital for Gibraltar.

The Labour Market 

The period covering the two employment surveys, which we have available in this  budget gives us a snapshot of the labour market as it was in October 2019 and October  2020. 

I think it is useful to see the changes from October 11 to October 2018 and then see  the effect of Brexit and the pandemic lockdown in October 2019 and 2020. 

The 24 month period which has hit public revenues so hard has created a new labour  context for the planning of the economy. 

When we prepared the post Brexit National Economic Plan we were expecting that the  labour market would continue to grow in line with recent trends and produce a total  employment figure of around 32,000. 

In a post Brexit scenario we expected that the economy should be reshaped to  produce less labour-intensive work we therefore planned that the future market for the  four years 2019 to 2023 should be stabilized at a maximum size of 32,000 jobs and that future Economic growth should be delivered by increasing productivity from a  static workforce rather than an ever increasing workforce as had been the case  previously and which could not be extrapolated to continue indefinitely 

Even though we left the EU at midnight on 31 December 2020 and the free movement  of labour under EU law no longer exists, the degree to which we shall be controlling  the labour market is still pending the outcome of what is agreed in the proposed treaty  on our relationship with Schengen. 

The EU will be setting out their terms and we shall see whether in the negotiation after  that, an agreement acceptable to us can be reached. 

Should there be no deal we will be in the hard Brexit scenario that I have been  suggesting would be the most probable outcome since the result of the 2016  referendum was announced and there is no doubt in my mind that we would have  already been there a long time ago if Margallo had remained in office. 

The Treaty’s outcome in the next six months will put pressure on the labour market as  regards dependence on frontier workers. 

Our dependence on that source of labour has to start declining since if we have an  agreement at this stage it may not survive the so-called implementation period, if Spain  and the EU expect Frontex to be removed and Spanish officials to take over four years  after the treaty comes into effect. 

The Hon Mr Clinton has said: 

“Once we go down the route of the Customs Union it will be difficult to undo and we  may have lost business and business opportunities and some freedom and control in 

managing our economy. There has to be a clear cut economic case that joining the  Customs Union, in whatever form, will either prevent a loss of business without  crossing the red lines of sovereignty, jurisdiction control. This discussion has to be  open and frank.” 

Mr Speaker, I agree with the view expressed by the Honourable member, but I think I  need to point out that in fact we are not asking to have a Customs Union and as far as  I know nor are we being offered a Customs Union. The relevance of seeking some  understanding or agreement is so that the movement of personal purchases does not  stop the queues that no longer exist because we are in Schengen. At the end of the  day every time somebody comes in and buys something from Morrisons or every time  somebody buys in La Linea, has to go through Customs and there is a queue on the  Customs side, then in effect one thing would be negating the other. I think that whether  such a thing is possible, we do not know, but what we are talking about is if we have  managed to the first and then find that the second negates the first, then the whole  exercise would have been worthless. We would still have a situation of people having  long queues to go in both directions. 

At present, there are conflicting figures as to the number of frontier workers between  the numbers registered by the ETB and those declared by the employers in the  response to the October 2020 employment survey. The ETB figures are for 31  December 2020 and were compiled to establish who will enjoy continuing EU rights in  the labour market, in accordance with the withdrawal agreement negotiated with UK. 

The market is likely to be stable or declining from now on but this does not mean that  they will be the same people doing the same work, as in the past the turnover has  been higher than the net increase. For example the labour market figure that we use  for calculating the GDP and therefore planning the economy has always been the  figure in the employment survey reports. Since these are the numbers reported by  employers they are likely to be accurate or if anything conservative as there may be  under reporting of employees but not over recording. 

The size of the labour market consisted of 22,247 jobs in October 2011. This is the full  time and part time figure but not necessary 22,247 individuals since there will be  persons holding two jobs, although it is not likely to be significant statistically.  

The public sector was 4574 and the balance MOD and private sector. 

The private sector, which is what concerns us in the context of the policy on the labour  market, was 16,960 up from 15,561 an increase of 1399 since October 2007. 

In October 2018 the private sector was 23,969 compared to 16,960 an increase of  7009 in seven years. The increase was higher than when compared to 2012 since  there was a drop of 1116 jobs in our first year of government to 15,844. 

So from 2012 to 2018 when it went up every year there was an increase of 8125 in six  years.

The drop from 2011 to 2012 in private sector frontier workers was from 7287 to 6189  a total of 1099. 

The public sector in turn lost 79 making the total more than the contraction in the jobs  market which in fact meant employers substituted with resident workers. 

This was reversed from 2012 to 2018. Frontier workers more than doubled in the  private sector from 6189 to 13,371 providing 7182 workers of the increased demand  for 8125 jobs. 

By contrast with this higher expansion in the private sector from 2018 to 2019 it only  grew by 32 jobs and shrunk from 2019 to 2020 by 1214 jobs. 

The frontier worker figures for 2019 however grew from 13,371 in 2018 to 13,839 in  2090 an increase of 468. This implies that the net growth of 32 jobs meant a  replacement of 436 residence workers by the same number of frontier workers. 

This is entirely consistent with the fact that the public sector grew from 2018 in 2019  by 593 jobs and that of this 437 came from the private sector and were replaced by  frontier workers. 

Quite frankly this is not good the sustainability of the public sector or the security of  the private sector that becomes more dependent on frontier worker fluidity as a result. 

From October 2019 to October 2020 the number of jobs in the private sector fell by  1214, the frontier workers in the private sector dropped from 13,839 to 12,571, a total  of 1268 which implies that the resident workers in the private sector went up by 54.  The correlation between the movement in the public sector and the frontier workers in  the private sector lend support to the complaint of private sector employers that the  demand from the public sector forces them to have to recruit frontier workers as  replacements. 

Whereas the private sector reduced on its dependence on frontier workers in 2020 by  reducing the number by 126, the public sector saw an increase in the number by 57,  with the biggest element being those designated as other EU nationals. 

It is possible that this increase was due to employees living in Spain previously using  a Gibraltar address which they were forced to change due to the controls of the  pandemic initially and later the departure from the EU. 

The frontier workers registered in Gibraltar at the end of December was a much higher  figure than the number than those in the survey returns and will of course be  scrutinized to ascertain the accuracy for economic planning purposes.

Financial stability  

Mr. Speaker I have been entrusted by the Chief Minister with a task of restoring  financial stability, which was not part of my responsibilities at the time of the last  budget. However in practice it is closely linked to the policy of increasing efficiency in  the public sector for which I was responsible already 

I have said when my additional responsibility was announced that we had lost financial  stability because by definition and the determining criterion, stability in public finances  requires the implementation of the GSLP Golden Rule introduced by me from 1988 in  the first Socialist Government and many years  

Financial stability requires balancing income with expenditure in respect of recurrent  spending in the public sector and preferably providing a surplus to fund principally 3  areas, investment in the creation of capital assets, which the GSD also did between  1996 and 2011, contributing to the finances of the independent charity Community  Care Limited and building a rainy day fund, which GSD did not do between 1996 and  2011 and which indeed they rubbished as soon as they were elected in 1996. The  Chief Minister announced in this House “the rainy day is today” and emptied what he  called all my piggy banks. This of course left Gibraltar more exposed to losing its  financial stability than it would otherwise have been, as a result. 

So restoring financial stability in our book requires keeping a tight control on spending. 

Such decisions are taken collectively by cabinet which decides the policy of the  Government although I tend to be blamed if there is a negative reaction resulting from  such measures. 

The Chief Minister has recently told the House and the general public that we have  been so badly hit in our revenues by the pandemic lock down and extra public health  Covid measures that we have finished with a deficit of £158 billion. The largest deficit  in Gibraltar’s history but a similar situation to that experienced by many other countries  in Europe and by the US, except they have never implemented our Golden Rule on  recurrent expenditure and were in many cases running deficits to meet recurrent a  operating costs. 

This year‘s budget reflects the need to restore this stability. 

As the Chief Minister also announced at the earlier meeting, the result projected for  the current financial year 2021/22 is a deficit of £51M, almost £1M a week. Let’s be  clear what this means, the projected expenditure is expected to exceed our projected  revenue by £1M every week starting on 1 April. 

Total Departmental expenditure is £46.5M more than the actual expenditure of 18/19  compared to the annual average of £69.5M for the preceding 24 month period.

The Government is nonetheless committed to restoring financial ability which means  getting back to projecting recurrent levels of spending that come in at or below the  expected levels of income.  

To achieve our target for this year will not be easy and therefore a number of policies  have been implemented that require that cabinet approval be obtained before  expenditure is incurred. This as it should be but in the past it has frequently been the  case that the cabinet position on approving additional spending, has been a paper  exercise since the spending had already taken place. 

This is not a new phenomenon and indeed I remember one particular issue with GHA  spending which was on relief cover which was removed from the budget by the GSD  administration so that the allocation would not be accessible without the prior approval  of the Chief Ministers office in an attempt to keep control of the item, an attempt which  if I remember correctly eventually failed to achieve the desired result. 

The elimination of waste in the procurement process is also something that requires  to be looked into. 

There is a tendency in departments to simply re-order supplies by repeating  periodically what has been ordered in the past. 

It is an area that may not yield the kind of savings we are looking for but we have to  become conscious that every penny counts and we have not been there for a very  long time. 

The mind-set that has been created is that every year without much effort the revenue  of the Government goes up and the expenditure goes up as well, as if that wire the  natural order of things. 

It has not always been like that but I accept that there are many people who have  never known anything else and will need to get used to the new normal. 

A recent press release from the Honourable Lady’s party said something to the effect  that revenue has not increased under the present government and this can only mean  that whoever wrote that has never looked at the estimate book. Revenue increased  from £383 Million in March 2011 to £708 Million in March 2019, 8 years produced a  growth in revenue of £325 Million. 

There has been an increase in revenue in many areas without any increase in what  people are charged simply because there has been more activity in the economy. 

What we have had in the last two years has not been what was normal but could  become the new normal and may require the Government to look in future to new  areas where revenue can be raised.

A real test in the nine months ahead is to contain expenditure so that it finishes no  higher than the amounts that we are approving this week. 

We need to establish as a standard the notion that an increase in costs in one area  must be matched by savings in another. 

The departmental spending in future should be constrained by accepting that the  overall priority is that we as a community consider is more most important expenditure  from the limited resources we are going to have so that they should be devoted to  those areas. 

This is how the public judges us when they criticize a government for spending money  in one area and then having to say no to something else that is more deserving of  public funding.  

It happens to every Government, it has happened to us and the people are right when  they criticize us for it.  

It also means that since we have to borrow £1 Million a week, to cover costs, it’s more  important than ever to spend money on things that cannot wait for better times ahead.  Which I have no doubt will come but I do not think for one moment are around the  corner. 

Keeping the economy on an even keel is something that I am confident we can do in  terms of the modest level of growth we are committed to. A target a target in output of  our economy £3 billion for the end of financial year 2023/24 to is what we aimed for  in 2019 and achieving it is still possible. However restoring revenue levels what it was  in the past is not going to be easy. 

I have already previously said that I do not expect to see the revenue level we attained  in 2018/19, which was the highest ever, £708 Million, before the next election and  perhaps not even for sometime after. 

So the financial strategy we need will therefore require inevitably that we should  address the efficient use of resources to contain expenditure looking at what we  charge for the services we provide and what in most instances is provided at a loss. 

In considering the efficient use of resources, we cannot ignore the size and costs of  the public sector payroll. 

The Chief Minister has given figures that show that although we are committed by our  manifesto to maintain the number in the complement of civil servants that we inherited  in 2011, in actual practise currently there are many more in employment and that  compliment is now far exceeded by the number of employees. The numbers employed  in the public service have also grown substantially since 2011. 

  

It cannot go up any further and indeed it will have to come down but not by dismissing  anybody but by redeploying people to meet changing requirements in the service and  doing this is not austerity it is good management. 

The opposition have criticized us when it has been increasing and criticized us when  it stopped increasing. 

In our first time term Mr. Feetham in a debate accused me of having created a bloated  civil service in the first few months when we were still filling vacancies created by them. 

The GSD had a system of keeping vacancies on hold and not recruiting over a period  of time and opening them up in a pre-election boost to improve their chances of  winning the election. 

We continued their pre-election recruiting for the first four years and added an extra  400 employees. When we put a stop to it after the 2015 election we were accused by  the same Mr. Feetham who had said were creating a bloated Civil Service of  introducing austerity. 

Based on the numbers in the Employment Survey Report for October 2020 and  October 2011 and the subsequent recruitment of 988 AA’s since last October we will  be talking about 1800 more employees than in October 2011. 

And this is something that must be understood, controlling the numbers of jobs in the  public sector is the only way we or any other government can protect the jobs of those  that are in employment now and for the future. 

Every time somebody leaves, we need to ask ourselves do we really need to take  somebody else on and if we find that we don’t then the next question is how can that  money be put to better use. This is not austerity, it is managing one’s budget the old fashioned way, before the culture of entitlement became the norm. It is something that  controlling officers should be doing all the time because they’re not there simply to  control what has been approved by this parliament but to make sure in a world of  changing methodology and new technology, that we are delivering the services we  need to in the most cost effective way. 

Restoring financial stability Mr. Speaker is not rocket science it is simply politically  difficult because it involves becoming unpopular for doing what is required, doing the  right thing to do in the long-term interest of the public service and securing the future  of our country so that we depend on no one. We must develop the capacity to be  competitive to earn a living that will enable us to maintain the quality and breath of  services that we have become used to having until now. 

The antithesis of Financial Stability is the culture of Entitlement.

 

Entitlement 

Perhaps the first indication of a culture of entitlement was the self-granted pay  increase on 17 December 1998 which was presented to this House in the first GSD  term. 

Something they had not bothered to put in their manifesto during the election  campaign. 

The government had first granted the Financial and Development Secretary a 25%  increase and then they followed by linking their pay to the new enhanced salary giving  themselves a higher percentage than was the case in respect of the old salary.  

As Leader of the Opposition I pointed out that when salaries had previously been  reviewed Sir Joshua Hassan had discussed it first with Peter Isola, Leader of the  Opposition and myself as the sole representative of the GSLP in 1980. 

The GSD had decided that it should be done on their own without any consultation.  The reply from the then Chief Minister was that by bringing a motion to the House and  the fact that we could speak and vote against the motion, it meant that we were being  consulted. It’s worth remembering what the definition of consultation was with a GSD  Government, Mr Speaker. 

The basic argument for the need to introduce much higher salaries, which reflected  the values of the GSD, was explained by the Chief Minister as follows. He said:  

“The fact of the matter is that it is the Government’s view that if as Gibraltar must in its  long-term interests, if Gibraltar is going to attract into the field of politics and through  the field of politics into these ventures people of the right calibre to govern Gibraltar  they have got be paid adequately, otherwise Gibraltar will be condemned to be  governed either by people who have enough private capital to do it on a charitable  vocational basis, in other words the stinking rich or those people for whom a salary of  £27,000 amounts to an improvement in their salary which of course was the case with  most of the Opposition Members when they became Members of Government. It is  the view of the Government that it is not in Gibraltar’s interest for the categories of  people who can afford to go into politics should be limited to that. The point is to give  the electorate the choice of every category and not to use quite wrongly the system of  remuneration to keep the competition out until eventually people offer themselves,  regardless of the conditions to do something about it. The Hon Members are entitled  to their views, which of course are as respectable I am sure as our own but have not  heard it articulated anywhere in Western Europe that those that govern should  somehow not be paid a full and proper salary because there is some romantic value  under-paying them because somehow it demonstrates their commitment to the people  and it demonstrates their sense of sacrifice and their sense of commitment to the  affairs over which they are responsible.”

 

I would point out that although he tried to wriggle out of it later the implication of what  he had said was clear. His message was that the existing system could only attract  the filthy rich who were bored and were entering politics as a hobby or the ignorant  poor who would see it as an opportunity to get a pay rise. He went on to say that the  second category was the one that had applied to the GSLP Minister’s in the previous  administrations. He argued that the word ignorant was my interpretation, well if it was  not ignorant in what respect were the GSLP Government of 1988 to 1996 made up of  people of low calibre attracted to become involved in politics in order to get a pay rise  because we had no expectation of being able to earn £27,000 otherwise. 

One person who was probably better off at that point in time was Minister Netto who I  suppose that GSD could have considered a low calibre candidate, but I don’t know if  that was also the attribute that they applied to Peter Montegriffo and the Hon Mr  Azzopardi who were also part of the team, perhaps they were the filthy rich. 

Mr Speaker in 1998 when I pointed out that the normal way we set guidelines in this  house was by reference to getting advice from the House of Commons as had been  done for members remuneration in 1979, the then Chief Minister said that by wanting  to bring an expert from UK I was undergoing a sudden conversion on the road to  Damascus.  

In 1998, there seems to be an urban myth within the GSD that I am constantly making  trips to Damascus. 

Given the level of insecurity that there is in Damascus, maybe its wishful thinking on  their part. 

Calibre might be the yardstick that the GSD has used in selecting their candidates  over the subsequent years although I cannot say that I’ve seen any spectacular  improvement over the years. I would not be expecting a need for it in the GSLP since  it does not classify people in terms of calibre but in terms of political conviction and  commitment to the defence of Gibraltar against any possible attempt by Spain to take  us over, the qualities that GSLP requires from potential candidates. 

Those values and those convictions are not swayed by the size of the pay envelope. 

But the new value system that the GSD wanted to attract into politics people of calibre  is a measure of how much some people need to be paid to be attracted by the  opportunity of being involved in guiding our country’s future. If it’s a question of calibre  political ideology is not relevant in the system, it becomes just another job which pays  well and allows you to lord it over your fellow citizens which in the case of the then  Chief Minister clearly was what gave him his adrenaline rush. 

So if the ministers only do a good job if they are paid enough money why should  anyone else in the public service be any different? That was the seed that led to the  dismantling of the parity basis for relativity in the public sector that has had such a  negative effect, on the total cost of the public payroll.

The introduction of the parity principle which has been seriously undermined enabled  people to accept pay differentials between different groups and trades on the basis  that the rule was that you were being paid this for doing the same work as in Uk in the  public sector, for better or for worse. 

Since then with every departure from UK analogues the culture of entitlement has  grown by discontent with the creation of internal relativity’s, peculiar to Gibraltar. 

Why should a police constable reach a higher pay, in the lower part of an SEO and  not a nurse? Who is more valuable in our society? It depends, if we’re in the middle of  a crime wave or in the middle of a pandemic.  

How can such a system endure without being constantly affected by never ending leap  frogging claims, which people feel entitled to have met. It was what used to be the  norm in the 1970’s and was banished by UK parity determining the acceptable  relativities. 

If someone is happy getting £50,000 he becomes unhappy if he sees a fellow worker  overtaking him and jumping above, going from £50,000 to £70,000. It happened with  the GSD in Government and has continued since and is very difficult to put an end to. 

The culture of entitlement grew under the GSD was inherited in 2011 and has been  growing since. Its most recent and worst example was at the beginning of this month. 

On Wednesday, 30 June the GSD in general and the Honourable Mr. Clinton in  particular was condemning the increase in contributions which will be paid as from this  month and go to restore the finances of the statutory benefits fund. 

The payments as I said in my interview by way of example, show the 30,000 workers  pay insurance contributions and fund the old age pension of some 6000 pensioners.  Failure to raise contributions means having to borrow money and subsidize pensions  which contributors of the past have earned with the contributions that went to pay  pensioners of their time in the pay as you go system we inherited in 2011 and not the  1996 model which was to hold reserves that provided investment income and made  pensions funding less vulnerable and less dependent on the size of the labour market  and the level of insurance payments. 

The next day on 1 July the GSD members of parliament participated in a  demonstration which is calling for payments to persons who receive tax free  occupational pensions in excess of £21,00 predominantly retired government  employees mainly in previously highly paid employment mostly those in the civil  service non-contributory pension scheme which they, the GSD in government shut  down in 2011. 

This demand the demo organizer says is to be backdated as if the charity that make  payments to persons in need, had any legal obligation to pay anyone anything and  must continue non-means tested payments until the old age pension for men is  brought down from 65 to 60.

Introducing such a change is to increase the cost of what would be the payment of an  old age pension to five times as many men as is the case until now. So if we did what  the opposition wanted us to do we will be paying pensions from the statutory benefits  fund, which has no money, to men reaching this year the ages of 65, 64, 63, 62, 61,  and 60. All this year and at the same time, according to the stance of the day before,  we have to make no increase in the payment of the social insurance contributions  which the legislation provide has to pay for the pensions. 

The policy of the members opposite who have previously oppose borrowing to create  assets and fund fixed capital formation, even though they did it in government and  were going to do it had they come back in 2011, they who up to now have opposed  capital borrowing now want recurring borrowing to pay for pensions at 60. The rest of  Europe which like us faces an aging and longer living population is going in the  opposite direction and raising women’s pensionable age to 67 and not reducing men’s  pensionable age to 60. 

I have to tell my good friend Roy Clinton that I’m disappointed that he should have  participated in this blatantly obvious farce which destroys any credibility he might have,  and had in my eyes, for a commitment to prudential public finance policies. 

The GSD Mr. Speaker, has blown hot and cold on the question of public expenditure  and the entitlement culture to the point of being almost psychotic.

Social Security 

I have also recently been given additional responsibility as Minister for Social Security  and my first responsibility was to put into affect an increase in Social Security  payments which had not previously been raised since 2018. 

Mr. Clinton made the point in a public statement that it was the first act I did in my  additional duties. 

I hope that it is not that he believes always trying to persuade others to believe that  the reason for increasing is the fact that I have been given the responsibility for Social  Security which of course is not the case because it is the implementation of the policy  of the government, with which I entirely agree of course 

The rates of social insurance contributions are not government revenue as every  member of this house knows. 

The money that is paid in social insurance contributions goes directly into the Gibraltar  health authority as to 70% and directly into the statutory benefits fund as to 30%. 

This has always been the case except that in in a particular year the GSD broke the  legal limit for maximum public debt and to restore the ratio they retrospectively  Legislated for the contribution to go into and out of the consolidated fund before it went  into the GHA account and it has continued to be done this way since. 

The social insurance pension fund has been facing a potential crisis similar to the one  faced by the revalued pensions for pre 1969 frontier workers for years without the  issue being addressed by the GSD. 

I will be giving some details of the pre 1969 frontier workers situation later on. 

The statutory benefits fund Mr speaker, the current version of the social insurance  fund has since its creation received the social insurance contributions.  

This are not taxes and have never been taxes and have never been credited to the  consolidated fund.  

I hope the honourable lady by now understands how this works and that the statement  from Together Gibraltar which says the opposite reflects the ignorance of whoever  wrote it and not hers. 

I will read the statement and demonstrate its inaccuracy. 

Together Gibraltar says: 

“The Government's recently-announced increase in social insurance payments  amounts to a regressive tax, and damages an already battered private sector - adding  any such measures should have involved consultation with the Federation of Small  Businesses and the Chamber of Commerce. In a statement on the changes - which are set to come into force from the 1st July - the Opposition party says it believes that  given the damaging effects the pandemic has had on the Rock's economy, it is not the  time to increase social insurance payments. 

Together Gibraltar says the Government's assertion that those on the minimum wage  will not be affected is "disingenuous", as the rise will affect a large number of  employees in the bracket only marginally higher - adding these numbers are especially  high in the most troubled sectors, such as retail, wholesale and hospitality. 

It also describes as disingenuous Sir Joe Bossano argument that social insurance  payment are used to pay pensions and healthcare - arguing that most government  revenue is collected into one pot, and that therefore, if any expenses in healthcare  happened to exceed the revenue from social insurance, the Government could source  funds from other parts of the budget.” 

A tax is something we all pay to finance the provision of public services and pays for  the salaries of public servants, government contractors and procurement of supplies.  

With social insurance if you do not pay you do not receive a pension. The more  contributions you pay the higher the pension you get. These are insurance premia just  as if you contributed to an occupational pension plan. 

If you don't pay your taxes you can get prosecuted but if there is a fire in your house  the Fire Brigade will still come to put it out. I hope this assists Together Gibraltar to  understand the difference  

Not only is it not a tax, it just cannot be regressive if it's a percentage of earnings  because the higher the earnings the higher the contribution, though the cap can be  said to be regressive and that is what has been made less regressive by the increase. 

There are according to the Employment Survey Reports 29,516 employee jobs of  which 18,105 are above the cap would pay more if the cap was at a higher level than  the £363 weekly income.  

Of the 11,411 with income levels below £363, 4089 are between the minimum wage  on the £363 and are affected by the increase in the cap. 7322 are at the minimum  wage or below because they worked less hours and have lower earnings. That group  is not affected by the increase in the cap.  

The money will go to pay for pensions that have been increased every year since 2018  whereas contributions have not gone up.  

The increase in the voluntary contribution eliminates the regressive nature of this  contribution where the amount paid was lower than the rate paid by employees who  were cross subsidising the persons making the voluntary contributions. 

At the previous rate of payment of the volunteer contribution, if we compare it with the  purchase of an annuity, was the equivalent of having a rate of return of 22% and at  the increased level the comparable rate of interest is 9%. 

In terms of what it buys in pension increases this depends on how many employee  contributions have already been paid, with the lower the number of contributions  already paid the higher the benefit obtained.  

At the old rate of voluntary contributions, the contributor would get his money back  from a higher pension within a time range from 6 months to 5 ½ years.  

At the new rate the time range is longer and would be from 1 year to 13 years. 

There are 232 voluntary contributors currently and the department will see what their  personal circumstances are to consider if any adjustment is required in their case. Any  new volunteer contributor will be paying the new rate. 

The social insurance fund has been having serious problems of long term funding as  currently structured. This has been the view of GSLP for a long time and explains why  we are committed to deliver a new social insurance scheme in which the ages of the  beneficiaries would be equalised which is what our manifesto says. The new scheme  cannot be prepared let alone delivered until we know what our relationship with the  EU will be as a result of the Schengen Access Agreement is. If there is an element  that deals with the Social Security arrangements for EU workers then it will mean that  what we are able to do will be constrained as opposed to work would be the case if  such a condition is no longer applicable. We are not going to do anything until we can  deliver a system that will protect future generations which is the responsible approach  to take on what is a long term intergenerational issue.  

At present young people still working pay for the pension of those who are retired.  That is not a system that can survive and is not how the scheme was intended to work  initially.  

I illustrated in a recent example that I gave that as it stands at present every additional  pensioner added to the expenditure requires 5 new workers to contribute to the  revenue. 

Or if the increasing number of workers are not happening then it would mean that  future increases in contributions would have to be higher. 

Pensions and Community Care 

The role of Community Care in protecting the standard of living of our senior citizens  seems to have been forgotten by members opposite in spite of the fact that in  Government the party they represent acted in a totally disgraceful way pretending to  uphold the survival of the charity whilst planning its demise as was revealed for the  first time in an interview published in the Gibraltar Chronicle on Thursday 17 July  2010. 

I quote what the then Hon Chief Minister said  

“For example on the pensions and Community Care the complete abuse of a  statement by the leader of the opposition that the Government has allowed Community  Care to run out of money. He did not say that as a matter of bookkeeping.  

He said that to transmit to the elderly of Gibraltar the view that the Community Care  

payments may be in jeopardy which he knows to be a complete and utter lie. But did  he have any reluctance to worry elderly people in Gibraltar? No. 

It has been the Governments policy for 15 years to run down the fund in Community  Care so that we can make alternative and better arrangements.  

Does that mean that anybody anybody’s payments are in jeopardy? No.”  

I know they have since disowned the policy of getting rid of Community Care, whilst in  opposition since 2011, but they spent from 1996 to 2009 also denying whilst in  Government their plan to close down Community Care . That is until they owned up to  what they had been planning and doing from 1996 to 2010. 

I also know that they frequently claim they are not responsible for the actions of the  GSD in Government except when it suits them as was recently the case where Mr.  Bossino, who aspires to be the next leader of the GSD, told Parliament that he was  proud of the GSD‘s record on Tourism in Government as if he had had anything to do  with it. 

I will not set out to demonstrate that even in that area there was little done to be  particularly proud of, because what I want to establish is simply the link with the past  performance of the GSD Government that is there. 

Much of what I am about to say is in the public domain already and of course because  of my long involvement I sometimes take for granted that others in this Parliament or  outside it, while organizing petitions, know the past and choose to ignore it. However,  it is quite possible that there are people out there who have no idea of the past and  are making false statements out of ignorance rather than malice, and I am prepared  to give them the benefit of the doubt, Mr. Speaker, by putting the record straight.

 It is also the case that much of what happened in the past in relation to the funding of  social insurance old age pensions is very relevant to understanding what is happening  now and what the future may hold. 

The creation of an old age pension scheme was the work of the AACR Government in  1955, following on the UK National Insurance Act of 1948. 

At a later stage collection for the Group Practice Medical Scheme contributions was  added. 

The old age pension Act that was passed created a scheme that was always intended  to be self-funded with the revenues kept separate from the consolidated fund and  legally held for the purposes of the Act and not available to Government to be used  for any other purpose.  

The requirements of the social insurance fund was subject to periodical actuarial  reviews usually five years to establish the level of contribution that was needed to  maintain its self-sufficiency and generate a surplus as that would create a reserve  which was considered by the actuary to be at least the equivalent of one year  estimated payments that would be made to all beneficiaries.  

This was seen as the prudential level of reserves. 

So those who say that this is simply a tax that Government can use for whatever they  want, do not know what they are talking about. 

Given that the same system has been in place for 66 years there is no excuse for not  knowing this. 

It was precisely because it was not part of the consolidated fund where all taxation  receipts go, that there was a Special Fund and a Spanish Sub Fund made up of  contributions by the withdrawn frontier workers with payments from 1955 to 1969. 

The total amount contributed by each worker was of the order of £38 (thirty eight  pounds) in the fourteen years. 

Based on their contributions they had an entitlement of a maximum weekly pension of  around £1 (one pound) a week for a single person and something like £1.50 (one  pound fifty) for a married pensioner. These were the benefits also payable to  Gibraltarians at the time. 

In 1973 the Social Insurance Ordinance was amended to give annual pension  increases for those contributors who continued to do work in Gibraltar and pay Social  Insurance. The contribution rates and the pension payable for this second category  was raised every year. The Spanish workers did not contribute because they had been  withdrawn by the Franco Government.

The Government of Sir Robert Peliza offered to transfer the accumulated fund of the  Spanish workforce and their accrued rights to the Spanish Government but this offer  was rejected by Franco. 

The 1973 amendment however, provided for pension increases for residents of  Gibraltar who had not contributed to the pension fund at the new increased rates post  1969 and this was the offending clause that permitted Spain to claim higher pensions  in 1986. The number of Gibraltarian pensioners in this category claiming on the basis  of residence rather than contributions was minute. 

In 1985 the Frontier was re-opened following implementations of the Brussels  Agreement. The Spanish Government informed Spanish pensioners at the time that  they would be able to collect their Social Insurance Pensions at 1969 rates from  February 1985 and that this would be re-valued to the level payable to resident  pensioners in January 1986. 

The GSLP in Opposition proposed that the Social Insurance Ordinance be  restructured to avoid the liability that would arise and which the fund was incapable of  meeting. 

The Gibraltar Government under Sir Joshua Hassan rejected the solution on the  advice of Sir David Hanney who said it was contrary to EU Law. This advice was  incorrect. 

In December 1985 at the Brussels Negotiating sessions in Madrid Sir Geoffrey Howe  agreed with his Spanish counterpart to pay re-valued pensions to former Spanish  workers from 1 January 1986. This had not been previously cleared with Sir Joshua  Hassan who was present at the negotiations and who issued a public statement  refusing to accept this liability. 

An agreement was reached with UK under which consultants were engaged to  produce a report to examine how the Gibraltar Social Insurance Scheme could be re financed to meet the liability and the ODA contributed some £15 million to meet the  payments for the period 1986 to 1988. 

The GSLP included a Manifesto commitment that it would not contribute one penny of  Gibraltar's money to finance Spanish re-valued pensions in the 1988 elections and  won on this basis. 

The Consultants Report commissioned by the UK simply came up with the self-evident  conclusion that the liability running at £8 million a year could be met by large increases  in Income Tax or Social Insurance contributions. 

Immediately after the election I held meetings with Baroness Chalker the minister  responsible for Gibraltar and this was the first policy conflict with the UK Government.

The amount allocated to meet the pre 1969 revalued pensions proved too little and the  first demand was that Gibraltar should start paying after July 1988 when the funds  available were exhausted. 

The UK wanted us to pay all of it. 

They then settled for us paying £1 Million which the AACR had offered to contribute  even though they considered it was not enough I was told that the previous  government had put £1 Million on the table and I had to honour it. 

My reply was that from the Opposition I had said not one penny, and I had a manifesto  commitment saying not one penny. When people voted for us, they had removed the  £1 Million from the table and not left even one penny. 

UK diverted ODA funds allocated by Parliament in 1984 to assist Gibraltar's infra structure projects, which the AACR had failed to spend and used it to avoid the ending  of payment to Spanish Pensioners in August 1988.  

This was done without the agreement of the GSLP Government. 

The UK agreed to continue payment beyond 1988 but attached two conditions: 

Pension levels would be frozen at January 1989 levels for all pensioners, including all  local pensioners who had made vastly larger contributions than the Spanish  Pensioners. 

The Social Security System would be dissolved and the balance accumulated in the  fund distributed to contributors with the UK paying pro-rata lump sum payments to  Spanish pensioners when this happened post December 1993. 

UK informed the Spanish Government and the EU Commission of these  arrangements. 

In 1989 the Government established a Social Assistance Fund which was entirely  funded from the proceeds of import duty. 

The Fund's objectives included the making of grants to charitable organisations. 

Also in 1989 a Charitable Institution, Gibraltar Community Care Limited was set up by  a number of individuals 

It introduced a Household Cost Allowance for assisting persons living in Gibraltar  whose cost of living was and is much higher than those across the border. The HCA  was paid in December 1989 at the rate of £26 per quarter for a single pensioner and  £39 per quarter for a pensioner couple, irrespective of the existing level of pensions  from the Frozen Social Security System.

The structure that was to replace Gibraltar's Social Security System post 1993, was  after that under discussion with UK. 

At first UK experts insisted that there could not be a State run social insurance  successor based on Social Security legislation as this would be caught by EU  regulations and be seen to be a devise to discriminate against Spanish Pensioners by  ending their Pension entitlement but re-instating them for Gibraltar Pensioners. They  insisted that each pensioner and each worker contributing to the scheme up to  December 1993 would receive a lump sum after the dissolution of the Gibraltar Social  Security System. This lump sum would be transferred to an occupational private sector  Pension Scheme which would be a money purchase scheme. 

After innumerable meetings and considerable work to try and meet UK's demands the  advice was reversed. The UK experts then decided that a private sector Occupational  Scheme would not do as it would be in breach of UK requirements which require the  aggregation and apportionment of Social Insurance Pension rights based on  contributions made in different Member States and the Gibraltar Government was told  it had to replace the existing system with a State Run public sector successor scheme  which would operate only on the basis of contributions made from January 1994  without any credits for persons who had not retired but had been contributing under  the scheme up to 1993. 

On the suspension of the Pension payments the Spanish Pensioners were informed  that in accordance with the 1989 UK-Gibraltar agreement accepted by the Spanish  Government at the time they would receive lump sum payments. 

On instructions from the Junta de Andalucia, the Spanish regional government, the  bulk of these pensioners refused their payments and the existing level of pensions  were provided to them by the Spanish Andalucian Government as loans in anticipation  of forcing UK to resume Pension payments. 

UK argued that there was no obligation under EU Law to keep paying Social Insurance  pensions for life or at any given level. Spanish pensioners argued that there was a  legitimate expectation of life payments. 

The Spanish Pensioners commenced legal action against the Gibraltar Government  funded by the Andalucian Government using the Chambers of Messrs Triay and Triay,  which at the time had Mr Peter Caruana as partner. The Gibraltar Government was  alleged to be discriminating against the Spanish workers on the grounds that  Community Care Limited was continuing to pay Social Security pensions which had  been suspended in the case of Spanish workers. 

There was absolutely no substance in this allegation since the Pension had been  suspended for both Gibraltarian and Spanish Pensioners and Community Care 

Limited had been making Household Cost Allowance Payments from 1989 and not  from January 1994, the time of the suspension of the Pensions. 

In 1994 the EU Commission took up the question of the dissolution of the Social  Insurance Fund with the UK Government as a result of receiving complaints from  Spanish Pensioners who at the time were in receipt of temporary loan payments from  the Junta de Andalucia. 

The UK Government refused to provide the Gibraltar Government with details of its  exchanges with the Commission and copies of the correspondence claiming that these  matters were confidential. 

By October 1995 the Commission issued a Reasoned Opinion against UK on the  grounds that the decision to dissolve the Social Insurance Fund was in breach of EU  law. The initial position of UK on the replacement being an Occupational Private Sector  Pension System was also considered by the Commission to be against EU Law. 

UK's position at first was that they would defend the decision before the European  Court of Justice on the basis that there was no obligation to have a state ran statutory  Social Insurance Pension System or to have a given level of Pension Rates, that this  was up to each member state. 

However, early in 1996 the UK capitulated when faced with imminent infraction  proceedings and decided to restore the frozen pension system which had been  terminated in 1993 and which had operated since 1989. 

In the course of meetings with officials I was asked to agree to restore the Frozen  Social Security Pensions back-dated to 1 January 1994 (it should be noted that the  UK decision to limit the Scheme to five years, 1988 to 1993 was to contain the cost to  £50 million as opposed to the estimated £250 million for keeping the system going for  the lifetime of all Spanish Pensioners.) Given that this requirement was for pensions  continuing frozen, for perhaps another twenty years. 

Naturally I refused to give any such undertaking. The United Kingdom position was  that they would not proceed with paying for the restoration of Frozen Pension  payments until this matter was cleared up. I had agreed to a text of a letter provided  by them as to the commitments that they required prior to this question of the  Household Cost Allowance being raised, but would not accept that the letter should  be amended to include any reference to the payments by Community Care. My  position was that since they were saying there was no legal obligation to continue with  the frozen pensions they should go ahead and let the Commission commence  infraction proceedings and defend themselves in the European Court of Justice using  the arguments they had used to persuade me in 1988 to agree to the dissolution of  our Social Insurance system in 1993.

 

Following the 1996 General Election, in the Official Opening of the House of Assembly,  in my statements as Leader of the Opposition, I made this public. When later in 1996  the new government brought legislation to the House of Assembly to restore the Frozen Pensions backdated to 1 January 1994, it claimed that they had not had any  negotiations on this matter with the British Government and that they were simply  giving effect to what had been agreed with me. 

Mr Speaker let me now summarize the position after all the detailed explanations I  have shared with honourable members. 

In 1992 Community Care was providing support to pensioners and widows and was  asked by our Minister Robert Mor to introduce a scheme for unemployment over 60  year old men, willing and able to work but not finding a job because of competition  from younger applicants in the labour market. 

What he called a “social wage” meant that rather than people depending on social  assistance, those in need provided useful duties in the community and received the  equivalent of a part-time job on the National Minimum Wage which had been  introduced in 1989, doing 80 hours a month, of community duties. 

This is what started in 1992 and continued until 2008, for 16 years mostly under the  Gsd. 

In 2008 Community Care was asked by the GSD government to extend it to everyone  whether the working or not working with income from work but not from occupational  pensions below £15,000 and not above £20,000.  

By 2009 it grew so big that the charity could not provide enough community duties to  those they paid and reduced the requirement from 80 hours a month to 8. 

At the same time the GSD that had been planning all the time to close down  Community Care by letting it run out of money, as was revealed in an interview in the  Chronicle in 2010 and had set up a committee to stop funding the charity and pay a  statutory benefit system, means tested HCA or some other similar product. 

The GSD government set up a committee of senior civil servants in December 2009  and announced their plan as government policy in the New Year Message of 2010, in  a lengthy interview in the Chronicle and in the budget session in the House. 

They defended the policy on the grounds that it had to be done to protect government  finances from claims for equal treatment from frontier workers which might be legally  successful and create a liability on public funds described by the then Chief Minister,  as a ticking time bomb.

 

The government was not willing to provide the opposition with any information of how  this was going to be brought about. 

The implementation date was delayed and during the election campaign of 2011 they  confirmed it would be ready to initiate in January 2012. 

In opposition former GSD Ministers claim not to know anything about these plans even  though they were candidates in the election that contained the commitment.  

In 2015 they announced a change in policy and said they would continue the present  system of funding Community Care. 

We get elected in 2011 and start refunding Community Care which had no reserves  when we came in.  

Since Community Care were getting in the finance they needed they continued with  the policy they had been requested to introduce by the GSD in 2009 which the GSD  were planning to end in 2010 but which apparently Community Care had no knowledge  of. 

As a result in the last 8 years the charity has dished out almost £40 Million from the  funding we provided in a scheme that was originally designed by us to help those in  need.  

The recipients consisted of practically the entire male resident population aged  between 60 and 65 including a former Chief Secretary receiving £6000 a year from  the charity for supposedly doing some community services for 8 hours a month. 

From day one the charity has been funded from the receipt of import duty initially  directly and later with the payment approved through the Social Assistance Fund but  identified as to the source.  

This has been seen by both GSLP and GSD governments as necessary to prevent  anyone claiming an entitlement as a taxpayer or contributor to Social Security. 

So the GSD wanted to close it down in 2011 because there was a risk of challenge,  change their mind in 2015 and agree that there is no risk and in 2021 take part in a  demonstration on the basis that the payments from the charity is an entitlement which  forms part of the statutory pension creating the very risk that their Chief Minister was  trying to avoid in 2010 when they believed it was there.  

Mr. Speaker you could not make this up. 

Let me spell out what the opposition is supporting for community officers and the  honourable lady wishes to extend to everyone that has paid 50 contributions to our  social security system in their lifetime making it legally binding to make payments from  the age of 60 for which no funding exist ever nor is likely to exist in the future.

  

The decision of the Members of the Opposition to publicly support the arguments of  entitlement of persons who have retired from work, some voluntarily at an age as early  as 50, with incomes of several multiples of the national minimum wage, convertible or  converted into six-figure lump sum’s, is the most irresponsible, incomprehensible and  dangerous behaviour I have witnessed from elected members in my 49 years of  membership of his House. 

It is a level of insanity without parallel, inexplicable and indefensible, to put our  country’s future at risk, in order, presumably, to obtain electoral advantage. 

If they were in Government with a policy of delivering what they are now promising,  which of course is not necessarily what they would do, given the 15 year record of  making false promises to ensure the survival of Community Care, promises made in  this House, whilst secretly planning for almost 15 years to do the very opposite of what  they were promising. 

But at least Sir Peter Caruana who was guilty of that deceit, eventually came clean,  went public and explained why he was doing it. 

Let me remind the present members of the GSD, how GSD in Government secretly  planned to close Community Care down. 

In the last quarter of 2009 the GSD Government set up a working party which was  formed to ‘brainstorm’ ideas for the possible reform of the Social Insurance and Social  Assistance Systems.  

The working party consisted of the following participants: 

Dilip Dayaram Tirathdas - Financial Secretary 

Mario Gomila - Principal Secretary, DSS 

Frank Carreras - Commissioner of Income Tax 

Marie Carmen Davitt - DSS – SEO 

Stephanie Saez - DSS – HEO 

The Agenda included the following items: 

  1. Gibraltar Community Care – Current Benefits  
  2. Gibraltar Community Care – Cash Flow Statement  
  3. Current Social Insurance Benefits and Social Assistance payments 4. Statutory Benefits Fund – Current position and year-end projections 5. Social Assistance Fund – Current position  
  4. Background information on criteria for inclusion of benefits as ‘Special non contributory benefits’ 
  5. Council Regulation (EC) No 1408/71 
  6. Introduction of new Special non-contributory benefits: 

  

The party considered the following options: 

The existing Community Care benefits could either be discontinued in February  2010 – when the Gibraltar Community Care runs out. Alternatively the payment of  these benefits could be closed to new applicants only and continue to be paid to  existing beneficiaries on a ‘closed scheme – personal –to-holder basis’. Some  transitional arrangements in the winding down of these schemes would also need  to be considered; 

New benefits would then be introduced to enhance the Basic State Pension (old age  pension) in the form of SNCBs or some other type of non-exportable benefits – for  example:- 

The Minimum Income Guarantee (“MIG”), which is currently payable from the  Social Assistance Fund, could be used as the basis for reform. The criteria for the  award of MIG could be reviewed and its application extended to provide additional  income to the over 60’s in our community in the form of social assistance on a  means-tested basis. Such payments would be in addition to the Basic State  Pension payable under our Social Insurance Scheme; 

The Community Officer Scheme could be replaced by a new and non discriminatory ‘Community Work Scheme’ available to all unemployed  persons over 60 in our community. This would also be ‘based on an individual  assessment of financial need’ and could be administered by say the Employment  Department as part of its assistance with job-seeking functions. 

A system of tax credits could be introduced for the over 60’s; 

The existing Pensioners’ Utility grants could be extended to cover the costs of  electricity, water and telephone charges of the over 60’s. 

Other areas of possible reform that were looked into, as follows: 

The streamlining and simplification of the benefit systems under both the Social  Insurance and Social Assistance Schemes.  

The possibility of transferring some of the functions related to Unemployment Benefits  to the Employment Department- in order to minimise the current duplication of work in  this area. 

In Gibraltar the qualifying period for a full Basic State Pension is 45 years for men and  40 years for woman. 

In relation with the issue of benefits currently payable by Gibraltar Community Care,  the following was discussed:

 

The possibility of integrating these benefits within the Social Insurance Social  Assistance Systems; or 

Replacing some or all of these benefits with other payments or benefits that can  be classed as ‘non-exportable’ under the EU Regulations. 

The integration of the Gibraltar Community Care Benefits within the Social Insurance  Scheme would increase the liabilities of the Social Insurance Scheme, significantly.  This is because state pensions are ‘exportable’ and ‘insured’ persons who work in  Gibraltar for just one year are entitled to a pro-rata pension (subject to other qualifying  periods of insurance being met, albeit that such qualifying period of insurance may be  in another EU country).  

Alternative benefits that would not be ‘exportable’ or that could be classed as ‘special  non-contributory benefits’ (“SNCB”) were therefore considered to be more appropriate.  The requirements under the relevant EU Regulations were looked into in order to  establish the criteria required for benefit payment to be non-exportable. 

In order for a benefit to qualify as an SNCB it would need to be: 

  1. A cash benefit; 
  2. Non-contributory in nature; 
  3. Funded out of general compulsory taxation; 
  4. Not based on aggregation of periods of employment or contributions; and  5. Based on an individual assessment of financial need. 

The Party submitted a report on the 18th December 2009. That was the secret plan  initially to be delivered before the 2011 General Election and then deferred to be  implemented after 

Chief Minister Caruana said there was a ticking time bomb and as long as Community  Care existed because it’s charitable payments could be challenged, the challenge  might be successful and the UK this time round would not pay, Gibraltar would face  the massive bill. 

But what the present Leader of the Opposition and the rest of the GSD have just done  by supporting the campaign, the arguments and the demonstration against Community  Care is 1000 times worse than what Chief Minister Caruana did. 

The members opposite told us in 2015 that they knew nothing of this, which they were  committed to implement if they had been elected in 2011. That is why I do not believe  this because if they knew nothing why did they not ask? 

This Policy was reflected in the Chief Minister’s New Year message which included  the following passage:

 

“When in 2007 the UK paid the pensions claim of pre 1969 Spanish workers based on  their challenge to Community Care, which Gibraltar has always told the UK was its  responsibility, the UK has made it clear that Gibraltar would have to meet the financial  cost of any successful EU challenge by post 1969, ie current Spanish workers in  Gibraltar, who eventually may make the same claim. 

Whatever we may think of the merits of any such claim, it represents a financial time  bomb ticking under our children and grandchildren in the future, for which they cannot  have recourse to the UK. 

I am not willing to bequeath this potentially lethal legacy of a massive and unaffordable  backdated claim to our future generations, and so, this year the Government will, as I  said at Budget time, introduce significant reforms to protect Gibraltar from this  possibility. This reform will NOT result in financial loss to our pensioners or recipients  of Community Care.” 

How can the Chief Minister deliver a Government New Year message and his  Ministers not have a clue on what it is all about, on something which the Chief Minister  says is so serious but it is an unforgivable irresponsibility not to support what he is  saying has to be done to save Gibraltar? 

In 2015 Mr. Feetham as leader of the Opposition brushed aside all my arguments and  said it was just a change of policy. A change of policy from believing it was a ticking  time bomb to it believing a dumb squib, not dangerous at all.  

Some change in policy, what the Hon Mr Bossino would no doubt compare with a St  Paul’s conversion on the road to Damascus. 

He then ridiculed my concerns and my request for clarification of what was being  planned by saying I was caught in a time warp. Well Mr Speaker if I was in a time warp  in 2015 it was future time it seems to me, not past time because my concerns of 2015  have now materialized in 2021 

Well let me tell the Hon Members of the GSD, that if Sir Peter Caruana, Mr. Feetham‘s  hero, the greatest living Gibraltarian, was correct in identifying the danger then they,  and in particular those who were part of the Government at the time, have now  increased the risk identified in 2009, exponentially. 

As for the honourable lady, words fail me to describe the insanity of the policy she has  adopted and the language she has used in the article published in the Chronicle. 

I will remind the House so that we have a record of this insanity if the time ever comes  when we need to apportion blame.  

If ever the Spanish Campaign needed an ally to improve their chances of success they  have just found one in her.

 

I will tell her what the Spanish campaigners think that they’re entitled to be paid. 

She has said the payment should be made irrespective of residence which goes even  beyond the Campo area and their claims as there are other persons getting social  insurance pensions but never claiming HCA, they are residents throughout the  European Union by virtue of having paid one year of contributions here in their  lifetimes. We are talking about potential numbers in hundreds of thousands. 

The mistakes by her father led to the first problems with pension payment. 

Peter Caruana tried to remove the risk, that the mechanism created for putting right  what her father had done wrong, apparently carried. 

I did not agree that such a risk existed Mr. Speaker. 

But she has now made a statement capable of creating the risk that Peter Caruana  envisaged, supporting the right to claim HCA and included in it even for those who  have never claimed such entitlement before. 

If the GSD was right in 2009 then what she proposes is an atomic ticking time bomb. This Government is not going to be the one that makes the ticking bomb explode.  

Indeed as the Minister responsible for restoring financial stability if such a step where  contemplated I would have to advise the government that financial stability could not  be achieved. 

The impact of such a policy on government finances would be much worse than the  impact of the pandemic lockdown effect, which we have experienced and which  continues to be causing us to have deficits. 

If this issue is not resolved by those complaining or those giving support and  encouragement from the opposition benches to the campaign, by them coming to their  senses and abandoning the dangerous road they have embarked on, then the best  thing might be to call an early election just on this issue and let those who want to  implement the huge pay-outs explain to the electorate how they would save Gibraltar  from the disastrous consequences of what they are advocating on public finance and  the elimination of Community Care which we have been defending since 1989, the  day it was set up 32 years, Mr Speaker. 

It seems as if they wanted to make sure that they inflicted the maximum possible  damage on Gibraltar’s finances and viability. The Honourable members opposite have  supported a petition which gets handed to the governor who presumably is expected  to make sure it reaches the UK Government which does the very thing that Sir Peter  Caruana claimed he feared could happen and set him on the of course of dismantling 

  

the role of Community Care, because strictly speaking he could not dismantle the  charity itself but only starve it of funding which he had already been doing for 15 years. 

The document they are supporting claims a version of history argued in the past by  UK and fought against by the GSLP government up to 1996 and the GSD Government  between 1996 and 2007. The document implies that UK was right and our defence of  the role of the charity was wrong. 

A defence in which the Leader of the Opposition for a time was a Minister in the GSD  Government, defending Gibraltar, and putting the contrary view. 

The opposition have publicly and officially supported the incorrect argument that the  Household Cost Allowance provided by Community Care was created by the GSLP  Government in 1988 in lieu of paying pension increases to all pensioners. 

In 2002 the GSD told the UK “in 1989, there was established in Gibraltar by a group  of private individuals a private charitable trust (Community Care Trust) with the object  of performing a range of charitable functions for elderly persons in Gibraltar. Amongst  its objects, the Trust pays a financial sum to persons of pensionable age in Gibraltar  to assists them in meeting household costs (i.e. electricity, water and other utility and  household costs which are particularly high in Gibraltar given the diseconomies of  scale which apply here). 

Housing Cost Allowance is paid at the same rate to persons on the minimum and on  the maximum pensions. The minimum is 25% of the maximum. 

It is not therefore in lieu of pensions increases which would be at the same percentage  for all pensions.  

Furthermore if it were a replacement for pension increases it would not be happening  because pensions were frozen at the instigation of the UK and unfrozen as a result of  the UK paying some £60M to pre 1969 Spanish pensioners under the Cordoba  agreement. 

The Housing Cost Allowance was not stopped when pension increases were  reinstated after Cordoba. 

The petition the honourable members support says the following:- “The Household  Cost Allowance is a scheme for Gibraltar resident men aged 60+, and also for men  aged 65+, that was created by the GSLP Government in 1988 in lieu of paying State  Pension increases to all pensioners.” 

Is this the new policy of the opposition?  

If so when did they decide to abandon the previous position shared with the GSLP  which they defended since 1996? 

 

Are they now reneging on the statement of Mr. Feetham as Leader of the Opposition  in the 2015 motion that I brought to the House when he said a GSD Government would  continue funding the independent charity as we were doing and retain its role? 

The charities role is not and has never been to provide the combination of the  Household Cost Allowance and the state pension so that together they form the  equivalent of this country’s state pension, as the petition says. 

If that is their position now, then they had better start looking for a few hundred million  pounds because the residence requirement would be in breach of EU law in how it  has been paid in the past and would need to be stopped once this interpretation is  accepted. 

They had better go back and review the results of the committee they set up in 2009  but pretended it never existed or that no one who was in the government knew it  existed. 

And furthermore they had better tell the people who signed the petition and those who  wrote the text to get Community Officer allowance that as a statutory payment the  GSD sponsored study group found in 2009 that all such payments could only be  provided by the state if they were based on need, that is means tested and certainly  not at £21,000 but inevitably at the rate of the National Minimum Wage or even lower.  Means testing the Housing Cost Allowance would radically limit its application which  currently is that every resident pensioner gets it on top of pension increases and  irrespective of any other income.  

And finally, the members opposite had better put their thinking hat on and come up  with how they get themselves out of their new policy commitment because they have  just opened a Pandora’s box and we may not be able to close it.

 

National Economic Plan 

The strategy I put together in 2019 which is reflected in the 2019/20 National Economic  Plan is designed to change how we deliver economic growth. 

It is about laying the foundation for Gibraltar’s future as a trading nation. 

In the election I often reminded people how in 1988 we had to change the way we  made a living after years of almost total dependence on the UK defence budget which  in Gibraltar had been declining since 1984, in my view as part of the process of talks  with Spain initiated with the Strasburg talks after Franco‘s death in 1976. 

The transformation in 1988 was possible because people understood and accepted  the need for change. 

It created an economic model which had two elements, a global one in gaming and  financial services based at Europort serving an international and United Kingdom  customer base, and a local element serving visitor numbers arriving by sea air and  land. 

The day visitor traffic by land making the biggest contribution to revenues and  employment. 

The tourist surveys clearly show this. 

In 2019 tourist expenditure reached an all-time high at £308M and a year later in 2020  an all-time low last seen in 1998. The principal source of the expenditure, the day  visitors from across the border in 2019 were at £255m at the highest level since 2011  and fell to the lowest level since 1993 at £61M. 

This is the context of what we might expect of a Schengen border or if there is not an  acceptable treaty that provides fluidity for day trips in and out of Gibraltar. The figures  for the land visitor are unlikely to show much of recovery this year. 

In the light of continuing Covid measures even if there is more fluidity it is unlikely to  go back to previous number since a high proportion of the visitors who came in  coaches were UK citizens on holiday in Spain. 

The fall in the numbers of customers was quite dramatic last year in respect of all three  methods of arrival.  

This low value high-volume model required imports of labour and goods with the  supply coming principally from the same direction as the bulk of the customers,  overland. 

The new economy for which we are setting the foundations now is happening 18  months later than I intended. Although as much preparatory work as possible has been  done in the period since the general election which I hope will be reflected in showing  tangible results this financial year.

 

What we have to move into now is the emergence of Gibraltar as a trading nation. We  must not see Brexit as a disaster but as an opportunity to do in the future what we  could not do in the past. 

The following data on some of our international trade indicates what has been  happening, and now well we are competing with other markets. 

The potential volume of business we can deliver limited to activities within the Gibraltar  market would be very small, in-capable of restoring higher levels of economic growth  if we just bring people to sell in Gibraltar. 

This will continue to happen in a small way of course but what has much more potential  is attracting new businesses that will have their head office in Gibraltar and subsidiary  companies in other jurisdictions 

Currently the ministry for economic development is engaged in discussion with a  number of such potential new partners on a global scale that fit the characteristics of  the new model and if these discussions that are taking place finish with a successful  outcome the details will then be published. 

Trade with UK is one important part of a strategic development of the new economy  and it is worth noting what has been happening in our bilateral trade following Brexit  and the Pandemic lockdown. 

The Honourable Mr Clinton has said: 

“The subject of Brexit and indeed a ‘Hard Brexit’ is one that deserves closer economic  analysis, because of course its meaning is different in a UK context to a Gibraltar  context.” 

I agree and it is relevant to see in fact how trade has affected UK and Gibraltar. UK's  international trade is down with almost all its partners but is probably much more likely  the result of the lockdown, than Brexit, which in theory has not been a hard one since  there has been a post withdrawal agreement.  

Since 2011 the value of total trade with UK in billions of pounds per year was as follows

Year 

Value of Trade

2011 

1.6

2012 

2.6

2013 

2.3

2014 

2.9

2015 

2.6

2016 

2.6

2017 

3.4

2018 

4.1

2019 

4.6

2020 

3.8



 

We have seen this trade grow since we were elected in 2012 with a £1 billion  improvement in our first year, which was fairly stable until 2016 when the Brexit  Referendum took place. 

Up to 2018 our trade went up £2 billion to reach £4.6 billion, compared to the £ 1.6  billion that was the position in 2011. 

The 2020 reduction in trade with the UK because of the Pandemic was £800 million,  far less than the drop between UK and other trading partners. We will be looking to  increase this trade in 2021 and future years. 

Total trade in goods and services (exports) between the UK and Gibraltar was £3.8  billion in the four quarters to the end of Q4 2020, a decrease of 16.1% or £740M from  the four quarters to the end of Q4 2019. Of this £3.8 billion. 

Total UK exports to Gibraltar amounted to £3.3 billion in the four quarters to the end  of Q4 2020 (a decrease of 19.2% or £774M compared to the four quarters to the end  of Q4 2019). 

Gibraltar was the UK’s 44th largest trading partner in the four quarters to the end of Q4  2020 accounting for 0.3% of total UK trade. 

In the four quarters to the end of Q4 2020, total UK imports from Gibraltar were £581M  (an increase of 6.2% or £34M compared to the four quarters to the end of Q4 2019). 

UK trade with both Morocco and Malta fell back to 2011 in 2020, whilst Gibraltar after  its own decline was at £3.8 billion compared to £2.6 billion as the combined value of  Morocco and Malta. 

By comparison 

Total trade in goods and services (exports plus imports) between the UK and Morocco  was £1.4 billion in the four quarters to the end of Q4 2020, a decrease of 31.3% or  £664M. 

Year 

Value of Trade

2011 

1.3

2018 

2.1

2019 

2.1

2020 

1.4



By comparison 

Total trade in goods and services (exports plus imports) between the UK and Malta  was £1.2 billion in the four quarters to end of Q4 2020, a decrease of 54.3% of £1.5  billion form the four quarters to the end of Q4 2019. Of this £1.3 billion.

 

Year 

Value of Trade

2011 

1.4

2018 

2.0

2019 

2.8

2020 

1.2



Total trade in goods and services (exports plus imports) between the UK and Slovakia  was £4.4 billion. Slovakia was the UK’s 42nd largest trading partner in the four quarters  to the end of Q2020, just above Gibraltar placed at 44. 

I'm quite hopeful that I shall be able, fairly soon, to lead a trade mission abroad with a  number of projects which will entail inward investment in those countries from new  investors setting up corporate headquarters for the investments from Gibraltar . 

I am particularly excited by one which involves an Israeli investor who is an inventor  and who has designed a car for the taxi trade which meets the criteria of the secular  economy that I consider to be so important for us to support where the vehicle is not  sold but paid for by usage. 

The state of the art design of the vehicle would be produced in micro factories in  different jurisdictions.  

The micro factory would be produced in Germany linked to a university that specialises  in research in technology and conversion of these results in delivering it to the market. 

Again in this new approach to manufacturing where instead of a mega factory  producing millions of cars and requiring vast movement of energy consuming  transportation of components, the micro factory requires less energy consumption. It  is designed to meet local demand and would employ a few 100 workers in two shifts  and on a footprint of 60,000 square metres and delivering some 30,000 cars annually. 

The investment for this option is in 10s of millions of dollars instead of hundreds. It is a much more environmentally friendly concept and it's designed to minimise waste.  

If we are successful in sponsoring the development the micro factories would be  subsidiaries of the Gibraltar parent that is expected to have a quoted value in excess  of 1 billion dollars. 

I am sharing this information with honourable members to reassure them but I am  thinking outside the box on how to reposition our economy. I am not doing it to  encourage them to start finding fault to try and stop me. 

 

The Environment. 

Beyond the green economy, there is the Circular Economy, which in my judgment is  the only initiative that has a chance of stopping the climate change catastrophe. 

The green economy is not enough because it only addresses how we produce what  we consume. 

It says and does nothing about the fact that we consume too much. 

What it does is say we should produce what we consume with a less polluting, more  environmentally friendly technology. 

So if consumption of electricity is very high and growing what is wrong is that it is  produced by fossil fuels. So we have natural gas instead of oil which is less polluting  or wind and wave power or solar energy which is greener but we can still continue  consuming ever higher amounts of electricity per capita. 

Of course even if the green energy source is less damaging and less CO2 producing  it still needs us to use raw materials and metals to manufacture the substitute  technology. 

The scientific evidence is that 91% of the resources we take from nature is wasted to  enable us to consume the remaining 9% 

The really disruptive approach is to develop a new way of life, a new approach to  consumption which many see as a novelty but in my view is going back to how we  used to do things and apply the same principles, the same approach, the same  philosophy, except that we do so with what is possible today and in the future, with the  latest technology. 

Let me explain what I mean by that Mr Speaker. 

I call it the Belling system Mr. Speaker. I can remember when in my household my  mother used to cook using charcoal. At one stage we had the City Council which used  to run municipal services before the 1969 Constitution merged City Council and  Colonial Government, “el Citi Caunci y la Colonia”, in llanito 

The Municipality came up with a way of introducing a mass shift to electric cookers. 

They bought the cookers and leased them as well as selling the electricity to the  consumer. 

The rental of the cooker made it available to low income families that would not have  been able to buy. 

The cookers were manufactured to last, they were provided repaired and replaced by  the City Council and the scheme was self financing for one reason and one reason  only the Belling cooker was built to last 50 years, not designed to have a limited life 

  

and be cheaper to replace them to repair. Indeed I believe there are still some working  Bellings around in our city. 

This which is my memory of the 1950s is the hot technology of the future which is  considered by many serious scientists our only hope of slowing stopping and reversing  climate change. 

Environment  

Mr. Speaker the decision taken by the European Parliament in 2020 and this year  promoting an alternative lifestyle and production model for industry seems to me to be  the only real hope we have that may reduce and then reverse the global warming and  climate change. 

Based on this analysis our National Economy Plan will include a strategy of  sponsorship for Inward investment projects that promote the circular economy and  support local initiatives that are compatible with that objective. 

However I have to say that the prospect of success for that approach developing at a  strong enough pace and on a sufficiently global scale are not very high in my judgment. 

We face the problem here on a miniature scale, indeed in this very room, between the  17 of us, elected to protect Gibraltar and its future. 

Can we protect Gibraltar from a catastrophic environmental if the rest of the world does  not act soon enough? 

The answer is clearly no. 

No one is safe anywhere on the planet. 

We have floods in the heart of EU with no parallel in recent history. Melting ice  everywhere and in particular in the two poles and Greenland which can lead to rising  sea levels and warming sea temperatures. We’re experiencing in the west coast of  America and Canada temperatures in excess of 45° and dry vegetation which is  causing spontaneous wildfires which in turn will accelerate the CO2 content of the  atmosphere and produce more climate change. 

There’s only one answer unless by some miracle we make a technological  breakthrough which enables us to find virtually free inexhaustible energy by  harnessing the fusion process that provides the energy of the sun and in turn supports  life on earth. 

This I imagine will happen sooner or later as there is a great deal of research and  investment in this area but will it happen soon enough? 

And if it were to happen, can it happen painlessly? Can we move from fossil fuel’s to  inexhaustible clean energy without a huge disruption developing in the global economy  and a huge shift in the balance of wealth and political power?

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But at the simplest level can we make people understand, in what is little more than a  village of 30,000, which is what we are, that we cannot consume more than we  produce?  

That we cannot take more from the planet than we put back into it? 

Can we give leadership to people by telling them that it is not possible to have more  of everything every year? 

But it requires disruptive technology because it combines the philosophy of the past,  building things to last and repair and reuse with the technology of the future. This will  only happen on a global scale if and when manufacturers and designers decide to  adopt it. 

They will not adopt it if the consumers are unwilling to become users of artefacts  instead of owners. And this may really be the ultimate stumbling block given the place  that ownership has in our social values as a way of reflecting the individual’s  importance in the eyes of the rest of the tribe, the persons peers, by whom most people  feel they need to be judged, in order to boost their self-esteem. 

In fact it will only become possible if we are able to free citizen the addictive condition  that I described in the 2019 budget. 

Compulsive consumption disorder is what I called it and described it as the illness of  western civilization. And illness which poor societies aspire to also be contaminated  with so that they can stop having to reuse repair and recycle and instead by use and  dispose which is the lifestyle which is predominant as the sign of success. 

It is easy to understand how we got here. 

It makes short term economic sense because the concept of polluter pays it’s just that  a concept but in reality the polluters where in the west and have not paid the price,  until very recently, the developing so called “poor countries” coincidentally the least  polluting have been the ones paying. 

But whether what is done is what is needed is another matter. 

The National Economic plan will evolve from a post Brexit future proof plan to a post  pandemic future proof plan by aligning itself with the future of where our civilization  needs to be, the Circular Economy, promoting it, participation in it and investing in it  profitably. 

We are not going to change the world, but we have to be where the world needs to be  if it is to survive the climate catastrophe that is threatening life on earth. 

That paying more money to people who do not need it for doing nothing and moreover  with the money that we do not have and need to borrow, not so that they do not suffer  hardship but so that they can increase their already high level of consumption, is the  very opposite of where the world needs people, to be doing, at this difficult time in  human history.

 

Is it that 17 of us cannot agree or are not willing to accept that this is the reality? 

We have to pay less to consume, we have to consume less and we have to pay  ourselves less. 

If we don’t then the gap between us and the generations that follow us will go into the  reserve of what it has been up till now. 

Each generation worse than the preceding one instead of better. 

Out destruction of the planets ability to support life makes the human species the worst  and most dangerous life form earth has ever had, by comparison the Covid virus is  benign. 

And in addition our continuing to increase our consumption levels will be the most  selfish thing that any humans and indeed any lifeforms have done in respect of  protecting their offspring’s. 

This is very simple Mr Speaker the more we take out of this planet compared to what  we put back the less there will be for the generations that follow us. 

The rainy day fund’s concept of the Socialist Government in the 1980s originally  rubbished but now welcomed in theory at least is the tangible proof of what needs to  be done to look after those will follow us. 

This year is the first time in our history that we are talking about finishing with a deficit  of £138 Million and projecting a further deficit of £51 Million, and we still have a debate  about spending more and not raising revenue. 

If we think that this is about who wins the next election then let me tell the House, in  the context of the issues that face Gibraltar as part of the global scenario in the field  of economics and the environment, that the actions that the members of Homo  Sapiens take in what they do in the lower part of the Rock is about as important as  what the Barbary Macaques do in there not dissimilar primate battles to gain influence  in the upper part of the rock. 

The natural behaviour of primates, in my humble opinion of course, Mr Speaker.