Gibraltar’s economy remains resilient in the face of Brexit uncertainty, Chief Minister Fabian Picardo said today as he delivered an upbeat, yet restrained budget that drew immediate flak from the Opposition bench.
Mr Picardo pointed to economic indicators including record employment and strong revenue growth to underpin his assessment of a robust economy that continued to attract international investment even after last year’s referendum vote.
He said the budget was prudent but not austere, setting out spending plans for key areas such as schooling and improved public services while storing up “rainy day funds”.
Budgetary measures included inflationary increases to the minimum wage and tax allowances, alongside a freeze on electricity, water charges and general rates. There were also import duty reductions on a range of goods including sport clothing and equipment.
It was a budget geared to helping the aged, the disabled and the young, as well as “the capitalist businessman and the workers he employs”, the Chief Minister said.
“Prudence, caution, optimism and investment. Those are the watchwords with which this budget has been laced,” he added.
“We must be prudent, but the results of the year just past and the year to date give us good reason for optimism.”
Mr Picardo forecast a record surplus of £75.8m for 2016/17 and gross domestic product of £1.9 billion for the same period, up 8.9% over the preceding year.
And he said government revenue was up “across the board” to £615m, representing a 75% increase since the GSLP/Liberals came into office in 2011against a 60% increase in expenditure to £597m over the same period.
The Chief Minister said aggregate public debt was marginally lower year-on-year at £443m at the end of March 2017, while cash reserves stood at £123m. Net public debt stood at £320m, or 16.75% of GDP, Mr Picardo told Parliament.
“We must equally be conscious of the fact that the process of Brexit has just begun, as we must be alive to the fact that the economic data available for Gibraltar’s performance last year is worth celebrating,” Mr Picardo said.
“Prudence and caution in our planning for the future cannot and should not ameliorate our ability – indeed, our obligation – to celebrate the excellent performance that our workers and entrepreneurs have delivered in the twelve months of the past year financial year 16/17.”
“In particular, we must reflect that nine of the months on which I am reporting occurred after the result of the referendum was known and Brexit become a reality.”
But the Chief Minister’s bullish analysis was immediately questioned by GSD leader Daniel Feetham, who accused the government of engaging in “a dangerous farce” that failed to provide an authoritative account of the state of public finances.
“Over the last six years we have seen the systematic destruction of parliamentary governance in Gibraltar and, in particular, the deliberate disablement of the ability of this parliament through this debate and elsewhere, to properly scrutinize our public finances in any meaningful way,” he said.
“The Chief Minister has the dubious distinction of leading a Government that, through the opacity in the way it has chosen to structure the public finances of this community, has made a mockery of these annual debates.”
Mr Feetham reaffirmed longstanding concerns about public debt and “off balance sheet spending” channelled through government-owned companies, insisting that Gibraltar’s gross debt was “an eye watering £1.2bn” and far higher than the figure presented by the government.
Mr Feetham welcomed the “modest” and “prudent” budgetary measures set out in the Chief Minister’s statement, which he said reflected the fact that “we live in uncertain times”.
But he said the GSD would take the unprecedented step of voting against the appropriation Bill in order to underscore its concerns about the government’s handling of Gibraltar’s public finances.
FULL STORY IN TOMORROW’S PRINT AND E-EDITIONS
– Budget surplus 2016/17 at £75.8m (up from £38.8m in preceding year)
– Forecast GDP £1.91bn for 2016/17 (up 7.5%)
– GDP per capita $92,800, ranking Gibraltar 4th in world on IMF scale
– Net public debt at £320m, or 16.75% of GDP
– Record employment at 27,073 jobs
– Average inflation 2.6%
BUDGET MEASURES 2017
– Import duty on Handbags is reduced from 6% to 3%
– Import duty on Jewellery and Imitation Jewellery is reduced from 4.5% to 3%
– Import duty on prams reduced to zero
– Import duty on sports trackers reduced from 12% to 3%
– Duty is reduced to 0% on sports or dance apparel imported by or for a sporting or dance association.
– Indoor sporting equipment such as that for billiards, pool, darts and chess is also reduced to 0%.
– Import duty on water pipe tobacco rises from £3 to £15 per kilo.
– Import duty on refills for tobacco products designed to be heated and not burnt is set at £45 per kg of tobacco content.
– Import duty on ordinary diesel automotive fuel will be increased by 3p litre and the duty on premium diesel automotive fuel will be increased by 1pm per litre.
– Electric forklift will attract the same cash-back as for any electric road vehicle, and the cash-back for full electric vehicles that have no element of propulsion by a combustion engine is increased by a further £750.
– The duty on plastic bags is doubled Mr Speaker from 5p to 10p
– Deductions which apply to residential premises in respect of the installation of solar power will also apply commercial premises.
– Duty on classic vehicles is reduced to zero.
– Import duty on Gold Bullion will now be decreased by 5% to 1%.
– Import duty on Jet Skis will increase from 0% to 20%.
UTILITIES AND BUSINESS RATES
– No increase to electricity or water charges
– General Rates payable by businesses will also remain unchanged and discounts for the early payment of rates will continue to apply
– Rates will not be charged on offices from date of certificate of fitness but from date of first occupation
– Taxpayers with assessable income of £11,150 or less will be brought out of the taxation system altogether and will pay no income tax. That represents a £100 increase in that exemption.
– Personal allowances increased by inflation:
The Personal Allowance from £3,215 to £3,300
The Spouse/Civil Partners Allowance from £3,215 to £3,300
The One Parent Family Allowance from £5,290 to £5,435
The Nursery Allowance from £5,025 to £5,160
The Child Allowance from £1,105 to £1,135
The Child Studying Abroad Allowance from £1,255 to £1,290
The Dependant Relatives Allowance: a. where the relative is resident in Gibraltar from £305 to £315 b. where the relative is not resident in Gibraltar from £205 to £210 70
Disabled Individual Allowance from £9,040 to £9,285
Blind Persons Allowance from £5,020 to £5,155
Medical Insurance Allowance from £5,020 to £5,155
– No further increase in social insurance in the current calendar or financial year.
– Government to press ahead with reform of the Social Insurance System.
– Social Insurance Contributions will accrue for the benefit of the contributor starting at age 15, not 20 as has been the case.
– Government will implement sick leave discount principles for all public sector workers with cancer related illness and in respect of bereavements as well as the annual leave aspects of employees.
– The rule in the Pensions Act that saw non-industrial workers able to retire at the age of 55 whereas industrial workers would have to retire at the age of 60 will be removed to allow those who could only retire at 60 to retire at 55 if they agree to take a commutation of the pension entitlement.
OLD AGE PENSION AND MINIMUM INCOME GUARANTEE
– Old Age Pensions will increase this year in line with the rate of inflation of 2.7% so that the single rate for Old Age Pension would increase from £440.54 by £11.90 to £452.44 and the couple rate would increase from 71 £660.85 by £17.85 to £678.70. The dependant rate will grow from £220.31 by £5.95 to £226.26 and the same the cash differentials will be maintained with the Minimum Income Guarantee as in previous years.
PUBLIC SECTOR PAY
– The general level of Public Sector pay will rise by 2.75% with effect from 1st August 2017.
– The statutory minimum wage will increase from £6.28 to £6.45 per hour with effect from 1st August 2017. This represents an increase of 17 pence an hour or around 2.7%, which is the rate of inflation.
PRIVATE SECTOR PENSIONS
– Government to continue consultation with a view to implementing the introduction of pensions for private sector employees.