Not the only budget to be delivered this month. (Photo: Getty)
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The other budget for a British domain

Britain isn’t the only place to have had a budget recently – the Gibraltarian budget is pretty much their version of the Queen’s Speech. Gibraltar Chronicle editor Brian Reyes reports.

On June 22, Gibraltar’s Chief Minister Fabian Picardo delivered his last budget statement ahead of this year’s General Election, pointing to a strong and resilient economy as he dismissed opposition criticism of his government’s handling of public finances.

The annual budget statement is a key fixture of the Gibraltar Parliament’s calendar, during which the government provides a snapshot of the Rock’s finances and sets out its economic and fiscal policies for the year ahead.

Mr Picardo presented positive figures across a range of economic indicators as he summed up four years of GSLP/Liberal government.

He said GDP had increased from £1.2bn in 2011/12 to a forecast of £1.64bn for 2014/15, with a further rise expected next year to reach £1.8bn.

Mr Picardo told Parliament that GDP per capita stood at £50,941, putting Gibraltar third in the global ranking after Luxembourg and Qatar.

Gibraltar now has a record 24,422 jobs in its economy, an increase of 16.4% since 2010, while the total number of Gibraltarians in full and part time employment stands at an all-time high of 10,991.

These were, the Chief Minister said, “…real jobs bringing real dignity to the lives of real people”, adding that the number of unemployed people stood at just 190.

Mr Picardo also signaled another increase in average annual earnings, which rose to £28,244 in 2014, representing a 19.8% increase over the life of the current administration. Inflation during that period was 13.5%.

“This is a Budget that has confirmed that what so many called a mission impossible when we embarked on it, has become a mission accomplished in economic terms,” he said.

The Chief Minister pointed to growth in both income tax and corporate tax receipts. Income tax increased from £122m in 2010/11 to £144m this year, up 18% despite reduced tax rates largely on the back of more people employed in the gaming and finance sectors.

Corporate tax receipts grew from £14.59m in 2010/11 to £61.53m this year, he told Parliament, adding that the government had also paid £28m in rebates over the four-year period.

The Chief Minister said these figures signaled the success of the government’s economic strategy.

“As Gibraltar has repositioned itself as an open and transparent financial services centre with a competitive rate of tax acceptable to the OECD, the International Monetary Fund and other objective international institutions, we are reaping the rewards of seeing real business done from here which accrue and derive their profit here and are taxed here,” he said.

As for the budget itself, there were no dramatic announcements. The Chief Minister outlined a range of measures designed to help local working families and businesses, including tax breaks for first-time home buyers and those at the lower end of the pay spectrum.

In line with the pattern set in the previous three years, personal tax rates were reduced, allowances increased, import duties tweaked and some tidbits thrown in for the business community.

Tucked into the measures was also the announcement of Gibraltar’s first tax amnesty, in respect of funds held abroad on which tax should have been paid in Gibraltar. On remittance to Gibraltar, individuals who avail themselves of the amnesty will be required to pay 5% of the total amount.  

The Chief Minister confirmed that there would be a General Election before the end of the year - in theory he could take it into 2016 - but insisted that this was “a responsible Budget”, not one littered with pre-electoral giveaways.

THEMES

Two themes emerged from the 2015 budget session that will play a central role in the months ahead as Gibraltar heads toward the election.

Public finances and power generation have been the subject of relentless political exchanges over the past year. The budget debate placed them firmly on centre stage.

On public finances, the Gibraltar Government talks of falling debt and controlled, transparent expenditure against the background of a healthy economy. The Chief Minister said gross public debt stood at £448m at the end of March this year, down £72m from the £520m debt level inherited from the GSD in 2011.

Estimated cash reserves at the end of the financial year were £72m and were expected to rise to £85m next year. That represented net debt of £375m, or 22.8% of GDP, Mr Picardo said.

“Our borrowing level continues to be low in relation to the size of our economy and, as a percentage of GDP is currently among the lowest of the countries in the European Union,” the Chief Minister told Parliament. 

Conversely, the GSD Opposition speaks of runaway spending using savers’ money channelled outside the scope of parliamentary scrutiny and oversight.

During his response to the Chief Minister’s budget announcement, Opposition leader Daniel Feetham said the Gibraltar Government was using “artificial devises” to circumvent legal borrowing limits and avoid parliamentary scrutiny.

In a stern attack on its handling of public finances, Mr Feetham accused the Gibraltar Government of “a complete lack of openness and transparency” on this issue.

At the core of his argument was the GSD’s view that the Gibraltar Government is using the Gibraltar Savings Bank “as a piggy bank” to fund public debt and expenditure.

Mr Feetham said the Gibraltar Savings Bank had invested some 70% of its assets - £700m - in government debt and companies, but that the Opposition was unable to properly analyse the spending.

“What we have witnessed over the last four years is the systematic destruction of parliamentary governance in Gibraltar and, in particular, the deliberate disablement of the ability of this parliament to scrutinise our public finances in any meaningful way, to the extent that this Government has made an absolute mockery of these annual debates,” Mr Feetham said.

He said that if the “off balance book” funding was factored in, then gross public debt stood at “an eye watering” £847.7m.

Disagreements over public finances will remain at the centre of political debate in the run-up to the election later this year,  but this was not the only thorny issue aired during the budget session.

There were feisty exchanges too on the government’s plans to build a new duel-fuel power station and associated infrastructure for liquefied natural gas.

The Gibraltar Government insists that its plans to introduce liquefied natural gas into Gibraltar are not only safe and environmentally friendly, but will potentially open up lucrative future business opportunities too.

But for the GSD, the issue is one of location. It says the consequences of an LNG accident are too serious to contemplate placing gas storage tanks close to built-up areas, irrespective of how that risk is mitigated.

Brian Reyes is the editor of the Gibraltar Chronicle.

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Looking to the future

In our last regular article on Gibraltar for a while, Gibraltar Chronicle editor Brian Reyes looks to the economic and political outlook for the short and medium term.

At the beginning of March, over 150 members of the local business community gathered in the World Trade Center construction site for a ‘topping out’ ceremony. As the last beam was placed on the structure, guests heard speeches about Gibraltar’s resilient economy, its potential for international growth and the need to offer global businesses the necessary working environment to remain competitive.

The EU referendum and the prospect of a so-called Brexit are dominating the headlines, and much of the coverage is gloomy. But in the background, Gibraltar’s private sector continues to drive projects which, in the long term, will help attract international investors to the Rock.

Earlier that same day, Gibraltar’s Development and Planning Commission heard submissions from well-known British architect Jonathan Manser, who leads the design team behind Eurocity, another major development that has its eye on Gibraltar and a prosperous future.

There are other schemes too, some still on the drawing board, some already under way. The MidTown Development, a mix of offices and top-end flats, is funded by a local consortium on a prime site in the heart of town. On the east of the Rock, the ambitious Bluewater project promises a mix of luxury and affordable homes alongside a marina. There are plans too for a former Ministry of Defence site named after Admiral Rooke, while in the Old Town, developers and individual home owners are breathing life into this run down but charming warren of steep, narrow alleyways.

Elsewhere, work is progressing on key infrastructure that will be essential for Gibraltar’s future, in or out of the EU.

Experts are finalising the environmental impact assessment for a facility that will store liquefied natural gas for Gibraltar’s new power station, already under construction. Work should resume too on the airport tunnel project, vital to freeing up Gibraltar’s clogged roads. A new sewage treatment plant, although still some way off, is also in the pipeline, a critical and long-overdue element of Gibraltar’s infrastructure.

There are new attractions for tourists - the opening of the Upper Rock rope bridge and sky platform is eagerly awaited by locals too - and important developments in culture and education, where the University of Gibraltar is building strong academic links across the community and beyond.

And against the background of uncertainty over the UK’s - and by extension Gibraltar’s - membership of the EU, the Gibraltar Government is leaving nothing to chance. A team of economists is analysing the different possible permutations of membership of the EU, EFTA or the EEA, including the potential effects on the Rock’s export economy of membership of the Common Customs Union. 

Despite the combative nature of Gibraltarian politics, there is unity on this question. Both the Gibraltar Government of Gibraltar and the Opposition agree that the UK and Gibraltar should remain in the EU and that Brexit could undermine the Rock’s economic model, creating uncertainty that Spain will undoubtedly seek to exploit. They add that the UK must factor Gibraltar into any post-Brexit negotiation with the EU.

Gibraltar’s long-term economic future will also be placed under scrutiny locally this year by the 2025 Committee, which brings together the public and private sectors and unions to draw up 10-year strategies for the different sectors of the economy, identifying challenges and opportunities in areas as diverse as e-gaming and shipping. A key element of this will be to find new opportunities for business in emerging markets in Asia, the Americas, the Middle East and Africa.

In parallel, a cross-party select committee of the Gibraltar Parliament will analyse various aspects of the 2006 Constitution ahead of a constitutional conference with the United Kingdom on a date yet to be determined. Along with the UK’s referendum on EU membership, the constitutional review will dominate much of parliamentary and political activity during 2016 and likely into 2017. If any changes are proposed as a result of the review, they will first have to be put to a referendum before they can be adopted.

Gibraltar is keeping a wary eye too on Spain, which has yet to swear in a government following an inconclusive general election last December. The future of cross-border relations will depend not just on whether the UK remains within the EU, but on the outcome of the post-election wrangling in Spain.

But even as Spanish politicians try to hammer out a coalition pact in a bid to avoid a return to the polls in June, there is grassroots contact across the border.

The Cross Frontier Group, which brings together business and union interests from Gibraltar and the Campo de Gibraltar, is forging ahead with a proposal to access EU funding for cross-border initiatives. Separately, the government continues to maintain contact with Spanish politicians ranging from PSOE senators to the mayor of La Linea, Juan Franco.

The hope is that, having cleared the EU referendum hurdle, Gibraltar will be able to develop positive dialogue with Spain, irrespective of who is in government. There is much to be gained through practical cooperation in areas as diverse as commerce, culture and sport.

There is, inevitably, a degree of caution. Spain’s acting Foreign Minister, José Manuel García-Margallo, has signalled that if Britain left the EU - and if his party remained in power - he would seek to revive the joint sovereignty proposal robustly rejected by Gibraltar in 2002. 

It would be a move doomed to failure because Gibraltar will have nothing to do with such a a proposal, and neither will the UK. Their shared view is that nothing can be decided on Gibraltar’s future without the agreement of the Gibraltarians.

When he was sworn in as Gibraltar’s new Governor last January, Lieutenant General Edward Davis reaffirmed the UK’s double-lock commitment to the people of Gibraltar, underscoring their inalienable right to self-determination and the UK’s commitment to secure their consent in all matters that pertain to the sovereignty of Gibraltar.  

In doing so, he was reflecting the words of one of his predecessors, General Sir William Jackson.

“Gibraltar is neither Spain’s to claim nor Britain’s to give,” Sir William wrote, in a sentence that resonates to this day and sums up the situation succinctly.

“It is the rock of the Gibraltarians.”

This will be the last item on the New Statesman’s Gibraltar hub for at least a while. We’ve thoroughly enjoyed bringing you insights and hopefully greater understanding of the issues affecting the Rock as well as its politics, culture, geology and a great deal else. We would like to thank our sponsors the Gibraltar government, our many writers and above all our readers.

Charlotte Simmonds, editor, March 2014-March 2015

Guy Clapperton, editor March 2015-March 2016

Brian Reyes is the editor of the Gibraltar Chronicle.