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.
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.