If the economy is as robust as the Government has sought to portray it should be doing much more to improve the quality of life of our citizens. If the failure to address issues of housing, traffic, health, the environment, social services or planning is not due to lack of resources then it is simply because of an inability or strategic unwillingness to tackle these core areas.

This budget, for example, guarantees little by way of improvement to the quality of life of a resident of Government housing estates. How are Government to allocate resources to address endemic humidity, vandalism, cleanliness or lack of maintenance of estates? How are Government going to tackle social needs for the elderly or their families? When is the traffic chaos going to end? Eight years after the rockfall when is Dudley Ward tunnel to reopen?

The budget is also insensitive to the business sector that needs to drive the economic recovery during a time when, at best tourism figures are mixed, retail trade is under pressure, volumes of business and revenue is down in the finance sector and this suffered a lost of over 80 jobs last year.

Equally the Opposition’s contributions to the budget have been high on emotional criticism and painfully low on alternatives. The Opposition is failing to demonstrate that it has any ideas to radically deal with issues of concern for people. The exchanges between the Government and GSLP/Liberals only revealed self-indulgent and destructive hurling of abuse. What people want are alternative ideas. That is why the PDP say there is a need for a new style of politics which places importance on delivering on promises and the presentation of ideas to address problems. That is why when critiquing this year’s budget the PDP [unlike the GSLP] are setting out some of its alternative ideas.

BORROWING AND DEBT

While the net public debt figure may be low in overall terms [15% of GDP] the Chief Minister confirmed that in future years this will “peak” at 23% of GDP. It will rise to 18% or £180 Million this year. In other words net public debt is going up not down. In other countries efforts are being made, in this current climate, to lower debt not raise it. While it is accepted that in net terms borrowing is low as a proportion of GDP the gross borrowing figure is now almost £450 Million. Any incoming Government will necessarily inherit financial parameters which will restrict its activities. That is unfortunate because if at least the borrowing were being channelled into dealing with long-term housing strategy or real economic development then we would be going in the right direction. But unfortunately, for example, £14 Million was spent last year on the air terminal project with another £29 Million to be spent on it this year. The PDP has made clear that it does not support undertaking the air terminal project on the scale that the Government has embarked upon. Our view is that the £43 Million that will have been spent by July 2011 would have been better directed at other projects. We recognise however that by the time of the next election it may be that Gibraltar is past the point of no return in that the structure of the Terminal will be largely built – landing Gibraltar with what is a massive potential white elephant. Even so in Government we would conduct a review to, wherever possible, make savings on the air terminal project.

IMPACT ON INDIVIDUALS AND BUSINESS

This is a mish-mash of a budget. On the one hand personal and corporate tax is lowered. On the other hand electricity and water charges, social insurance and rates are increased. Ordinary families will not be better off after this budget because any lowering of tax will be neutralised by electricity increases. Precious little has been done to incentivise the up-take of pensions in the private sector. The Government needs to be aware that encouraging individuals to opt for a flat rate personal tax system without allowances makes it less attractive for individuals to purchase pension products. It needs to rethink this strategy. The Government has promised a negotiated reform of public sector pensions for new entrants to the civil service – which the PDP support – given that only last year public sector pensions cost over £23 million. The problem in the private sector is the reverse. There is insufficient planning and provision. This needs to be tackled by discussion with the business sector and Unions and if necessary legislation.

For the business community there were little surprises in the announcement that corporate tax would go down as from 1 January 2011. This had been sign-posted some time ago. Indeed if there is any criticism to be made it is that the Government have dragged its feet on the implementation of the changes that were made necessary because of international fiscal initiatives. What were surprising are the so called re-balancing measures. First the Chief Minister has presented these as necessary to recoup possible loss of revenue when lowering corporate tax on 1 January. But the increases on electricity, social insurance and rates take effect from 1 July 2010 – in other words during a period when corporate tax has not been lowered. For 6 months and at a time of global recession companies will pay both the higher rate of tax and the increased up-front costs. That is not rebalancing – it is a naked increase in taxation. Secondly these are massive increases; 10% in social insurance, 12% in commercial rates and 10% in commercial electricity. Thirdly lowering corporate tax benefits businesses as long as their profits remain the same from last year to this year. But increases in charges, rates or social insurance hit businesses at the front-end. They will in many cases lower gross profits. They are a tax on jobs, a disincentive to further employment and put further pressure on cash-flow. At a time when small business is encountering a climate of cash-flow difficulties it is short-sighted to introduce these measures in this way. What appears to have motivated the Government is its concern that corporate tax revenue will drop. The PDP are not convinced that this will be the case because of the high-value formerly tax-exempt businesses whose profits will now become taxable for the first time. Additionally the Government is properly insulating the position by a higher rate for utility companies. As such in Government the PDP will review these charges downwards if the Government’s negative forecasts of corporate tax revenue do not materialise. Fourthly while the PDP welcome a climate of greater compliance what should not happen is that history is airbrushed away and previously compliant businesses are punished for the mistakes of Government or certain historically non-compliant businesses. There are plenty of stories of companies owing hundreds of thousands in PAYE, tax or social insurance. The compliant small business should not be penalised because the Government had not got its act together on companies like OEM, Haymills or other massive debtors. So, for example it was wrong in that context to reduce the early-payment discount on rates. Compliant businesses deserve recognition. A PDP Government would increase the early-payment rates discount. Fifthly if the Government is to introduce stricter fiscal controls it must also deliver greater efficiency in processing any tax rebates that may be payable to business.

CAPITAL PROJECTS

The Government flaunted a long list of capital expenditure on projects. Unfortunately these are the same projects every year. The Government cannot expect to be congratulated for lack of delivery of projects that should have been completed years ago – like the ex-OEM Houses, Waterport Terraces, the Trafalgar roundabout, Europa Point refurbishment, Dudley Ward Tunnel or the new prison. In many of these examples the projects were first announced several years ago. What this demonstrates is a chronic inefficiency and lack of delivery of its electoral promises. This is not only serious from that perspective but because it starves Gibraltar of necessary infrastructure, provision of adequate housing for people and economic development. It also dominates resources for years and clogs up traffic for unnecessarily long periods. All this has an effect on quality of life in the small urban environment of Gibraltar. That is why change is necessary. The PDP agree that people should not opt for “change” unless those advocating change promise alternative ideas. The PDP have consistently set out its alternatives. We do believe that change is necessary and that it should deliver regeneration, better planning and an overall improvement in the quality of life for citizens.

STRATEGY

For several years we have been criticising the budget because of its lack of strategy in the social sphere. It is clear that this is not accidental but rather part of a more deliberate decision to prefer the airport over housing and traffic chaos over planning of construction works. We make clear that in Government we would channel much more to radically address the long-term housing needs of our community and to improve the maintenance and quality of life of residents of existing housing estates. The health budget has increased significantly over the last few years but many people feel there is a crisis of confidence and management and low morale among staff. This area needs further reform. In the same way as the initial radical approach that led to a new hospital, new health centre and greater allocation of resources there is now a need to review working practices to improve the provision of healthcare to people and support our healthcare workers. These do an invaluable job and need to be listened to. There is a need for better interaction with social services and more investment in community support. In the environment and planning field the PDP would divert resources to measures that much more comprehensively conserve our natural, marine and urban heritage as well as deliver improvements to the environment and regulate planning. Gibraltar is one massive building site under this Government. People do not want to live forever in a building site.

OPENNESS AND TRANSPARENCY

The Government has announced that it will suspend the tender system in the construction industry. The PDP is against that. We consider that the unaccountable adjudication of public service contracts creates a dangerous precedent for the future. Once it is done it will place the Government in an invidious position no better than any previous administration that allocated contracts without tender. We have already seen how not putting projects to tender – as happened with certain OEM projects – was an unmitigated disaster. This practice should not be encouraged. The PDP would restore the tender system in Government and improve the system of checks and balances on the exercise of Government power to ensure there are no abuses.

The same applies to any idea that a new bank should be set up. If this is to be launched with the benefit or access to public sector support or funding then any venture should be subject to open competition. The PDP does not support the Government’s decision to present a proposal to unnamed “selected local private interests.” If the market is to be tested on a project of this nature there needs to be a public invitation by Government. In Government we would ensure there was such a public invitation.