Picardo’s final Budget sets course for treaty changes next week 

Chief Minister Fabian Picardo delivered his final Budget ahead of the “greatest change” in Gibraltar’s economy with the provisional implementation of the treaty, which comes into effect next week. 

Mr Picardo was emotional as he closed his almost four hour-long address and outlined the economic changes such as the forthcoming introduction of a transaction tax and the Government’s largest surplus since the pandemic at £15m.  

Further announcements in the budget included the increase of the minimum wage to £10, a public sector pay increase, an increase to disability benefit, a housing bursary for Royal Gibraltar Police officers, and the renaming of Gibraltar International Airport to Joshua Hassan International Airport. 

The budget comes a week before major changes to Gibraltar’s economy as the treaty will be provisionally implemented on July 15. 

“We are embarking, next week, on the greatest change in the operation of our economy in 55 years,” he said. 

“We have made all the necessary changes. As we start operations, there will be a need to tweak here and there.  Let us be clear. Where tweaks are necessary, in the short term, we will effect them.” 

He added his final budget was setting out matters at a time when he starts to “let go of the reins of office.” 

Mr Picardo said five years after Brexit Gibraltar has been largely unburdened by the consequences that haunted the rest of the continent, describing this as a profound achievement. 

“But it carries a paradox within it,” he said. 

“For when you spare people the pain, you sometimes also spare them the understanding of just how close that pain came, and of the sheer magnitude of the negotiation that has occupied this Government for the better part of ten years.” 

Mr Picardo added that it has “not been a gentle year” for the global economy, pointing to the war in Ukraine, and the war between the USA and Iran, and politics of tariffs and trade barriers. 

MINIMUM WAGE 

The minimum wage has increased to £10 an hour from £9.50, marking a rise of 5.26% “comfortably ahead of inflation,” Mr Picardo said. He added this rise from £5.40 in 2011, marks an 85.2% increase. 

“We grew this economy so that the cleaner, the carer, the kitchen porter, the shop assistant, the security guard would take home more this year than last, and more next year than this,” he said. 

“The men and women who rise before dawn and keep this Rock running deserve no less. Alarm clock Gibraltar deserves no less.” 

Based on the 37.5-hour week, the minimum wage will go up from £18,525 to £19,500, an increase of £975 per annum.  

Based on 39 hours a week, the minimum wage will go up from £19,266 to £20,280 per annum.  

According to Mr Picardo, the average Gibraltarian now earns £39,511 in comparison to 2011 when this figure stood at £25,831, marking an increase of just under 53% in average earnings.  

Disability benefit will rise by 2.5% as from August 1, 2026, and Mr Picardo said that as a direct result of the reform implemented by this Government in 2015, the number of individuals receiving the Disability Benefit has increased circa 150%.  

PUBLIC PAY 

Mr Picardo announced a structured, multi-year settlement for public sector workers which recovers the full 12.6% of lost purchasing power over five years and binds this Government, and succeeding Governments, to a framework that endures well beyond the life of the recovery period.  

The Government has determined that the recovery of lost purchasing power will be delivered over five years, running from financial year 2026/27 to 2030/31.  

This settlement will take effect as from the first August payslip and will apply to every public servant earning up to £100,000. 

Above the threshold of £100,000, recovery will be delivered at a flat rate of 50% of the identified loss for every public servant, regardless of how far above the threshold their salary sits.  

Mr Picardo added that recovery will be consolidated and pensionable, and a permanent uplift to base pay, carrying through into pension entitlement for every year a public servant remains in service.  

The Government will also bring forward an increase to the annual leave allocation for public sector workers, set at an additional two days of annual leave extra after 15 years of service as part of this settlement's broader improvement to terms and conditions and to work-life balance across the service. 

Mr Picardo said this “is a product of genuine, detailed, and at times robust negotiation” with Unite, the GGCA, Gibraltar NASUWT, and the GPF.  

The settlement will shape the relationship between this Government and its public servants for long after the last instalment of the 12.6% recovery has been paid, and that extends for a decade.  

“Therefore, from 2032/33 through to 2036/37, public servants will continue to benefit from annual pay awards linked to inflation, plus an additional 1%,” Mr Picardo said. 

“Accordingly, these annual awards will be capped at 4%, striking the right balance between protecting public servants from the effects of inflation and safeguarding the long-term sustainability of the public finances.” 

The Government will also start the process of filling the vacancies accepted as part of the 2026/2027 complement, that will mean 57 new public servants will be recruited to the post of AA in the Civil Service.  

PENSION 

The eligibility to collect the state pension has reduced to 60 for men, since July 1, and will remain at 60 for women. 

The cost of introducing this is estimated at £8 million and there will be some 1400 male pensioners benefiting.  

A single individual will receive a maximum of £603.00 and a minimum of £156.60, whereas the upper limit for couples scales up to £904.75.  

Mr Picardo said the Old Age Pension, has risen under this Government from £398.76 a month in 2011 to £588.30 a month today for a single pensioner and for a couple, from £598.18 to £882.65 a month.  

FINANCES 

Corporate tax receipts were £82m above forecast, reaching £252 million against an estimate of £170 million.  

Import Duty is estimated this year at £20 million, which reflects just the three months of the financial year before the Treaty takes effect.  

Mr Picardo said from the “first second” of July 15, Gibraltar’s laws will be in place which also brings into the new rules on the Transaction Tax and the European Excise Duties. 

The revenue from Transaction Tax has been “conservatively estimated” at £80 million for the remainder of the year.  

This year the rate will be fixed at 15%, increasing by 1% next year, and then will settle at 17%.  

There was an overspend in Health and Care of £31.8m, with the forecast outturn at £256.1m. 

“That overspend represents the expansion of services and the many changes that Health Services in Gibraltar has undergone this year, with more changes to come,” he said. 

“It also represents the relentless rise in the global price of medicines, medical supplies and pharmaceuticals.” 

“It is also the additional clinical staff recruited to meet growing demand.” 

“And it is our unbroken promise that every Gibraltarian who needs treatment abroad shall receive it. That, Madam Speaker, really does set us apart from any other Overseas Territory and even the UK. “ 

At the University of Gibraltar, the Government has doubled the provision, from £500,000 to £1 million.  

The yearly average for Gibraltarians registered unemployed in 2025 was 16, marking a 96.4% reduction in unemployment since 2011, with the average for the second quarter of this year falling to seven. 

Mr Picardo said the job market has grown to a record high and the number of employee jobs in Gibraltar is up to 32,206, with 22,247.  

The Scholarship Maintenance Grant will be increased by the rate of inflation since the last increase, namely 5.4%.  

Following constructive engagement with the Musicians Association of Gibraltar, the Government will introduce a tax allowance for all fees received for live performances in Gibraltar for musician’s resident in Gibraltar who perform locally and who reinvest their earnings from performances into equipment and instruments.  

This measure will apply retrospectively from July 2019, recognising the contribution made by musicians to Gibraltar’s cultural and social life over recent years. 

POLICE HOUSING BURSARY 

A housing bursary for new the Royal Gibraltar Police recruits who have not previously been in receipt of the scholarship grant was announced. 

The bursary will be set at £30,000, the approximate cost of a university degree over three years, and it will be applied as a deposit upon the successful completion of the purchase of a residential property by the officer, whether on the private market or through one of our affordable housing schemes.  

“It will be available to new entrants to the Royal Gibraltar Police who have not previously taken the education bursary, which this initiative is designed to substitute, and who have not previously purchased an affordable home,” Mr Picardo said. 

As with the Regiment, the bursary will be released from the third year of service and will carry a commitment to a total period of eight service to the Royal Gibraltar Police.  

This will not be applied retrospectively and is an instrument to recruit and to retain the officers of the future.  

The eligibility conditions will mirror those of the Regiment's scheme: an applicant must hold a valid Gibraltar red identity card, be registered with the Civil Status and Registration Office, and meet the residence requirements, with the finer points of eligibility confirmed in the usual way.  

TOBACCO 

Mr Picardo outlined the changes to tobacco duty, which is moving to a new differential of 80 cents of a Euro per packet or €8 per carton.  

There will be an excise duty of the equivalent of at least €115 per 1,000 cigarettes, Gibraltar will continue setting the minimum retail price for cigarettes and each band of tobacco will be no more than 15%, or circa 80 cents of a Euro, cheaper in Gibraltar than in Spain.  

Import Duty is presently set at £121 per 1,000 cigarettes, as from midnight on 14 July 2026, Excise on cigarettes will vary by category. 

Transaction Tax at 15% will be levied on cost, insurance, freight and excise for each category. 

Nicotine pouches and SNUS will be banned in Gibraltar, and the Government will present legislation, akin to that in the UK to ban the sale of tobacco or tobacco related products to locally resident individuals born after 2009.