Chamber ‘flabbergasted’ by Unite’s call for Govt borrowing to fund public sector pay rise

The Chamber of Commerce said it was “flabbergasted” by Unite the Union’s suggestion that a public sector pay rise could be funded through increased government borrowing.

The Chamber was reacting after Unite said on May Day that an economic study commissioned by the union had concluded the Gibraltar Government could afford to fund a pay rise for public workers through increased debt.

Stuart Davies, Unite’s National Officer for Gibraltar, said wage increases would be a stimulus for the economy, as more money would be spent on local businesses and more would be paid to the Government in taxes.

“The record high Index of Retail Prices (IRP) and spiralling costs have placed real financial pressure on working people in Gibraltar across the public and private sectors,” Mr Davies said on May Day.

“Whilst the union has been successful in negotiating a numbers of competitive pay awards in the private sector, we have seen three consecutive years of no cost of living increase in the public sector, increases that are also important in driving pay awards in the private sector.”

But the Chamber questioned the call and urged Unite to publish the study on which it based its position.

It said Mr Davies’ “laughable economic analysis” on borrowing to fund a pay rise “beggars belief and sounds like the kind of economic thinking that led to the collapse of the Soviet Union”.

“He refuses to realise that his continued call for ever greater pay rises across the board add to continuing inflationary pressures and is therefore, ultimately self-defeating in the current economic climate,” the Chamber said.

“Like all responsible governments, the current administration has committed not to borrow to fund recurrent expenditure.”

“This is one of Mr Bossano’s Golden Rules of prudent economic management.”

“The current budget deficit has been attributed to the exceptional costs of paying for the costs of the COVID pandemic which cut tax revenues considerably.”

“Over time the government has pledged to bring the budget back into balance.”

“This needs us all to tighten our belts, but this must be done in as fair a way as possible.”

“Whilst the cost of living has increased, a crisis exists only for those that are facing real hardship.”

“Borrowing to fund additional pay rises will not only delay government from moving away from the current deficit and end up costing the taxpayer more, but will lead to further increases in inflation and can seriously affect government’s financial stability and potentially affect government’s ability to fund sectors such as health and education.”

“The fact remains that current levels of government debt are already too high and need to be reduced for the benefit of all of Gibraltar.”

The Chamber said it had spoken to numerous civil servants who acknowledged that it was “utter madness” to expect a government to increase the deficit on a recurring basis for the sole purpose of a salary increase in circumstances where many civil servants in Gibraltar already earn more than their UK counterparts.

It cited the Chief Minister’s statement in last year’s budget, in which Fabian Picardo said parity with the UK public sector had been exceeded in many areas and that public sector salaries in most cases were around 40% above equivalent grades in the UK.

During his May Day speech, Unite’s Mr Davies had acknowledged the inflationary impact of Brexit and the war in Ukraine, but he pointed too to companies that had posted record profits in recent months and said "profiteering by employers" was a key driver of inflation.

For the Chamber though, the analysis was flawed.

“The Union insists that companies have been profiteering at the expense of their employees albeit the fact that the minimum wage has been increased by 50% over the last 10 years when inflation for the same period was just under 28%,” the Chamber said.

“The reality is that companies have had to deal with many increases in costs: energy, rents, rates, license fees, duties, taxes, social insurance and so there is less available for pay rises.”

“The public sector does not have these commercial pressures. Unite has lost sight of the fact that it is imperative that Gibraltar remains a competitive jurisdiction to do business in if it is to overcome the current situation.”

“Instead of giving a blanket pay rise across the whole of the public sector, attention should be directed at those individuals in the community who are suffering genuine hardship from the recent increase in living costs.”

“This should be done by making adjustments in the system of benefits and allowances so that help is targeted at those who really need it.”

“Such measures would not only be more affordable but would targets the assistance where it is needed most.”

“At a time when Gibraltar’s economic future remains distinctly uncertain, it would be hugely unfair on the taxpayer and extremely unwise for the government to borrow further to fund recurring expenditure.”

“To do otherwise in the current climate will mortgage Gibraltar for many generations to come.”