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Chamber says Unite economic study is ‘highly misleading’

Archive image of a busy Main Street on Monday morning. Photo by Stephen Ignacio.

The Chamber of Commerce said key claims in an economic study commissioned by Unite the Union were “highly misleading” and “irresponsible”.

 The Chamber said the study relied on outdated employment statistics from 2020, despite the availability of more recent data, and compared those statistics with information from the Government’s Estimates of Revenue and Expenditure for the years 2022/23.

“The result of this confused analysis is to present misleading sets of data upon which the Union attempts to make a claim for further pay increases,” the Chamber said, highlighting in particular the “extraordinary claim” that public sector pay had declined by 3.4% between 2011 and 2022.

“This is a huge distortion of the truth and the Chamber urges the Union to correct this swiftly as it is both erroneous in fact and highly misleading.”

The Chamber, using data from the Government’s annual employment surveys, had last year highlighted that average earnings in the public sector in 2011 were £38,256 per annum or one third higher compared with those of Gibraltar’s private sector at £28,836 per annum.

By 2021, the Chamber said, average earnings in the public sector had risen by 23% to £47,005 per annum. Average earnings for the private sector in 2021 were £35,002.

Inflation over the period was 19.7 per cent.

“To say that earnings in the public sector over this period had declined by 3.4% is simply not true,” the Chamber said in a statement, adding the minimum wage had increased in every year since 2011, “even in 2020 and 2021 when the economy was affected by the pandemic”.

In the executive summary of the study, Unite claimed that only four public sector employees out of a total of 5,497 would benefit from an increase in the minimum wage, citing this as the reason why higher pay increases should be given. 

But the Chamber disagreed and said: “If anything this emphases the high level of pay in the public sector.”

“The union appears to be obsessed with pay scales and what individuals employed in the public sector might be able to earn for a given pay scale.”

“As individuals progress through their career they will move to posts with greater responsibility and higher pay scales. The union’s study appears to see this as a problem.”

The Chamber said that comparing Gibraltar’s economic output to OECD member countries was “not a useful comparison” because Gibraltar did not have similar “large budget” items such as defence expenditure. 

 Many of the OECD countries chosen in the union’s study, the Chamber said, were EU members and the interplay of EU membership costs and subsidies also impacted GDP figures. 

Gibraltar does not have either of those pressure, it added. 

According to the Chamber, “a more reasonable comparison” would be to compare Gibraltar with other smaller economies with similar employment levels.

 “Gibraltar does not compete with the UK in most areas,” the Chamber said in the statement.

“We compete with Spain where living costs are lower and considerably lower than those in the UK.” 

“Gibraltar provides many local citizens with heavily subsidised housing which the UK does not do.”

“Energy costs are also subsidised in Gibraltar. Commuting costs in Gibraltar are miniscule and taxes are far lower.”

“Overall the costs of living are much higher in the UK than in Gibraltar so it is not useful for the purposes of comparison.”

“The union’s claim that there is a cost-of-living crisis in Gibraltar similar to that of the UK is irresponsible.”

In the report, the union described the Government’s public finances as “robust” and “sound” in the long term and suggested that a public sector pay rise could potentially be financed through increased borrowing or taxation. 

But that would be a bad idea, the Chamber argued.

“The Government has significant obligations to lenders and in a rising interest rate environment the costs of servicing ever higher debt will mean there is less money available for education, health and housing,” it said in the statement.

“Borrowing further to fund recurring expenditure is not a prudent way to manage public finances and as with the pandemic, should only be considered in exceptional circumstances.”

According to Unite’s analysis, the current weekly payroll for the public sector runs to £4.4m per week or £230m a year.  

This represents around one third the government’s annual expenditure.

The Chamber said the union’s call for higher taxation to pay for an increase in this level of expenditure “is worrisome”.

“As the Chamber has advocated previously, instead of giving a blanket pay rise across the whole of the public sector, attention should be directed at those individuals who are suffering genuine hardship from the recent increase in living costs,” it said.

“This should be done by making adjustments in the system of benefits and allowances so that lower paid workers end up with more disposable income.”

“This is more affordable and targets the assistance where it is needed most.”

“Inflation in Gibraltar is beginning to fall although it remains uncomfortably high for many businesses.”

 “Pushing for ever greater pay rises across the board will only add to inflationary pressures so the move would be self-defeating.”

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

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