CM announces scaled public sector pay rise, £9.7m surplus and transitional changes in post-Brexit Budget

Chief Minister Fabian Picardo announced a scaled pay rise for public sector workers, with those earning under £50,000 set to receive a 5% increase.

Mr Picardo set out the increase during a budget statement that forecast a surplus of £9.7m for 2024/5 alongside record revenues.

Mr Picardo delivered the budget during a three-hour address to Parliament on Tuesday morning and laid out a “prudent” spending plan for the financial year ahead, with an eye on the treaty and Gibraltar’s post-Brexit future.

This year’s budget comes against the background of a political agreement on Gibraltar’s future relationship with the UK, with Mr Picardo announcing the creation of a Business Transition Advisory Group to advise the Government on the implementation of the Transaction Tax as part of treaty arrangements.

As Transaction Tax will replace import duties upon the implementation of an EU treaty, Mr Picardo said the Government does not intend to change the rates at this stage.

The budget also saw further announcements including an increase to the minimum wage of 60p to £9.50 per hour, a Gibraltar e-gov Membership Pass, marked increases in tourism income, and a change to the legal age of marriage, which will increase to 18 years old.

Mr Picardo told Parliament that Gibraltar continues “to navigate the choppy, if not turbulent waters” in a global context with wars in Europe and the Middle East, shouldering Covid debt, high inflation, and threats of higher fuel prices.

Despite political instability globally, Mr Picardo pointed to the political agreement for an EU treaty after years of negotiations and the business opportunities this will bring.

The Business Transition Advisory Group will be chaired by the Minister for Business, Gemma Arias Vasquez, a former Chair of the GFSB, to advise the Government on the implementation of the Transaction Tax and all relevant business considerations arising from the new EU Treaty.

The additional composition of the Committee will be announced by the minister and will include the Chairs of all the business organisations in Gibraltar and the Attorney General.

The Group will report to the Cabinet before the end of November on how best to ameliorate any potential transitional effects on businesses.

Mr Picardo said there will be additional discounts on business rates to come and opportunities for businesses to thrive.

And he said border fluidity would not impact security, adding all implications of the removal of the frontier fence were being carefully assessed.

“We are ready to see Gibraltar’s economy now decisively take the fork in the road towards thriving greater growth instead of just turning to surviving and stagnation after a hard Brexit,” Mr Picardo said.

PUBLIC SECTOR PAY

Mr Picardo announced pay rises to public sector workers as he said the Government would not borrow to pay salaries.

He said claims received from one union, when analysed, could have led to some individuals receiving pay rises of £30,000 to £60,000.

“We will certainly not borrow to pay higher salaries,” he said.

“Because, if we did so, we would be shamefully asking our children to fund public sector incomes today.”

The lowest paid in the public sector in financial year 23/24 earned £19,119.

This increased in financial year 24/25 to £22,874, which Mr Picardo said represented a pay rise of 19.6%.

The minimum public sector salary will be increased this year from £22,874 to £24,017.70.

This will exceed the current UK Local Authority Pay Settlement and meets Unite the Union’s claims in this respect, Mr Picardo said.

Across the public sector, the pay rises will be layered as follows:

- Employees on salaries below £50,000 will receive a pay rise of 5%.

- Employees on salaries above £50,000 and below £80,000 will receive a pay rise of 4.5%.

- Employees on salaries above £80,000 and below £90,000 will receive a pay rise of 3.5%.

- Employees on salaries above £90,000 and below £100,000 will receive a pay rise of 2.5%.

- Employees on salaries above £100,000 will receive a pay rise on 1%.

Mr Picardo said these payments will be consolidated and pensionable and the total cost will be in the region of £8.8m distributed between all public sector workers.

The Minimum Wage will increase by 60 pence to £9.50 per hour, given that inflation will be in the region of 3%.

Based on a 37.5-hour week, the Minimum Wage will increase from £17,355 to £18,525, an increase of £1,170 per annum.

Based on a 39-hour week, the Minimum Wage will rise from £18,049.20 to £19,266, an increase of £1,216.80 per annum.

Mr Picardo said the Government will ensure that by December 31, 2025 it has completely expunged the direct use by it of zero-hour contracts other than in the use of bank staff.

The State Pension and Disability Benefit will also increase by inflation at 3%.

The full old age pension payable will now be £588.30 for a single person and £882.65 for a married couple.

The Full Disability Benefit for an adult will go up from £485.55 to £500.15.

The Full Disability Benefit for a child will go up from £346.95 to £357.40.

An increase for public sector occupational pensions which will increase by 2%.

The Transaction Tax, when it becomes applicable, will start at 15% for the first year, 16% for the second year and will reach 17% in the third year.

Mr Picardo said that if after the first year of application, the 15% standard rate is found not to create market distortions, it would be possible for Gibraltar to remain at 15%.

Some goods will be subject to the EU’s reduced rate of 5% and these will include children’s clothing, works of art, antiques and bicycles.

Some goods will be subject to the EU’s super reduced rate of 0%. These will include food, supply of water, pharmaceutical products, medical equipment, books, newspapers and periodicals, solar panels.

Some other goods will be able to benefit from an outright exemption from transaction tax.

This includes: the supply of fuel to vessels for bunkering purposes; ship supplies; the supply, hiring, repair and maintenance of equipment for vessels used for commercial activities; and the supply of goods for the fuelling and provisioning of aircraft used by airlines operating for reward.

Additionally, electricity, which is considered a ‘good’ in EU law, will be included in the super reduced rate of 0%.

Excise duties will also apply to tobacco, alcohol and fuel. There will be an excise duty of a sum equivalent to €115 per 1,000 cigarettes, Mr Picardo said.

“This will mean that each band of tobacco will be no more than 15% or circa 80 cents of a Euro cheaper in Gibraltar than in Spain,” he said.

He added that there will no longer be a restriction against registering vehicles in Gibraltar regardless of the date of first registration in the European Union.

“Although, in lieu thereof, the EU’s rules in respect of restrictions on emissions will have to be adhered to instead,” he said.

Mr Picardo added that water production has been subsidised for 9%, and electricity production by 43%.

The cap on social insurance will increase by 5% but rate will remain unchanged.

“No one on the minimum wage will be affected,” Mr Picardo said.

“All that happens is that the stage at which one starts paying less than 10% is going up.”

For homeowners whose underleases were issued over 25 years ago, and whose homes are still held on a co ownership basis, Government will be allowing them the opportunity to purchase their entire remaining share at a 25% discount, so long as they do so between now and the end of June 2026.

The estates affected are Sir William Jackson Grove, Harbour Views, West View Park, Montagu Crescent, Montagu Gardens, and Brympton.

PUBLIC FINANCES

The surplus has exceeded the projected £3.252m by three times to reach £9.782m. Mr Picardo said this marked the second year since Covid that a surplus has been achieved.

Mr Picardo announced that Gibraltar had achieved the highest revenue ever with an outturn of £813.36m, in a year where he lowered personal taxes and still received higher personal tax revenues than anticipated.

He highlighted that tourism has improved with Museum entrance receipts up 25% from £60,000 to £75,000, and increased ticket prices at Gibraltar’s tourist sites has seen an increase from £9.1m the year before to £11.5m, marking a growth of around 25%.

He said the estimate for this year is further growth to £15m, which would mean a 64% increase in Upper Rock revenue in 24 months.

Over 700 personalised driving plates have also been sold to date, generating £1.5m in revenue.

Mr Picardo said Savings Bank reserves were up to £83m, up from around £1,400 the GSD left in 2011, and separately, Corporate Tax came in at £60m higher than the estimate.

Mr Picardo said costs of the £6.3m McGrail Inquiry could have funded 3% more of a pay rise for the whole public sector in one year.

COVID DEBT

The Covid pandemic resulted in an £500m debt, which Mr Picardo said is Gibraltar’s largest portion of public debt today.

In his budget address Mr Picardo said £1.5m of this debt had been repaid, and although this is a small amount it shows Gibraltar’s commitment to make repayments to the debt.

“The Government’s strategy remains to secure a borrowing for the final 20 years outstanding of the 25-year period 2025 we agreed with the UK Government for the Sovereign Guarantee.

Mr Picardo said the Government has waited for interest rates to decrease and saved taxpayers millions of pounds in interest rates over the next 25 years, by not entering into a long-term repayment plan in 2023, when interest rates were at their highest.

He said if the Government had listened to GSD MP Roy Clinton and fixed the repayment for 22 years in 2023, this would have led to a loss of £110m.

DEPARTMENTAL OVERSPEND

Last year’s departmental expenditure was estimated at just shy of £610m, with a forecast outturn is £675.165m.

Of the £66m overspent, £36m relates to the Gibraltar Health Authority, Elderly Care and the Care Agency.

Mr Picardo pointed out how GHA staffing levels have increased in the years and the cost is £166m.

He added that the overspend is considerably lower than last year and shows a taming of the post-Covid health budget.

“The domiciliary care provided by the ERS and Care Agency is now amongst the most generous in the world and it costs money,” he said.

Further overspend included £11m on education, £7m for the social assistance fund, and the remaining overspending £10m to 12m overspent is spread across Government departments.

The overspend is also inclusive of the consolidated public sector pay rise which was not provided for in the 2024/2025 estimate.

Mr Picardo added that for the current financial year the Government is projecting a surplus of £5.3m, and in respect of expenditure they are projecting a total of £768m for the current financial year.

According to the Statistics Office, Gibraltar’s economy is set to grow by 6.5% with a GDP forecast of just shy of £3.1b.

CSRO

The age of marriage will increase to 18 years old, in line with the UK which updated its legislation in 2023.

Senior members of the CSRO have noticed a marked increase in marriages involving predominantly girls between the ages of 16 and 18, and Mr Picardo said it has become increasingly evident to the Government that certain groups are seeking to exploit Gibraltar’s lower legal age for marriages.

The Civil Status and Registration Office will soon be rebranded as the Department of Immigration and Home Affairs.

“What is clear is that under the new EU Treaty, we are going to have to be more careful than ever about who wants to come to reside in Gibraltar,” Mr Picardo said.

He added that future rights to settle in Gibraltar will need to be more carefully thought out than ever as becoming a local resident will be of huge value to third country nationals.

Mr Picardo is constituting an Immigration Criteria Consultation Committee that will be chaired by the Minister for Economic Development, who established the High Net Worth Individual Status.

The Committee will report to the Cabinet before the end of November on how best to reform entitlement to residence in Gibraltar in future.