Picardo delivers bullish budget despite Brexit uncertainty and GSD doubts
Gibraltar’s economy remains resilient in the face of Brexit uncertainty, Chief Minister Fabian Picardo said yesterday as he delivered an upbeat, yet restrained budget that drew immediate flak from the Opposition bench.
Mr Picardo pointed to economic indicators including record employment and strong revenue growth to underpin his assessment of a robust economy that continued to attract investment even after last year’s referendum vote.
He said the budget was prudent but not austere, setting out spending plans for key areas such as schooling and improved public services while storing up “rainy day funds”.
Budget measures included inflationary increases to the minimum wage and tax allowances, alongside a freeze on electricity, water charges and general rates. There were also import duty reductions on a range of goods including sport clothing and equipment.
It was a budget geared to helping the aged, the disabled and the young, as well as “the capitalist businessman and the workers he employs”.
“Prudence, caution, optimism and investment,” the Chief Minister said.
“Those are the watchwords with which this budget has been laced.”
“We must be prudent, but the results of the year just past and the year to date give us good reason for optimism.”
Mr Picardo forecast a record surplus of £75.8m for 2016/17 and gross domestic product of £1.9 billion for the same period, up 8.9% over the preceding year.
And he said government revenue was up “across the board” to £615m, representing a 75% increase since the GSLP/Liberals came into office in 2011against a 60% increase in expenditure to £597m over the same period.
The Chief Minister said aggregate public debt was marginally lower year-on-year at £443m at the end of March 2017, while cash reserves stood at £123m. Net public debt stood at £320m, or 16.75% of GDP, Mr Picardo told Parliament.
“We must equally be conscious of the fact that the process of Brexit has just begun, as we must be alive to the fact that the economic data available for Gibraltar’s performance last year is worth celebrating,” Mr Picardo said.
“Prudence and caution in our planning for the future cannot and should not ameliorate our ability – indeed, our obligation - to celebrate the excellent performance that our workers and entrepreneurs have delivered in the twelve months of the past year financial year 16/17.”
“In particular, we must reflect that nine of the months on which I am reporting occurred after the result of the referendum was known and Brexit become a reality.”
But the Chief Minister’s bullish analysis was immediately questioned by GSD leader Daniel Feetham, who accused the government of engaging in “a dangerous farce” and failing to provide an authoritative account of the state of public finances.
“Over the last six years we have seen the systematic destruction of parliamentary governance in Gibraltar and, in particular, the deliberate disablement of the ability of this parliament through this debate and elsewhere, to properly scrutinize our public finances in any meaningful way,” he said.
“The Chief Minister has the dubious distinction of leading a Government that, through the opacity in the way it has chosen to structure the public finances of this community, has made a mockery of these annual debates.”
Mr Feetham reaffirmed longstanding concerns about public debt and “off balance sheet spending” channelled through government-owned companies, insisting that Gibraltar’s gross debt was “an eye watering £1.2bn” and far higher than the figure presented by the government.
Mr Feetham welcomed the “modest” and “prudent” budgetary measures set out in the Chief Minister’s statement, which he said reflected the fact that “we live in uncertain times”.
But he said the GSD would take the unprecedented step of voting against the appropriation Bill in order to underscore its concerns about the government’s handling of Gibraltar’s public finances.
The last time Mr Picardo delivered a budget statement to Parliament was in the immediate wake of the Brexit referendum.
Back then there had been little indication as to what shape Brexit might take, a situation that a year later still had seasoned political commentators “scratching their heads”.
He insisted that “no one in Gibraltar has any interest” in joint sovereignty in exchange of EU membership, but that the commitment secured from the UK meant Gibraltar was on a solid footing despite the challenges ahead.
He said Brexit Secretary of State David Davis had been “clear and unequivocal” in telling him that the UK would not do a future trade deal with the EU that excluded Gibraltar.
Crucially, the UK would maintain the “strong mechanisms” that underpin Gibraltar’s access to the UK market and are enshrined in UK law, while seeking to increase economic cooperation and market access.
“We genuinely believe that Gibraltar will be able to carve out an important niche as a gateway to the UK for business already in the EU,” he said.
“Those who might have been rubbing their hands with glee to take our EU business may in fact now find all their UK facing business come to us. We shall see.”
While he said the EU decision to allow Spain an additional veto on Gibraltar “felt like a slap in the face”, he said the effect of clause 24 of the EU guidelines remained to be seen.
Mr Picardo announced that the Gibraltar Consultative Council would meet for the first time on July 24 to explore the government’s “ideas and concerns” about Brexit.
The Chief Minister confirmed that Gibraltar would respect the acquired rights of all EU nationals established or working here before the final cut-off date agreed between the UK and the EU.
The position in respect of EU nationals who come to Gibraltar after that date would depend on whether clause 24 is used to exclude Gibraltar from the benefits of any future deal, he added.
“We will see how all that plays out but one thing is for sure, this Government of Gibraltar…will not allow Gibraltar to be discriminated against and yet extend generous rights to the nationals of those who are discriminating against us,” he said.
“For it should be clear that the people of Gibraltar are not going to be pressured to surrender sovereignty in exchange for EU rights or access to the Single Market or anything at all.”
During a wide-ranging speech that highlighted the Gibraltar Government’s commitment to investing in students, Mr Picardo revealed that a working group composed of teachers and parents had analysed the issue of co-education and reported back to the government.
As a result of its recommendations, “…the process to introduce full co-education in the two comprehensive schools will now commence.”
To coincide with this, there will also be a re-alignment of the key stages in the education curriculum to follow the practice in England and Wales, with children entering the comprehensive schools one year earlier, at the beginning of year 7.
These changes will coincide with a programme to provide new schools by September 2019 to St Martin’s – “our first priority” - Notre Dame, St Anne’s, Governor’s Meadow, Bishop Fitzgerald, Westside and Bayside Schools.
Plans are also being drawn up for St Mary’s Middle School and St Paul’s School.
Reflecting on the past year’s performance and future prospects, Mr Picardo said the number of jobs in the Gibraltar economy had economy reached a record high of 27,073 in October 2016, representing an increase of 3.6% compared to the previous year.
The increase was led primarily by the private sector, which had grown 4.5% by 907 jobs, including a “spectacular” 9% rise in the gaming sector, which registered an additional 289 jobs.
“Of course we will hear of firms restructuring, but this is normal and to be expected as firms grapple with the typical cyclical nature of their businesses and the looming Brexit changes,” he said.
“What we are seeing is a real growth of the industry not a retrocession.”
The Chief Minister highlighted his administration’s investment in public housing stock and its strategy for recovering arrears and bringing them under control.
And he insisted that despite GSD criticism, his government had “planned prudently” in order to repay tax rebates, adding that the percentage of outstanding tax refunds measured against tax revenue stood at a ratio of 19%, the same as in 2011.
Not only that, the government had more than doubled the annual £5m payments made by the GSD. Last year, for example, the government paid £11.1m, he said.
“That is by no means to say it is right,” Mr Picardo said.
“I want to ensure we catch up both with what people owe the Government and with what we owe people.”
“But it should put paid to the incessant criticism that things were somehow better in their day.”
“Also at £10m a year we should start making inroads into their problem, [because] at £5m all that happens is that it snowballs.”
He said the government aimed to eliminate the backlog of rebates “cautiously and fairly” and would increase the budget if need be.
The Chief Minister reported strong growth too in other key areas of the Gibraltar economy, including the port and tourism sectors.
And he said private investors continued to believe in the Gibraltar economy, with a new reclamation project in the area of Coaling Island to be launched “shortly”.
While some projects such as the Bluewater development and the Rooke scheme were still being negotiated, others including the World Trade Center had been successfully completed.
“It is because there is great confidence in the Gibraltar market that there is therefore great investment into Gibraltar,” he said.
“That is why members opposite would be foolish to talk down the economy or public finances of Gibraltar which are demonstrably strong.”
“They would be wrong to raise the spectre of our public finances being anything other than entirely robust.”
“Because this debate should be a little more sophisticated than them coming here to say things are not going well when they demonstrably are.”
“Our economic data is shows robust growth and there is nothing for Gibraltar to gain by pretending otherwise.”