An economic strategy for the next 10 years

Brexit poses significant threats to our economy such as not seen since the closure of the naval dockyard. The loss of EU passporting opportunities in financial services will not be fully replaced by passporting into the UK. Similar threats exist to the online gaming sector. 

The recent fall in value of sterling and likely increases in transportation costs on goods brought into Gibraltar will likely cause prices to rise in our shops and put pressure on the purses and wallets of ordinary people in Gibraltar. The prospect of recession in the UK, the EU and globally presents additional threats to our standard of living as do other external initiatives such as mounting pressure from the OECD to combat tax base erosion and profit shifting. None of these things are good for Gibraltar.

Together Gibraltar has a forward-looking 10-year economic strategy to reinvigorate Gibraltar’s economy and mitigate some of the effects of looming Brexit. Our economic strategy is specifically designed to build a stronger, more robust and sustainable economy and a better, more sustainable environment.

Central to our strategy is a diversified, better balanced economy that is less dependent on one trading partner nation or one sector; an economy that is better able to withstand economic shock and that will enhance the lives of ordinary people in our community. We want to ensure the benefits of sustainable economic growth trickle down to all and not remain disproportionately in the hands of a few.

Diversification can be achieved without detracting from our success in attracting private wealth or delivering financial services, online gaming, marine bunkering or tourism. Quite the contrary, as Gibraltar’s visibility around the world grows and our reputation for innovative and sustainable economic development becomes apparent and coupled with better-targeted marketing of the jurisdiction, we will help mitigate the threats to some sectors and enhance the success of others.

Concentration of our economic activity on the UK makes Gibraltar vulnerable to economic conditions and prospects in the UK. If, for the next few years, conditions in the UK decline or the UK decides to become a low tax jurisdiction and competes with Gibraltar then our economy may suffer. Gibraltar needs, therefore, to reduce long term reliance on the UK economy and work towards standing on its own economic feet. 

Our strategic goal is to gain economic sovereignty for Gibraltar.

Enterprise Investment Scheme

Together Gibraltar will encourage enterprise and industry by means of powerful fiscal incentives designed to diversify the economy and kickstart investment in technology-led industries, and develop the skills needed to support those industries. The focus will be on creating value instead of heavily relying on value extraction.

We will introduce an Enterprise Investment Scheme (EIS) to encourage investment in new businesses in specific, predominantly technology-led, industries that actually develop and build products and services and employ people in Gibraltar. Gibraltar taxpayers who invest in EIS companies will enjoy income and other tax relief.

EIS will provide much needed early-stage capital in target industries as diverse as gaming software, satellite technology, and technologies to combat climate change.

We will also bring in fiscal and other measures to encourage reinvestment of corporate earnings in Gibraltar, particularly in tourism, financial services, online gaming and the new technology-related industries. 

Enhanced Scholarships and new vocational bursaries

There is a shortage of the skills that will be required to support the technology-led enterprises needed to sustainably grow our economy as well as skills needed in some existing sectors. Accountants are an example. 

To encourage development of required skills, Together Gibraltar will provide non-means tested enhanced scholarships and financial awards for science, technology, engineering and maths students. We will also introduce bursaries for those undertaking vocational training overseas, putting vocational pathways on a par with academic ones. And we will guarantee permanent jobs for those attaining the highest academic or vocational performance, encouraging the brightest and best to contribute to our future in the technological era.

Income tax

Everyone should pay their fair share of tax. The present system where the rich pay proportionately less tax is inherently unfair and fuels a widening social and earnings gap where ordinary people lead incredibly hard lives while the privileged become richer. Today, those earning £30,000 a year pay 25% tax on every extra pound they earn, and a person earning £40,000 pays 28%, but someone earning over £700,000 a year pays only 5%. This is plainly unjust.

We will take a first cautious, prudent but necessary step in a direction towards fairer taxes by doubling the tax rate on the £700,000 tax band from 5% to 10%. Those on Category 2 and HEPSS tax schemes will be unaffected. 

£1million second homes

Success comes with its rewards and that is perfectly fair. Some are fortunate enough to be able to afford expensive second homes. It is only right that those owning second homes with a market value of £1million or more should contribute more to the cost of developing Gibraltar’s economic future. We will introduce a property tax on second homes worth £1million or more, charged at 2% p.a. of market value.

Investment properties will not be subject to second home property tax. Gibraltar taxpayers who invest in EIS companies will enjoy second home property tax relief. Those on Category 2 and HEPSS tax schemes will be unaffected.

Minimum wage

Everyone should be able to earn enough to live a decent life. Many are paid only the statutory minimum wage. Unions and constituents consistently tell us that the current minimum wage is not enough to live on.

We will increase the statutory minimum wage after taking advice from a newly created Low Pay Commission that will engage with unions, workers’ representatives and employers.

Zero-hours contracts

Zero hours contracts are exploitative. They are inherently unfair in a just society, especially for the low paid. Most people on zero hours contracts would rather have certainty of income, however low paid their job might be.

We will introduce measures to curb abuse of zero hours contracts. Except when specifically requested by a worker to be engaged on a zero hours contract, we will eliminate zero hours contracts from the public sector and encourage the private sector to follow suit. From next financial year, employers will have to pay at least the minimum employer’s social insurance contribution for all employees including those on zero hours contracts.                                                                          

Tax reform

Prioritising the needs of those on pensions and those with a disability, we will conduct a comprehensive review of Gibraltar’s tax and welfare regime and consider what reforms may be necessary to ensure it is up-to-date and appropriate for a modern economy and that it will meet Gibraltar’s needs into the middle of the 21st century.

Corruption

Corruption costs the Gibraltar economy between £59m and £117m a year. Ultimately, this diverts money from providing public services. Corruption, cronyism and nepotism are neither ethical nor sustainable. All may appear well until times of economic stress. Eventually, the system fails and collapses like a house of cards.

Together Gibraltar is committed to root out corruption. We will spend a minimum of £25m over the next 4 years towards eradication of corruption, with a first-year commitment of £10m for the creation of an Anti-Corruption Commission.

By effectively combatting corruption, there will be savings to the economy of between £200m to £400m over four years which will be reinvested in measures to improve quality of life such as health, care and welfare, the environment, job quality, and education designed to provide the skills needed to sustainably grow the economy.

Government inefficiency

Government inefficiency and maladministration cost Gibraltar’s economy up to £100m a year. They are unproductive, wasteful and diminish everyone’s quality of life.

By eliminating government inefficiency and redeploying human and other resources into better service delivery, we will improve the quality of public sector jobs and reward those who bring positive impact, however large or small, to the community at large, whether that is to faster, more responsive customer service, cleaner streets, shorter waiting times or reduced cost to the people of Gibraltar. Without reducing headcount, Together Gibraltar will redeploy the savings of up to £400m over four years to improve the quality of everyone’s life.

Tourism

Our tourism offering is becoming dated, unadventurous and competes with more exciting or interesting attractions around the world. Our main natural resource and heritage are not being exploited, developed or promoted to their fullest potential.

Tourism is a quick win for our economy, capable of providing early economic results. Together Gibraltar will invest at least £10m into re-energising the tourism sector, giving priority to sustainable projects and eco-tourism products.

Prosperity

Gross Domestic Product (GDP) per capita (per person), is a measure of a country's standard of living; effectively, an indicator of how prosperous a country feels to each of its people. Many in Gibraltar feel anything but prosperous. Despite rhetoric about Gibraltar having a high GDP per capita compared with other countries, the fact remains that ours lags well behind that of other microstates of similar population size. Liechtenstein and Monaco, for example, have a GDP per capita that is nearly twice that of Gibraltar.

Other measures better reflect the prosperity of our community. Because Gibraltar receives significant foreign investment and the income from the profits of such investment often flows abroad, Together Gibraltar believes other indicators such as Gross National Income (GNI) provide a better depiction of Gibraltar’s prosperity and more accurately reflects our economic performance. We will start providing Gross National Product and GNI data alongside that of GDP.

Better-informed government decision making

To improve government decision making, parliamentary scrutiny and transparency in general, we will introduce policy impact assessments, cost-benefits analyses, and value-for-money assessments when considering new legislation, investment projects employing public funds, and policy initiatives. Policy impact assessments will cover economic, social and environmental effects of public policy. We will also bring in Green Government Budgeting to speed-up progress towards a carbon neutral Gibraltar.

Brexit

All are agreed Brexit will be bad for Gibraltar – at least in the short and medium terms. What is unknown is what kind of bad and how bad. Whatever Brexit throws at us, we will confront it in the spirit of the values of community, solidarity and fraternity that has characterised our people.

The Government of Gibraltar has so far flip-flopped between supporting Theresa May's deal, standing in support of staunch Brexiteers, and putting out timid statements in support of remain. Together Gibraltar believes this is neither positive for Gibraltar nor conducive to the resolution of this crisis in the long term. A Together Gibraltar government would stand firmly in support of the revocation of Article 50 and express our unequivocal preference for any future deal to be decided in a referendum with an option to remain.

Whether we leave the EU on 31 October or next year, Together Gibraltar’s overriding objective is to mitigate the effects of Brexit on the lives or ordinary people. Even if Article 50 is revoked, the damage already sustained by our economy from the long period of uncertainty will need to be carefully and painstakingly repaired. Normalising lives will be our number one priority from 18th October.

Public information

There is a very little information available for the people of Gibraltar and businesses, especially small businesses, to adequately prepare for Brexit. People do not know what to expect in just a few short weeks’ time.

Together Gibraltar thanks the present Government of Gibraltar for following our suggestion of opening a Brexit advice centre in town. However, much more is needed to help people properly prepare for Brexit. 

Together Gibraltar will devote its first week in power assessing Gibraltar’s readiness and initiating measures to shore up people’s ability to withstand the adverse effects of Brexit. We will immediately establish a Communications Task Force to start work on filling the information void left by the outgoing government. In addition to the Brexit advice centre, we will establish a 24/7 phone enquiry service. Our priority will be keeping the public fully informed.

Free frontier flow

Delays and congestion are to be expected at the frontier with our nearest neighbour. Disruption to flights and the inward flow of goods are similarly anticipated.

We will provide Brexit support at all Gibraltar’s frontier crossings and at the airport and port to assist travellers, importers and exporters. We will immediately work with local authorities in La Linea to provide liaison facilities on the Spanish side in order to help alleviate any problems encountered there. This will be especially relevant in the event of extended frontier delays which will affect tourists, residents and the 15,000 workers who cross daily and help Gibraltar’s vibrant economy thrive.

Crisis management

Any government’s ability to deal with events as they unfold is paramount. We will implement real-time monitoring, conducted from a 24-hour situation room with a direct and immediate channel of communication to the minister responsible for Brexit and, if required, to all ministers. We will implement a daily reporting and briefing cycle involving the whole of government. These measures will remain in place until disruption to everyday lives is over. We will seek active co-operation and engagement from all branches of government and political stakeholders, including members of the Opposition.

We will also continue with preparations at the port to establish guarantees that supplies will get to Gibraltar in the case of a complete standstill via alternative routes.

Relationship with the UK

Gibraltar has arrangements in place to cement its trading links with the UK. The practical application of these arrangements will necessitate close cooperation with the authorities in the UK.

Building on a shadow network of relationships in the UK developed by Together Gibraltar over several months and years, we are well placed to bring about smooth and effective transition from the outgoing government to a Together Gibraltar government. Years of public policy work in Westminster, the City of London and Brussels conducted by members of the TG team will be brought to bear on securing the best possible co-operation and communication with these centres of power.