INCREASE IN SOCIAL INSURANCE RATES AMOUNTS TO A REGRESSIVE TAX AND DAMAGES AN ALREADY BATTERED PRIVATE SECTOR

Together Gibraltar is baffled by this measure, and wonders whether the person responsible for making these economic decisions has forgotten that all public spending is a product of revenue created by the private sector - and not the other way round.

The party believes that considering the damaging effects the pandemic has had on our economy, it is not the time to increase Social Insurance payments.

The government's point that those falling in the minimum wage bracket will not be impacted is rather disingenuous given that these rises will affect a large number of employees who fall in the bracket only marginally higher than the minimum wage, numbers that are especially high in the most troubled sectors, namely retail, wholesale and hospitality.

Sir Joe Bossano’s argument that Social Insurance payments are exclusively used to pay pensions and healthcare, as if they were a completely separate branch of Government finances, is also disingenuous. Most government revenue is collected into one pot, and all Government expenses are paid from said pot. Though there is some structure in the budgeting and (one would hope) policies in place aimed at guaranteeing the sustainability of future liabilities, the reality is that sums of money are moved around depending on the needs of the day. If the expenses in healthcare happen to exceed the revenue levied by Social Insurance payments (such as in a global pandemic), the government will not close down our hospital, but source funds from other parts of the budget.  It is simply a ruse to justify their overspending and subsequent increase in taxation.

Our economy faces severe challenges at the moment, not only the reduction in trade as a result of Covid-19 but also in the uncertainty faced by business in relation to Brexit negotiations and the Chief Minister's refusal to inform businesses on the development of these.

The Government would best serve the interests of the community by being more honest in conveying the real truth behind the state of our finances. Since 2011, the civil service has grown by somewhere in the vicinity of 20%. Furthermore, this current administration has overstretched our spending capacity with costly capital developments and lavish vanity projects, for which it has entered into unprecedented levels of borrowing, which will be paid off by future generations to come. Add to that cocktail a downturn in revenue caused by a global pandemic and it is no surprise that we are left with the current scramble to implement (and hide) public spending cuts and to generate revenue by introducing stealth taxes.

The pickle we find ourselves is mostly of our own making.

If the financial situation is as dire as it seems from the acts of austerity being implemented (budget cuts, non-renewal of agency and nursing contracts, limits to  overtime hours, reduction of educational grants, increase in charges to the Upper Rock Nature Reserve when taxis and tour operators are struggling for survival and other stealth taxes) TG would have preferred to see progressive forms of increasing government revenue implemented, in order to allow those most privileged and less impacted by the crisis to do their bit for a community that has always been extremely supportive of their endeavours. Instead of penalising workers and employers across the board (in fact, penalising those on the lower end of the pay scale more), the government should have had the courage to implement progressive tax reforms in the vein of those implemented by most developed economies. Let us not forget that high earners in Gibraltar pay extremely low income taxes (as low as 5% in top brackets), while Gibraltarian middle class families are taxed at rates that are close to European standards.

Let us also remember that workers in the civil service and public sector, despite having had their workload significantly reduced (in many areas, clearly not those related to healthcare) did not see a penny cut from their salaries throughout the pandemic. A coherent and honest government, having stated repeatedly in the past that the recurring cost of the civil service is unsustainable, should implement progressive (proportionally affecting higher earners more than low earners) cuts in this area of expenditure, if the sustainability of our public sector depends on it.

Another important side of the coin is the failure to increase revenue and respond to the challenges faced by our economy.  Very little diversification has taken place since 2011, and this is simply down to poor planning and investment by the present administration.

In any case, any measures taken in the area affecting business should have involved extensive consultation with the GFSB and the Chamber of Commerce and should not have been conducted in a clandestine, knee-jerk fashion.  

Together Gibraltar’s Craig Sacarello said: “Regardless of the austerity measures implemented, without a healthy and diverse private sector Gibraltar’s economy is doomed to fail.  It is also key that if necessary, progressive and not regressive taxation policies are considered to ensure that the effects of this financial crisis are not felt disproportionately by those with lowest incomes.”