“The money is just not there”, is a passing comment from Sir Joe Bossano, in his GBC interview of Thursday, which sums up the dire public finance situation that the GSLP-Liberal Alliance Government is needing to deal with now. A reality which he insists that the public sector needs to bear in mind, as the private sector pays for the public sector whose workforce earns much more.
What Sir Joe cannot deny or ignore is that he has been part of the Government engaged In extravagances.
The situation that he describes is that company tax and import duties are greatly down, but income tax and other revenues are steady.
The result is that there is a projected deficit for the current year of £51 million, after cuts of £75 million have been found, without the cuts the estimated deficit would have been £121 million. Why that extravagance of £75 million that could be cut? How much has been wasted over the years?
He emphasises, however, that when the figures come in it may well be that added expense (subject to actual revenue) will need to be met and authorised by a Supplementary Appropriations Act. Interestingly he mentioned a figure of £40 million.
DEFICIT COVERED BY BORROWINGS
The result has been that in breach of the GSLP (his) golden rule that no money should be borrowed for recurrent expenditure, deficits are now being paid from borrowings.
How long that will go on for, he does not say, but there are some realities.
First it will take time for company profits to recover, and so for more company tax revenue to be received by the government.
Secondly, if companies are suffering there will be a drop in employees. He points to a reduction of over 1000 already. That being so income tax revenue, whilst still stable, will reduce, over the short term.
Thirdly, it will take time for traders to recover, imports to improve and so import duty revenue to recover to recent levels.
PUBLIC SECTOR WELL OFF
He emphasises that in the context that there are 34% more public employees, with a 72% increase in the cost of those employees. A reality that he puts down to above inflation pay increases for several years.
Those hikes have resulted in Gibraltar public employees receiving 40% higher salaries in Gibraltar than those in the UK.
Sir Joe put it clearly in terms that people in the public sector, who are much better off than those in the private sector, must accept that it is not the time for pay rises.
LESS WELL-OFF NEED PROTECTION
Sir Joe reiterates his socialist credentials by confirming that if there is less money, it is the less well-off and those at the “bottom” who must be protected and looked after. Few, if any will disagree with that.
He spells things out clearly saying, people must understand that if there is less money coming into Gibraltar, then the less well-off need to be protected. In times when there is not enough money to increase the better off (the public sector) it is the less well-off who need protection.
A clear warning to public sector workers to curtail expectations of future pay rises.
PRIVATE SECTOR PAYING PUBLIC SECTOR
Sir Joe has accepted that the private sector, who earn less, cannot be taxed more to pay the public sector who earn much higher amounts.
The average public sector pay is £41,000 a year, compared with the private sector average of £26,000, yet the private sector income and company taxes maintain the public sector.
A further warning to the public sector to curtail expectations of future pay rises.
WORST IN 51 YEARS
Sir Joe emphasised that people must understand the seriousness of the financial situation.
He said that it is the worst he has seen it in the 51 years he has been engaged in frontline politics.
Despite that he has promised that no public servant will be made redundant, but that before replacing those leaving serious consideration will be given to the need to replace.
He referred to the undertaking to maintain levels at numbers as in 2011, not that those will be increased.
Sir Joe insists on the need for a restructure of the economy. Sadly, that has been said frequently but no government has done it in the last 35 years.
He now suggests that it will need to be done in the four years that Frontex are engaged at our borders if an EU Gibexit deal is structured.
Interestingly, not one question or comment from Sir Joe as to what the options might be if there is no Gibexit deal, and so no four years. Is that indicative that a ‘deal’ is expected?
The idea is, during those four years, to reduce reliance on 15,000 cross-frontier workers by restructuring the economy from a low pay private sector to a private sector with fewer employees earning more. An ambitious project over four years, if ever there was one.
That said he maintains his position that if there is less, the lower paid must take more.
A LESSON IN REALITY
Sir Joe gives a lesson in ‘reality’. What needs to be seen is how we all react to that lesson. The first whose reaction will be clear is public sector workers. Their Unions are already seeking pay increases.
Aside from the realities that Sir Joe makes clear, will the private sector sit back and accept that illusionary world that public sector workers seem to live in? It is most unlikely.
Many people are waking up to what faces Gibraltar in the short term. Most do not like it.