3rd May 2022
The Gibraltar Government will report a deficit for the 2021/22 financial year ending March 31 of £55.3m, Chief Minister Fabian Picardo revealed yesterday.
The figure, which is usually announced at the budget session in Parliament, was disclosed as the Government published the Appropriation Bill for the next financial year.
The deficit is far lower than anticipated by the Opposition, which in recent statements critical of the Government’s “mishandling” of public finances had said it could be as high as £90m.
In revealing the deficit, Mr Picardo also announced that net borrowing had increased to £652m after cash reserves “just shy” of £120m.
The Appropriation Bill was published as the Government also released the latest accounts for the Covid-19 fund.
Gibraltar’s response to Covid-19 has cost £362m since the start of the pandemic, according to data that lays bare the impact of Covid-19 on Gibraltar’s economy.
Over the past year alone, Covid-19 cost Gibraltar nearly £135m, about double what had been expected.
The Appropriation Bill provides for £553m of spending from the Consolidated Fund, as well as an additional £1m of exceptional expenditure to cover the cost of the McGrail inquiry.
Among the main areas of spending are £128m earmarked for the Gibraltar Health Authority and nearly £63m on education.
The Bill provides too for contributions totalling £30m to Government-owned companies and a £40m contribution to the Covid-19 response.
A sum of £6.6m is also provided for the capital expenditure of Public Undertakings.
Mr Picardo said he had taken the decision to release the deficit figure on the same day he circulated to MPs the 300-page Estimates of Revenue and Expenditure for 2022/23, which sets out in detail his administration’s spending plans for the next 12 months.
The Estimates Book becomes public upon the commencement of the budget debate in Parliament, but a courtesy copy of the confidential document was also provided to the Governor, as has been the case each year since Mr Picardo become Chief Minister.
“The preparation of the Estimates Book this year has been a mammoth task,” Mr Picardo said.
“The book provides 300 pages of detailed information on all areas of Government expenditure and revenue.”
“This is 100 pages more than the last Estimates book prepared by the GSD when they were in office, which was only 195 pages with much less information than we now provide.”
“The team led by the Financial Secretary has had to battle with Covid and the challenges of the Omicron wave in dealing with all the detail that we provide in the most detailed, transparent and accountable exercise in public finance accounting in our history.”
“I thank the whole team for the work they have put into the Estimates Book, the Appropriation Bill and the Covid Response Fund Quarterly Statement to ensure that they have all been available for circulation to Members of Parliament and publication, respectively, today.”
“I look forward to debating the Appropriation Bill and these Estimates of Expenditure in Parliament during the course of the Budget debate this year, which is the ‘State of the Nation’ debate in our democracy.”
“For now, I believe it is incumbent on me to report to our people immediately the final figures of the deficit for the year as at 31st March, which is £55.3m.”
“As a result of the COVID pandemic net borrowing has increased to £652m after cash reserves of just shy of £120m.”
“Although these are figures usually disclosed in the Budget debate, I think it is important in these exceptional times that people should have those figures hot off the press on the same day as we have shared them with Members of Parliament.”
‘COVID COST’
The figures laid out in the latest accounts of the Covid-19 Response Fund show spending of just over £135m in the period from April 1, 2021, to March 31, 2022.
The represents about double the Government’s forecast of £67.5m for the 2021/22 financial year at the time of the last budget.
Prior to this 12-month period, the Covid-19 fund had previously incurred costs of just over £227m for the financial year ending March 31, 2021, meaning a total cost since the start of the pandemic of £362m.
The figures show that in the 2021/22 financial year, the impact of first the Delta variant of Covid-19, followed by the Omicron wave, derailed economic forecasts amid travel disruption and changes to consumer behaviour and a drop in tourists.
The bulk of the Covid-19 spending has been targeted at covering shortfalls in government revenue that in some areas have been sharply higher than anticipated and totalled just over £107m for the 12-month period.
That was particularly the case in lost revenue from import duties.
At the time of the last budget, the Gibraltar Government anticipated having to cover a £19.2m shortfall in import duties during the current financial year.
The data published on Tuesday, however, put the actual shortfall in revenue from import duties far higher at just under £65m.
The data published on Tuesday also shows a provision of nearly £32m for the financial year to cover a shortfall in corporate tax, compared to a forecast of £28.7m at the time of the budget last year.
That was in part offset by the fact that the cost of covering loss of revenue from income tax was under £2m, compared to a forecast of £5.6m.
There was a stark disparity too between the forecast for healthcare and the actual year-end figure for payments from the Covid-19 fund to the GHA.
At the time of the budget, the Covid-19 fund was forecast to make payments to the GHA totalling £5.5m in the 2021/22 financial year.
The year-end cost as of March 31, 2022, however, stood at over £20m, driven up in large part by the need for ramped-up testing to monitor the spread of the different variants in the community and adjust the healthcare response accordingly.
At the time of the last budget, the Gibraltar Government had cautioned that its forecasts for Covid-19 expenditure were based on an honest assessment of what it anticipated, but with the express caveat that it might be different if Covid-19 came back, which it did.
On Tuesday, the Chief Minister left little doubt as to the serious impact of Covid-19 on Gibraltar’s economy.
“[The Covid-19 Response Fund accounts] show that the cost attributed to that fund since the pandemic begun is already over a third of a billion pounds, or over 15% of GDP in direct expenditure and lost revenue,” Mr Picardo said.
“That is huge and would be a problem for any economy, let alone an economy the size of Gibraltar.”
He said 2021 “…was not a year of recovery as many had wished and anticipated, but another year of lock downs and waves of new variants.”
“This meant that economic recovery was also impaired and revenue did not return as expected to the traditional heads of revenue, such as duty and corporate taxation.”
“That is a huge burden for any nation, especially a small nation like us.”
“As we now face the two financial years before a General Election is due, we will work to return our economy to surpluses as soon as possible and to reduce the debt in order to ensure that we put our public finances back onto the sound footing on which they were when the pandemic begun.”
“That is the work we are now embarked upon and on which I will say more during the budget debate also.”
Reacting to the latest fund accounts, Roy Clinton, the GSD’s Shadow Minister for Finance, noted the disparity between forecasts and actual spend.
“The Covid-19 Response Fund has to March 31, 2022, incurred an expense over the year of £135m taking the cumulative total cost of Covid-19 so far to £362.4m,” he said.
“It was budgeted that Covid-19 might cost £67.5m in the year to March 31, 2022, so in that context £135m means the full year budget has been exceeded by £67.5m, or double the amount estimated.”
“The details gazetted show that the annual recurrent expense spend in respect of the GHA was £14.6m more than expected.”
“Revenue loss in respect of Import Duty is worrying in needing £64.9m of support versus the budgeted £19m for the full year.”
“The forthcoming budget debate will no doubt shed light on how the excess of £67.5m over budget has been funded.”