The recent announcement of huge increases in social insurance payments highlights the precarious state of the Government’s finances in the wake of not only the Covid Pandemic but also years of rampant recurrent and capital expenditure. It also demonstrates the inconsistent approach which the Government takes on consulting on matters affecting the business community. It beggars belief that these measures have been announced without consultation and without notice to those most affected.
When social insurance costs were increased in 2017, the Government said it had to impose a double digit increase to catch up after so many years without an increase. At the time, Government assured the Chamber that the 10% increase was a one-off and that future increases would be in line with inflation. Despite this assurance to the Chamber, in 2018 social insurance increased by a further 10 per cent or four times the rate of inflation, a total increase of 20% in just over 15 months.
Now the Government seeks to burden the taxpayer once again with very significant increases in social insurance of between 20-100%. This at a time when inflation is currently running at just 1.4% and a large number of local businesses are on the verge of collapse after having had to endure their worst year of trading in living memory. The fact is that even in the case of those businesses that survive these increases, many will be forced to cut jobs in order to be able to pay for them. These increases, therefore will not only leave many workers without a job but will not give the economy the type of stimulus it needs right now and is counter to all of the good work that came out of CELAC and the Beat measures.
The Chief Minister has on many occasions told parliament that the engine of our economy is the private sector. Despite this, Government continues to increase the cost of doing business in Gibraltar and is doing so to the point that many businesses are struggling to survive. Business closures result in job losses and loss of Government revenues.
The Chamber reminds the Government of the comments made by its very own Sir Joe Bossano in relation to the public sector, namely that the rising costs of the civil service are impossible to sustain economically and difficult to justify socially, even without Brexit. And that was before the Covid pandemic.
The Chamber urges the Government rethink these increases in social insurance and to implement efficiencies and rein in public expenditure before it comes knocking on the door of, an already struggling, private sector to bail out public finances. The Government needs to do this so that it does not imperil Gibraltar’s financial position further at a time when our future is far from certain.
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