The Chamber of Commerce is flabbergasted to hear that Unite the Union is calling for public sector pay increases to be funded through increased government borrowing.
The Chamber encourages Unite to publish the economic study which it has commissioned, just as the Chamber has published its own economic studies in the past. It would make for interesting reading. In the meantime, Mr Stuart Davis’s laughable economic analysis that borrowing is good for the economy beggars belief and sounds like the kind of economic thinking that led to the collapse of the Soviet Union. He refuses to realise that his continued call for ever greater pay rises across the board add to continuing inflationary pressures and is therefore, ultimately self-defeating in the current economic climate.
Like all responsible governments, the current administration has committed not to borrow to fund recurrent expenditure. This is one of Mr Bossano’s Golden Rules of prudent economic management. The current budget deficit has been attributed to the exceptional costs of paying for the costs of the COVID pandemic which cut tax revenues considerably. Over time the government has pledged to bring the budget back into balance. This needs us all to tighten our belts but this must be done in as fair a way as possible. Whilst the cost of living has increased, a crisis exists only for those that are facing real hardship.
Borrowing to fund additional pay rises will not only delay government from moving away from the current deficit and end up costing the taxpayer more but will lead to further increases in inflation and can seriously affect government’s financial stability and potentially affect government’s ability to fund sectors such as health and education The fact remains that current levels of government debt are already too high and need to be reduced for the benefit of all of Gibraltar.
The Chamber has spoken to numerous civil servants, who, unlike Mr Davis, are responsible Gibraltarians who acknowledge that it is utter madness to expect a government to increase the deficit on a recurring basis for the sole purpose of a salary increase in circumstances, where many civil servants in Gibraltar already earn more than their UK counterparts. As the Chief Minister said in last year’s budget, “in the past twelve years we have exceeded parity (with the UK public sector) in many areas. In most areas, public sector salaries in Gibraltar are now in the region of 40% above parity with equivalent grades in the UK”.
The Union insists that companies have been profiteering at the expense of their employees albeit the fact that the minimum wage has been increased by 50% over the last 10 years when inflation for the same period was just under 28% The reality is that companies have had to deal with many increases in costs: energy, rents, rates, license fees, duties, taxes, social insurance and so there is less available for pay rises. The public sector does not have these commercial pressures. Unite has lost sight of the fact that it is imperative that Gibraltar remains a competitive jurisdiction to do business in if it is to overcome the current situation.
Instead of giving a blanket pay rise across the whole of the public sector, attention should be directed at those individuals in the community who are suffering genuine hardship from the recent increase in living costs. This should be done by making adjustments in the system of benefits and allowances so that help is targeted at those who really need it. Such measures would not only be more affordable but would targets the assistance where it is needed most.
At a time when Gibraltar’s economic future remains distinctly uncertain, it would be hugely unfair on the taxpayer and extremely unwise for the government to borrow further to fund recurring expenditure. To do otherwise in the current climate will mortgage Gibraltar for many generations to come.
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