The Chamber of Commerce has looked at the recent economic study undertaken by Unite the Union. It questions why outdated employment statistics from 2020 have been used in the study (page 5) when more recent data have been available for over a year. Also, the study has compared statistics from the Government’s Estimates of Revenue and Expenditure for the years 2022/23 against employment figures from 2020. The result of this confused analysis is to present misleading sets of data upon which the Union attempts to make a claim for further pay increases.
In particular on page 12 of the study the Union makes the following extraordinary claim on public sector pay increases between 2011 and 2022:
“Public sector pay in Gibraltar has declined by a greater amount (-3.4%).”
This is a huge distortion of the truth and the Chamber urges the Union to correct this swiftly as it is both erroneous in fact and highly misleading.
In March last year the Chamber published an article in its member’s magazine, Gibraltar Business, on the changes in average earnings in the public and private sector. All the data was drawn from the Government’s Annual Employment Surveys.
The article highlighted that average earnings in the public sector in 2011 were £38,256 per annum or one third higher compared with those of Gibraltar’s private sector at £28,836 per annum.
By 2021 average earnings in the public sector had risen by 23% to £47,005 per annum. Average earnings for the private sector in 2021 were £35,002.
Inflation over the period was 19.7 per cent. To say that earnings in the public sector over this period had declined by 3.4% is simply not true.
The minimum wage has been increased in every year since 2011, even in 2020 and 2021 when the economy was affected by the pandemic.
In the Executive Summary of the Study the Union claims that only 4 public sector employees out of a total of 5,497 will benefit from an increase in the minimum wage and cites this as the reason why higher pay increases should be given. If anything this emphasises the high level of pay in the public sector.
The Union appears to be obssessed with pay scales and what individuals employed in the public sector might be able to earn for a given pay scale. As individuals progress through their career they will move to posts with greater responsibility and higher pay scales. The Union’s study appears to see this as a problem.
Comparing Gibraltar’s economic output to OECD member countries is not a useful comparison as Gibraltar does not have large budget items which most OECD countries have such as Defence expenditure. Many of the OECD countries chosen in the Union’s study are EU members and the interplay of EU membership costs and subsidies also has an influence on GDP figures. Gibraltar does not have these either.
A more reasonable comparison would be to compare Gibraltar with other smaller economies with similar employment levels.
Gibraltar does not compete with the UK in most areas. We compete with Spain where living costs are lower and considerably lower than those in the UK. Gibraltar provides many local citizens with heavily subsidised housing which the UK does not do. Energy costs are also subsidised in Gibraltar. Commuting costs in Gibraltar are miniscule and taxes are far lower. Overall the costs of living are much higher in the UK than in Gibraltar so it is not useful for the purposes of comparison.
The Union’s claim that there is a cost of living crisis in Gibraltar similar to that of the UK is irresponsible.
The Union describes the Government’s public finances as “robust” and “sound”. The Government has significant obligations to lenders and in a rising interest rate environment the costs of servicing ever higher debt will mean there is less money available for education, health and housing. Borrowing further to fund recurring expenditure is not a prudent way to manage public finances and as with the pandemic, should only be considered in exceptional circumstances.
According to the Union the current weekly payroll for the public sector runs to £4.4m per week or £230m per annum. This is around one third the government’s annual expenditure. The Union’s call for higher taxation to pay for an increase in this level of expenditure is worrisome.
As the Chamber has advocated previously, instead of giving a blanket pay rise across the whole of the public sector, attention should be directed at those individuals 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 lower paid workers end up with more disposable income. This is more affordable and targets the assistance where it is needed most.
Inflation in Gibraltar is beginning to fall although it remains uncomfortably high for many businesses. Pushing for ever greater pay rises across the board will only add to inflationary pressures so the move would be self-defeating.
At a time when Gibraltar’s economic future remains distinctly uncertain, even though it may be possible, it would be unfair on the taxpayer and unwise for the Government to borrow further to fund recurring expenditure.
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