BUDGET REPORTNot allowing ‘external forces’to stifle economic growth<strong>Gibraltar</strong>’s government is “on track” to deliver its predicted growth of50 per cent in the economy in the next four years, “despite thecontinuing European and economic recession”The territory’s nominal GrossDomestic Product (GDP)was forecast to have reached£1.14bn by end March <strong>2012</strong>, arise of 8.3 per cent in a year forwhich the Socialist LiberalGovernment of Fabian Picardohad responsibility for just fourmonths since winning office.Once the effect of inflationhas been stripped out, theeconomy’s increase to £949m,amounts to 5.1 per cent forReal GDP – the measure usedby most European governments,and much more than forother territories.However, like his predecessor,Chief Minister Picardowarned in his <strong>Budget</strong> speechin July of external effects forwhich <strong>Gibraltar</strong> was notinsulated.“A collapse of the Euro, oreven the departure from theEuro of one or more countrieswould have seismic effects wellbeyond any one country or theeurozone”, he noted.Not immuneSterling was not immune to theproblems affecting the Euro:“when Sterling rises against aweaker Euro our exposure toexchange rate variancesbecomes marked”, Picardosaid.What might be good newsfor cross frontier workersexchanging Sterling wages toEuros, was not so good forretailers when goods rose incost for Euro purchasers, hepointed out.But <strong>Gibraltar</strong> should notbe “cowed” and apart fromreducing both national grossand net debt, he and his ministersannounced a series ofmeasures to assist the economyand improve the population’sfinancial position.Civil servants get a 2.7 percent pay rise this year and thepromise of a slightly larger onein 2013/14. “As the engine forgrowth for <strong>Gibraltar</strong> and facilitatorsof the private sector, thepublic sector needs to be adequatelyresourced and systemsof work in the public sectorneed to be brought up-to-datefor the benefit of everyone inour community”, the ChiefMinister asserted.Minimum wages rise 5.5per cent (to account for inflationsince last changed 18months ago) to £5.70 ph, pensioners’earned incomebecomes tax exempt (as are<strong>Gibraltar</strong> pensions already),electricity and water chargesare held, and a large proportionof workers effectively will havelower income tax.Import duty cutsThere were cuts also in importduty “to stimulate the retailsector” and “make <strong>Gibraltar</strong> amore attractive destination forshopping” both for tourists andlocals, rather than use on-lineretailers, Picardo declared.Portable computers, TVs,Hi-fi equipment, DVDs andCDs have no duty (down frombetween 6 and 12 per cent previously),while the duty washalved for mobile ‘phones, perfumesand make-up, clothing,footwear, watches and jewellery.And he warned the governmentwill “be keeping aclose eye on how prices areaffected by these decreases tomonitor whether reductions areNew power station within four yearsA decision on what could be the largest singlecapital expenditure item in <strong>Gibraltar</strong>’s history –a new power supply to replace three aged,polluting and increasingly unreliable powerstations – is close, but the government will notbe rushed.Frequent power cuts in recent times areseen as potentially damaging to business,particularly the <strong>Finance</strong> Centre and e-gamingcommunity, which relies on round-the-clockavailability of service.New Chief Minister Fabian Picardo saw a£350m oil-fired power station planned by theprevious administration as too costly and notright for the jurisdiction.In his state-of-the-nation <strong>Budget</strong> address,he emphasised: “We are taking steps to ensurethe right combination of security of supply,reduction of polluting emissions, noisenuisance and technological future proofing.”A decision, that might involve wastemanagement and renewable energy solutions,is expected shortly and once taken thegovernment “will move very fast and we areaiming for implementation within this term ofoffice”.Pressure from environmental action groupsfor a speedy result was understandable; “butwe must make the right decision, not thefastest decision”, Picardo asserted.The Government’s choice of energysources would reflect its commitment toensure <strong>Gibraltar</strong>’s carbon and noise pollutionemissions are minimized.being passed on to customersand not pocketed by retailers”.But the duty on cigarettesin <strong>Gibraltar</strong> – one of the lowest-pricedtobacco locations inEurope - rises by 10p a packet,a move Picardo recognises as“sensitive, but it is the rightthing to do in support of ouragenda to stop smoking inenclosed public places”!However, computer softwarenow has no import duty“to promote <strong>Gibraltar</strong> as aplace to do high tech business”,nor is there duty on equipmentfor production of sound orvideo recordings in the music,television or cinema industry asa means of promoting “the useof <strong>Gibraltar</strong> as a jurisdictionfor the creation and ownershipof intellectual property”.And duty on importedyachts, pleasure craft and othersea going vessels has beenremoved for vessels over 18mlength and halved to 6 per centfor smaller ones in movesdesigned “to stimulate the useof <strong>Gibraltar</strong> by superyachts”.To encourage “responsiblebusiness who pay on time”, thediscount for early payment ofrates by offices, workshops,construction and manufacturingindustries is being doubledto 10 per cent, those forbars and restaurants raised furtherto 40 per cent untilautumn next year, and there isa 50 per cent rates cut for thefirst year trading of start-upbusinesses.Bigger budgetsurplusAn originally estimated budgetsurplus for 2011/12 of £21m isnow expected to be £58mgreater at £79m, but departmentalexpenditure, publicdebt charges and the costof government pensions alsorose, which together reducethe anticipated net surplus to£31m, Picardo reported.Continued on page 186 GIBRALTAR INTERNATIONAL www.gibraltarinternational.com
Change language