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Chief Minister’s Statement to Parliament on BEAT 4.0 – 889/2020

By December 11, 2020 No Comments

The long term, economic consequences of the COVID-19 pandemic to our Community are highly uncertain.

This is a unique crisis where our health and economy are under serious strain.

Indeed, it is as uncertain for Government as it is for our crucially important business community.

But against this backdrop of extreme uncertainty, the package of direct financial support I am announcing today, provides a degree of certainty and strikes the right balance in protecting jobs and our economy as best as we can. 

We had originally hoped to allow our businesses to gradually work themselves out of this financial assistance as we anticipated seeing the return of some normality in August.

That was clearly wishful thinking on our part and no doubt on the part of everyone in our community as we hoped against hope that the worst effects of the pandemic might have been mitigated by science, medicine or divine intervention – depending on our respective creeds – by then.

As Honourable Members and all our citizens now know, that has not been possible.

We therefore now need to look at our economy in the whole and balance what some of our business community needs to survive against what we consider we are sensibly and prudently able to do until we commence our economic recovery.

It is truly a challenging time but we hope that these latest round of measures will go some way to easing that burden, and enabling our firms to work through this pandemic with us.

Most importantly, we hope that this ‘leg up’ will mean the difference for many businesses and will help them continue to survive as employers in coming months.

I am therefore pleased to announce the outline of the new business support measures that will apply from 1 December 2020 to 31 March 2021.

These measures are timed to assist business through what we hope will be the last period of serious disruption as we turn a new leaf and emerge from the pandemic-induced slump.

The main staple of the new measures will be BEAT 4.0.

This is a scheme that has been developed organically following the 3 preceding BEAT schemes that Government implemented since the 1st April 2020.

I will broadly summarise the various stages for the House, Mr Speaker, as follows:

The original BEAT 1.0 was a scheme for employers to assist inactive employees where we targeted the financial support directly at the employees.

We practically eliminated wage costs which are normally the highest direct cost facing a business.

Beat 1.0 was a three-way collaboration.

An alliance between Government, Employers and Employees.

Government paid employees their new wages; inactive employees sacrificed their contracted wages through their employer; and businesses paid their reduced business expenses despite the hit to their revenue.

Government also sought to mitigate these business expenses through various other measures, from PAYE and SI waiver and deferrals schemes, to rental discount schemes, and to rates waivers, and the various Import Duty mechanisms to support businesses. Throughout Government has done as much as we possibly could in a small economy such as ours.

The total cost of the BEAT 1.0 scheme saw Government pay out around £14 million direct to business and their employees over the second quarter of this year.

Money well spent.

This lifeline meant that businesses were able to retain their employees and have them firing on all cylinders as soon as they tentatively reopened after lockdown.

Once employees were allowed to return to work, we redesigned the BEAT scheme.

Instead of a contribution strictly for employees, the subsequent BEAT schemes (BEAT 2.0 and BEAT 3.0) were paid out as a grant to the Businesses themselves.

This was an amount of money that was paid to businesses to support them in meeting their business costs.

They were not directed to use this grant to pay employee salaries.

The BEAT 2.0 and 3.0 grant schemes have been simple and effective and businesses have welcomed this support to help them through these very difficult months.

Both BEAT 1.0 and BEAT 2.0 schemes were designed in close consultation with CELAC, who have provided constructive and practical feedback throughout the entire process, and also the Official opposition, who have also contributed.

The BEAT 3.0 scheme that we rolled out for October and November 2020 was simply an extension of BEAT 2.0 – it simply repeated the grant payments that we had made during the month of September 2020.

We have recognised the simplicity of this grant scheme, but we also recognise that businesses will need more assistance as we close the year, and begin what are traditionally very quiet months in the first quarter of each year.

There will be no bumper Christmas for anyone this year.

This is a painful reality that we must all accept.

Strong Christmas takings normally help our businesses – and businesses around the world – navigate the first months of the next year.

This year the takings will not be so strong in the hospitality industry.

There will be less tourists coming to visit to eat or shop.

Our retailers will likely be less active, despite the local captive audience.

Consumer confidence will no doubt not be what it was last year.

Our new scheme, BEAT 4.0, will continue to be paid as a grant.

It will be just the same as BEAT 2.0 and BEAT 3.0.

But the amount of that grant is now increased from 20% to 30%.

Why, because we recognise that the longer the pandemic goes on for, the harder that trading has become for those of our businesses that are in scope.

Additionally, the life of BEAT 4.0 will be to the end of the current, 24 month, financial year.

That is to say, Mr Speaker, BEAT 4.0 will be paid up to 31 March 2021.

What we are doing now is essentially giving businesses further certainty in terms of their guaranteed cash flow that they can rely on up to the 31 March 2021.

The amount of the grant will continue to be based on the average payment that the business received under BEAT 1.0 (from April to June).

Businesses will therefore be able to calculate the amount that they will be receiving over the coming months and they can plan accordingly.

Businesses who were able to participate in previous BEAT schemes will be receiving emails as I speak, so that they can confirm their participation for BEAT 4.0.

These businesses will have until midnight on Friday 18th December to confirm their participation, and we expect the first round of BEAT 4.0 payments to be made to Businesses in the week commencing 21 December.

Save for the December payment, all remaining payments will be made at the end of each relevant calendar month as was the case with previous BEAT payments.

We are well aware that this increased grant is being paid during December, whilst most businesses will see an increase in trade activity.

But we hope that these businesses will use this grant conservatively, so that they are as prepared as they can be to weather the first quarter of 2021.

We anticipate that the first quarter in 2021 will be slow, as has traditionally been the case in previous years, and this slow-down is likely to be compounded by the effects of the pandemic.

Businesses in receipt of BEAT grants are required to keep any terminations within a fixed threshold to avoid any BEAT grant payments being converted into interest bearing loans.

The employee termination threshold that was previously 30% is now being increased to 50% for wholesale, retail, hotel, bar and restaurant sectors.

This is in response to continued feedback that Government has received from business representative groups within these sectors.

These representations have explained that these sectors traditionally experience a high turnaround of employees and they have sought an increase in the threshold to give them greater flexibility with the management of their staff in a way that does not penalise them from converting their grant into an interest bearing loan.

We recognise that no business wants to make their staff redundant.

But we are acutely aware that in some circumstances, redundancy may be inevitable and we do not want to strip the financial aid from these businesses at this challenging time.

I should inform the House, Mr Speaker, that the quarterly average of the number of resident persons seeking employment in Gibraltar, that is to say, those registered unemployed is currently likely to end the quarter at about 25, using the figures as at the close of business yesterday.

Mr Speaker, we set out to protect jobs, and we have.

We have also adapted and tweaked some of the existing measures following requests from these sectors.

Whilst Government will continue to apply an additional 25% early rates payment discount to all businesses who pay rates on time, we will in addition also apply a rates waiver for the period from 1 January 2021 to 31 March 2021 for all businesses in the wholesale, retail, hotel, bar & restaurant sectors only.

The additional rates discount and waiver does not apply to supermarkets and pharmacies, as was previously the case.

This wavier will, of course, only apply to businesses who are up to date with their rates payments.

Government will continue to waive work permit and registration and administrative fees throughout the first quarter of 2021.

The commercial rent discount scheme will also be extended to 31 March 2021, with Government providing a discount of 50% on all rent and licence fees, and private landlords encouraged to provide a rental discount of 25%.

As before, private landlords who do not extend this discount to their tenants for Q1 2021 will face a tax penalty and their tenants will receive a tax credit.

Our private sector landlords have supported this scheme, and we are grateful to them for this support.

I must tell them that we intend this to be the last quarter for which we will introduce this rental discount scheme for private landlords.

We recognise that landlords are businesses too and that they need to see light at the end of the tunnel too.

Restrictions on rental increases, the waiver of tables and chairs licences fees and the import duty waiver scheme will all continue as I have previously announced up to 31 March 2021.

Mr Speaker, the total cost of this package is approximately £1m per month.

Mr Speaker, I am grateful to the Ministers for Business and Financial Services and Gaming, Hon Vijay Daryanani and Hon Albert Isola, for having worked with CELAC members, with the Catering Association and with Financial Secretary Albert Mena on the development of these measures, together with Income Tax Commissioner John Lester and his team, and Director of Employment, Debbie Garcia and her team.

I have been unable to involve myself in detail on these matters as I have been involved in the detail of the BREXIT negotiation.

It is for that reason that it has not been practicable for me to consult with the Leader of the Opposition on BEAT 4.0.

I know that the relevant sectors need this clarity now and I do not think we could therefore delay this announcement any further.

I would have wished to have been able to consult the Honourable Gentleman fully if possible.

I do hope we will be able to consult him on future stimulus measures.

Our amendments to the Insolvency Act, that introduced a moratorium period, were due to expire on 31 December 2020.

In line with the extension of the other measures that I have announced, this moratorium period will be extended to 31 March 2021.

Government has also sought to remind businesses that if they are in distress solely as a result from the pandemic, they may be able to take advantage of the business disruption loan guarantee scheme which I explained to Parliament on 26 June 2020 and 25 September 2020.

This scheme was contracted to continue to receive applications up to 31 December 2021 but I am pleased to announce that Government will extend this deadline to 31 March 2021 in line with the other measures that I have just mentioned.

With the new year comes new hope that the mass vaccination will lead to economic recovery and we hope to see that transition as from April 2021.

We are starting to consider measures that we will be rolling out as from April next year, as we seek to kick-start our economic recovery.

The Government is committed to assisting the business community until that recovery process commences.

We will face a different problem if we allow this pandemic to scar our economy and reduce our tax and other revenues.

It is by keeping our economy on this life-support system that we can avoid a longer term increase in our welfare spending.

We will continue to work together to support our business community in a prudent and responsible manner.

We have many challenges to navigate, each with their own difficult consequences and we will measure our response appropriately.

Governing is never easy, but in these times it is especially difficult.

But we have not faltered.

And we shall not falter.

And together, Mr Speaker, I have every confidence that we will all see much better times to come.