The GSD statement on the increase in contributions to pay for pensions and healthcare is a combination of false information and cynical vote catching behaviour.
The decline in Government revenues, which the Government itself has announced and is not a state secret that has been revealed by Mr. Clinton, is not the result of anything the Government of Gibraltar has done. It is the consequence of the decline in economic activity following Brexit and the pandemic lockdown combined with the payment of BEAT and other benefits which the GSD supported in Parliament.
The decline in public revenue and the increase in expenditure in the past year in Gibraltar is no different from the decline in revenue and increase in expenditure experienced by almost every other government in the world.
The GSD by implication are, nonetheless, cynically asking people to believe that if they had been in government they would have not experienced falling revenue because they would have been able to prevent Brexit and COVID and the pandemic lockdown economic and fiscal impact of them.
In fact, the last increase in Social Insurance contributions was in 2018, there was no increase in 2019 and no increase in 2020. The increase for 2021 is therefore to restore revenue and provide income to pay pensioners and meet the costs of the health service with less reliance on the taxpayer.
Contrary to what the GSD says, the employees on the national minimum wage currently £282.75 for a 39-hour week are not affected in any way by the increase in the maximum payment since their contribution is below the existing maximum.
The contribution of those on the minimum wage will therefore still be below the existing maximum when the national minimum wage goes up to £292.50 (or £.7.50 an hour) this year.
The employee’s social insurance contribution for persons on the minimum wage is 10% in June at £28.28 a week and 10% after the increase this year at £29.25 a week.
The increase is the result of having a higher minimum wage and has nothing to do with a higher cap which is applicable to employees on higher earnings.
The current maximum, which was introduced in 2018, is £30. 25.
This means that in 2021 an employee on the minimum wage for 39 hours will not be affected.
Anyone on £302.5 for a 39-hour week will pay 10% i.e. £30.25 as they were in
Above this level they will pay 10p for every extra £ which they earn up to the new maximum of £363 after which sum employees will have no further increase in contribution.
A number of anomalies have been addressed in these changes which arise from the system put in place before 2012 by the GSD Government where, for example, a person can pay £6 and receive the same benefits as someone paying £30.
This is obviously unfair.
The anomalies arise from zero hour contracts where employees may work only one day a week.
The Government also rejects Mr Clinton’s suggestion that the need to provide financial resources for paying pensions and healthcare is a discouragement to create jobs in the private sector. That is nonsense. In the private sector most of the jobs that are created are at the national minimum wage which, as already illustrated above, is not in any way affected.
The Government’s policy is to pursue a strategy on fully funded re-current expenditure so as to avoid borrowing to pay for the current cost of the public services. These measures are designed to achieve that effect, which the Government believes the majority of the public agree with wholeheartedly.
The estimate for the next 12 months in the Government budget, of which Mr. Clinton is already aware of and has been made public, is a shortfall of almost a million pounds a week (a deficit of £50m). The Government is already publicly committed to preventing the shortfall from increasing and wants indeed to reduce it as quickly as possible in order to ensure that Gibraltar’s public finances are returned to full strength without delay. Mr Clinton says one day he supports that objective and the next he is off criticising the things that have to be done to achieve it.
Finally, the reason for announcing the increase last Thursday is that, although Mr Clinton does not seem to be aware of it, the increases in social insurance take effect from the 1st July. For that reason, the Government did not consider it appropriate to wait until the Budget session, which would have meant collecting contributions retrospectively and without any legal right to do so. This was the practice under the GSD and not something that the GSLP Liberal Government supports.