THE BUDGET 2024 –THE HON SIR JOE BOSSANO 2024 ADDRESS - 480/2024

THE BUDGET 2024 -THE HON SIR JOE BOSSANO 2024 ADDRESS

Index

Introduction……………………………………………………………….…..2 - 5

The Economy………………………………………………………………...6 - 10

Labour Market…………………………………………………………….…11 - 12

Savings Bank………………………………………………………….……..13 - 14

Departmental Expenditure……………..…………………………… 15 - 16

The Future……………………………………………………………………..17 - 21

Introduction

Madam Speaker

I had my 85th birthday last month and I have always believed that you are never too old to learn.

And I have learned something new recently from the behaviour of the members opposite to which there is no comparable experience in the 52 years I have been a member of the legislature or indeed during my previous experience of the conduct of local politicians even before I first stood for election in 1972.

Political Parties in Gibraltar have traditionally fought elections on the basis of different Political programmes by defending that one programme would be more beneficial to our country than that of the alternative from those contesting the election.

That is what happens in a mature democracy.

I have never previously known a Political Campaign against one individual conducted by another party to the extent of producing a video urging voters not to vote for that one person.

The GSD produced a video entitled "don't vote for Joe" and suggesting that my contribution over 52 years was negated by a quote of 40 years ago which showed me as Chief Minister answering a question from GBC without the question or the context of what it was about.

I have learned something about the sort of people who are now representing the GSD in this House.

By way of example I will remind members that in the 2015 budget they invented the fiction of the existence of 2 books of recurrent expenditure which I understand was Mr Clinton's contribution and led to the policy of voting against of all the expenditure of all the departments on the false premise that part of expenditure had been diverted to the Government companies in order to show surpluses when they were presumably expecting deficits. They then concluded that the payment from the annual surplus to the Government companies was for this purpose.

This entire fiction they repeated year after year, the truth was far simpler.

Until 2011 the GSD covered the deficits in Government companies by advances from the cash pool and we introduced the first payment in the budget of 2012 to clear these inherited deficits. The deficits from all the year after 2012 were predominantly from those Government companies which we inherited, which by definition could only operate with deficits and an example was the bus company where the annual operating cost exceeds the revenue since the bulk of the passengers don't pay fares.

This year since the surplus is still not large enough to provide for a contribution to reduce company deficits the accounts are being presented in the same way that it was done during the years that the GSD was in Government.

A more recent version of the reason for voting against all recurrent expenditure was that given by the Leader of the Opposition when he claimed that the failure to achieve the level of expenditure voted by the Government and not by them was exceeded by 2 or 3 departments which they claimed then meant that we had lied to the electorate because they interpreted, for the first time ever, estimates of expenditure as binding promises of expected outcomes a year ahead as if the approved estimates had now become an exercise of having the ability to know the future.

Madam Speaker, in the 52 years that I have been here the Treasury has done the same exercise of arriving at a reasonable estimate of expenditure independent of whoever was in Government. In arriving at such estimates and in the context of the golden rule of not borrowing for recurrent expenditure the estimate also reflects the anticipated level of income but that of course applies at the level of total income and total expenditure within those totals some departments have a higher priority than others depending on how essential the public service provided is.

Quite apart from all this, the figures that the Leader of the Opposition quoted to support his argument were all wrong because he did not understand the information in the estimates which Mr Clinton tried to cover up when I pointed this out a year later. Therefore, to suggest that the estimates of expenditure in that year or indeed any other previous or subsequent year since 1972 has been a set of binding promises made by individual Ministers in respect of their individual departmental responsibilities is the most ridiculous definition of what the budget entails that has ever been made in this Parliament and I suspect probably in any other Parliament anywhere else. What's more that it should be said by someone who himself has served as a Government Minister implies that he also believes that of himself when he was in Government.

This is the level of debate we have come to expect.

If we were to come to Parliament with measures to deal with any difficulties that might lay ahead in our relationship with Spain, then I predict the Leader of the Opposition would claim that any such difficulties would not have happened if he had been in office since Brexit and had had to deal with the EU.

An EU who sold us to Spain not just in our departure by extracting us from the UK negotiations, at the request of Spain, but from the very 1st year of Spain's membership when they kicked out our airport from the EU also at the request of Spain.

So clearly, I do not share the identification of the member opposite as being European meaning being part of the European Union. The concept of being European is simply a geographical concept not a concept of National identity.

We are British Gibraltarians, and we happen to live on the European part of the planet as does UK but there is no such thing as European Nationality.

There is Madam Speaker, one even more fundamental difference between us and them. A fundamental red line that means that the relationship between us and them can only be one of permanent antagonism to each other's values.

This is the incredible attempt to overturn the sovereign right of Parliament to determine policy by majority vote representing the democratic choice exercised by our people in the General Election.

When the Government brought a bill to this House so that on becoming law a number of words and phrases contained in statements made in the public inquiry in respect of McGrail's resignation as Commissioner of Police the members opposite misrepresented the issue and were vehement in opposition to it.

The Government members voted in favour and the Opposition voted against so there was a majority of 1.

Between 1972 and until just after the 2006 new constitution there was predominantly a majority of 1 in the elected members of the Government compared to the Opposition.

When we vote this year's budget assuming the Opposition continues with its policy of voting against irrespective of whatever it contains,

there will also be a majority of 1.

So is the view of the Opposition that a majority of 1 is not sufficient for laws to be enacted by this Parliament and that they can then go to ask the Governor to overturn the decision of parliament and block the legislation or even go to the Foreign Secretary to ask for the same to happen.

This is what the Leader of the Opposition and Mr Clinton and Mr Bossino did in respect of the legislation that was designed to not publish individual words in documents that were available to the inquiry but not available to the public because the advice that we had was that it was potentially capable of damaging security issues. So because they were against it or because they believed that was not the case or because they wanted the general public to believe it, they went to the extent of trying to put our constitutional relationship with the UK back to pre-1954, wiping out all the constitutional advances in the intervening years for which many elected representatives of our people have fought and won irrespective of their political ideology.

This is the GSD that after the 2006 constitution was implemented argued that we were no longer a colony as a result of it, that there was no need to continue to campaign for self-determination or to hold the casemates self-determination political rally. That there was no longer a need to participate in addresses in the UN to seek recognition of our right to self-determination because by implementing the 2006 constitution, we had already exercised self-determination and decolonised ourselves, thereby requiring the UN to de-list us.

Well as we all know the GSD did not convince the United Nations and did not convince us and we continue as a non-self-Governing Territory.

Indeed, the Leader of the Opposition addressed the Governor in the last meeting by saying it has been more than 40 years (and arguably more than 100 years) since the English and Commonwealth courts recognise that the crown in a self-Governing Territory comprises a separate and distinct crown in the right of that Territory.

This, Madam Speaker, can only mean one thing that the crown is the crown of independent Commonwealth countries that are not republics and therefore for self-Governing territories we can replace independence and decolonisation.

He then claimed that Gibraltar has undoubtedly acquired that measure of self-Government.

Well Madam Speaker, if that is what the Leader of the Opposition and GSD believe, which is what they said in 2006, then his Excellency the Governor is part of the Government of Gibraltar to the same extent as his majesty the King is part of the Government of the United Kingdom.

So, does the Leader of the Opposition here believe that the Leader of the Opposition in the United Kingdom can ask his Majesty the King to overturn legislation approved by the Government majority in the UK Parliament?

Having compared our level of self-Government to that of other Commonwealth Countries that have been decolonised, he then went on to suggest the opposite, namely that there has to be further constitutional reform to continue along the path of self-Government. It is self-evident that if we have achieved level of self-Government such that we are no longer a non-self-Governing Territory, that is, a colony, then the path of self-Government is complete. Of course in the same sentence the member opposite talked about modernising further, a GSD concept that we have never accepted, which equates modernisation with decolonisation, which are fundamentally two different things.

The Economy

Madam Speaker, the last input/output study of the economy was delivered in 2003.

An important observation made was that the changes that had taken place in Gibraltar's economy made it difficult, and to some extent, meaningless to try to allow comparison between the 1978, 1998 and 2000 models.

Today we are also at the point where the economy going forward has to be different from the previous models.

Firstly because of the changes in our trading relations since Brexit. We need to remember that the fluidity deal does not create different employment or trading rights.

And secondly because the pace of new technology in particular the provision of AI is going to fundamentally change the world of work and we need to be ahead of the curve to remain competitive.

When it comes to our trading position, the following facts are important.

The future economy of Gibraltar cannot be determined by whether there is an agreement this year on access to Schengen for persons and access to the EU single market for goods.

This, if it happens, will no doubt impact on the competitiveness of local businesses who could face much tougher competition from the hinterland but is unlikely to affect one way or another the international businesses which are the foundation of our economy, including the work undertaken by the ship repair yard under its present ownership which has produced the most beneficial results in its history since it ceased to be one of the five Royal Dockyards.

The plans for the expansion of the workload of the Dockyard are an important part of Gibraltar's future and count with the full support of the Ministry for Economic Development.

In terms of the possibility of an agreement, as was made clear during the election campaign, it will either be a deal that meets the criteria that has been set out to protect Gibraltar's red lines, or a no deal result.

The latest position of the Spanish Government in its statement to the Senate and more recently in La Linea requires the presence of controls by Spanish Officials within our country and thereby describes a no deal result.

The Frontex involvement in the delivery of Spain's obligation under Schengen law, to ensure controls on entry into Schengen area, has been proposed and would apply on the basis of the non-binding understanding of December 2020 which allowed negotiations to start in 2021.

The limitation of the Frontex presence to four years followed by their departure and replacement by Spanish Officials under Spanish authority working in the terminal on the isthmus reflects, in my view, the expectation by the Spanish Government that their presence on our homeland will be less objectionable after four years of Frontex.

The red lines now have to be the red lines in 4 years' time and the relationship with Schengen will be terminated.

Why should that be, Madam Speaker?

Because the Spanish view is that the presence of Spanish Officers is unacceptable to us because we don't trust Spain but that our distrust will be eroded by the convenience of a free flowing movement across the International Frontier between us and Spain, across which it would still be the end of Spain, Schengen and the EU Territory and the start of our National Territory. Fluidity of movement in and out of Spain will not change the fact that there is a line, which demarcates where our sovereignty over our land begins.

The position is no different from what happens in any other entry point of the Schengen area where there is an agreement with the neighboring State. The agreement is about movement not Territorial Sovereignty

So the movement into Croatia for example is controlled by Croatia and then once people are in Croatia they can enter into the Schengen area. In the case of Croatia nobody has argued that they cannot control who goes into Schengen.

The position here is that Spain says the Isthmus is not part of Gibraltar. However the law of the European Union applies in La Linea not on the Isthmus, which is subject to Gibraltar Law only. Moreover the fact is that the Gibraltar which is listed as a non-self-Governing Territory at the United Nation, starts at the International Frontier with La Linea and not at the Casemates Guard House where we carry out the Ceremony of the Keys Parade.

In spite of all this, it is still possible for a Schengen state to put in place controls and this is currently happening; for example Austria has done so on its border with Hungary and Slovenia.

With this in mind it is clear that increasing our self-sufficiency and the reduction of our dependence on the hinterland is the only sure strategy that can protect us in the future.

It is a strategy that I identified in 2016 when the referendum result was announced since our experience as EU second class Citizens after the Spanish entry, was in my view, likely to put us at the mercy of Spain in any post Brexit negotiation.

This is exactly what happened when the EU refused our inclusion with UK in the transitional period and forced us to negotiate separately with Spain after the UK had secured its position.

A scenario which has been repeated and is what has happened since the end of the transition in December 2020.

The members opposite have limited themselves to criticizing the Government at the result of any negotiation even when the incredibly valuable tax treaty was signed which for the first time in our history provided that Spain recognize the separate identity of the Gibraltarian people in an International Treaty, which is the first Treaty with Spain on Gibraltar since 1713.

This incredible recognition by Spain in an International document was something they had repeatedly said at UN seminars they would never accept.

The Leader of the Opposition in his remarks on the arrival his Excellency the Governor used the word the people and the population as if they meant the same thing.

They don't.

The people of a non-self-Governing Territory have a separate and distinct identity.

The population of the Territory includes the people of the Territory and other residents whose Nationality is different and who are not a colonial people with the right to self-determination.

Issues that will determine the future of our land have to be decided by those who have the right to our land.

There are issues that appear to be of relevance to the economy but putting the economy at the mercy of a hostile neighbour has to be determined by the Gibraltarians, who have no other home than our Rock.

In 2019 we fought an election where we spelt out the change of direction of our economy following Brexit. It's astonishing that the members Opposite then or since, have never given an indication whether they agree that this is the direction we need to travel or whether they think there is an alternative, a different National Economic Plan for our economic structure and the security and future of our land and our people.

How can they claim to be ready to govern without saying if they agree on the direction of travel that we have planned for Gibraltar or have an alternative?

If the answer to both is no, then it can only mean that a future Gibraltar that is absorbed by Spain is not something that they are committed to prevent.

The Constitutional relationship of Gibraltar with the UK is the least of our worries at this point in time, what we have to address is how we reposition our economy to be able to maintain the level of public services we have, for which the consumers are not fully charged, because the tax yield from the global companies based here provides sufficient revenue to cover the bulk of the costs.

It is the most important task our government has, and it would be the same for whoever else might be in government since it is an externally imposed situation, which we have to adapt to.

Just as we have done in the past when significant changes to the economy took place.

Just like the GSLP did to adapt the economy during the period 1988 to 1996.

Incidentally Madam Speaker, when the Leader of the Opposition chooses to draw attention to how small the difference involved between the 2 sides in the 2023 elections he needs to remember the past.

Other than in the 2 elections won by the GSLP in 1988 and 1996 when the margin between the Government and the Opposition was in figures of 8 or 9 thousand votes, there has generally been a gap in the low hundreds.

But even when it was the result of thousands of votes, in our case we still had the majority of one in the elected members.

But of course the Leader of the Opposition knows all of this because he was already involved in politics in those years.

What Gibraltar needs today is an Opposition that is capable of coming up with a strategy for our future economy that is better than ours. If they don't have one then the Opposition must accept and support our strategy as the way ahead, irrespective if there are any other issues, on which they may disagree.

Of course I say this on the premise that there is an awareness that we need to restructure our economy but perhaps I am mistaken in thinking that, and they are not even aware that this is the position, because they think that nothing needs to be done to give direction to our economy and that there is no need for a National Economic Plan because the economy will look after itself with no direction. Since they have never set out where they stand on this it means that the only option for Gibraltar's continued prosperity is what's in our Economic Plan.

In spite of the size of our economy we need to try and develop a degree of diversification so that it is not over dependent on a narrow sector of economic activity.

For example the number of air arrivals is an indicator of both tourist and business arrivals but with the tourist element predominant

Under the GSD fifteen-year period it grew from a level of 40,000 plus to a high of 61,743 in 2003 and then fell back to 55,619 in 2011 a trend that continued in 2012 at 52,340 persons. After 2012 it started to grow strongly so that by 2015 it surpassed the highest GSD 2003 level at a new high of 66,735, an extra 5,000 visitors.

The growth continued every year till 2019 and peaked at 92,657, almost 31,000 more than the GSD peak of 2003, an all-time high.

Covid in 2020 took the figure down to the level of 1990s at 44,830 compared to 41,616 in 1998, for example.

The recovery from the Covid economic close-down was followed by an early recovery to 56,567 in 2021 and further growth to 69,171 in 2022 already above the 2003 and another increase last year to 72,332.

However, these fluctuations have not had a corresponding identifiable impact on Government revenues that would show a correlation.

The numbers however play an important part in the profitability of small local businesses.

This sector of economic activity historically has produced a larger spend from day visitors overland than from staying visitors arriving from UK simply because of the huge disparity in numbers.

Visitors by land though the year 2000 plus were in the region of 7m to 8m increased in 2010 and 2011 to over 11m, they remained around 9m to 10m up to 2019 and then the Covid drop occurred to a 5.34m level returning to 7.7m in 2022 and 8.8m last year.

The fluidity across the frontier will affect the numbers in future and delays in coming and leaving Gibraltar could become a factor that would make unlikely an increase from this source, if the delays reduce the visitors time, spend here.

The spending in our economy in the past has been as follows:

From an all-time high of £225m in 2019 it dropped to £66.5m in 2020 and has since recovered to a level of £190m last year.

Labour Market

Madam Speaker

Our National Economic Plan since 2019 has had as a fundamental element the containment of the size of a workforce, a change from the policy we adopted in 2012 to increase employment, which was similar to the previous administration.

The previous administration had had a policy prior to 2012 to increase the size of the workforce.

Since there has not been a reaction from members opposite to the change in the economic policy and in turn the management of the Labour Market we do not know if they are in favor or against the policy we introduced in our 2019 Manifesto to deal with the post Brexit situation.

I will remind members that in line with this policy we identified as a target a maximum labour force of 32,000 in the 2019 Manifesto and repeated it in last year's manifesto so it continues to be Government policy to curtail the size of our labour market.

The reason for this, which I also explained at the time, is that we were no longer targeting increases in GDP but instead we had a new metric which was GDP per worker as opposed to GDP per resident.

To monitor the impact of the policy I set out the comparators we had chosen by reference to the performance over a number of years up to 2018/19 and the years post this date.

From October 2015 to October 2018 the labour market grew by 3851 employees from a total of 26,144 to 29,995 an average increase per annum of approximately 1284.

From 2018 to 2021 the increase has been 408 from 29,995 to 30,403.

By comparison with the growth of 2018 to 2021 the average per annum increase has been 136.

Taking the 4-year period we have in 2014 to 2018 an increase of 5573 from 24,422 to 29,995. An average per annum increase of 1393.

And in the post Brexit strategy from 2018 to 2022 the increase is 1158 that is from 29,995 to 31,150.

An average per annum of 348.

Coming now to last year's performance we now compare two 5 year periods 2013 to 2018 and 2018 to 2023. In the first period it went from 22,907 to 29,995 an increase in the workforce of 7088 representing an annual average of 1418.

Whereas in the 5-year period from 2018 it has gone from 29,995 to 31,523 an increase of 1528 and an annual average in the last 5 years of 306 per annum.

In the first 5-year period the number of frontier workers went from 7504 in 2013 to 13,654 an increase of 6150 out of an increased workforce of 7088. That is 87% of the total increase consisted of frontier workers whereas the resident worker proportion was a 13% of the increase.

In the second 5-year period with the new policy objective, the workforce grew 1528 and of the increase in frontier workers amounted to 490, that is 32% of the total whereas resident workers now account for 68% of the increase in the workforce from the level of 2018 to the level in 2023.

In fact between 2022 and 2023 there was an increase in resident workers of 373 and over the same period a slight decrease of 6 frontier workers.

The drop in employment in the retail sector last year indicates increased productivity given the increase in visitors expenditure in the year which went to £258m from £209m a £49m increase and at the same time the workforce dropped to 3.573 from 3.599.

This gives a very clear indication of how since 2018, based on the policy change of 2019, we have successfully reduced the rate of growth in our dependence on frontier workers which makes us vulnerable to the disruption of our economy if there are delays in coming in to work.

The process has however only started since we need to see a reduction in numbers and not just a dramatic slowdown in the rate of growth.

Savings Bank

I am pleased to inform the House that the Savings Bank is doing very well in terms of attracting deposits and it is likely to exceed the figures in the target we set ourselves in the October general election.

Some 12 months ago as a result of the high rates of interest set by the Bank of England, commercial banks introduced very competitive savings with much higher rates of interest than was the case previously.

To maintain the competitive position in the local market the Economic Development Debenture was devised and made available in late August. They were well received with the investor take up somewhat slow at first.

In answer to Question 658 of 2023 I provided the Parliament with the money invested in this product as at the end of September 23, which came to just over £11.25m.

After the general election I wrote to all our depositors explaining the purpose of the new debenture and generally how the Savings Bank was performing in accordance with the targets we had set ourselves, in our manifesto.

I also explained in broad terms how the deposits from the public were reinvested and in particular how the new product launched a few months earlier would play an important role by providing in some cases funding for projects undertaken by the private sector but supported by the Ministry for the Economic Development as sponsored projects.

Mr Clinton didn't like my letter to our depositors and chose to comment on it.

The level of investment since December when the letter was distributed and in particular from January this year on has grown at a huge rate. In my second letter recently I was able to report to our depositors that the level reached was £173M.

The demand continues to grow and depositors are having to make appointments to be able to purchase debentures.

I am therefore very confident that at the rate deposits are coming in, particularly for the Economic Development Debentures, this product will probably reach £200M in the current year.

The level of investment in Economic Development Debentures will place us in a very good position to support sponsored projects in the current financial year which will help in the creation of assets and increase our self-efficiency and resilience in other words the role of the People's Development Bank, the Savings Bank, will be more important than ever before, in this present term.

As regards the overall target of £2 billion in deposits, which is the figure in our manifesto for the growth of the Savings Bank in this term, it looks at present as if we could reach this target earlier than October 2027.

Madam Speaker, the contrast between the way we responded to the GSD Government on the Savings Bank and the behavior of the GSD in Opposition is a difference between night and day.

In the 2003 Budget the House was told, I quote:

"During recent years the availability of appropriate banking services has been concentrated in progressively fewer banks that is to say the appropriate domestic banking services. Some people particularly the low paid find it increasingly difficult to obtain certain range of banking services at affordable prices and on affordable terms. In order to remedy this and to supplement the services available in the private sector the government will during this financial year extend further the role of the Gibraltar Savings Bank by extending the services and the banking products provided by the Gibraltar Savings Bank and these will include cheque accounts for certain, ATM facilities, automatic teller facilities, and possibly also card accounts. This extension of the role of the Gibraltar Savings Bank the government hopes will go to correcting some of the difficulties that people in Gibraltar, some people in Gibraltar, particularly those that are paid low incomes in cash are having in obtaining easy accessible banking services".

And I have previously reminded members there was a later occasion where they announced that the Savings Bank would become a provider of annuities for pensioners which would be converted into a multimillion pound business.

There was not one word of criticism from me as Leader of the Opposition nor did I ever chastise them for not delivering their promises.

This is in stark contrast to how the GSD conduct their affairs when they are in the Opposition.

In Government, their standard position was that they made things public when they thought it should be done and not when we asked questions.

And even more important, their policy was that the Opposition had no legitimate right to criticize the Government for delays against delivery times of issues where the Opposition had not made a political commitment themselves and therefore the items in question would have never happened if the Opposition had been the party in Government.

By this criteria 90% of the accusations levelled at the Government by the present Opposition are invalid according to the criteria of the GSD in Government.

Departmental expenditure

Madam Speaker,

As regard recurrent expenditure, the forecast balance of the consolidated fund provided a year ago was £176.3M.

This has now been revised and the actual figure is £179M.

Although there was an improvement in recurrent revenue in 23/24 at £726.3M compared to an estimate of £723.7M the treasury estimate for the current year continues to be at £733M close to the actual income for 22/23 which was at £723.4m.

The position is that revenue from existing sources is not increasing and any new activity under the Economic Development Initiatives cannot be expected to have an immediate impact in raising revenue levels.

Still it is important to note that the current levels are higher than any previous year before 22/23.

The original estimate for 2022/23 was £637m following an actual level achieved of £650.3m the previous year.

This was the start of the revenue recovery, which had fallen form an all-time high of £703.8m in 218/19.

This conservative estimate was revised and forecast to come in at £731m primarily as a result of forecast income tax received of £251.4m as supposed to an original estimate of £182.4m and now further revised at the actual level of £255.5m.

In the case of company tax, the forecast was for £159.5 compared to an original estimate of £125.2m and an actual figure that has now come in at £159.7m.

For the year, just ended 2023/24 the forecast revenue is £746.3m compared to our original estimate of £726.9m.

This includes revised income tax forecast of £255.5m compared to an estimate last year of £250m and in the case of company tax a forecast of £155.3m compared to an original estimate of £155m.

On the expenditure side of the Departmental budget the position is as follows. The actual budget figure finished at £603.8m 2022/23 from an original estimate of £552.8m and a forecast of £605.4m.

The utilities head came in at £83.8m compared to £67.8m accounting for £16m and Health and Care came in at £203.20m compared to £192.5m accounting for £10.7m the total increase in those two heads therefore came to £26.7m. The balance of £9.2m was spread over the remaining 50 plus heads of the department, which went up from £307.6m to £316.8m an increase of just under 3% whereas in the case of Health and Care the increase was 5.6% and the utilities 26.3%. Clearly indicating the impact of fuel cost.

This £32m was predominantly in Health and Care, which is forecast to come in at £228.6m compared to £203.2m an increase of £25.4m

The balance of £6.6m is spread over the remaining 50 plus heads and represents a 1.6% year-to-year increase in respect of all these other departments collectively. Whereas in the case of Health and Care to year-to-year expenditure was up by 12.5%.

It is quite clear that many of our people think that increasing the level of spending by the Government every year is normal, and there is an expectation that this will happen. This is only possible when the level of recurrent revenue is also increasing. In the last 3 years the level of revenue, which recovered after Covid, has been stable but not on an increasing trend.

Therefore, restraining growth of public sector expenditure in these circumstances is no mean task but as long as our revenue streams remain static, there is no other choice.

The future

Madam Speaker, the way ahead from where we are is not going to be easy, however the past year has been quite sensational in terms of our economic performance but it has had negligible impact in increasing Government revenues.

In the areas of labour productivity and international trade the performance has probably been the best annual results in the last 52 years.

This is in spite of the factors such as the wars in Ukraine and elsewhere distorting and affecting the global economy, the fact that the globalization agenda is still growing, and that there is increasing concern that the target of keeping the global warning within range of a maximum 1.5 degrees above pre industrial levels, looks increasingly unlikely to be delivered.

These factors are destroying assets at a huge rate on a global scale which is impoverishing the global community.

In spite of this negative background our bilateral trade with the United Kingdom reached its highest level ever in 2023, after starting the increase post Brexit and then having a down turn with Covid the terms of trade in the UK have been as follows up to 2023.

£ billions

Year	2016	2017	2018	2019	2020	2021	2022	2023
Value of total trade	2.8	3.7	4.5	4.9	4.1	6.3	6.4	7.2
Value of exports	1.8	2.6	2.9	4.3	3.4	4.7	4.3	5.0
Value of Imports	1.0	1.1	1.6	0.7	0.7	1.7	2.1	2.3
Trade balance	+0.8	+1.5	+1.3	+3.6	+2.8	+3.0	+2.2	+2.7

To put this in context we bought from UK more than either Morocco or Portugal.

At the same time as we reached £7.2 billion trade with UK we had a similar level with the EU in Euros, 90% of which was purchase of fuels. Gibraltar is ranked 43^rd as a trade partner of the EU, based on the total value of trades in goods.

Taking together these 2 markets and adding other smaller international bilateral flows brings the total figure of our international trade to over £15 billion in a year where our GDP came in at just under £3 billion, giving a ratio of 5 times international trade to GDP.

The standard view of economists is that a country whose trade is five times its GDP would have a trade-to-GDP ratio of 500%.

This is extremely high and is rare, but small, highly open economies with substantial trade relative to their economic size might come close.

One notable example is Singapore.

Singapore's trade (the sum of exports and imports) is often significantly higher than its GDP.

For example, in recent years, Singapore's trade-to-GDP ratio has been reported to exceed 300%, reflecting its status as a major global trading hub.

However, reaching or exceeding a 500% trade-to-GDP ratio is uncommon and indicates an exceptionally high level of trade activity relative to the country's economic output.

Other small and highly open economies, such as Luxembourg and Hong Kong, also have very high trade-to-GDP ratios, but typically not as high as 500%.

In other words, in this area, in 2023, we were No.1.

The next success was in productivity.

Over the past two years (2021-22), UK productivity has grown at an annual average rate of 0.9%. This is almost double the average growth rate in the previous decade, (0.5%).

To be clear, low productivity growth is not unique to the UK. Labour productivity has plummeted in most advanced economies since the late1990's. It has been especially pronounced since the global financial crisis and following a major hit from the Covid-19 pandemic.

But the UK performs worse than several comparable economies. It ranks mid-table among G7 countries, based on GDP per hour worked, below France, Germany and the United States

The next UK government will need to make tackling low productivity growth its top political and economic priority. This means putting it first in decisions on public spending, tax policy, regulation and international economic policy. And doing the minimum necessary on other issues that compete for resources despite the strong case for them.

There is a simple reason for this. Without a sustained increase in productivity performance, the UK will continue to find it impossible to meet public expectations for rising prosperity and quality of life - or its international security, environmental and development responsibilities.

In Gibraltar's case the latest employment survey report for October 2023 puts the total workforce at 31.523 and the estimate for 23/24 GDP at £2,911.120 billion, producing a ratio of output per worker at a value of £92.349.

The value of output per worker as a percentage increase in productivity is the new metric introduced in 2019.

The base being the October 2018 statistics which for that particular year was a GDP of £2.455.980 billion which produces growth up to 2023 GDP of £445.14m an 18.53%.

This growth in the output of our economy was accompanied by a growth in the size of a workforce, including frontier workers, of 1528. The inclusion of frontier workers in the calculation deals with the biggest shortcoming of the previously used GDP per capita, which is the normal measure used by everyone, in other economies.

The workforce increased from 29,995 to 31,523.

This means an increase of 5.1% in the numbers of workers generated a growth of 18.53% in the size of the economy hence reflecting increased productivity.

The results of the 4 year National Economic Plan 2019 to 2023 is now showing the results that we projected and proves that we have moved in the right direction.

The new metric applied in 2019 show that 5 years after the announcement the increase in productivity has been achieved.

The policy of the 4 years after the 2018/19 has been reflected in the 2003 Manifesto and we now have the use of the first term results as the evidence for what was going to be Government policy going forward.

It is of course extremely disappointing that members of the Opposition have to date not given any indication as to whether they agree with this policy or have a better alternative or indeed any alternative at all.

In my judgement, there is only one policy that safeguards Gibraltar's future.

But of course that is self-evident, Madam Speaker, because if I thought there could be something better that we could be doing in terms of policy, then I would have advised the Government to do something else and indeed the policy to optimise targeting productivity increases, is what economists elsewhere are recommending for the way ahead.

In fact, a recent endorsement of the UK future labour Government from highly regarded economist points to precisely the need for the UK to get out of the front of no increased productivity, which is expected to be an early part of the agenda of a new labour Government.

Madam Speaker,

I expect this financial year to see quite a lot of progress on a number of exciting private sector developments, which are sponsored projects under the National Economic Plan.

The sponsoring of a project does not mean that the project will be funded, constructed or owned by the Ministry for Economic Development, or any other Government department, so it would not be a charge on our recurrent expenditure.

But it does mean that the project will be considered to result , once completed , in the provision of facilities that will be of benefit for the economic and social development of our country, and/or an asset that contributes to its resilience and adds increased self-sufficiency thereby contributing to the objectives of the National Economic Plan.

Madam Speaker, with respect of the argument put by the leader of the opposition who does not want to wait a year to be told what I think of his contribution I will this year tell him now.

He still does not understand that the expenditure we ask Parliament to approve is conditioned by

1. What the treasury conservatively estimates the revenue for the year is likely to be.
2. The priorities as to what services should be getting in their request for expenditure constrained by the level of revenue.

This is all that is done and has ever been done in putting together a budget target.

If during the year less money comes in and or one department needs more then, since we will not break the golden rule we look to make savings or not proceed with spending in one area to compensate for the excess in another.

This is the only way to avoid potential deficits.

This is what the leader of the Opposition criticises in his speech.

Why Madam Speaker?

Because if we take action to avoid deficits then he cannot attack the deficit that he wants us to have.

So he now has to rely on Mr Clinton to criticise the action that we've taken to avoid having deficits which is what they say they want us to do. Clearly they are committed to the concept of attacking the Government so they attack us if we allow the deficit to take place and they attack us if we take action to prevent it.

Finally, Madam Speaker,

I have already explained how and why we have changed the treatment of providing for the loss in Government Companies.

Mr Clinton in anticipation of his contribution here, has chosen to place on Social Media copies of the change of treatment of company losses as if he was revealing something hidden. The 2 pages he has copied are already public.

I will now provide similar 2 pages for the budgets for 2008/09, 2009/10, 2010/11, showing the GSD treatment of company losses which is the way we have now done it this year.

By Mr Clinton's calculations the" false surpluses" under the GSD are as follows:

Year	GSD Surplus	Clinton Deficit
08/09	18.947	( -11.053)
09/10	25.437	( -43.563)
10/11	28.270	( -37.30)

In 2012 we introduced a contribution of £28,300m instead of an advance to cover Government losses showing for the first time according to Mr Clinton the true surplus of £31.256m we have then shown a true Mr Clinton surplus of all the succeeding years until this year when we've shown a GSD fictitious surplus according to Mr Clinton.

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