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Not possible to be in government for over 11 years and get everything right
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From a speech to the Chamber of Commerce by the chief minister Peter Caruana
The GSD Government welcomes the Chamber?s objective approach of plaudits when they are due and well measured criticism when they are due. I hope that in the same spirit you will permit me, despite being your guest , and despite the fact that I seek your votes, an element of mildly critical disagreement with some of the views expressed by the Chamber.
It is of course not possible to be in active and effective government for over 11 years and to have got everything right, or on time, still less to enjoy everyones? support for every decision, every policy or every project. Universal popularity is usually the clearest symptom of ineffective government.
FERTILE CLIMATE
Political stability and progress has created a fertile climate and environment for economic success, and this has in turn allowed us to make considerable social progress through investment in improved and expanded public services, especially health, social and other caring services, investment in public amenities like sports and leisure facilities and Gibraltar?s physical appearance, and of course cuts in personal taxation on an unprecedented scale.
And it is not just public investment, more jobs and higher pay that has spread the benefit of this economic success throughout the community. Tax cuts have been one of our principal tools for wealth distribution.
NO LONGER TRUE
It is no longer true to say that ?Gibraltar remains a high tax jurisdiction?. Nor that personal tax rates are uncompetitive with the UK for staff at the sort of earnings levels that companies should be bringing people from UK to Gibraltar. Nevertheless the GSD remains committed to its policy of cutting taxes to the lowest prudently affordable levels. We have proved this like no other government has before, or is likely to in the future.
Of course, the Government?s decision to end the historical discrimination against local companies by levelling the tax field by moving from a high tax for some and none for others, to a system of low tax for all companies participating in our economy, will hugely benefit most members of the Chamber. I can also understand that you want that benefit as quickly as possible, but the Government has a responsibility to ensure that that benefit is sustainable and not short lived, and that the manner and timing of its introduction causes the least harm and disruption to existing economic activity and public finances.
FLAK IN THE AIR
I know that there has been some flack up in the air about this issue, but the judgement as to timing can only be responsibly and properly made by taking into account all the competing factors, and not just the interests of those who want to pay less tax as soon as possible or narrow section interests within one sector of the economy.
What are these competing interests? Well, first and foremost there is the overriding need not to provoke the judges of the European Court at the very time that they are pondering their ruling on the crucial regional selectivity issue. Then there is the need to take account of the interests and views of the sectors of the economy most adversely affected, not least the important on line gaming companies. Even within the finance centre itself there are conflicting views and interests, for example between the tax exempt and non tax exempt banks. Many lawyers and accountants are doing valuable works that requires a rate of tax above a certain level, and lobbied the Government to delay the introduction of the new low tax regime.
And then of course there is the need not to destabilise or disrupt public finances.
I know that the insurance section of the finance centre is especially aggrieved , and indeed has been the most vociferous and persistent in its criticism. The Government welcomes this new and growing part of our finance centre, but it is a tail which cannot expect to wag the dog.
The Government cannot be expected to jeopardise existing economic activity and public finances for the benefit of the speculative possibility of two years worth of growth in the insurance sector.
Our economic success is anchored in our political stability and progress. This has been enhanced by the advent of an era in which there has been a breakthrough in relations with Spain, with whom, despite our continuing differences on important issues, we know enjoy unprecedented levels of normality of relations. The main element of this new political architecture is the favourably structured trilateral forum, which enables Gibraltar to take part safely in constructive dialogue. The first fruits of this Forum, the Cordoba Agreements, resolved some of Gibraltar?s most longstanding and thitherto politically intractable problems : telephones, pensions, frontier fluidity and airport.
These agreements can neither be renegotiated or cherry picked. Gibraltar cannot choose the bits that it will implement and those that it will not. Spain and the UK( which is also a party to the agreements and has paid out the pensions in good faith) have understandably made that crystal clear.
There is no room for ambiguity of language or position on this issue and the consequences of Gibraltar reneging on its commitments are clear: We will lose the benefits of the Airport, frontier and telephone agreements, while Spanish pensioners retain the benefit of the Pensions agreement; The favourable and safe trilateral forum will collapse; Relations with Spain and the UK will go back to square one; Gibraltar?s credibility as a serious political interlocutor will be severely damaged.
And all completely unnecessarily, since the supposed flaws are imaginary and invented for sheer political expediency.
FRONTIER FLUIDITY
If I could be permitted a comment on the frontier fluidity agreement, in the light of the Chamber?s comments. It is important neither to misquote the agreement nor to encourage unrealistic expectations about the degree of fluidity that we should be entitled to expect.
The agreement commits Spain to keeping arrangements under review to further improve and maximise fluidity of traffic in both directions. And I think the Chamber is right to observe that the existing arrangements can be improved further, and we are in a constant dialogue with Spain about this, which will feature in the next round of talks. But the present arrangements , improvable as they undoubtedly are, do not constitute a breach by Spain of the agreement. Nor can we overlook the fact that this is an international border separating two countries with different Schengen and EU Customs statuses and regimes ? customs differences which Gibraltar trade in keen to retain. This entitles and indeed requires Spain to conduct both passport and customs checks.
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