CM says economic shock around the corner of the sort the world has not seen since 70s

Added: 2026-05-09

[00:00:00]I think we're at the pivot point right now. If there isn't peace in the Middle East very soon in the context of the conflict between the United States and Iran, if the Strait of Hormuz does not open up quickly, then that can have devastating economic consequences for the whole world. It'll affect, of course, the Middle East, of course, the United States, perhaps less in the United States than the rest of the world, but Europe in particular will suffer the effects of that economic shock. And of course, when there's an economic shock, the people who suffer the most are the most vulnerable in our community, the least well-paid. So, in the context of what's coming in the next few months, which is the negotiation of a public sector pay round, a Gibraltar budget, and what may be happening at that time, it's my obligation not to hide these things and put them on the table. I'm not saying anything which isn't just beyond the front page of newspapers, if not quickly coming onto the front page of newspapers, but it's important that we have our national dialogue about the economics over the next year, based on the reality of what's happening, and not based on some Halcyon view of what we might all wish the panacea to be.

[00:01:07]Uh last year, a framework was agreed towards restoring uh real terms public sector pay. Uh will this affect the time frame for that? Well, potentially. I mean, I I don't want it to affect the time frame for that. I want there to be no economic shock. But what you cannot do if you're dealing with a current economic shock, as we may be within the next 8 to 12 weeks, is in that same period address the effects of an economic shock that you have slowly been trying to address. You need to deal with the current economic shock, and then what happens is that the economic shock effect is cumulative, and you need to try and recover from that in slow order after you've dealt with the current shock. That's not where we want to be.

[00:01:50]It's not that I'm saying that that's what is, in my view, happening. It's not about a view, it's about what is actually going to happen, and nothing could make me happier than to see an announcement that there is a lasting peace agreed between Iran and the United States, and that the Strait of Hormuz is liberated, and we catch all of these things just in time for this to have been an economic nuisance rather than an economic shock. At the moment, it doesn't look that way.

[00:02:18]You highlighted that this would affect the lowest paid. Is this an indication that the government may want to prioritize the lowest paid in any public sector pay claim rather than raising pay across the public sector? You just >> Excluding the higher grades? You just have to look at what has actually happened. So, in the past 20 years, the cost of living has gone up by about four times. Except that in the past 5 years, it's gone up four times again.

[00:02:45]So, what used to happen over a 20-year cycle is happening over a 5-year cycle because of the compression of COVID and Ukraine. Now we're coming to add to that the problem in the Middle East.

[00:02:58]Of course, if the price of pasta goes up four times in 5 years, it affects the person at the bottom of the earnings rung capacity, and not the person at the top. Of course, it has an effect on the person at the top, but it doesn't have the same impact as the person at the bottom. That's why I'm very clear that if you're in the union, if you're in the socialist party, you're in the left. And if you're on the left, you're looking to protect the most vulnerable. And then I think speaks for itself.

[00:03:30]Um on May Day, Unite said it had submitted a draft proposal on public sector pay, and that negotiations are expected to begin in coming weeks. Um do you have a a time frame for when this will happen, and how will this be affected by this uh by this assessment?

[00:03:42]We've been negotiating for some time now. Um Unite have submitted a paper, other unions have submitted a paper, the government has submitted a paper. All of those things are on my table for me to consider with the unions now in the final stage of the negotiation. You cannot have this negotiation earlier because you have the actual numbers for spending and surplus or deficit in the year delivered to the government the last week of March. You have the estimates book circulated to members of the parliament at the end of April, and then you have the opportunity of bringing senior leaders in the union movement into the ring of confidence with those numbers to have the final part of the negotiation based on actual numbers of surplus or deficit and estimated surplus or deficit for the following year, so that you know what you're actually really playing with.

[00:04:33]You're not just crystal ball gazing. You have to crystal ball gaze as to what chance there are that those numbers might become the reality, and that a shock isn't going to affect them, but at least you're working with current figures. So, that means that we're going to be having the final part of the negotiation now, and that means it can be an informed negotiation. Under, you mentioned the impact, for example, on tourism and the kinds of tourism Gibraltar might see. So, what assessments have been or are being made of the impact this will have locally?

[00:04:59]That that is current. That that is exactly what is happening now because these things are actually in play at the moment. At the moment, all the flights that are scheduled to come across the Atlantic are coming across the Atlantic.

[00:05:09]So, all the American tourists that are coming onto European cruise ships or on cruises in the European basin area are coming. The question is whether they will come in July or August, whether, in fact, the tourists who might go from Europe to the United States or further east might still be able to go, whether they'll have to stay home, and then they'll be they'll be tourism, but it might be more in the nature of homegrown tourism. You just have to ask my colleagues in the taxi trade or in the tourist trade what the spending power of your average European tourist is compared to the spending power of your average American tourist is to know that that can have an effect on average tourist spending in a particular year, not because the government has failed to attract a tourist, but because the type of tourist that might come might be different. Now, the treaty is a very good thing. It's going to enable us have more fluidity of people into Gibraltar.

[00:05:57]Who are those people? How much can they spend? Might depend in part on what happens in the Middle East, ironically.

[00:06:04]All of that is part of a jigsaw puzzle that is the economy of Gibraltar, which produces the income for the government in the public finances of Gibraltar, which enables us to fund public services, which is shorthand for pay the public sector workers who do those public services a particular amount or more. What would the like What would the socialist chief minister like to do? Pay more. What might a socialist chief minister have to do? Restrain what we can pay so that we can pay.