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24th March 2020, 18:12

Chief Minister announces details of employee subsidy for those made 'inactive' by Covid-19 crisis measures

The Chief Minister has announced details of further fiscal measures, designed to benefit: employers, employees and self-employed people affected by the regulations restricting freedom of movement and economic activity, and all citizens. 

Speaking at Number Six on the first day of lockdown in Gibraltar, Fabian Picardo said a new status of "inactive" would be introduced for affected workers, and that businesses will receive a per employee amount of £1,155 for full-time employees deemed inactive, with this reduced for those who work fewer hours. 

Mr Picardo said these payments would be made at the end of April, with employers expected to honour their March salaries. He said there would be criminal as as well as financial penalties for anyone abusing the system.

The Chief Minister also announced the extension of some previously announced business measures, as well as some additional measures. 

COVID-19 STATISTICS

The Chief Minister announced Tuesday’s Covid-19 statistics. Five cases have been confirmed since Monday, meaning there are now fifteen confimed cases in Gibraltar: ten active, and five recovered. Of the ten active, Fabian Picardo said all are doing well and a large number will soon be rated as recovered.

The total number of people tested is 206. 82 test results are pending, with 124 results received, of which 109 were negative.

Mr Picardo said all parts of the testing kit are now in Gibraltar, meaning tests will be able to be carried out much faster soon.

He reminded people that the restrictions on movement are now in place, describing these as steps taken in order to protect life, in a public health emergency.

FISCAL MEASURES ANNOUNCED

Fabian Picardo said “the market economy is largely broken”, and that the “business & employee assistance terms” (BEAT COVID-19) measures he would announce are designed to favour everyone who works in Gibraltar’s economy: employees and the self-employed, affected by regulations restricting freedom of movement and economic activity; employers and entrepreneurs; and all citizens generally.

Mr Picardo said he and the Financial Secretary, Albert Mena, had worked very closely with the Covid Emergency Liaison and Advice Committee (CELAC), and had consulted with the Leader of the Opposition, Keith Azopardi, and the Opposition spokesperson for public finance, Roy Clinton.

The measures, he said, would operate throughout the month of April before being reviewed. He described them as "one of the largest incentive schemes any Gibraltar Government has ever announced".

ELIGIBILITY FOR MEASURES

The Chief Minister announced a new status was being created in law for employees affected throughout the Covid period. Employees can be deemed “inactive” by their employers, meaning that they can benefit from the measures announced by the Government. This will be applicable to workers whose employer has experienced a downturn or cessation in business, and who have therefore been sent home without work – not for those who are still working from home.

Fabian Picardo said he expected businesses to take advantage of this and retain their employees, and that no employer will therefore be able to justify any mass layoffs or redundancies.

In order to register their employees as “inactive”, businesses will be required to fill out detailed forms which will be made available online, and will receive money to pay to the employees. They will not be allowed to retain or deduct any money from the amounts to be paid to employees.

Those who are self-employed must fill out the same form as businesses, and will receive their monthly payments directly.

The forms will require contact details, so that the Government can check the claims for accuracy on a sample basis. In order to qualify as a full-timer, you must work an average of 7.5 hours a day or more. For part-timers and those on zero hour contracts, employers will need to detail the average amount of daily hours they have worked from the 1st of January to the 15th March. This will be used to pro-rate the daily rate for part-time employees.

The amounts will be paid tax free, and will attract no PAYE or social insurance deduction on the part of the employer, the employee or the self-employed. Social insurance records will be deemed as paid in April, even though the have been waived.

Terminations of employment as from the 15th March will not be allowed, except by specific consent of the Director of Public Employment, meaning these measures are designed to retroactively benefit anyone affected since the start of the crisis.

The measures will apply to all sectors, with some exemptions which will be reviewed on a monthly basis: in response to media questions, the Chief Minister said, for example, that the financial services and gaming sectors had agreed to opt out of certain measures, such as the employee subsidy. He said a notice would be published setting out the exclusions.

The Chief Minister said as for employees, the measures are designed to be able to benefit any registered employee of a business in Gibraltar, regardless of their nationality or place of residence.

DETAILS OF MEASURES

The Chief Minister said the relevant legislation for what he called this “second round of measures” to protect the economy would be published in the coming days, and that the first payments to employers would be made by the end of April 2020.

Businesses will receive a per-employee amount of £1,155 pounds per month for full-time employee, with the same applicable to a self-employed person. This will be adjusted for those who work fewer hours, such as part timers. This, the Chief Minister said, was based on a minimum wage of seven pounds per hour, computed based on 7.5 hours a day and 22 days a month.

The funds will be paid toward the last week of each month during the Covid period, starting from the last week of April. Employers are therefore expected to honour the March salaries due to their employees, with the Chief Minister saying the Government cannot move quicker. He also explained that the payments could not be made weekly, as the Government cannot validate forms and administer funds on a weekly basis.

He advised businesses in difficulty to approach their shareholders, or local banks offering loans at reasonable rates; and, he said, anyone in need of these payments must complete their forms as soon as possible.

Fabian Picardo said the Government would make a available a table that breaks down each of the measures as they apply to business sectors. In response to GBC questions, he said more details would be announced tomorrow. 

BUSINESS MEASURES

The Chief Minister said in some circumstances, the Government had extended or improved the business measures it had previously announced on the 20th March. It said all businesses not specifically excluded from the application of the following business measures would benefit from them.

The measures include a waiver of commercial rents for the second quarter of 2020, where the Government is the direct landlord of a businesses within a “relevant sector”.

It said they would also benefit from the encouragement for private landlords to provide commercial rent waivers for the second quarter in 2020, with the Government applying a tax on gross rents and a deduction against tax liability of three times rent paid, or a rent waiver and lease extension of three months.

Business rates will be waived for the second quarter in 2020 for all businesses in the Gibraltar economy. There will also be a deferral of utility charges for businesses in non-excluded sectors for April, which can be paid over the following year.

The payment of salaries to employees who continue at work in sectors not excluded will not attract PAYE, or employer or employee Social Insurance contributions for April. These sums will be retained by the employer, with the law changed to exceptionally permit this.

Employers across all sectors (including the excluded sectors) will be allowed to defer their PAYE and Social Insurance contributions for the second quarter of 2020 by a period of 12 weeks from the month end, instead of the 10 weeks previously announced.

Mr Picardo added the import duty waiver for all classes of goods except for tobacco, fuel and alcohol is in effect until the end of April; in relation to motor vehicles, the waiver will be administered as a rebate upon the sale of the vehicle imported during this period.

He said the streamlining of work permit and registration processes for the gaming and financial sectors, and the waiving all of fees in this respect will continue and will include all sectors.

And, the deferral of FSC fees that would normally be payable for the whole year in advance in April has been extended further from the first round of business measures: the fees are paid quarter in arrears, giving FSC-licensed businesses greater leeway.

FURTHER BUSINESS MEASURES

The Chief Minister announced that a BEAT COVID-19 corporation tax deductible will be introduced at the sum of £50,000 as a one-off capital allowance for the current financial year, for business undergoing expense to adapt their operations to the challenges of the pandemic.

He said the encouragement that the Government had given landlords to pass on rent waivers is limited to the second quarter in 2020 – but added that if the pandemic lasts beyond that, it will consider whether it is able to help affected landlords themselves.

Gaming duty will also be deferred to the end of each quarter, and the Government is monitoring the sports-related part of online gaming, which has been affected. The Chief Minister says the Government will be reviewing effects on gaming and financial services sectors, although they are excluded from parts of the new measures by the agreement of their representatives, the GBGA and the Finance Centre Council.

SUSTAINABILITY OF MEASURES

Asked by GBC how many people will be able to to benefit from the £1,155 allowance, the Chief Minister said there are 34,973 employees in Gibraltar. He said that subtracted from this would be the public sector of 5,000 to 6,000 people which will still be operational; sectors excluded from the employee subsidy measures (such as gaming and finance), which total around 5,000 to 10,000 people; and others whose businesses will still be active. The Government will then see how many people make claims – adding that is why employers should continue to pay employees if they can.

Asked by GBC how affordable the ensuing £10 to £30 million a month would be, the Chief Minister restated that he had told Parliament last week that the Government would take out a loan of up to half a billion pounds if necessary (20% of Gibraltar’s GDP), depending on how many months the situation goes on for, and depending on the number of people that take up the benefits. He emphasised that the Government may find that it has to reduce the amount it pays if it is unsustainable. He added that the Government would need firepower as it is giving money out and failing to take money in, given the “extraordinarily difficult time” we are living. Mr Picardo stressed the importance of the rainy day fund and Gibraltar’s ability to borrow directly; he said he had told Parliament that the Government has a line of credit of approximately £150 million to see Gibraltar through this entire period, from business measures to GHA funding.

Asked about the letter by seven former Governors saying that the UK should provide financial assistance to Gibraltar if necessary, the Chief Minister said the Government is in contact with the UK Treasury on how the UK can support Gibraltar. He said with the UK’s assistance as a sovereign state in guaranteeing the borrowing, Gibraltar can benefit from lower interest rates. He added Gibraltar was also trying to determine if it has access to European funds within the Brexit transitional period. In the context of negotiations with the UK on bilateral issues, he said, they had spoken about Gibraltar’s ability to access UK funds instead of the EU funding it had had access to previously. Mr Picardo said he had emphasised that Gibraltar’s businesses should have access to anything that is put in place to help the UK.

The Chief Minister also referred to the Spanish Premier’s call for an EU-wide “Marshall Plan” for recovery, and said Gibraltar should have access to whichever plan is put out there: the UK’s or the EU’s. He said it was necessary to rebuild Gibraltar’s economy, and that exceptional support is needed in exceptional circumstances.

MEASURES TO HELP CITIZENS; CALL FOR COMMUNAL INTEREST 

The Chief Minister said the system was aimed at protecting jobs, retaining employment, and ensuring employers can fund employees to meet a basic income required to buy the essentials and put food on the table. He said this involved large amounts of public money at a time of need, and was targeted exclusively at those who need it most – adding the Government will not tolerate any abuse of these measures.

Fabian Picardo emphasised that the system will include internal checks to reduce abuse, and to ensure it is severely punished when identified. He said those abusing the system would be prosecuted to the fullest extent of the law, with those drafting the legislation instructed to provide for fines and imprisonment.

The Chief Minister said the Government would be making arrangements not just to cover April, but also May and June, when the economy is expected to bear the brunt of the crisis.

However, he warned, the Government would need to review the April measures, to ensure it can continue to pay the same amount in future. Fabian Picardo said if more people claim than the Government expects, this would not be possible – calling on people, therefore, to take what they really need and no more.

The Chief Minister also announced he would seek to put in place measures to ensure that no evictions can be carried out in cases where tenants have been unable to pay rent – but asked people to pay rent if possible. He added the Government is working on relief to provide to first-time homebuyers of affordable properties in hardship, advising these to contact GRP.

He also called on management companies not to take action against those who cannot pay estate service charges – but asked people to pay these charges if they can.

The Chief Minister also included a restriction on recording within medical facilities in Gibraltar unless this has prior written consent from the GHA.

He added that Gibraltar’s request for UK military assistance to the civilian authorities here had been approved, with MoD planners working alongside Government civil contingency officers on logistics and operations.

Fabian Picardo said he had introduced many measures, and called on people not to abuse them. He extended the people of Gibraltar’s solidarity to the people of the UK and Spain, saying this is a time for communal and international solidarity.

PRICE CONTROLS TO STOP PROFITEERING

Mr Picardo also warned against profiteering in shops. He said the Office of Fair Trading had been made aware of various businesses profiteering on medical items such as paracetamol and hand sanitisers, adding price controls will be introduced to stop this.

Shops will not be able to increase the cost of items by over 10% unless they have a reasonable cause to do so. If they can prove the cost of buying the items has gone up, then they will only be able to profit by a maximum of 20% on the cost price.

There will be a fine of up to £10,000 for profiteering. 

You can read the Chief Minister's speech in full here.