CM BUDGET - Public Sector cost of living increase to be delivered over five years

Fabian Picardo has used his final Budget address as Chief Minister to announce a ten-year public sector pay framework, the equalisation of the state pension age at 60, and a series of measures he described as evidence of Gibraltar’s economic strength on the eve of the UK/EU Treaty’s provisional application.

He said he would hand over an economy nearly three times the size of the one he inherited, with record employment and rising wages, set against the backdrop of a new era at the border.

Across nearly four hours, Fabian Picardo moved between personal reflection, and what be belives will be his political legacy – but this was also a financial declaration and a state of the nation address.

Budget Measures

A public sector pay settlement plans to restore what the Government says is a 12.6% loss in purchasing power since 2019.

The Chief Minister said the deal follows negotiations with Unite, the GGCA, the NASUWT and the Police Federation.

It will begin with a five-year recovery period, with annual 2.5% recovery payments. These will be consolidated and pensionable. Public sector salaries will also rise by inflation during those five years, although any inflation above 2.5% may be deferred for between 12 and 36 months.

From next month, public sector employees earning under £100,000 will receive a 5% payrise. 

Full recovery will apply to public servants earning up to £100,000. Those earning above that threshold will receive a reduced recovery rate of 50%.

Mr Picardo also announced that the minimum entry salary across the public service will rise to £24,413. Public servants with more than 15 years of service will receive two additional days of annual leave.

The Chief Minister said the framework would continue beyond the initial recovery period. From 2032/33 to 2036/37, public servants will receive annual pay awards linked to inflation plus 1%, capped at 4%.

He also confirmed that, once the Estimates are passed, the Government will begin filling approved vacancies in the 2026/27 complement, including 57 new AA posts in the Civil Service.

A second major announcement was the equalisation of the state pension age at 60.

The Chief Minister said men’s pension age will be reduced to 60, while women’s will remain at 60. The change takes effect from 1st July and will benefit around 1,400 men aged between 60 and 64 years and 11 months.

The estimated cost is £8 million. Mr Picardo said the measure applies to qualifying contributors in Gibraltar and Spain.

Old Age Pensions and Survivors’ Benefits will also rise by 2.5% from 1st August. Disability Benefit will increase by 2.5%, with the Government increasing its budget by a further £500,000. Mr Picardo said the number of people receiving Disability Benefit has increased by around 150% since reforms introduced in 2015, with 577 people receiving it by the end of May 2026.

The minimum wage will also rise, from £9.50 to £10 an hour. Mr Picardo said the minimum wage stood at £5.40 when the Government came into office in 2011, meaning it has now risen by 85%.

Treaty Measures

The speech was delivered against the backdrop of the Treaty. Mr Picardo said the agreement will be signed in Brussels next Tuesday and provisionally applied from Wednesday 15th July. He also confirmed he will lay the UK/Gibraltar Concordat before Parliament in the coming days.

The Chief Minister said the Treaty opens a new chapter at the frontier while preserving Gibraltar’s sovereignty, jurisdiction and control. He also linked the Treaty to changes in Gibraltar’s indirect tax system, including the introduction of Transaction Tax.

On tobacco, he announced a new price differential with Spain, category-based excise duties on cigarettes, and a ban on nicotine pouches and snus. The Government also plans legislation to ban the sale of tobacco products to locally resident people born after 2009.

Other measures included a £30,000 housing bursary for new entrants to the Royal Gibraltar Police, available from the third year of service and tied to an eight-year service commitment.

There will also be a tax allowance for fees received by Gibraltar-resident musicians for live performances, where earnings are reinvested in equipment and instruments. This will apply retrospectively from July 2019.

Finally, Mr Picardo announced that Gibraltar’s airport will be renamed Joshua Hassan International Airport to reflect the contribution of a man he described as the father of the Gibraltarians.

Gibraltar’s Economic Performance

Mr Picardo said no Budget is delivered in a vacuum, pointing to the war in Ukraine, the war affecting the Strait of Hormuz, energy prices, global inflation and trade uncertainty.

But he said Gibraltar’s GDP had grown from £1.082 billion in 2010/11 to a forecast £3.253 billion in 2025/26. He described this as almost trebling the size of the economy, an increase of more than £2 billion.

GDP per capita, he said, had risen from £34,247 in 2011 to £85,145, based on a resident population of 38,200. He said this placed Gibraltar third in the world on that measure, ahead of the UK, the US, Spain, Switzerland and Singapore, while acknowledging that such comparisons are not exact.

He said the yearly average number of unemployed Gibraltarians in 2025 was 16, compared with 442 in 2011. He said the second-quarter average this year was seven. The number of employee jobs has risen to 32,206, up from 22,247 in 2011, an increase of almost 10,000.

On revenue, Mr Picardo said Government revenue had risen from £393.7 million in 2011 to £883.468 million in 2025/26, an increase of £487 million, or 125%. He said revenue had grown year by year, with a dip only during the pandemic period.

Debt

Debt and refinancing formed another major section of the address. Mr Picardo said the full cost of the COVID pandemic to Gibraltar’s economy was £425 million. The Government created a £500 million borrowing facility during the pandemic and has now drawn £475 million under what he has now remaned - the COVID, Treaty and Security facility.

He said the UK had been prepared to continue its Sovereign Guarantee, but Gibraltar could now refinance without needing it, on the same terms as if UK backing were still in place. He also announced a new annual debt repayment commitment of at least £5 million, or 10% of any surplus, whichever is greater.

Net public debt stands at £696.5 million, or 21.4% of GDP. Aggregate debt stands at £893.2 million. Mr Picardo said net debt would have been around £200 million but for the pandemic.

Farewells

Mr Picardo ended on a personal note, paying tribute to his Cabinet colleagues and the staff at Number Six, saying they had helped him through the toughest professional and personal moments of his time in office. He said he would leave office as Gibraltar’s only unbeaten leader.

The Chief Minister said the building itself would not miss him, and that he would not miss it. But he said he would miss the people there every day for the rest of his life.

Mr Picardo was visibly moved during his final words, and despite several attempts was unable to complete his planned part of the speech where he thanked his children. He instead moved to his last act in his final budget address – commending the bill to the House.