Annex 5, Annex 1
Letter from the Director of Labour and
Social Security, Government of Gibraltar, to the Deputy Governor,
Gibraltar, 23 September 1976
FORMER SPANISH WORKERS IN GIBRALTAR—IMPLICATIONS
TO GIBRALTAR SOCIAL INSURANCE FUND IF AND WHEN SPAIN JOINS EEC
With the prospect of Spain acceding to EEC at
some future date it is vital to bear in mind the tremendous implications
which the EEC's Social Security Regulations would have on our
commitment towards our former Spanish workers.
2. At present we have about 3,000 Spaniards
(1,130 men, 1,870 women) entitled to pension and there could be
anything up to a further 14,000 qualifying for pension during
the next 30 years. The great majority of those already entitled
to pension are not being paid by us because they live in the Campo
area and are required to come to Gibraltar to collect. In fact,
a very few do come occasionally but by and large—according
to my information-they are all being paid by the Spanish Institute
Nacional de Prevision the amounts which this Department quotes
in the letter of allowance sent to each individual after he has
applied to me on the prescribed form and enclosed the necessary
documents to establish entitlement. The Social Insurance Fund's
present commitment to the existing 3,000 or so pensioners is about
£117,000 per annum. Because the bulk of this is not actually
being paid by the Fund, the increase in contributions during the
last four years have not had to be as large as they would otherwise
have had to be.
3. Their rates of pension remain the same
as when the workers were withdrawn in 1969 (ie 60p a week for
a man and 40p for a woman). These rates have been progressively
increased very substantially since then, and in January 1977 stand
at £9.20 for a man and £5.80 for a woman, but the higher
pensions are not payable to these Spaniards. In order to debar
them from the progressive increases in the pension rates, on the
grounds that they ceased to contribute as a class (in fact they
constituted a majority of the insured population) when the contribution
rates were very low, and that to give them substantial increases
in benefits would impose an intolerable burden on current contributions
provision was made (Section 10A of the Social Insurance Ordinance)
whereby the higher pension rates apply only if the pensioner (or
the person on whose insurance title to pension is established)
has been ordinarily resident or paying insurance in Gibraltar
for at least two years since July 1970. This provision, by the
way, is one which, if only for administrative reasons, I would
like to see repealed as soon as possible, but this is unthinkable
so long as we have the commitment to the Spaniards hanging over
our heads.
4. My purpose is writing this memo is to
place on record, and for background information if and when the
occasion arises, the immediate and continuing effect on the Social
Insurance Fund if Spain were to be admitted into EEC. As I see
it, unless very specific alternative provisions were possible
(such as, for example, the handing over of that part of the Fund
attributable to the Spaniards which in 1972 was calculated at
about £750,000), the application of the Community Social
Security Regulations would require residence in Spain to be regarded
as residence in Gibraltar (Article 10(1)) of EEC Regulations 1408/71.)
The much higher rates of pension would therefore apply to the
Spaniards and the immediate impact on the Social Insurance Fund
would be that the present commitment of about £117,000 (most
of which is not being paid anyway) would become an inescapable
commitment of something of the order of £1.75 million per
annum (at 1977 rates) on would continue to increase in 1978 and
thereafter. Needless to say this would have a crippling effect
on the Fund, now standing at about £4.25 million and would
have to be mitigated by, for example, either or both of the following:
(a) disproporitionate increase in employees'
and/or employers' current contributions in relation to increases
in benefits;
(b) substantial and recurrent financial injections
into the Fund from taxation (or perhaps partly or wholly from
UK funds, as this would appear to be an obvious case for "sustain
and support" as a result of the closure of the Spanish frontier).
5. There are other disturbing ramifications
such as, for example, the requirement regarding contributions
paid in another Member State (in this case, Spain) as insurance
paid in Gibraltar, which would enhance very considerably the entitlement
of Spaniards whose "yearly average" would otherwise
continue to decrease as would the reduced pension applicable.
6. I mention all this, without going into
great detail, in order to give some idea of the magnitude of the
problems which would arise, and by the same token the figures
of cost quoted in paragraph 4 above are merely broad estimates
based on the current position.
7. I presume that FCO will want to be fully
aware of the above in good time, to prevent the possibility of
Gibraltar being faced with a fait acompli at some future date,
as has happened only very recently in connection with the EEC
Directive on Collective Redundancies, of which they had not been
made aware until one and half years after it had been adopted.
(Secretariat reference 5671 AB).
Director of Labour and Social Security
23 September 1976
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