Select Committee on Foreign Affairs Appendices to the Minutes of Evidence

Annex 5, Annex 1

Letter from the Director of Labour and Social Security, Government of Gibraltar, to the Deputy Governor, Gibraltar, 23 September 1976


  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  Their rates of pension remain the same as when the workers were withdrawn in 1969 (ie 60p a week for a man and 40p for a woman).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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