In a budget statement that was uncharacteristically short, but nonetheless sweet for the average Gibraltarian, Mr Caruana declared that the territory has never had it so good and claimed that, despite the economy's diminutive stature in world terms, Gibraltar's citizens are actually in the top ten nations in terms of wealth.

“If Gibraltar were an independent country our economy would be the 159th largest in the world, according to the World Bank list for 2004. In terms of personal affluence, our GDP per capita is 10th in the world. In fact, it may be even higher because it is 10th comparing 2004 Gibraltar GDP to 2005 figures for other countries," he stated.

Mr Caruana also told the house that public debt, at GBP93 million, has remained static in cash terms, despite the government’s ongoing and substantial capital investment programme.

“By OECD and EU measures Gibraltar’s public debt is very low indeed, representing only 15.7% of GDP and the debt servicing cost represents only 3.6% of total Government revenue. To place these figure in context, the benchmark is 40% of GDP, the UK figure is 33.7% and the EU target for all EU countries under the Maastricht Treaty criteria is 60%," he observed.

Mr Caruana went on to announce several income tax relief measures, some of which included:

• Occupational pension tax abolished from age 60 (55 for ex-policemen and firemen);
• All taxpayers’ allowances topped up to a minimum of GBP3,500;
• 35% tax band abolished; GBP3,000 added to the lower 30% band;
• Top rate further reduced from 45% to 42%;
• Tax credit for low income earners (less than GBP8,000 income) increased by 20% to GBP275;
• All allowances increased by 3%;
• Replacement of 'wife' allowance with 'spouse' allowance, and all other discriminations between men and women to be removed;
• Need to purchase annuity with pension capital abolished and the 20% tax on pension capital withdrawn abolished;
• New charity giving system known as the 'Gift Aid Scheme'; and
• A reform of the tax system to help taxpayers with low allowances: a choice between present system and near flat rate capped from 1 July 2007

The Chief Minister also announced changes to the Social Insurance Contributions Collection system, which is to be merged with the PAYE (pay-as-you-earn) system. This will replace the hours regime with an earnings related system, with maximum contributions capped at present rates. The new system will in particular assist low paid and part-time workers.

Social Insurance Contributions will be abolished for people who work over 60 years of age (55 if ex-firemen or policemen).