£300m housing deal ‘ticks boxes’ of public debt, Hassan Nahon says
Independent MP Marlene Hassan Nahon has described aspects of the Gibraltar Government’s £300 million financing deal as commendable, but nonetheless flagged concerns about how the money will be spent.
Despite the Gibraltar Government’s assurances to the contrary, she added that the deal met the ‘conventional definition’ of public debt.
The MP made the statement after meeting the Chief Minister, Fabian Picardo, and the advisors on the deal, who also met members of the Opposition on Monday.
Mrs Hassan Nahon said elements of the deal were to be applauded.
She pointed to the “pre- Brexit timing providing attractive borrowing rates to the Government, the long termism of the institutional investors who have traditionally not lent in Gibraltar and the fire-power in £300 million of capital available to Gibraltar for when markets may not allow to borrow so easily.”
She said the Government had advised her that it had received opinions from its advisors demonstrating that this loan is not classified as public debt.
But, Mrs Hassan Nahon said, the Government is bearing most of the risks associated with this borrowing, insisting it “ticks the box of every conventional definition” of public debt.
She explained that the borrowing is structured and managed by the Treasury, is collateralized on Government owned property, the servicing of it is the responsibility of, and undertaken by, the Government via public companies, the proceeds of the loan controlled and spent by Government officials and it carries an implicit or explicit Government guarantee.
Classification as public debt is important as there are laws governing public borrowing which in turn control the risk Government takes in its expenditure, Mrs Hassan Nahon stated.
“I do not want to see the floodgates open for future Governments to borrow, perhaps recklessly, outside of public scrutiny and spend this borrowing in essence through a parallel Government,” she said.
“Any government, and most of all a government elected on transparency, would want to provide its people with meaningful and accurate information that is actionable and relevant.”
“Public debt numbers are an attempt to assign responsibility, putting the Government on the hook for implicit liabilities.”
She emphasised the need to ensure that all Government liabilities and guarantees are subject to the same degree of scrutiny through the budget process and local laws as other spending.
She added that clarity and transparency on the public-sector finances “has never been more vital” in the context of recent concerns over public sector debt.
“With no law to constrain Government on how its spends the £300 million of loan proceeds, Parliament and the people of Gibraltar need to ensure this capital is not spent on ordinary Government expenditure or manifesto promises, that otherwise would be covered by ordinary Government income.”
Mrs Hassan Nahon said Mr Picardo had assured her that this will not be the case with the £300 million loan.
“However, for reasons of transparency, I urge the Government to make disclosures to ensure that a broad range of information on public sector liabilities, obligations, contingencies and spending are readily available, whether or not included within balance sheets,” she said.
Mrs Hassan Nahon added that it is of paramount importance to hold Government to account on all its expenditure, whether or not the funding for this expenditure emanates from traditional Government revenue sources, or otherwise.