CM says ex-gratia payments were lawful and avoided higher public costs 

Ex-gratia payments criticised by the former Principal Auditor in his 2018/19 report were lawful and transparent, and sought to protect the public purse from potentially higher costs had disputes been resolved in court, Chief Minister Fabian Picardo told Parliament on Monday.  

Mr Picardo said all payments were made on legal advice, adding that the Government estimated that in most cases “upwards of 25% on the amounts that we paid” had been saved by avoiding litigation. 

The Chief Minister was speaking as the ongoing debate on a Government motion challenging aspects of the 2018/19 Principal Auditor’s report resumed in Parliament on Monday morning. 

The Opposition, which has not yet had an opportunity to speak to the motion, has described it as an “assault on democracy” that seeks to “trash” its author and silence criticism.  

Mr Picardo said ex-gratia payments by their nature were “discretionary financial settlements made without admitting legal liability and without any legal or contractual obligation”. 

They were often used by both governments and businesses as a “pragmatic and flexible mechanism” to resolve claims where formal litigation “is undesirable”. 

The audit report had noted ex-gratia payments during the six-year period from 2018 to 2024 totalling £11.08m, many of which the former Principal Auditor said were “excessive and in many cases unwarranted”. 

In Parliament, the Chief Minister said 91.2% of those payments were in relation to settlements, compensation and damages, including pension-related payments totalling £5.52m, employment-related payments of £1.65m and personal settlements of £1.95m. 

The total included £3.61m in a pension settlement relating to Gibtelecom which had not been criticised. 

Overall, Mr Picardo said, the payments amounted to about £1.9m in each financial year, adding “that does not appear to be excessive” in a public service costing £650m a year. 

The former Principal Auditor had said that “in the absence of justifiable explanations” there had been “no obligation” on the Government to pay most of the ex-gratia payments, an observation that the Chief Minister described as “remarkable” given that was the nature of ex-gratia payments. 

Without a written Government-wide policy on ex-gratia payments, the former Principal Auditor had considered the payments in question to have been “unrestricted and uncontrolled”. 

But the Chief Minister said this analysis was wrong, adding the largest amounts including settlement of the Gibtelecom pensions claim were paid due to manifesto commitments.  

“I fully understand why so many in our community might have felt personally affronted by some of the payments referred to in the report,” he said. 

“In fact, if what the report sets out was complete and accurate, I might have agreed.” 

“But the affront that has been felt by many arises directly from the manner in which the report has presented such data.” 

“I am unable to judge whether this was a deliberate or careless failure.” 

“Both or either are just as bad reasons for the failure to present information fully and properly.” 

The report, he said, was “incomplete and, therefore, entirely misleading in its presentation”, adding that it created impressions and reached conclusions that were “entirely unfair and erroneous”. 

The Chief Minister said the Government’s legal advice was that the decision on whether to make ex-gratia payments, and at what amounts, was a matter of policy for the Government “and no one else”. 

He said that while there was no formal policy “other than the commonsense principle of avoiding higher judgements or costs”, payments of this nature were approved “at the highest level of government”, often by the Chief Minister, the Chief Secretary, the Financial Secretary or all three. 

“I would have thought that this centralised sign-off provides a degree of oversight and accountability ensuring that decisions are not made without senior scrutiny,” he said. 

And he insisted that each payment was carefully scrutinised by the Government and its lawyers, adding that they were also debated in Parliament.  

“It is vitally important to underscore that all settlements – all settlements – are made on legal advice to avoid greater costs and risks of litigation, thereby protecting taxpayers,” Mr Picardo told Parliament. 

“It reduces the risk of losing at court.” 

“Let me be plain. When the Government decides to effect an ex-gratia payment, it does so because it has obtained legal advice from the relevant legal expert and that expert has advised us to settle to avoid the uncertainty inherent in litigation outcomes and to avoid greater costs.” 

“In other words, when the Government decides to make an ex-gratia payment, it is because it would risk a greater financial burden if it did not make the payment.” 

Mr Picardo accepted that current oversight did not replace the need for a structured framework, though he insisted it mitigated concerns about “unchecked discretion” and reinforced that such payments were not made lightly. 

He noted though that the Government “will happily accept” recommendations where there are lessons to be learnt, adding that he had instructed officials to prepare a draft policy document for his consideration and that of the Cabinet. 

Mr Picardo rejected suggestions that any of the payments were politically motivated, adding that they included payments to people aligned with the Opposition including an ex-minister. 

He underlined too the confidential nature of such payments given they were “case-specific and discretionary”, adding public disclosure of amounts and terms could lead to “copycat claims” regardless of legal or factual basis, and could breach privacy rights. 

“This can create entirely unnecessary financial pressure on public resources, undermine the discretionary nature of such payments, and encourage opportunistic, manufactured, or unjustified claims,” he told Parliament. 

“Moreover, confidentiality protects the privacy of the individuals involved, especially in sensitive employment or reputational matters.” 

“Confidentiality enables the government to negotiate settlements without setting public precedents, which could constrain future decisions or expose inconsistencies.” 

Mr Picardo said it was “unforgiveable” that the audit report had been fashioned in a way that made two recipients of ex-gratia payments identifiable, “the consequences of which will echo for years to come on the lives of those individuals unfairly and improperly, and in the way that governments of whatever political complexion can do settlements going forward and the confidence that people will have on the Government's ability to keep to confidentiality provisions.”

During his intervention, Mr Picardo also rejected criticism that the motion was one-sided. 

“They all seem to want the public only to listen to the political charges against us,” Mr Picardo said the Government’s critics. 

“They are not interested in a balanced assessment by the public once all the facts are in the public domain.” 

He dismissed too accusations that the motion sought to “trash” the former Principal Auditor. 

“It is quite something to hear that we are trashing anyone or anything simply because we are meticulously putting our arguments and countering those which have been trespassed against us,” the Chief Minister said. 

“What is unfair and not in the style of the Gibraltarian is to suggest that it is acceptable for individuals, senior civil servants, politicians and others to have their reputations trashed based on erroneous facts.” 

And he later added: “That is what they don’t like about this motion, that we are taking our time to meticulously, respectfully, in keeping with Parliamentary rules of address, to properly challenge the things improperly and erroneously said about us.” 

Parliament adjourned to Wednesday at 10.30am, when the Chief Minister said he would continue addressing the issue of ex-gratia payments with a detailed look at two payments highlighted in the audit report.