Clinton raises 'sovereign bet fund' concerns over Govt’s plan 

GSD MP Roy Clinton raised serious questions about the sovereign wealth fund announced by Chief Minister Fabian Picardo earlier this week, describing it as “sovereign bet fund” that carried risk for the public purse and could exceed the Government’s powers. 

Mr Clinton said the GSD had already requested detailed documentation on the fund’s structure and would assess it closely before determining a final view on the initiative. 

But on the information available so far, Mr Clinton said he was “uneasy”, adding that the Government was committing the public finances of Gibraltar to effectively underwrite a private credit scheme, with contingent liability if there was a default. 

“This is not a sovereign wealth fund,” he said. “This is a sovereign bet fund.” 

“The Chief Minister is betting the house on red in roulette in the hope his luck comes out, but it could easily go the other way.” 

“And the house he’s betting is… the public finances of Gibraltar.” 

“He thinks this is a wonderful scheme. Maybe it is, but we need to know more.” 

In a budget address on Tuesday, Mr Picardo said the fund, which he first announced in his New Year statement, was focused on the UK elderly care sector, with the Government providing credit support rather than capital, allowing debt raised in the capital markets to finance the purchases. 

In return, Gibraltar receives an annual fee and a share in the underlying assets over time. 

 Mr Picardo said the use of public credit to support privately financed assets was well-established in the UK and used by the central government, the NHS and local authorities to fund hospitals, schools, roads and care homes. 

He said the debt supported by the Government totalled £544.7 million and was secured against care home real estate valued at £722.9 million, leaving what the Chief Minister described as a surplus of value over debt of £178.2 million. 

He added the fund was structured with several layers of protection designed to reduce the risk of any liability falling on the Government. 

But it was precisely the risk of that potential liability that lay at the core of Mr Clinton’s concern in his own budget address. 

Mr Clinton said that despite the Chief Minister’s explanations on the fund, “there are gaps”. 

“We don’t know who this UK institution that the Chief Minister said he is working with is,” Mr Clinton said. 

“We don’t know what structures are being used and how this sovereign wealth fund is going to operate.” 

Mr Clinton said Mr Picardo’s explanation included terminology and concepts more commonly used in private loan financing, not public finance.  

“This is not public finance and what the Chief Minister has described is certainly not the accepted view of what a sovereign wealth fund is,” he said. 

“Indeed, the last time he used such a term was in describing the Credit Finance Company years ago and that is certainly not a sovereign wealth fund.” 

Mr Clinton noted that, in his explanation, Mr Picardo had referred to the Government having an obligation in the event of default of rent payment. 

The Chief Minister had told Parliament that the Government would receive a quarterly fee equivalent of 20% of the principal rental across the portfolios and, once the financing was fully amortised, would retain a 24.9% share in property companies that owned the estate in two of the portfolios and a 20% stake in the third. 

That would generate about £5.6 million in the first year, with rents linked to inflation. 

The share in the property companies behind the portfolios would be worth about £180 million on today’s values at the end of the 35-year term, and potentially more over time, Mr Picardo told Parliament. 

The conservative estimates suggested the fund could produce between £700 million and £1 billion for Gibraltar over 35 years, Parliament heard. 

“If somebody is willing to pay you 20% of their rental income, it’s not for nothing,” Mr Clinton said. 

“There is no such thing in this world as a free lunch, certainly not in banking or finance.” 

“And I come back to this question of obligation, [because] it isn’t clear to me what has been signed and with whom.” 

Mr Clinton said the Government’s obligation in the event of a rent default “to me sounds like a guarantee” - “There is no guarantee,” Mr Picardo said from a sedentary position in Parliament - and that under Gibraltar Public Finance legislation, these could not be entered into except in accordance with law or with parliamentary authorisation. 

“I am not aware of any public law allowing the Government to enter into a payment deed as described, nor has any resolution been passed by this House,” Mr Clinton said. 

“I trust the Government has taken the necessary legal advice on this transaction, because if the Government of Gibraltar is indeed the counterparty, which the Chief Minister seems to be suggesting, frankly it looks to me that it’s ultra vires [meaning exceeding powers in law].” 

“This is something that has a direct link back to the public finances of Gibraltar in which there could be a financial cost which will come out of the Consolidated Fund.” 

GIB LINK 

Mr Clinton pointed to a Gibraltar link to Hartford, a UK care home group mentioned by the Chief Minister in his explanation of the fund, which had been rapidly expanding through private equity financing. 

He said that a search at UK Companies House showed that Gibraltar Community Initiatives Limited, the subject of GSD questions in Parliament and described by Sir Joe Bossano as a charity structure, had registered charges against a number of Hartford companies. 

According to Mr Clinton, Gibraltar Community Initiatives Limited also held a 20% share in Hartford Care Propco Limited, with the Financial Secretary listed as a director of the UK company and the charges and director’s appointment in effect since July 2, 2024. 

“So, what on earth is going on?” Mr Clinton asked.  

“In January, the Chief Minister talks about some fantastic sovereign wealth fund.”  

“Yesterday, he gives us some details of a very complicated structure with all sorts of finance arrangements, loan to value ratios and all sorts of other things.” 

“And yet parts of this… were already up and running in July 2024…” 

“How is the Financial Secretary involved in this transaction in July 2024 in which a private charity appears to be lending money or financial support?” 

“The Chief Minister needs to explain this and much more because not to do so is to invite public speculation as to who is running this private credit scheme using the taxpayers’ credit rating, if not savers’ money, and why.”  

“Is Gibraltar Community Initiatives Limited and its operations the Chief Minister’s concept of a sovereign wealth fund, a private charity outside Government control but under the control of partners of his law firm Hassans?” 

“Is that what he’s talking about? Because that’s what I can see. Maybe I’ve missed something and if I have, I’ll happily apologise, but that is the information that’s available publicly.” 

Mr Clinton said it was “shocking” that in presenting details of the fund earlier this week, the Chief Minister had not referred to Gibraltar Community Initiatives Limited, adding: “What’s the big secret?” 

COMMUNITY CREDIT UNION LIMITED 

Mr Clinton also raised questions about Community Credit Union Limited, a company owned by Gibraltar Community Initiatives Limited. 

He noted that Sir Joe Bossano, the Minister for Economic Development, had told Parliament that the Gibraltar National Mint Limited had purchased £114m of loan notes from the company. 

The mint had itself obtained mirror funding from GSBA Limited, which in turn issued loan notes to the Gibraltar Savings Bank. 

“So, in effect, the Savings Bank is ultimately providing the funding to Community Credit Union to action loans to its clients,” Mr Clinton said. 

“Sir Joe has told this House that he approves each funding decision based on documentation and analysis provided to him.”  

“He has also advised the House that this was not his idea and it does not form part of his National Economic Plan.” 

“So the mystery is, to whom has Community Credit Union provided loans and why?” 

Mr Clinton said that, when asked, the Government it was up to Community Credit Union Limited as to whether it wished to disclose that information. 

“The Government are being deliberately opaque on this which is serious given Savings Bank money is involved,” Mr Clinton said. 

“It really would be best if those involved disclosed voluntarily because it is the worst kept secret on Main Street.” 

Based on documents from Companies House, he named a list of companies against which Community Credit Union Limited had registered charges, adding that the group had been purchasing businesses in Gibraltar. 

“The mystery is why?” Mr Clinton said. 

“Why is the Government providing money from the Savings Bank to fund what is apparently a private game of monopoly?” 

“Where is the national interest in this? Who’s benefiting?” 

“People are asking questions and they deserve answers.” 

Savings Bank money was ultimately guaranteed by the Consolidated Fund should anything go wrong, Mr Clinton said. 

“Because if anything goes wrong, and I desperately hope that nothing ever goes wrong, it will be this House that picks up the Bill and our public finances that will suffer.” 

Elsewhere in his budget address, Mr Clinton estimated that direct and “opaque” indirect debt totalled a “worrying” £2.6 billion, calling on the Government to present “a realistic, true and sustainable budget”, alongside full disclosure of the financial affairs of its companies.