‘Bankrupt’ public purse?

By Robert Vasquez

The Gibraltar government cannot go ‘bankrupt’ like an individual or a company. If the public coffers run dry, it must stop spending, or it simply stops paying what is owed.

The Gibraltar Constitution does not cover how to deal with government overspending. In contrast, there is a system that operates if a UK local authority overspends.

The penalty for possible past abuses still waits to be paid by each of us, who are in the end liable to cover public spending and debt. We will likely have to fend for ourselves, so it will cost everyone.

If public coffers were to end up ‘empty’, in essence, our responsible public servants are obliged to balance the books on fear of personal liability.

UK SYSTEM
The statutory system for UK local authorities indicates what may happen in Gibraltar were public moneys to run short.

There, the local authority finance officer issues a report of his/her belief that expenditure is unlawful under the Act, based usually on an acceptance that there will be a deficit in the financial year.

The effect is to freeze all that local authority’s expenditure absent permission from the finance officer, and the authority must then meet to adequately bring spending within lawful limits.

The local authority measures include spending cuts, asset sales, seeking temporary relief through borrowing or using capital project funds, council tax rises, central government intervention via direct instructions or ‘commissioners’ to take over specified tasks, and/or, extremely rarely, direct central government funding.

GIBRALTAR’S SITUATION
There are no equivalent constitutional provisions in Gibraltar. So possibly a take of the above hints at what will be applied by the UK.

In Gibraltar most public monies must be paid into specified funds from which withdrawals can be made only as permitted constitutionally or by law.

The Minister charged with public finances, usually the Chief Minister, presents the Budget to Parliament annually.

It is made up of annual estimates of revenue and an appropriation Act, which authorises expenditure, and withdrawals; supplementary appropriation Acts can be presented also from time to time to meet shortfalls.

THE LAW OF PUBLIC FINANCES
The Public Finance (Control and Audit) Act is the primary, very complicated, law governing public finances. What follows is of necessity a guideline.

The Minister must account to Parliament for finances over which he has management and controls and directs everything engaging the public finances.

However, the Accountant General is authorised by the Financial Secretary to make payments, save as restricted by the Minister in the public interest.

There are provisions for payments to be made by the Accountant General, like payments required to be made under the Constitution and laws, employer’s obligations like salaries and pensions.

In their respective roles the Financial Secretary and the Accountant General have responsibilities equating to those of a UK local authority finance officer.

The Act covers many areas dealing with public monies, and the duties of public officers. For example, a public officer is liable personally (‘surcharged’) for any loss caused to the public purse if he/she is in neglect of duty, careless or at fault.

CONSTITUTIONAL SILENCE
Despite the silence in the Constitution about overspending, just as a UK local authority, reality points to the need of Gibraltar governments to rely on the following, which need a careful eye by the Financial Secretary and the Accountant General:

Spending cuts without breaching legal obligations that must be met. It is evident that the Government seems to be engaged in such an exercise.

However, there is indirect evidence that points to a government currently failing to pay what is due in time, but the obligation is about not incurring the liability in the first place. Delaying payments is a policy that will catch up with government and will not resolve liability.

Asset sales, but many available assets seem to have been disposed of already.

Borrowing or using capital project funds, which provide short term relief but are not solutions. Additionally, Gibraltar is already overborrowed, so the likelihood of further public borrowings is limited, if available at all.

Increasing tax, rates, and public fees. There is some scope here curtailed by the economic dependence on the finance and betting sectors, which would be undermined by wrong measures. It will be residents, therefore, who will be hurt through any increases.

It may be time to revamp tax concessions given to non-Gibraltarians and to property developers. They reduce public revenues, are unfair, and tend to stoke up the property market, making residential property unaffordable to many.

Lastly direct funding from the UK. When the UK government is not funding its local authorities, the chances must be near nil.

‘PEACE, ORDER, AND GOOD”’GOVERNMENT
The times for ‘freebies’ have ended. Those days of public money generosity in return for votes and popularity are gone. We need mature politics with responsible people elected, not populists.

The problem is that electors don’t want that, especially an electorate accustomed to good times only, so those seeking election avoid even discussing the public finance situation.

Gibraltar could be facing a governmental void due to 30 odd years of populist government, as has been permitted by constitutional failings.

Robert Vasquez, KC, is a retired barrister and political commentator. He stood as an independent candidate at the last general election on a platform of democratic reform.