'Cheating the rules' of public finance
by Roy Clinton
Whether in business, sport or education nobody likes a cheat. There is only one thing that is more upsetting to us and our sense of fair play and that is a cheat that gets away with it within the rules and then rubs it in our face thinking there is nothing much we can do about it.
After a year in Parliament I have regrettably come to the conclusion that the current rules governing the way our public finances are managed and reported are completely useless and simply do not deliver the level of scrutiny that was anticipated by our constitution. This Government is knowingly misleading us and yet perversely it is technically within the rules.
This is not a statement I make lightly and will explain why I have come to this conclusion. I have spent my entire career in both audit and banking looking at rules and how they should be interpreted and applied. I am not a lawyer but in audit we were always told to look at the substance of a transaction and not its legal form, meaning simply you looked through all devices and corporate structures to consider what was the true underlying purpose of any transaction and that was how you reported it.
I have found that the Public Finance (Control and Audit) Act together with the Public Finance (Borrowing Powers) Act are being neatly side stepped by the wholesale use of companies owned by the Government and outside the remit of the Principal Auditor. Our public finances can now be likened to an iceberg whereby what you see above the surface and reported in the Annual Estimates of Revenue and Expenditure is but a fraction of that which is concealed beneath in a multitude of companies and devices.
Before, during and after the election I tried to explain how Credit Finance Company Limited was such a device that provided this Government with £400 million of funding from the Savings Bank. This Government made out I was scaremongering and trying to undermine the Savings Bank. Well today we have a much simpler transaction to consider namely the mortgaging of six housing estates for £300 million for 31 years! This Government would now have you believe that in borrowing £300 million secured on six public housing estates they have not added a single penny to the level of Gibraltar’s public debt. The interest bill alone will amount to £314 million over those 31 years.
What is truly perverse is that this Government fully intends to spend the £300 million borrowed on capital and other Government sponsored projects without any reference to Parliament at all. It did not seek Parliament’s permission to borrow the £300 million and will not ask Parliament’s permission as to how to spend it in the annual Budget, nor even tell Parliament what it has done with it. So really we need to ask ourselves is it that Parliament is redundant and the people no longer require debate and scrutiny of our Public Finances or is it that the rules are simply being wrongly interpreted or just plain wrong?
Remember that at the end of the day it’s your money not theirs to spend as they please, and this Government will have to ultimately answer to you the people even if it refuses to be answerable to Parliament. I have tried repeatedly in Parliament to argue that the debts of Government owned companies should be taken into account when considering the level of public debt, but to no avail. So strictly speaking according to the letter of the law this Government can get away with it, an objective observer might come to a less charitable view. Our Public Finances which were meant to be transparent and accountable to Parliament and the People of Gibraltar are neither, and are now being run with the minimum of public disclosure and the minimum of public discussion.
This Government is cheating the rules on Public Finance and they know it, but they don’t want you to know it because they want to keep on winning general elections by pretending they are reducing debt even when they are in fact increasing it by huge amounts and this is now easily over £1 billion. That’s this Government’s way of trying to win the political game when it comes to Public Finance, but in my opinion that’s quite simply cheating the rules, is deliberately deceptive and is an affront to the People of Gibraltar who deserve nothing less than full transparency and accountability!
Roy Clinton is the Opposition MP with responsibility for shadowing the public finance ministerial portfolio.