Political clash over cash
The dormant row over public finances erupted again yesterday after Opposition MP Roy Clinton claimed the Gibraltar Government was running “ridiculously low” on cash, drawing a furious response from No 6 Convent Place.
The exchange signalled a renewed attack by the GSD on the government’s handling of public finances and comes just weeks before the Gibraltar Parliament is due to debate draft legislation to increase legal debt limits.
Mr Clinton said recent parliamentary answers showed cash reserves were “surprisingly low” at £16.6 million, while net debt was “the highest ever” at £ 431 million.
The GSD MP said the figures questioned not only the government’s ability to meet projections on debt reduction, but also its ability to manage Gibraltar’s finances prudently.
“The government cash levels are lower than would be prudent or you might expect,” he said.
“If they don’t meet their own projections, then obviously they would not meet their debt reduction targets.”
But the Gibraltar Government hit back and said Mr Clinton was ignoring “the rotten legacy” inherited by the GSLP/Liberals, adding that it was confident that targets would be met by the end of the financial year.
“Mr Clinton is using monthly figures to try to extrapolate what the position will be at the end of the year without factoring in how Government cash flow changes throughout the year. I am confident we will meet the targets set out in our estimates,” said Chief Minister Fabian Picardo.
“The public have, just over two months ago, overwhelmingly preferred our prudent proposed manner of dealing with the public finances for the next four years.”
“Mr Clinton needs to accept that and see how our economy and public finances will continue to flourish and improve in the coming months and years.”
The opening salvo in the exchange was fired by the GSD’s Mr Clinton, who said the government would need a significant inflow of cash inflows and savings between now and the end of March in order to meet its 2015/16 estimates.
Mr Clinton said that in order to meet its projections, the government would have to cut gross debt from £447.7m to £400m, while increasing cash reserves from £16.6m to £85.8m.
In real terms – and assuming the government used the £15.6m it had set aside in a special fund allocated for debt repayment, known as the General Sinking Fund – Mr Clinton said the government would have to find £101.3m in cash.
“This contrasts sharply to the cash reserves of £234 million and net debt of £286 million being the position as at 8 December 2011 after the last GSD administration, and puts in serious question the GSLP/Liberals ability to manage Gibraltar’s public finances prudently,” Mr Clinton added.
In a statement, the Gibraltar Government said Mr Clinton had referred to cash reserves but ignored the fact that the GSD had accumulated £520 million of gross public debt and that, at the end of the GSD's last financial year in office, Gibraltar had just £2m available once the then new GSLP/Liberal administration had stopped all the ongoing GSD projects.
“If the projects had continued, Gibraltar would have breached its maximum permitted legal borrowing limit,” the government said.
According to the government, an advance of £87 million had been made by the GSD administration to the Government-owned companies and this was projected to increase to £100 million by the end of the financial year.
“The effect of this was that the end-of-year cash reserves were estimated to end at £100 million less than had been anticipated in the published estimates,” the government statement said.
“The only other alternative, which the former GSD leader proposed, was to increase the borrowing limit in order to fund the capital expenditure already committed by the GSD administration as well as to meet the then planned £150 million diesel power station and the remaining balance on the £83 million airport terminal building.”
The government said it had additionally paid over £90 million since the financial year 2011/12 and continued to pay £25m each year in order to cover the recurrent deficits in the government trading companies established by the GSD, adding that these were previously not being reflected in the published estimates.
It said Mr Clinton's analysis also failed to address “the huge risk” that the GSD took with Community Care, “…having failed to fund that charity so that its reserves were reduced to zero.”
That charity has to date received in excess of £100m from the first GSLP/Liberal government, it added.
The government said Mr Clinton had also failed to refer to the GSD's “historic plundering” of the reserves of the Gibraltar Savings Bank, which it said had been reduced to zero when the GSD took £17m to spend on general expenditure.
“All of this was less than prudent and is a serious blot in the GSD's history of management of the finances of our nation,” said Chief Minister Fabian Picardo in the statement.
“Mr Clinton wants to gloss over the near bankruptcy of Gibraltar which arose from the over half billion pounds of gross debt which the GSD was responsible for. People will not forget that.”