Public finances under strain
In a series of themed articles, the Chronicle is asking the GSLP/Liberals, the GSD and the Independent Social Democrat candidate for their thoughts on some of the most pressing issues facing Gibraltar. In this second instalment, they explore Gibraltar’s public finances which are under huge strain. Irrespective of the different views as to the underlying reasons for this, the current circumstances require a concerted strategy to meet recurrent expenditure while generating sufficient revenue to invest in capital projects and reduce long term debt. What does Gibraltar need to do to get its public finances back on track? What roles must the government and the wider community play in this? Going forward, and given a growing population that lives longer, how sustainable is Gibraltar’s current model, including its provision of free healthcare, free university education, tax free pensions and subsidised housing? What, if anything, needs to change?
Independent Social Democrat
Why secrecy in public finances?
By Robert Vasquez
The direct and indirect public debt will need to be paid by each of us, with now the added Covid-19 £500 million loan. Anything going wrong in Gibraltar’s economy will impact on public finances and revenues, but every one of us is liable to pay the public debt.
Why the need for secrecy in public finances if everything is fine? The secrecy surrounding public finances using government owned companies, as well as the level of indirect public borrowings, are wrong. It indicates that all is not fine.
The GSLP-Liberals boast Gibraltar is better off than ever. The GSLP-Liberal Alliance has bragged that, despite living off borrowings beyond Gibraltar’s means. Doing that has never worked, either for any government or for any household anywhere.
The GSLP-Liberals has boasted that Gibraltar has never been better off financially. Yet its ‘elder’ and ex-Chief Minister Sir Joe Bossano, warns of unsustainable recurring public expenditure. Robert Vasquez believes Sir Joe and believes that the public debt needs to be reduced.
Our public finances are kept secret. The exact state of public finances is near impossible to know due to the use of government owned companies. Much public spending, borrowings, and investment is obscured by the GSLP-Liberals using that device. It is wrong that we, who are taxed to pay for all public debt and expenditure, do not know.
It is contrary to the open and transparent government promised by the GSLP-Liberals in each of their 2011, 2015 and 2019 manifestos. It is not enough to say that people can delve into hundreds of pages of estimates to find it.
Robert Vasquez will fight for disclosure by any government, and he will be a rebel in and out of Parliament campaigning for full, open, transparent, and accountable public finances.
Gibraltar needs people like Robert Vasquez in Parliament who will fight for publication of a full account of how much public borrowing (including through government owned companies) stands at, which each of us will need to pay.
Robert Vasquez will not tolerate clever lawyers and financiers’ tricks of using companies and options so that the level of borrowing can be kept shrouded.
Robert Vasquez will fight for Gibraltar to be given full and frank disclosure of everything that could come back to cost us all money. If money matters go wrong, it is all of us who will pay.
The exact amount of the overall public debt is not openly in the public domain in a visible form. Robert Vasquez will be a rebel and campaign for more systemic open and transparent public finances, as borrowings are ultimately payable by all of us.
Robert Vasquez is told that gross debt stands at about £1.9 billion. £300 million borrowed on the strength of mortgaging public housing. £500 million borrowed now on the back of a UK short-term guarantee, which is being renegotiated. Recently, even more obscure debt, as clever financing arrangements were used to keep more £162 million off the public books.
Much of what this GSLP-Liberals spend, for example £100 million on schools and some £134 million on other capital projects and sporting facilities is not clearly shown. It seems others pay, and we rent causing huge annual recurring expenditure.
Financial issues are serious. Brexit has come, followed by the Covid-19 pandemic. The question is will we get through them despite the public debt mountain and recurring expenses that the GSLP-Liberals have incurred? We have no choice; we must find the money. It will have to come from each of us, so growing the economy despite the potential effects of Gibexit is essential.
The GSLP-Liberals blame the pandemic, but the fault lies primarily with their earlier financial mismanagement. Yes, the pandemic was unforeseen, but greater control of our finances before the outbreak would have had us in a better place.
The overspending of the GSLP-Liberals has left us in a worse and more vulnerable situation. We all need to see whether Gibraltar shall or can overcome the current money challenges, but Robert Vasquez will do anything and back all to support a successful outcome.
Provision of free healthcare, free university education, tax free pensions and subsidised housing will all need to be looked at, however unpopular that may be, because finding savings is essential. Hence another reason to reform the electoral and parliamentary systems.
Balancing the books
By Roy Clinton
The main objective in public finance is to obtain sufficient funding to meet the policy objectives of Government and thus the community.
In Gibraltar the Government’s estimates of Revenue and Expenditure are operated on a cash in cash out basis much like a bank account. A surplus is recorded when less cash is spent than received and a deficit when the reverse is true. There are two accounts run in parallel the Consolidated Fund for recurrent revenue and expenditure and the Improvement and Development Fund for equipment and building projects.
Cash movements include money obtained from borrowing or that paid out in repaying debt. The Gibraltar Government cannot print its own money so any money it spends is either borrowed, raised by taxing or charging individuals or businesses, or the proceeds of the sale of property.
To understand where we are financially we need to capture the whole range of Government’s financial activities. The GSD has in recent years voted against the appropriation bill at Budget time because we have no visibility as to money held or owed by Government owned companies that distort the true picture of Governments spending or commitments.
A simple example being the mortgaging of the housing estates for £300 million and the claim by the Chief Minister to have spent £160 million on schools none of which was recorded in the official estimates of the Government.
Before any decisions can be taken as to the future financial policy of any incoming Government the true overall position needs to be independently established and understood.
As I noted in my budget speech the taxation burden is increasingly falling on the individual. Government’s main sources of tax revenue are PAYE, Corporation Tax and Import Duty.
“The ordinary taxpayer is having to bear a higher burden of tax to offset a major loss in import duty which in 2018/19 was £173 million and in 2023/34 is estimated 45% lower at £95 million.”
“Combined with a continuous increase in departmental fees for all sorts of licences the burden of personal tax both direct and indirect has increased.”
The estimates for 2023/24 are for revenue of £724 million. This will be made up of Income Tax 34.5%, Company Tax 21.4%, Import Duty 13%, Departmental Fees 21% and others 10.1%.
The projected surplus of £2.5 million in the Consolidated Fund is we think unrealistic and a result of underestimating expenditure in key areas such as healthcare.
It is evident that without the UK Guarantee the Gibraltar Government is unlikely to be able to borrow from banks outside its control. At present the £500 million UK guaranteed facility from RBSI/NatWest has been extended to 3 December 2026 of which only £75 million remains unused. So this is a serious constraint on an incoming Government. Furthermore a debt repayment plan has not yet been agreed which would need to be reasonable and sustainable.
Given the obvious financial constraints, it is incumbent on an incoming Government to seek to reduce waste and ensure value for money in all spending. This will mean the work of the Principal Auditor is more important than ever in protecting the public purse and may require the granting of additional powers by law.
The ultimate objective is to achieve a sustainable public finance model such that recurrent revenue matches or exceeds expenditure, that capital projects are funded and finally that our debt obligations are repaid as they fall due.
There are many ways to achieve that balanced public finance model but new or higher taxation has to be targeted at those who can afford to pay not simply across the board. Capital projects need to be undertaken on an essential and not electoral basis. Policy objectives as to expenditure may need to be redefined so that maximum benefit is delivered first to those who need it most.
Efforts to grow our economy in all areas will be needed but these will not necessarily pay immediate dividends in Government revenue. Thus prudence in all things will be required but tempered with meeting the essential needs of our community and fairness to all and not favours for the few.
A credible plan to restore financial stability
By Fabian Picardo
It is no secret that our public finances have come under significant strain as a result of our increased spending and lack of revenue throughout the pandemic period. Hundreds of millions of taxpayers’ money was spent in trying to defeat COVID; not only physically but financially too. The Government that I lead, with the support of the GSD Opposition at the time, agreed to BEAT COVID support payments that ensured every family of anyone working in Gibraltar (including cross-frontier workers) were able to put food on the table every day and that businesses were able to stay afloat throughout the period without them having to worry about paying salaries at a time when Gibraltar was totally locked down. In our darkest moment, we came together to beat the pandemic. Let no one ever forget that we lost 100 Gibraltarians – I certainly never will.
The GSLP/Liberals are the only party with a credible plan to restore financial stability. Given the devastating impact that COVID-19 would have on our public finances, I appointed Sir Joe Bossano as Minister with responsibility for Financial Stability. Sir Joe’s National Economic Plan (‘NEP’) should be read by all – you can find it in our manifesto.
To get back to surpluses, we must diversify and enhance the Government’s revenue streams. A GSLP/Liberal Government, with a Minister for Economic Development and Financial Stability in Sir Joe Bossano, and a Minister for Financial Services in Nigel Feetham KC will focus on diversifying our economy. This could include, for example, the development of emerging industries, such as renewable energy, technology, and sustainable tourism. The projects listed in the NEP will help to maintain economic activity and deliver sustainability and resilience. Expressions of interest which are chosen as projects that promote self-sufficiency/economic resilience, will become sponsored projects under the NEP. The Gibraltar Savings Bank (‘GSB’) will provide support at competitive rates. The returns will contribute to the profits and reserves of the GSB and I know Nigel and Sir Joe are the best people to deliver on this key area of Government business.
A GSLP/Liberal Government will never introduce austerity measures in Gibraltar.
We believe that Health, Education and Housing are the pillars of our society and, therefore, require continued investment. In education - 10 new schools in 12 years. In health - a new PCC and Children's Care Centre with more and more services offered here in Gibraltar. In housing - more affordable housing in 12 years than the GSD ever even promised to build. We will continue to invest in these areas!
Our manifesto sets out our vision for Gibraltar for the next four years and beyond. It is our contract with the community. To achieve this in a post-pandemic Gibraltar, we will apply effective budgeting, careful monitoring of public expenditure, and eliminate waste. In demand-led areas like health, we won’t hesitate to overspend where necessary. A GSLP/Liberal Government will never refuse potentially lifesaving treatment to anybody. Messrs Azopardi and Clinton have continuously criticised us for this - a vote for Azopardi is therefore a vote for austerity.
Investing in capital projects is also vital for Gibraltar's short- and long-term economic growth. The GSLP/Liberals will prioritise strategic projects, that drive economic and social benefit, as well as the potential for a sustainable return on investment.
It is true that our model of free (at the point of consumption) healthcare, university education, tax-free pensions, and subsidised housing is the envy of the world - but that all comes at a cost. Our growing population is also living longer. Sustaining this model will require forward-planning and strategies which will deliver our key objective - the GSLP/Liberals will never cut in any of these areas. We will work harder, generate more revenue and we will only ever improve the quality of the lives of our citizens. That is the GSLP/Liberal ideology; to invest in our community.
The GSD’s is just to cut, cut, cut!
We Get the Job Done. We haven’t come this far to ONLY come this far. We are the team of experience, continuity, and change. Vote all ten GSLP/Liberal candidates on the 12th October and we will ensure, with your support, that we Keep Gibraltar Safe.