Row over £300m deal intensifies

The row over the Gibraltar Government’s £300m financing deal intensified yesterday after the GSD claimed the transaction pushed Gibraltar’s public debt to an “eye watering” £1.1 billion.

The Government had insisted earlier this week that the £300m “institutional investment”, secured against six publicly-owned housing estates, represented an “excellent, zero risk” deal for Gibraltar.

It said the finance had arranged at a compound interest rate of 3.85% over 30 years and would not become part of the Government’s useable cash reserves, but rather of the cash pool of Government-owned companies.

The Opposition, it added, was “scaremongering”.

But the GSD described the deal as “a mortgage” on public estates and said it amounted to additional borrowing structured through Government-owned companies.

“This takes Gibraltar’s debt, inclusive of the borrowings by Government-owned companies, to in excess of an eye watering £1.1 billion,” the Opposition said in a statement.

The GSD the Government was borrowing because it had spent too much, adding that it was “little comfort” to argue that this was an excellent deal not least because interest rates had since dropped by 0.25%.

“Borrowings need interest paid and eventual repayment,” it said.

“If there is no necessity to borrow, a Government would not have companies that it owns borrow more for use in pursuing manifesto promises.”

Earlier this week, No 6 Convent Place had described the deal as “one of the best” Gibraltar had ever made, adding that such arrangements were increasingly common in the UK and represented investor confidence in Gibraltar.

It accused the GSD of trying to discredit the lawyers and civil servants who had structured the deal in the run-up to the EU referendum and despite the uncertainty surrounding a potential Brexit.

But the Opposition brushed this aside and said it had never sought to criticise anyone, adding the responsibility for the borrowing lay at the door of the Government and Chief Minister Fabian Picardo.

“He should stop hiding behind professionals and external advisers, which is his trademark when he wants to deflect criticism from himself,” it said.

The GSD said the claim that this “mortgage” was zero risk contradicted the legal reality of such a structure, which required the Government or its companies to pay just like any other borrower.

It said the public knew nothing about the revenue streams of these companies, most of which it claimed were non-revenue making.

It concluded that if the Government had to fund the companies, then the debts of those Government-owned companies should form part of the authorised public debt, which is the position in the UK.

“At the last election Mr. Picardo promised to reduce debt [but] this new £300 million borrowing increases the debt of Government and Government owned companies to over £1.1 billion,” said Opposition Leader Daniel Feetham, dismissing the Government’s insistence that the money was not direct borrowing.

“In the end, this is money in the control of the Government that will apply it as it decides,” he said.

“The Government is right to say that there is a current climate of uncertainty. This is why caution is necessary.” “In the past, when Mr. Picardo used to say the GSD Government was addicted to debt, borrowings were much less and uncertainty negligible.”