Jul 07 – Hassan Nahon Budget Speech
Transparency, Accountability and Probity
Producing a more efficacious Budget for Gibraltar
Mr. Speaker, before I commence my address, my young son has told me that I must mention today here in Parliament last night’s events at our very own Victoria Stadium where Gibraltar’s champions Lincoln, managed to win their first round game and are now drawn against Celtic from Scotland. This is a great achievement and we will now be able to host Scottish fans in what I hope will be a great event for Gibraltar. Mr. Speaker it seems that since the referendum result, Gibraltar and Scotland seem to be making huge strides together.
Mr. Speaker, it is an honour for me to rise to deliver my first budget speech as an Independent Member of Parliament. When I was first sworn in as a member of this House, I felt not only a strong sense of privilege, but also one of immense responsibility in keeping with this Chamber’s long and close association with the history of democracy in Gibraltar. And it is with the confidence of the mandate that was given to me at the last general election that I stand here today, determined as ever to meet these responsibilities as a minority member, as indeed a number of independent parliamentarians have done before me. It is their passionate commitment to the people of Gibraltar, Mr. Speaker, that I hope to reflect in myself. And it is in this spirit that I would like to state my first response to the Government’s Budget.
This budget and its reflection Mr. Speaker, follows a bruising Brexit campaign and result. The conviction to remain part of the EU unified the people of Gibraltar across political party lines, religions and economic sectors - across all traditional divides. Now that the result is known, it is important for Gibraltarians to focus their attention on its growth engine - the economy. It is a time to work with the Government of Gibraltar in its quest to find the best solutions for a post Brexit Gibraltar. Until the UK itself comes into solid ground as to what are the effects and new stipulations of a Brexit within the EU, any pretence that there is a clear policy to offer with regards to Gibraltar’s place going forward would be purely speculative.
While talks and ideas for a redefining of the UK is underway, I wish to add that I have no doubt Mr. Speaker, that Gibraltar will continue to thrive and reinvent itself as it has always done, in order to move forward with the times and continue to be a successful economy for generations to come. We have seen this so often in our history and this latest challenge, Mr. Speaker, should be no different.
Mr. Speaker, I am aware that there will be some overlaps with what has been discussed this week. However, I am hopeful that my unique position will offer a different insight.
I would like to start with the people of Gibraltar, for whom the budget has a direct impact on their daily lives. I am glad to report that my invitation to Gibraltarians to provide me with their issues and queries was heeded by many concerned citizens. As I have committed, I will start with some of the main concerns and comments. I will in due course be sending a letter to the Chief Minister in which I will articulate their suggestions and concerns.
Mr. Speaker, over the years, Gibraltar has seen a spate of lifts being installed in many estates around the Rock. I am pleased for those in our community who are now finding mobility easier as a result of these lifts being installed. However, I have been made aware that such facility has not yet been extended to those living in many areas of Gibraltar.
I was recently approached by residents of Sandpits House where many are struggling up and down flights of steps while they wait for their promise of a lift to materialise.
As people living in these estates get older Mr. Speaker, and their mobility is reduced, so is their independence as a result of this delay, something which is greatly affecting their quality of life. I therefore call on Government Mr. Speaker, to complete the installation of lifts in estates around Gibraltar as soon as possible and within the 2016/2017 financial year.
With regards to the cemetery and its upkeep Mr. Speaker, it has also been brought to my attention that people are aggrieved for the condition in which their beloved friends and relatives are lying to rest. People would like to know whether there is a structured maintenance program in the cemetery, and although I do note the Honourable Member, Minister John Cortes saying yesterday that there was a plan and structure in hand, I am sorry to say that up until now, the cemetery has not been dealt with by way of priority.
Mr. Speaker, if we really are the caring society that we purport to be, we need to be reflecting this by restoring dignity to our cemetery, a place of peace solace and comfort, as a matter of urgency.
Mr. Speaker, if I may, I will now touch upon the topic of tax arrears, which is another issue that is distressing many in our community, some of those, who are in arrears, others whose employers are not paying their taxes for them, and a few who are waiting for their rebates.
On June 07, arrears stood at £28.71 million or 4.86% of Government estimated revenue for 2016/2017. Since, first being published for 2011, the tax arrears for “individuals” have remained fairly static.
The breakdown only provides for four categories, namely “individuals”, “self-employed”, “companies” and “PAYE”, and does not afford an understanding of the aged debtors.
In order to gain a sense of how realistic the expectation would be for the Government to be able to collect the tax arrears, I call on the Government to release a schedule of aged debtors.
From my dealings with many employees, I have a particular concern with PAYE, which is withholding tax on income payments to employees. As I understand PAYE means that the tax was deducted by the employer from its employee’s salary, but not paid over to Government. This means that on March 31, 51.72% of tax arrears were attributable to companies. Is there a relation between the company tax arrears and PAYE arrears? As I understand it, the collection of PAYE is a function that Government transfers to companies, so companies act as their agents. So if the companies do not pay over the PAYE, they have effectively taken money due to Government. What sanctions does Government impose on these companies in these instances?
And Mr. Speaker, during last week’s Chief Minister’s Questions and Answers, the Honourable member, the Chief Minister, alerted this House to the fact that £30million is owed in refunds to the taxpayer.
Various people over the last few months had approached me with a view to voicing their need to receive these rebates, something I believed would be forthcoming in the not too distant future, or that it wouldn’t be an issue Mr. Speaker.
However, after noting that Government have only budgeted £10m for the current financial year, I have to ask, on what basis can this be justified? Last year £7 million was budgeted for rebate but even then, £560K was held back from being returned. Is this the new and improved rebate mechanism put in place?
There is no excuse for the delay in refunding peoples monies, Mr. Speaker, especially when the sums are extortionate and in effect being borrowed by Government but not included as part of its public debt, a public debt figure which would have broken the legal limit approved by this House had it been accounted for. Mr. Speaker, I ask Government, would not rebating at this rate inevitably compound the rebate amount while people await their money indefinitely?
Mr. Speaker, this delay seems unfair on the public and unfair on the staff at the Income Tax Office whose will to solve the problem is stifled due to Government budgetary decisions.
And having said that, Mr. Speaker, I hope that there is or will be a process in place to ensure that people who are in arrears on their rents do not get a refund, should such be due to them.
And on the subject of rent Mr. Speaker, I am pleased to note the increase, however small it may be, on rental charges, but hope that Government has thought through a mechanism to ensure how those in arrears will be complying with such a rise as well as paying those outstanding arrears. I also hope that Government intends to have annual or regular increases on rent, to catch up for the last few decades. At this point, I think it is important to recognise the work of the Honourable the Minister for Housing for working tirelessly and firmly to decrease Housing arrears, something that needed to be done desperately, but a thankless task that is not easy or popular to see through.
On the subject of arrears Mr. Speaker, we haven’t even begun to discuss arrears in electricity, which actually stand higher than rental arrears at over £6.6 million! I call on Government to explain to this House how it plans to retrieve this other large arrears sum.
As highlighted Mr. Speaker, the general feedback I have been receiving, the feedback that matters, the feedback from our community is, in part, the result of my shout out through my press release of June 06, stating that it is important that Gibraltarians from all walks of life be involved in, and are able to participate in the compilation of the budget.
An interactive budget is more than just cameras and extra Parliamentary sessions Mr. Speaker. What is important is that all Gibraltarians should understand the budgetary process and for their voices to be heard. No contribution should ever be trivialised, or rejected out of hand. It is with this intent that I am pursuing my call that this, and all future budgets, honour the trilogy of evaluation -namely transparency, accountability and probity.
In addition, the budget should be acknowledged as a living document. It should be a process rather than an event. Following its delivery, we should not need to wait 12 months for another. I am proposing and calling for the introduction of a biennial budget review. A 6-month review, if you will. The United Nations (UN) adopts such a budgetary process - its Office of Programme Planning, Budget and Accounts.
This budgetary process allows the UN to implement, monitor, evaluate and provide feedback on the budget. Similarly, in the UK, we see each year what is known as an “Autumn Statement” some time in November or December when the Chancellor of the Exchequer provides an update on the Government's plans for the economy based on the latest forecasts from the Office for Budget Responsibility.
In a world where the only constant is change, we no longer have the luxury to wait 12- months Mr. Speaker. The budgetary process needs to be as resilient as we Gibraltarians are.
Mr. Speaker, while on the subject of planning and interaction, this House will recall the Chief Minister’s announcement, on May 04, 2015, of the creation of an Economic Advisory Council, named ‘Gibraltar 2025 – In Partnership’, to assist the Government in ‘its development of a ten-year strategic economic plan in partnership with the private sector and unions’.
More than a year has passed since this announcement so I think it is time for Gibraltarians to receive an update on the progress of the Council.
Mr. Speaker, let me offer my reflection and observation on Gibraltar’s tax base. According to the Estimates Book, import duties and income tax are estimated at £150 million apiece, or collectively at 50.78% of total revenue. Company tax is estimated at £105 million, and inclusive of customs duty and income tax it equates to £405 million or 68.55% of total revenue. Should one add Group Practice Medical Scheme of £25 million, these four taxes equate to 77.35% of total revenue. There are 110 revenue items, so 3 or 1.82% of the revenue items accounts for 77.35% of total revenue.
It is quite evident Mr. Speaker, that Gibraltar has a very narrow tax base. Though this ought to be of grave concern to all Gibraltarians, more concerning is that very little is for instance known about the nature and extent of the revenue collected by means of import duties - the tax on imports.
The most recent import statistics are for 2014, as contained in the “Abstract of Statistics 2014”, which was released in December 2015. However, there are a few concerns with the dataset. For one, “The source data for 2014 is incomplete and will be revised once all the declarations have been processed by HM Customs.” The 2015 dataset is, as yet, not available. The partial dataset then also excludes petroleum products. Why is that?
Then, there are no statistics as to the products being imported, nor of the aggregate import duties that they attract. So imports tend to be a closed book, despite, as mentioned by the Chief Minister, a substantial growth in Customs staff. I call on the Government to release more detailed import and export statistics. As do I require clarification as to how, for instance, Government is able to budget for import duties when these datasets are not complete?
I must say however, Mr. Speaker, it was refreshing to note the Government’s removal of import duty on nappies, Tampons and sanitary towels.
While I, and I think I speak for all women in Gibraltar between the ages of 12 and 50, congratulate the Government on their decision to eliminate import duty on these essential items, I lament the fact that this was necessary in the first place. It is however, comforting to see Mr. Speaker, that these vital products, are no longer considered luxury items and that they are no longer bunched up in the same category as hair extensions!
And Mr. Speaker, now to Government Companies – Wholly Owned Government Companies, are normally confined to page X in the published “Approved Government of Gibraltar Estimates of Revenue and Expenditure” for a given financial year.
I call on the Chief Minister to publish, and include, additional pages, containing the names of all companies in which the Government has an interest – inclusive of minority shareholding, and also for all Commissions and Agencies which it has established. If past practice is anything to go by, then the Estimates Book, will contain the standard diagram of the “Government Companies (wholly owned)”.
In essence it consists of two holding companies, namely Gibraltar Investment (Holdings) Ltd and Gibraltar International Bank Ltd.
The expenditure item “contribution to Government owned companies”, accounts for 4.99% of total expenditure or £25 million. So, what do we know about these companies? Where are the revenue and expenditure reflected? Would one not expect it to form part of the budget?
Then, do these companies submit annual returns? And if so, to whom? And, are these annual returns available for public scrutiny? Do we know if these companies have boards? If so, who are the members of these boards, and what is their remuneration to serve in such capacity?
Also, to who are these board members and companies accountable to, and what is the sanction if they do not fulfill their mandate? These are but some of the questions which I call on Government to clarify and answer in the name of transparency, accountability and probity.
I would have expected Mr. Speaker, that since the Government is allocating expenditure, which is essentially the redirection of revenue, to these companies namely in the figure of £25million, as announced for this year, that these companies should have accountability to this House.
While having just dealt with Government Companies - Wholly Owned Government Companies, of which this House has at the very best, very little, if any financial information, in the Chief Minister’s address yesterday, yet another has been created, via “Gibraltar Capital Assets Limited a newly incorporated subsidiary of the Gibraltar Development Corporation”.
This latest development - the £300 million new institutional investment -raises many more questions- and a matter which I ask the Government to provide more details on to this House.
Mr. Speaker, I would like to clarify exactly what this is so that the man on the street understands in no uncertain terms that when the Honourable the Chief Minister refers to institutional investment of £300million, what he is in fact referring to, is a long term loan – additional government borrowing of £300million, secured against six government estates where ordinary people live. In short, a massive mortgage.
So the question is, on what terms has Government entered into an agreement of this magnitude and is it right to commit future generations to such an agreement?
I call on the Government to inform this House how the structure works, inclusive of the source of finance for repayments. In addition, I would also ask Government to explain to this House and Gibraltarians what would happen in the event of the Government defaulting on any of its commitments?
Because, Mr. Speaker, in the trying times facing Gibraltar, people want to and need to feel safe about our nation’s financial arrangements and decisions, so more disclosure on this latest agreement, would be very welcome.
I also ask Government to explain to this House and to the people of Gibraltar how it could enter into an agreement, without any consultation of this House, an agreement that binds Gibraltar for such a long period of time. A period of time that would conceivably extend well beyond this administration’s term of office.
Although the Government might profess this to be a better strategy than “selling off these prized assets” Mr. Speaker, what it is doing is to rather borrow against these “prized assets”, while acting as facilitator employing a Wholly Owned Government Company, which finances are not reported to, or receiving the scrutiny of this House.
I ask for clarification as to why money needs to be raised, particularly in light of the recurring Budget surpluses that the Government have been recording, and the glowing testimonial given on the performance of the economy.
Mr. Speaker, people are asking me why, is an amount as large as £300 million required, an amount equivalent to 50.78% of estimated revenue for 2016/2017? Is the intention to use the full amount and offset the net public debt at £345 million?
Why is this amount needed, particularly when the Chief Minister, in his address stated that “We have the liquidity necessary to deal with the issues that do confront us and we have the liquidity necessary to deal with the issues that could confront us”?
Mr. Speaker, on a personal note, and to recap what I have been doing in the last seven months since been elected to Parliament, I would like to remind you and the House of a few of my endeavours. In Education, I have highlighted concerns by teachers and parents ranging from the practical to logistical, questioning manifesto commitments, which have now turned into consultation exercises like school lunches, to matters of health, safety and security in the new schools that we eagerly await to be built.
Likewise, in Health, I have brought to the House people’s concerns with the current system at the Primary Care Centre and St. Bernard’s Hospital as well as those of doctors, for example in connection to the upcoming implementation of the General Medical Council, a dynamic and ambitious move, but one that sadly I feel has not been properly thought through and could have negative repercussions for the Health Authority if we don’t get it absolutely right.
In general, Mr. Speaker, I have spent much of my time talking to but most importantly listening to constituents and bringing their causes and concerns to Government, this House and responsible bodies.
And on that note, I would like take this opportunity to thank the Minister for Health for collaborating with me when he has been able to do so, for having always given me the time to present to him the cases I have come across when shadowing the Health portfolio, and listening to the constituents who have approached me needing action to be taken. To this day, the Honourable member the Minister for Health has always been willing to help me to help others and I thank him for this.
I would love to see more cross party collaboration for the good of the average Gibraltarian who needs to be heard and helped.
In order to, in future, facilitate a more conducive and productive budget deliberation, I call on the Government to next year release the full copy of the “Draft Government of Gibraltar Estimates of Revenue and Expenditure 2017/2018” to this House, including the information it provides in the copy which is subsequently published for public consumption.
In accordance with my commitment to foster a culture of an open Budget, I have written to a number of international institutions that champion this cause. I believe that much could be gained from Gibraltar being an active participant in these initiatives.
I call on the Government to adopt a biennial budget review, making it a living document, increasing transparency and including all Government companies (wholly owned), joint ventures, agencies and commissions in a single Government budget, presented to this House.
By way of conclusion Mr. Speaker, I want to reiterate, that I still have a responsibility to the electorate to form part of an effective Opposition that is so essential to the democratic process.
Mr. Speaker, I want to work in partnership with the majority party in Opposition to hold the Government to account, but for me, it is also important to hold the majority Opposition to account when I feel that their sense of perspective may be distorted.
And Mr. Speaker, I would like to remind the people of Gibraltar that I am here as their voice in Parliament, to represent them and bring their causes and concerns to this House and to try and help the vulnerable and those in need in any way I can.
I would also like to thank the Leader of the Opposition, the Chief Minister, the Clerk of the House and his wonderful staff and in particular you Mr. Speaker, for helping me ease into my first year as a Parliamentarian. And despite the upheavals between myself and some of my former colleagues, I would like to reassure them that they, as well as ALL other members of the House, shall remain on my Christmas card list!
And if there are any doubts to my loyalties, Mr. Speaker, then I would like to make it clear that my loyalties today, as they have always been, are to democracy, to this House, and to the people of Gibraltar.
I thank you.
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