Budget Speech - Daniel Feetham

Mr Speaker thank you very much.

Mr. Speaker, today I have been asked by the Leader of the Opposition, to draw together some of the themes that we have highlighted in this year’s debate and respond, where relevant, to some of the speeches from the Government side. 

The English broadcaster Mark Steel once said: The annoying thing about being an atheist is that you'll never have the satisfaction of saying to believers: 'I told you so.'

It is perhaps not elegant in politics to say “I told you so” but if the roles had been reversed, I suppose the Hon the Father of the House would have said “if you want elegance go to a fashion show”.

The fact is that on the effects of public debt and unrestrained public spending; on the unsustainable increases in departmental expenditure and the public sector in general; on way we warned that that our size and economic model made us more vulnerable to international downturns than much larger and more diversified economies; on the way that this was all creating a cultural expectation which was unsustainable and, indeed, socially insipidly damaging. We told you so, we told you so, we told you so. 

There is no point to the Govt coming to this House and saying that “the age of entitlement is over; this is the age of responsibility is here” when they themselves have been irresponsible and they are the ones who have created the very illness that they now seek to cure. Where were Hon Members Opposite when I was being lambasted as the architect of austerity when I was telling them all the things that they have told this house need to happen over the course of this week: keeping to Governmental budgets; prudence; responsibility; not being all things to all men.

And, of course, no one on this side of the House, is saying that if they had been prudent with the people’s money over the last 10 years we could have avoided a £157m deficit, which is, of course, COVID related and no one could have predicted the pandemic, but we certainly would have been in a better position to deal with this crisis and we did consistently warn about the potential but extremely serious curves up ahead.  In 2015, the GSD team would go around the estates telling people: agarense usteded que bienen curvas, and our warnings were ignored.

Since at least 2017, Mr Speaker, those justified criticisms from this side of the House of the Government’s handling of our public finances has turned out to be the biggest “We told you so” in the history of these debates.  

COVID has undoubtedly been devastating; that is true.  But the seeds of our economic problems (and the undoubted social issues we warned were being created by the ‘all things to all men’ policy of the Government) run much deeper, are more complex and lie (principally) at the door of honourable members opposite. 

It is not as if they were not warned; not only by us (principally so) but also by at least one member of the Government benches who has been so exasperated by the situation that it has prompted him to make some astonishing statements over the years: some of which I am going to refer to today.

It is in the management of the public finances that differences between the Government and the Opposition have been most apparent over the last 10 years.  And, Mr Speaker, those differences have not just been about transparency and accountability.  In all the budget speeches that we have delivered over that time, we have always been at pains to emphasise that the systematic dismantling by the Government of our ability to properly scrutinize the public finances also interfered with our ability to identify the true extent of any present and future financial problems. An that was phenomenally dangerous. 

As the Honourable the Leader of the Opposition has emphasised in his eloquent and articulate exposure of the Government’s deception, in June 2011 when Honourable members sat on this side of the House, and we were debating the last Budget, of the last GSD Government, direct public debt (reflected and accounted for in these estimates of revenue and expenditure) stood at £480m and the debt in Government owned companies stood at £20m. Today Mr Speaker direct gross public debt stands at £677.7m expected to rise to £747.7m next year but more importantly the debt in Government owned companies has gone up from £20m in 2011 to £959m today.  There is more debt in Government owned companies than is owed directly by the Government and more importantly we do not know how much of that has been spent.  We don’t even know how much interest is being paid on some of these loans as Mr Clinton has pointed out or how they will be repaid when they mature.  

If our warnings of the way the Government was increasing debt, increasing spending and in particular recurrent expenditure had been heeded, we would have been in a far better position to overcome the current crisis than we are today.   Instead, the Government has been intoxicated by the desire to pile on the votes at a General Election and that has had huge repercussions and has caused huge damage to this community. 

And Mr Speaker when I say that, I know I can say that authoritatively, because as the Grinch of Gibraltar politics I have been warning about the direction of travel and the effect Government policy was not only having on our finances but on social attitudes for years. 

Actually, the genesis of why we are where we are today can be found as far back as the 2011 election when members opposite made promises which could only have been kept at the expense of a systematic dismantling of parliamentary transparency and accountability in relation to our public finances.  

And that is very simply because they promised both to spend £750m in capital projects in 4 years, donate every last penny of Government surplus to community care and to decrease public debt.  It was an impossibility without political shenanigans. 

And of course on top of all that: Dec 2011 the whole Gibraltar had their popcorn out, when he came out on public television with his best solemn face: saying my fellow Gibraltarians we have found a £100m black hole behind an impenetrable curtain. The performance was so brilliant that he had me thinking: what on earth do I say to my mum from my 6 by 6 cell at Windmill Hill Mr Speaker.  

But Mr Speaker I knew there was something not quite right, when he started burning money as if there was no tomorrow, and barely a year later and following the announcement of yet another multi-million pound project Christine Vasquez asked him “how can you afford all this when less than a year ago there was a £100m black hole”. And as Gibraltar reached for the collective cupboard for the pop corn: Christine “I have cured the problem”.

Of course, Mr Speaker on this side of the House we knew that promising to spend £750m whilst at the same time gifting the profits of Gib plc to a charity and reduce public debt just simply did not stack up. That is why as early as this debate in 2013 (a few months after that interview) we said this:

 

“Mr Speaker, if your cash reserves are down, you will not borrow [directly] because you do not want to increase net public debt ... you also promise to donate every single last penny [of surplus] to Community Care, how on earth do they expect to fund £750 million in Government projects … ?” 

I then answered that rhetorical Q:

“Or does the Government intend to use, for example, deposits in the Gibraltar Savings Bank – which have shot up spectacularly … to fund those projects?

Of course, Mr Speaker, the Gibraltar Savings Bank debt securities do not appear in the Estimates as public debt because it is strictly a debt of the bank, not the Government …

Mr Speaker I have been observing the Hon. the Minister responsible for the Gibraltar Savings Bank  for a very long time indeed. I may not always agree with him, but he has never done anything without a reason. I hope, Mr Speaker, that I am wrong and that the Government is not contemplating using that money to fund its capital projects or Government-owned company expenditure simply because it is committed not to borrow or to donate Government surpluses to Community Care or because its projections of rising revenue and expenditure are out of kilter. The consequences for these annual debates and the transparency of Government finances would be considerable because it would blow a massive hole in the Government’s duty to account to this House at Budget time for expenditure, because as we all know, the Gibraltar Savings Bank expenditure is not reflected in the Estimates.”

 

That was in 2013 Mr Speaker.  

Shortly before that the Government had already started shifting monies from the GSB to Gibraltar Investment (Holdings) Limited (that is the company that stands at the top of tree of all Govt owned companies and from where money can then be transferred and cascade down to other Govt owned companies) and indeed within a year poured £300 then £400m into Credit Finance Co Limited. 

Despite the difficulties placed in our path, we on this side of the house predicted precisely how it was to be done and the implications of it for these annual debates. And I am immensely proud of the job that the GSD team did on these issues despite the unpopularity of the things we were saying.  The Govt kept its promise to spend £750m in capital projects but we were proved right as to how they would fund it.  Of course, we all know that the Government could never have borrowed that amount of money directly because statutory debt limits (ironically introduced to ensure Govt borrowing did not became unaffordable) didn’t allow them to do it. As both the LOO and Mr Clinton have pointed out – on Tuesday the CM accepted that it is precisely to circumvent the borrowing limits that the Govt borrowed through Govt owned companies which is precisely our criticism of them during those years.

Mr Speaker, they have done some good things.  You do not win elections otherwise: but the way they have managed the public finances has been reckless and politically dishonest.

And it is not right to say that the GSD Government did the same.  The only reason why any of this became possible was because they changed the law: they amended the GSB Act in 2012 to change what the GSB could invest the proceeds of its debentures in.  Before 2012, they could only be invested in cash or cash equivalent investments (i.e. very safe forms of investment) and after those amendments they could invest in anything they wanted.   

Mr Speaker on Tuesday we heard that recurrent revenue is no longer covering recurrent expenditure and that we are now borrowing to cover recurrent expenditure.  Of course, you cannot ignore the realities of the pandemic and Brexit, but we have been warning about the rise of recurrent expenditure since at least 2013.  Some of the rises in Departmental expenditure was causing the Minister for Economic Development as much discomfort as it was causing us.  It was all terribly confusing.  The GSD defending the prudent fiscal core values with which the Honourable Member the Minister for Economic Development had been associated all his life whilst his own party ignored those core values.  Honourable Members will recall that when asked by Jonathan Scott of GBC whether the rise in departmental expenditure accorded with his core values the Minister said that consultants were brain washing Government Ministers to spend without guilt. And, therefore, whilst undoubtedly the current predicament is COVID based, the trend (the clear trend and clear concern) was already there. 

In 2019 (pre-covid) the Minister for Economic Development gave a health warning on public television about the amounts of money that his own Government was spending by way of recurrent expenditure.  We had been warning about it since the 2013/14 and referring to the experiences of other small jurisdictions like Bermuda, where governments there changed the borrowing limits, much as they have done in 2016, and ended up borrowing to pay recurrent expenditure. And they come to this House talking about the age of responsibility.

Our philosophy has been a strong economy, sound public finances, money in the bank to see us through difficult times ….  those are the true foundations of a successful society. That is the way to protect the Gibraltarian way of life, our public services and ordinary working-class people.  All of which has been threatened by their management of the public finances. And now in our time of need, we are in a worse position that we would have been to weather the storm.

We were never the party of austerity despite the scandalous attempts by some (then members of Unite including a UK official) attempting to paint us as such (no doubt to please them) on public television during the 2015 election; we wanted to prevent austerity.  If the Government had listened to us (and their own Minister for Economic Development) all those years ago, and reined in Government expenditure, we would have undoubtedly been in a better position to deal with the current crisis.

In the meantime, not only has overall debt (direct and indirect) risen from £500m in 2011 to £1.7 billion today but the Government has mortgaged Government estates to secure and procure part of that borrowing – all before COVID. 

Indeed, instead of heading our warnings about the huge increases in debt, they legislated in 2016 to change the amounts the Government could borrow despite the fact that we had fought the 2015 election on debt and spending and at no stage did members opposite say they would be changing the debt limit to borrow even more. 

All countries borrow Mr Speaker, we accept that.  When used correctly, public debt improves the standard of living of a country. We accept that too. 

But debt can also be a millstone that impacts not just on today’s generation of taxpayers, but it can also affect future generations in a small community. If you are not careful (as again we warned) debt becomes deferred taxation and we are now seeing that in increases in social security payments and corporate tax.  

It is true that our small size makes us agile and responsive but there are structural issues in our economy which have always made us vulnerable: import duty revenues largely derived from tobacco revenue; a dependency on the gaming sector and a public service dominated economy. 

I also want to say this Mr Speaker: yes there must be a collective change of chip.  I agree with the Hon Gentleman when he says: “we cannot continue to behave like the spoilt child of Europe”. But every parent will tell you that the best way to prevent that is by not giving a child everything it wants.  They are the ones that have spoilt the child despite again our warnings about the insipid social effects of their uncontrolled spending and promises.

For many years people did not care about public debt or the amount of money the Government was spending.  As long they had money in the pocket and their two cars in the garage; the moment there are difficult times and either public service expansion is frozen, or someone is refused a request (however unreasonable) – se an gastao mucho dinero / spent too much money. When the Govt was spending and borrowing as if there was no tomorrow, but things were ok: el GSD no se calla / the GSD doesn’t keep quiet.  There is no point complaining after the horse has bolted.  We have all got to do our bit and in fairness that has been our message for 10 years.  All of us: politicians and the electorate.  If we continue to turn elections into souks and the public continues to judge politicians by the promises they make, however, unreasonable, and unaffordable, we will not prosper in the way that we have in the past.  Or worse, Mr Speaker, we have voices (which we have never been heard in Gibraltar) that we need to do a deal with Spain, however, unpalatable and unacceptable.  No, no, no Mr Speaker.  In this I have trust in the Govt – it will not agree to the total capitulation that is represented by the EU negotiating mandate: neither the CM, the DCM or any of the members opposite will agree to that.  That is why we welcome the intervention of the DCM on Tuesday and his very clear commitment to this House.

Indeed, Mr Speaker, before I turn to the contributions of some of the members opposite, I just want to say something on those negotiations.  I was concerned by the in-principle agreement when it was announced.  The Govt has dealt with some of those by promising that there will be no Spanish police boots on the ground at the airport or at the port.  That was a major concern for me, and I welcome that promise.  It is not a secret that I would have seen Brexit as an opportunity to pursue closer constitutional links with the United Kingdom but that is neither the policy of the Government or, indeed, the Opposition. There is, therefore, only one horse in this race and for the sake of everyone it must be given the maximum opportunity to succeed.  The LOO has rightly emphasised that whatever our reservations, the Government must be given an opportunity to agree a deal that eliminates the frontier as a political pressure point and we agree that that is going to involve a level of political compromise.  Compromise yes, capitulation no.  We need to go into this with an open mind but firm in what we cannot agree to.  In the Brexit select committee and in this House in 2017/18, I told the Govt on various occasions that it had a duty to at least explore some type of customs union application to Gibraltar provided we could safeguard businesses and I was assured that studies had been undertaken and the Govt was confident that a balance could be maintained.  

On this side of the House we wish the Government well in attempting to strike that balance and, the LOO has also asked me to convey the fact that we are here to assist wherever we can.  To Spain I have this message: our overwhelming market in FS and gaming is the UK; the father of the House said during the course of his intervention that in 2019 our trade with the UK was worth £4.6 billion up from 1.6 billion in 2011.  The deep economic links and indeed economic integration with the UK is there for all to see: accelerated by Brexit.  If these negotiations fail those links will increase.  Inevitably a large part of our economic offering will need to focus on the UK’s plans vis trade deals and determine what we can offer to get a slice of that action.  At the moment UK trade deals with third parties do not automatically extend to Gibraltar and the time may come when we want to reverse that: they should automatically apply unless we suggest otherwise. Either way, Gibraltar will not be EU facing despite our geographic position.  That can have potential future political and constitutional implications. Our children speak less Spanish today than they have ever done – I don’t personally welcome that but if the EU and Spain want Gibraltar to look elsewhere for its economic future, the negotiating mandate actually does that. 

I want to turn to some of the comments made by the Father of the House in his very interesting (if lengthy) historical lesson on Community Care yesterday.  He used phrases like : “they have legitimized what we have spent 34 years defending against”; or the participation by members on this side of the House in a demonstration some weeks ago represented support for a “level of insanity without parallel”.  The majority of those participating – where GSLP activists. But the only person that I have ever heard in my time in this House drawing a link between Government control and community care was the Hon. Member in his intervention yesterday when he referred to internal and confidential Govt memoranda.  No one has ever drawn that link. It was one of the most dangerous speeches we have heard on the subject and whilst we associate ourselves with much of what the Hon. Member said yesterday on departmental expenditure and the culture of entitlement, which we have been saying for years, we completely disassociate ourselves from the link he drew between Govt influence and community care, and we invite the Govt to do likewise. The GSD will not stop the funding of community care which is the maximum extent of Government influence on the charity. No one on this side signed the petition. The sole point we have made is that the sudden 17 Feb 2020 removal of payments without consultation seemed arbitrary and unfair, there should be a moratorium and new arrangements discussed and transitioned.  Full stop.  

As for old age pension – we are going to have to deal with this.  We cannot stick our heads in the sand.  It is unconstitutional. Its clear discrimination on grounds of sex. The Govt may wish to consider setting up a committee (along the lines of the Canepa committee on democratic reform) composed of a cross section of the community to advise the Govt and make recommendations on how this is dealt with.   

Samantha Sacramento: I, of course, associate myself entirely with the speech of my learned and Hon. Friend Mr Phillips. The fire he shows in his belly is an essential component of successful Opposition politics and no one has shown more fire in his belly than Mr Phillips has since the election. I congratulate him for that.  I am getting on a bit; the fire doesn’t shine as brightly, and the belly isn’t what it used to be.  I therefore want to congratulate the Hon lady on her handling of the COVID crisis.  The vaccination program and the way testing is done in particular, has been absolutely brilliant.  The airport testing facility with which I am most familiar is a credit to her and the rest of Gibraltar.  And I speak as someone who has had numerous tests in the UK this year and they do not come anywhere near the level of organisation and customer service of our facility in Gibraltar. On the anti-corruption authority – that has been a bun in the oven (so to speak) since 2011 and we look forward to seeing how it will work.  Our position is reserved. We hope this is not going to turn out to be another expensive quango. On disabilities, she did not however say how the reform/review instituted by Mr Licudi of the system of disability benefit is going and some of the applications that are being rejected should not be rejected and there is still confusion amongst appeal panels as to how the criteria works.  All that needs to be sorted out; as indeed the full implementation of the Convention on HR; indeed, some of the provisions in the disability act have still not been implemented despite the act having been passed some time ago.  We also hope that after 10 years mandatory drugs testing is introduced – I still do not understand why there are so many delays on the implementation of a phenomenally useful provision.