Oct 01 Opposition Question how the Housing Schemes will be Funded
The Opposition notes the announcement by the Government of the award of contracts for the construction of nearly 1,000 flats in two housing schemes in excess of £115 million.
The Opposition is calling on the Government to provide details of how it intends to fund these projects. In particular, whether it intends to fund them from the proceeds of savers’ debentures deposited with the Gibraltar Savings Bank (“the GSB”). It will be recalled that over £307 million of those savings have been transferred from the GSB to Credit Finance Company Limited, which in turn, has been lending money to private entities and also the management company of certain housing estates. More than once we have pointed out that this distorts public finances because the Government does not need to borrow to undertake the same activity itself as it is effectively using savers’ money as a Government piggy bank. It is also exposing Gibraltar plc to huge future repayments that it may not be able to afford in future. The Government’s legal borrowing limits are set by law in order to prevent the Government from borrowing what it cannot afford. The use of the proceeds of GSB debentures to fund projects (if that is what will happen) will effectively allow it to circumvent those borrowing limits.
If they are not going to be funded from the proceeds of GSB savers’ debentures, the Government should come clean as to how it is going to do so in the light of its criticisms as to the state of public finances in recent years. It will be recalled that as late as last year the Chief Minister appeared on public television claiming that his Government had inherited public finances that were in ruinous state and that public debt was dangerously high. Indeed, that we had exceeded legal borrowing limits. In an address to this community last year, he appeared on public television and spoke of "a serious public debt problem", "a serious public finance problem", and "an impenetrable curtain". He then went on to create the impression, an impression he reinforced at last year's budget, that the Government had found a £100 million black hole.
It is not possible for the Government to have cured those very serious problems to the extent that it is now able to commit to the spending of £115 million on these projects on top of the announcements in relation to a power station that will cost by anyone's estimate over £120 million, millions on the new berths and a promenade in the port, the Queen’s Cinema purchase, Commonwealth Park, the cost of which the Government has refused to disclose but also importantly considerable increases in recurrent expenditure.
For example, over £48 million in four years on the Future Job Strategy alone. Indeed, in comparison to the financial year ending 31 March 2012 the projected overall recurrent expenditure for year ending 31 March 2014 will have risen by £66.6 million per annum or £5.525 million per month.
We believe that irrespective of the contradictory political discourse between “a serious public finance problem” of last year and “the land of milk and honey” this year, it would be very serious indeed if the Government intended to fund many of these projects by using the proceeds of debentures in the GSB.
The Government should come clean on how it intends to fund these latest projects.
