Nov 07 - Government Addresses Credit Finance Company Ltd Speculation
Following GSD Leader Daniel Feetham’s claims that funds being invested in Credit Finance Company Ltd have huge implications for the future financial stability of the communitythe Government has stated that Mr Feetham’s continued scaremongering can only be put down to a ‘desire to score political points and are of no substance whatsoever’. A statement released by Number 6 has admitted that longer-term deposits in the Savings Bank are being securely invested by the Government via Credit Finance Company Ltd, on terms that enable the Savings Bank Fund to make a reasonable return on its investment and with the maturity dates of such investments being matched with the corresponding maturity dates of deposits in the Savings Bank.
Following Minister Bossano’s refusal to answer a question on Credit Finance Company Limited investments in Parliament a couple of weeks ago, Mr. Feetham has insisted that the company is being used to pay for and cover Government operating costs, cash flow and projects, without figures appearing in official Government accounts. No.6 have today hit back by saying that the debate was started by the GSD after they lost the election in 2011. A statement notes, ‘they said that the Public Debt of Gibraltar was very low compared to all other countries in Europe and that it was, therefore, perfectly in order to use up the Cash Reserves in order to fund capital projects, such as the then planned £150 million Diesel Power Station; the multi-million pound Airport Tunnel Project and the remaining balance on the £83 million new Airport Terminal Building. At that time, the GSD said that they would support the Government if they were to seek leave of the House to take the approved level of Net Public Debt of Gibraltar beyond the limits prescribed under the Public Finance (Borrowing Powers) Act 2008.’
The Government go on to claim that the Opposition was happy with public debt standing at around £520 million, they add that their administration was not prepared to take the Public Debt beyond the levels prescribed under the Public Finance Act 2008. They add, ‘Unlike the previous administration, it was also not the policy of this Government to hold large unusable Cash Reserves earning interest at less than 1%, whilst at the same time continue paying interest on Government Debentures at 5%. The Government is not in the business of making such losses. Over £160 million of Government Debentures have been redeemed since this Government took office.’
Commenting in defence of the Gibraltar Savings Bank debentures scheme, they explain that debenture holders continue to receive the higher levels of interest, whilst at the same time retaining the security that they previously enjoyed in former Government debenture schemes. No.6 insists that all Savings Bank deposits are backed by a statutory guarantee by the Government covering both capital and interest.
Speaking on Credit Finance Company Ltd a Government spokesman has insisted that as a licensed money-lending institution, the company invests its funds prudently in revenue producing assets, including fully secured loans at commercial rates of interest. ‘As with any other commercial lending institution,’ the spokesman adds, ‘its lending information and loan agreements are commercially sensitive and the details of individual loans cannot therefore be disclosed. Quite apart from Data Protection issues and requirements, the company would not be able to function as a commercial lending institution if it were to publish such information on individual loans. This must be clear EVEN to Mr. Feetham, who is clearly choosing to disregard this important aspect of this matter.’
The Government is adamant that Credit Finance Company Ltd provides benefits to both the Government and the community by funding up to 100% commutation of Government pensions. ‘This gives retiring Government officers greater flexibility in managing their finances on retirement whilst at the same time provides the Government with a potentially huge saving in its overall final-salary pensions bill.’
Following suggests by the GSD, the Administration insists that Credit Finance Company Ltd does not provide any loans for the settlement arrears of either Income Tax or PAYE. It does, however, provide funding to assist in the repayment of other Government arrears, such as electricity charges, commercial property rents and general rates. This is done on a fully secured basis and at commercial rates of interest. This has the added benefit to the Government of providing a structured and secured recovery of such debt and also brings these ‘off-balance sheet’ debts on to the books of the company.
‘As regards, the implications for the future financial stability of this community arising from the funds provided to Credit Finance Company Ltd, the fact is, of course, that even if one were to take the total of all the Preference Shares invested in Credit Finance Company Ltd and add this to the total of the current reduced level of Net Public Debt, this would still be less than the 50% of GDP that the Opposition has suggested would have been perfectly affordable by this Community.
By the GSD's own standards, there is therefore absolutely no need for any concern in this respect. The only cause for concern in this episode are the continuing double-standards of the Opposition or the question of whether Mr Feetham has also changed the GSD position in this respect as he has done in so many others.’
Commenting on the issue, Chief Minister Fabian Picardo explained that Daneil Feetham asked the question he knew would not be answered, and then submitted no supplimentaries. He added, ‘He did not ask why the question could not be answered or what information he could have about Credit Finance. He did that, obviously, in order to justify his "stunt" walk out of Parliament for dramatic effect. Most people in our community - even many GSD supporters - have seen through that. They now have further reason to deeply question Mr Feetham's performance as leader of the GSD and the Opposition. The question marks keep building and his credibility keeps falling. Meanwhile, the assets of the Gibraltar Savings Bank are safer than ever and Credit Finance is helping bring off- balance sheet debt on balance sheet and secure previously unsecured debt. That's why depositors in the Gibraltar Savings Bank can be and are completely relaxed about the safety and security of their deposits; as they are showing in the increasing amounts being deposited with the said Bank.
