If you want to get bad news out do it on a Friday. This Friday was no exception. The news was that the Government had written off £5,000,000 in taxes and social security and £1,400,000 in rates, a total of £6,400,000 of public monies that have gone up in smoke. Undoubtedly write offs are a fact of life. No government can or should be criticised for having to write of an element of debt. What I believe requires some analysis is the reason given and what requires some comment is the nature of some of the write offs, namely social security and PAYE.
The reason given is that the amounts are in the main due by companies that either have been liquidated, struck off or do not otherwise have the wherewithal to pay or self employed individuals who are no longer in Gibraltar. The reality is that this reason simply analyses the final situation faced. It does not analyse the cause of the problem. It is important to analyse the cause to reduce the level of bad debt owed to government.
Businesses do not get into trouble overnight. It is a process that develops over time. There is little or no doubt that businesses will go down. When businesses go down there will be bad debts owed not just to government but to other creditors. The only way to reduce ultimate loss is to limit the amount of credit that businesses are allowed. It is in the process and efficiency of collection that the solution lies. It is important to ensure that no business is allowed to go into such large arrears that the ability to pay is compromised. Inability to pay debts as they fall due is the main ground for bankruptcy.
Permitting growth of debt when dealing with social security and PAYE is the most unconscionable of acts. This is money due in part, not by the business, but by the employees of that business. It has consequences on the employees. It is essential that a culture of prompt payment is instilled. There is no excuse for any delay. Non-payment at due dates give rise to criminality. Businesses should be made fully aware of the consequences. This is achieved by an efficient and unyielding collection system with immediate consequences flowing from non-payment.
The final consequence to a business, other than potentially criminal prosecution in some situations, of non-payment is usually bankruptcy. There is an argument to say that this should be avoided if possible to safeguard, for example employment. This argument has some force if there are facts and circumstances that are indicative of a probability that a business can trade itself out of a short term cash flow problem. In most other eventualities allowing a failed business to continue trading only achieves an aggravation. It results in increased write offs in the end. It also permits unfair competition in the market place, thus increasing the chances of other businesses getting into financial difficulties, which in turn also leads to increased write offs. Ridding an economy of failed businesses is curative for the economy as a whole.
Crticising for past occurrences and write offs is easy. The reality is that what has happened has happened already and whatever action needs to be taken now, including write offs, has to be taken. The write offs that we have been told off will not be the last. There will be more. What needs to happen is that steps are taken to reduce the risk of write offs and so reduce the loss to the public purse. There are clear signs that the present GSD government are tackling this issue head on. It should be supported and not criticised in this endeavour.
Making political capital of any steps taken in achieving what is a laudable aim is opportunistic, of no benefit to the wider community and counter-productive, not least, because those in opposition today may need to be doing exactly the same in government tomorrow. Politics is about doing what is for the better good of the community, not for selfish short term electoral gain. On occasions opposing political parties criticise in manner that is not for the greater good of all, perhaps it is time for this type of politics to come to an end.