Sunday, 17 July 2011

Public Borrowings ... Have Legal Limits been Exceeded?

We have the CM accusing the Leader of the Opposition of ignorance and deceit, economic illiteracy, misleading and scare mongering, of having no moral compass and of a systemic lack of sincerity. Never have I witnessed, as I have already written about, such a vitriolic attempt at character assassination.

The consequence has been that Mr Bossano has accused the CM of lying to Parliament. This is one of the most serious accusations that can be made of an MP. If right, resignation should follow, not that it will. The CM has now come back at Mr Bossano saying that the CM has not lied and that he condemns both Mr Picardo and Mr Bossano. The GSD Government then play politics in an attempt to gain sympathy votes by addressing words of reassurance to debenture holders, not that anyone has seen a single one of them panicking.

What a spectacle! or como se dice ... que bonito! What the heck will they be leaving for the election? I pray and hope that political argument will return to the land of sanity, sense and proper argument but, somehow, I doubt it.

All this over the budget and most specifically to do with the level of debt. Some of the debate centres on the issue of what the government is legally permitted to borrow. It is easy to forget that. It is not so easy to understand the pertinent law, the Public Finance (Borrowing Powers) Act 2008 ("Act"), specifically section 3. On the CM's interpretation the amount of net debt falls within the legal limits, on another interpretation it does not. I will expand on this argument but forgive me for being legalistic and technical. I consider that it is important to debate the interpretation of the permissive section. My analysis may well exacerbate the controversy but so be it.

The essence of section 3 of the Act, which sets the borrowing limit, is that government's net borrowing first cannot exceed "... the higher of £200,000 or the lower of ...."two figures alternative figures calculated by reference to two formulae. The first is 40% of GDP. The second is 80% of Consolidated Fund Recurrent Annual Revenue ("CFRAR"). There is then another overall cap which forbids the Annual Debt Service Ratio ("ADSR") of the gross public debt to exceed 8%. I do not know whether any of GDP, CFRAR or ADSR are independently assessed or the formulae are all applied using figures arrived at by the government itself. If the latter there can be an element of perfectly justifiable (but self serving) inclusion or exclusion of figures to arrive at an opportune final sum.

The CM's interpretation is that the Act permits the government to borrow more than £200,0000,000. The CM's interpretation is based on the first overriding of the two limbs being interpreted as meaning that the government can borrow the higher of £200,000,0000 or a figure that is higher, if the lower of two subsidiary formula delivers, as it does, a higher amount. This remains so only if the second overriding restriction (not exceeding 8% of CFRAR) is not surpassed. On the figures provided by the CM, which there are no reasons to disbelieve, we are well within these permitted limits. I agree that this is a perfectly plausible interpretation.

However, there is another possible interpretation, which gives a different result.  This interpretation is that the maximum that can be borrowed is not £200,000,000 but a lower limit, if a lower limit results from the subsidiary formulae, namely, either 40% of GDP or 80% of CFRAR. The maximum of £200,000,000 under this interpretation is an absolute cap applying if a higher figure results from the application of the subsidiary formulae. The words "higher" and "lower" in the sections being interpreted as circumscribing, not the two subsidiary formulae, but the overall amount that the law allows a government to borrow. If this second interpretation is correct, then the government has already exceeded its legal borrowing limits, because net borrowings already stand at £217,000,000.

If the Government has exceeded the lawful borrowing limit, then it has it has acted outside the law. If so this Government has breached its constitutional obligation of good governance. If good governance requirements are breached, the powers of the Governor come into play. If the second interpretation is the correct interpretation, there are, also,  repercussions to the UK government because it stands as banker of last resort to Gibraltar. Will it want an increased financial burden and/or debt risk in Gibraltar? Will the Governor's powers be invoked? If they are, are we back in the days of possible direct rule? I think there is enough material here to keep lawyers busily arguing for a while ...


  1. complex topic indeed!! how does the act address Government borrowings via its numerous limited companies? do these escape the net?

  2. Anonymous at 12:06

    My understanding is that such borrowings as any wholly owned government company has do not fall within either the Act or the net public debt figures revealed by the CM. Although, in fairness, he has revealed the existence of one such loan in the sum of just under £20,000,000. The CM has said that even were this to be added to the net public debt figure the total would fall below the permitted maximum of £306,000,000, based on his interpretation.

  3. tks Robert
    Am i therefore right in assuming that if the likes of GJBS, Gibraltar Bus Company, GRPL, Gibraltar Car Parks Limited etc., to name but a few, have any borrowings/liabilities they do not form part of Governments overall debt exposure?

  4. You can't be serious Robert? Anda picha anda picha, to te lo frie y tu te lo come.
    Believe me if this Govt or any other Gib Govt was at the brink as we were in 96, the Spaniards and Brits would be doing cartwheels on your head and all our heads at the prospect of the mayhem they could cause us and in the hope of forcing a position on us.
    The Facts today suggest quite a different position.

  5. I do believe that the government has exceeded legal limits and that its management of the economy has been reckless and incompetent. The question which needs to be asked is WHY????? why have ALL public projects cost much more than they should ad have even after the Pardo n the cynicism but is there a common denominator in all this?

  6. Robert

    Where does the Principal Auditor come into the quandary?

  7. Tyrone Duarte says:

    You lost me with the figures - not my forte. However, if the conclusion you arrive at is correct will you be writing to the Governor on the matter?

    As for those who keep on harking about 1996 and what the Spanish and the British governments would or would not do - have they paused to think that: they might, respectively, have slighly bigger problems at the moment than the biggest pebble in NATO? That some of us worry about white-collar grey and black activities that are taking place at the moment?

    1996 was a lifetime ago, as was the PAG - or should we also bang on about the latter? La gente cambian - I hope.

  8. Anon@13:36

    What makes you believe that the government has exceeded all legal limits and that its management of the economy has been reckless and incompetent. Let us discuss. Please explain what Mr Pardo has to do in all this. Let's discuss.

  9. The Murdoch empire meltdown is absolutely amazing to watch and finally the pustule of corruption has been lanced. It really is healthy for society to rid itself of the parasites that live infect and from it. The current spotlight on the key players makes fascinating watching yet it is tinged with embarrassment and shame and utter shock at how deep these parasites have burrowed into the stalwarts of Government and the police.. Oh how the mighty fall and quite right to when it is deserved and proved.
    I can't help feeling that Gibraltar with it's outwardly shiny exterior defies the real truth that at it's core there is something quite rotten but there isn't a current legal process the cure to get rid of it.. I’m sure that I am not alone tired of all this pussy footing around asking nebulous questions, the constant sniping and unfounded accusations, without any real evidence , the constant rumours of corruption and insider interests driving the decision making processes by the GSD government. Surely it is the public interest that Gibraltar like the UK press needs a good honest purge and exposure of the real facts.
    The current debate over Government spending and the resulting debt problem is a watershed moment and an opportunity to air peoples real feelings over the way the politicians have behaved. It is in the public interest that this has to come to an end and fast as the cost of all these decisions are finally coming to roost and the citizen is hugely in debt as a result.. I think it only fair that the politicians to quash these rumours and innuendo . I think it is high time that there should be an independent forensic investigation by a qualified commission into the decision making process and disenterial level of the Government spending on capital projects. The key question is ,If the people are not directly profiting economically who is ? Direct straight uncloaked questions need to be asked under oath , and any obfuscation of the facts be deemed as criminal behaviour... If the government's responsibility is to protect the interests of it's citizens and the economy.
    How on earth can it be right to spend so much money on an Airport terminal and tunnel when there is absolutely no proven need for it .This is especially true when a new Electricity generation station is so desperately needed for the present and future economic health of Gibraltar.. Could it be that a generating station is not visible and iconic enough to warrant due focus and attention? Could it be that personal ministerial family connections and interests have clouded decision making ? The taxpayer and future generations will be coughing up for these so called vanity projects for decades and even more critical when the politicos have gone into retirement , will any of those currently in power ever be held personally responsible for the spending. It is absolutely shocking that the attitude of politicians is that they can make decisions and get away without accountability and personal responsibility even after they have left office?… Is there and appetite for this investigation ? I guess by the recent questions raised in this blog and elsewhere on facebook groups ,Twitter that there is a need ..Will it ever happen ..Hmmm it’s a pity but I doubt it …..In the light of the collapse of Murdoch who knows it might just happen ..I hope so . If it doesn’t then Gibraltar deserves it’s fate , accept the status quo and they have only themselves to blame ..

  10. You legal types and your endless wars on common sense :p

    Naturally I bow to your knowledge of legalese, however any rational person writing something in this way (well, they wouldn't have written it in that way, but still) would mean the former interpretation. If it is the latter then it is fantastically badly drafted, which is entirely possible.

    While no fan of the current government they do seem to be right on this specific point, although only because of their amendment to the legislation in 2009.

  11. Anon 14:39. You have such lack of faith in your own.

  12. I find it very strange that No 6 is quick to quash some rumours but not others.

  13. Whoever is right on this one, one thing seems to be for sure... we are more dependent than ever on the revenue received from the sale of tobacco.

    Shouldn't we start learning to live within our means?

    oh, and is this not immoral anymore?

  14. Tyrone Duarte says:

    Who is Mr Pardo and what does he have to do with government borrowing? I'm afraid that I am not familiar with this person- is he a civil servant?

  15. Anonymous at 13:05

    Yes you are right but one assumes that they do not, as in the same way as the CM announced the £20,000.0000 borrowed for office development, one has to assume that he would have done so if any of the other companies also had borrowings.

    Anonymous at 13:20

    Who has said anything about any brink? I am postulating different scenarios. Do you not understand this type of dialectics?

    Tyrone Duarte

    This blog is read in those circles ... no need to write to the Governor :)
    Mr Pardo is the Government Consultant who advises on all Government funded property developments, including the air terminal and airport tunnel.


    You may be right but there are clearer ways of writing it so that it would not be open to interpretation.

    17 JULY 2011 21:58

  16. once again many thanks LLW, pero for a Government that stood back in 1996 under the banner of absolute transparency we should not have to assume anything ;)

  17. Tyrone Duarte says:

    Robert, hypothetically speaking, other than fees, can a consultant to the government benefit financially in any other way from the projects he is advising on? And if not, is there a conflict of interest, or worse, if he does?

  18. Anonymous said...
    L.E.F. says,

    I have to agree with Matt's view that the former interpretation and not the latter is correct.

    However I admit I find the mention of £200 million slightly confusing to fully comprehend its inclusion in the act.

    What frustrates me is the way we complicate our own functioning as a people.

    Would it not be easier to say let the limit be 400 or 200 or 300 million. A figure set in stone where we do not have to doubt or dispute any interpretations.

    Before this change we had managed with a debt ceiling of £100 million since 1988. A simple figure everyone could understand.

    At present with this current formula any Government can carry on increasing our debt if it is within the permitted parameters, without having to debate the increases in debt in Parliament

    I do not like it. It leaves us exposed as a people for any Government to incur massive amounts of debt in our name, sometimes solely for party political gain.

    I concur that those who draft certain laws sometimes seem to confuse and blur what should be straightforward issues. We have to call a spade a spade and not invent new complicated names or formulas to realize it is a spade.

    As always our elected representatives prefer to resort to insults and anger with no real commitment to address the issues at hand.

    Simple questions require simple answers.

  19. Tyrone Duarte:

    It depends on the contractual arrangements and issues of disclosure and consents ... also who the consultant is agent for.

  20. should our Government be mortgaging £20 Million of our money to invest in an office block?

    It might be legal, but is it right?

  21. Matt and L.E.F.

    You may well be right (I accept in my blog that it is a plausible interpretation). My question is why have a limit of £200,000,000 then at all, if it exceeds the"safe" limits implicit in the two subsidiary formulae i.e. the ratios to GDP and CFRAR. It seems odd as you yourself point out L.E.F. Would logic not indicate that the intention was to allow £200,000,000 as an upper limit subject to these ratios not being exceeded?

  22. L.E.F. say,

    You could also interpret that the £200 million is the highest limit possible even if the other requirements (ratios toGDP and CFRAR)are not met.

    These are all interpretations we could do without if we had a transparent and truly accountable Government that does not have to resort to spin and by continuously leaving ajar the door of doubt and confusion.

  23. L.E.F.

    Yes but it defies logic if the formulae are intended to ensure "safe" borrowing ratios. It would be interesting to know whether the ratios gave a higher figure than £200,000,000 from the date of the coming into force of the Act. If it did the figure of £200,000,000 was always unnecessary. The rules of interpretation have to be applied to make sense of the inclusion of that figure by Parliament, which can only happen if the alternative interpretation that I have suggested is the correct one..

  24. L.E.F. says,

    It certainly is confusing and can not be backed with safe borrowing ratios to present a coherent and easily understandable formula.

    The £200 million must have a specific intention and purpose in being stated as an actual figure. It must have been brought out from somewhere by someone.

    I doubt it has been based on any logic or reasoning to arrive at the £200m figure but more on a doubling of the previous figure.

  25. L.E.F

    And, guess what, the previous figure of £100,000,000 was definitive without any formulas ... QED?

  26. L.E.F. says,

    Yes the ratios gave out higher figures than £200m. You can check it out C.M. Budget speech 2008.

  27. Gentlemen (one assumes LEF is male), pray tell, hay gato encerrao then?

  28. L.E.F.

    Well then QED x 2 possibly?

    Anonymous at 23:57

    Possibly and L.E.F. is male :)

  29. so Gentlemen, ahora que?

  30. Anonymous at 00:03

    There are powers that be who read this blog ... they may or may not wish to take the matter up ...

  31. but surely Robert, the Accountant General would have stopped this at the time and not allowed it to happen in the first place

  32. Anonymous at 00:12

    I have said that the CM's interpretation is plausible so the issue is not black and white. It is just a bit peculiar ...

  33. Morning all,

    Perhaps somebody can assist me with a question.

    We have £200 mil+ net debt, and a further £200 mil+ gross debt.

    The gross debt it appears has arisen as a result of a debenture issue by GoG with the proceeds lying in cash presumably in a bank account somewhere. This cash is apparently immediately available to the Government – at least that is the impression given by the little of the CM’s reply to the Leader of the Opposition that I listened to during the budget exchanges (“I could go to the bank tonight and get the money out if I wanted to” etc).

    So what I want to know is, what is the point of holding all this debt as cash, apparently on very short call? Why are we holding debt as CASH? Surely we issue debt to raise capital for fulfil some positive function?

    Grateful for any explanations / perspectives / opinions the readers might wish to offer.

  34. Robert

    There certainly are better ways to express this formula, the most obvious being as an actual formula...

    I assume that the 200,000,000 is taken to be the lowest debt ceiling that will allow Gibraltar to continue with investment etc. I would guess that this was based on the amount of debt that the GSD thought it was going to run up, obviously ignoring the off balance sheet stuff that pushes it up.

    It does sort of make sense that way - if the thinking is:

    "We need a minimum of £200m available for investment, however if the economy can support it, as demonstrated by these tests, we will raise the ceiling to allow further investment."

    For me the questions then would be whether those tests really do demonstrate that the level of debt is sustainable and whether it has been used in a sensible way.

  35. Matt

    That is essentially the interpretation being given to the section by the CM, which I have said is plausible, but it would seem to be odd to set a limit that is not within what you describe as being suopportable by the economy, isn't it?

  36. Owen


    You are not the only one. Many have been pondering: what is the point of borrowing £260m from savers, which includes corporates, pension funds and trusts, only to have the funds languishing in deposit accounts earning a pittance. Surely Govt debentures should be limited to individuals i.e. pensioners and other savers who for whatever reason are unable to work and need a higher return on whatever savings they have managed to acquire over their former working lives. Why should taxpayers have to subsidise higher interest rates to benefit corporates, pension funds and trusts at a cost of £9 million a year?

  37. Mr Caruana says he could repay all debenture holders immediately but Mr Bossano says doing so would "wipe out" our reserves (last week on GBC). Mr Caruana "reassures debenture holders who may have been unnecessarily worried by Mr Bossano's statement" (Saturday's Chronic). Could the Government inform us of the precise level of reserves so that we can make our own judgement?

  38. Who audits the Government budget and rubber stamps it prior to delivery to Parliament?

    With all this talking about formulas and interpretations, whys doesn't the Government commission an independent audit of the books and published it? When not let an independent entity put at rest the worries of the public!

    By independent i mean an entity that is agreed by all including the opposition! If not i fear that they will be a Government appointed crony who will just pay lip service and produce what the Government want!

  39. Andrew

    This is a point that I address in a previous blog "Budget Observations".

    Anonymous at 13:47

    There is no procedure or requirement to audit the budget, as is the case everywhere. The "audit" (if it can be called that) is by Parliament.

  40. @Robert
    Yes, odd, but it's a bit of a feedback loop - the theory being that without investment the economy would never be able to grow. That growth then allows the economy to support the amount of debt suggested by the tests, which allows more investment, increasing growth and allowing for more investment.

    That initial investment (or stimulus if the recession hits Gibraltar harder further down the line) might be more than the tests indicate the economy can manage at the time, but the growth it generates allows it to be dealt with.

    Where it kind of falls down is that the same theory says you should be saving during the good times.

    But we all know that no economy anywhere has ever suffered from growth based on debt...(?)

  41. Matt

    Yes I follow your argument to the extent that a lawyer with "A" economics can but does this meet the facts. I understand that when the Act was made law in 2008, the resultant amount applying both tests already exceeded the £200,000,000 limit. Does this not make any reference in the Act to £200,000,000 totally unnecessary in that, for example GDP would need to just about halve before that limb of the test would mean an amount less than that might have reduced the amount to below £200,000,000?

  42. @Robert
    As I said, I think it's a safety net in case things do get bad - remember this Act was passed as the world financial crisis began and then amended after the effects were being felt everywhere.

  43. L.E.F. says,

    There is no denying that Gibraltar's economy has done well under the GSD Government.

    What is difficult to understand is what the hell has happened since this act was enacted.

    If during the first 12 years 'we achieved growth without a need in materially increasing the public debt', why so drastic an increase in the public debt in such a short space of time.

    We were doing fine progressing slowly but surely, without a need to mortgage our childrens future.

    Our debt levels might be within legal parameters and compare well to western nations. Yes, we might only owe £217 million net public debt, a mere 20%+ of GDP.

    What we fail to compare and identify is which nation has increased its debt by over 500% in just 3 years.

    Our Gross Public Debt has increased from £93m in 2008 to £480m in 2011 . An incredible 516%.

    Our Net Public Debt has also increased from £43m in 2008 to £217m in 2011. An unbelievable 504%.

    Hard to believe isn't it.

    Statistics are just that . They can be used to ones advantage to produce the required result to please people or frighten them.

    That is why it is better to have a debt ceiling set as just a figure without a need for ratios or formulas. By all means decide or arrive to a figure based on ratios but define a limit as a concrete figure.

    If we did alright in financing ourselves since 1998 why this mad rush all of a sudden.

    Might it be that we are already providing the stimulus needed (as Matt mentioned) to maintain a large workforce on these construction projects financed by Government.

    We still need to finance the generating station,sewage treatment plant ,refuse incinerator all projects promised back in 2008.

    To what level will the next elected government take our public debt to?

    We must ensure that our debt does not spiral out of control.

  44. L.E.F

    Thank you for those very interesting statistics. Also for reminding us that Gibraltar still needs to fund, not only the power station, which is the only example that I gave, but also the sewage treatment plant (an EU obligation, if I remember correctly) and the refuse incinerator.

  45. we also need to KEEP ON funding hair-brained projects like the free buses, for example, which might be free to the general public but are a drain on the tax-payer.

    The car-parks company is another example, employing a whole host of Highways Enforcement Officers for the sole purpose of moving on Spanish cars stopped in the middle of the road whilst they buy their cigarettes, instead of introducing on-the-spot fines managed by the Police.

  46. lets hope that the generating station is built soon, hopefully before our ability to raise further capital runs out! Funnily the GibraltarWorldTradeCentre website sells itself as having its own onsite generator and power back up facility! not a very good advert for Gibraltar PLC if you ask me

  47. The present power station will feel the strain when the new environmentally-unfriendly airport terminal is up and running (despite being empty for a large part of the day)

  48. Kaelan Joyce says:

    Money, money, money must be funny in the rich man's world.

    One does wonder where all this money is coming from......

    Highway Enforcement Officers? Employed to do the RGP's job and whose starting wage is advertised at 20k (then increases).

    A huge white elephant of an airport? Which clearly has limited scope.

    The east side project that never was? Now known as Mount GSD.

    A Children's park at europa point? Where the salt water will surely take its toll.

    The power station fiasco. That has led to Gibraltar having power cut issues synonymous with the likes of third world countries.

    The mid town project.

    Does the GSD Government even THINK before it starts throwing cash around? One does wonder......

    Money, money, money must be funny in the rich man's world.


  49. @Robert @L.E.F
    I'd be amazed if the big projects weren't funded using off the books methods as mentioned earlier.

  50. que callao estan the GSD-boys & girls, estaran de holiday? or maybe preferring to ignore this one!

  51. @LEF

    "What we fail to compare and identify is which nation has increased its debt by over 500% in just 3 years."

    what a scary thought!

  52. slightly off-topic, but how far does the CM want to go in treating the Convent (and the Queen and the British by implication)with complete disdain?

    now its 'the medal of distinction'! only to compete with the Gibraltar Award (Governor's badge and certificate).

    I have always prided myself to be a nationalistic Gibraltarian and care little for colonial pomposity but the CM is taking his feud to heights that even I recognise as looking for trouble.

    This latest act begs the question, is he trying to get Britain to give us away in an attempt to make Spain's 'rescue' more palatable to the Gibraltarian?

  53. In his budget speech, Mr Caruana said that "£263 million is held in cash by the Government". This means that although he stated that he could repay debenture holders that very day if he so wished, the amount of debentures outstanding as of 4 July 2011 (the day of the budget speech) was £280 million. This figure is rising rapidly by the day as companies and trusts rush to invest at an attractive interest rate of 5%, subsidised by all of us (to the tune of £9 million last year - next year it'll be much higher). This policy of offering high interest rates will not only cause gross public debt to balloon from the current £480 million but will also fuel the increase of NET public debt because the cash reserves will presumably remain static at £263 million, given that by the CM's own admission it is deposited in accounts earning very low interest. Is this a deliberate policy by the CM to allow both gross and net public debt to balloon so as to bequeath Fabian a massive debt problem when Mr Caruana is voted out of office later this year, as is looking increasingly likely?

  54. The latest rumour on the grape-vine is that the bus-routes fiasco is to be addressed in September and further changes made, presumably back to the original system which had served us well for many years.

    The rumours blame the management of the bus company for coming up with the wrong plan in the first place, however those close to management insist the new plan was a direct order from No6.

    If the latter is correct, then once again we are faced with proof that No6 controls every move and takes every decision, rendering the need for expensive managers, redundant.

    If however, this is not the case, if the managers at the Bus Company did actually conceive this ill-thought out, half-baked, very costly plan, surely then, some heads should roll and responsibility placed where it belongs.

  55. anon @ 12:10, you may be right with your last comment, who knows! but I think Caruana will hold on to power by the fingernails if he has to otherwise he would have already called the next election. He is too arrogant to believe that he could be voted out of office and as he surrounds himself with yes-men and women, nobody has the courage to tell him otherwise!

  56. Anon 12:10 you do understand that net debt means money u actually use. Any increase on further investments via GOG debentures is not and will not be classed as useable.
    No point in asking Bossano or Picardin cause they're both on it all. The mud continues to be thrown at pace and even whilst Picardin is on honeymoon, this new style collegiate Govt in the making is on a role.
    Change you can trust. PLC

  57. Anonymous at 20:52

    You are wrong ... based on the CM's interpretation he can still draw a further £88,300,000 before reaching net borrowing limits (see my blog on "Budget Observations"). What makes you think the GSD will not draw on debentures for this purpose? So who is now?

  58. Robert, are you suddenly in the CMs head. What makes you think he will draw from debentures when he never has before and quite clearly dies NOT need to do it, given his and the rest if the world interpretation on safe debt would suggest he has margin. Surely you are not overriding even the opinion if such a leftist economic establishment as is the LSE?
    Then again you may be suffering from the same problem JB and Picardin have. It's called notragocaruana porquepuedema queyo.

  59. Anonymous at 21:13

    1. We do not know whether or not the Government has or has not drawn down on debenture moneys. The figures indicate that they have (£263,000,000 in the bank, debentures of £280,000,000).

    2. I have not said that the CM WILL I have said that he CAN DO if he wishes! Why would anyone issue debentures at 5% return not to use the proceeds? Maybe you can explain.

    3. I have not commented at all on whether the debt level is or is not too high so how have I overridden any opinion of what is considered to be "safe debt"? It is only "safe" whilst (a) our economy does not shrink and there are clouds on the horizon e.g. taxation in UK of gambling and (b) that we sacrifice some projects by delaying them e.g, power station, sewage treatment plant or refuse incinerator.

    4. You assume too much when you say I suffer from "notragocaruana porquepuedema queyo". It is for the electorate to decide that. Is criticism not allowed under a GSD regime? I thought that was what it accused the GSLP administration of in 1996? This is role reversal not to call it hypocrisy ... another role reversal being using GOG owned companies to do things that may not be permitted if done directly by the GOG? I wonder what the legality of that is? I have an idea ... we will see ...

    I think you continue to be and possibly suffer from tolokehacecaruana stabien pokelohace el!

  60. Robert...;) ere un mostru.Are you suggesting Caruana is lying about where the debenture monies are? Has he not always insisted that these monies are held safely? You may nit have commented directly on the position of our debt but you allude even with your last comment that it could be a risk if gaming companies flee, you'rve begining to sound like JB and Picardin, first you suggest that he lies and then you throw one in to scaremongering for good measure. One tends to rely on past performance and comparable to measure reality and forecast, to date I would suggest you are wrong on most counts, although your plight for more democracy is worthy and probably seen to be so by CM - if ou we had an accountable opposition ah. But look what you say is tantamount to suggesting to us all that we should nit cross the road in case of a bus running us over.
    I assume nothing, I know what Gibraltars position is and Am particularly impressed at our state given the world wide fiasco. No doubt you come up with your mumbo jumbo stuff on how we don't control anything, fuf, you see it's the bus syndrome again. vamo salisbury todo Como siga Picardin tu, y che con el tema.

  61. Anonymous at 21:45

    Why do you insist in putting words that I have not uttered in my mouth? It is such a low trick. It really does not behove the GSD well. Many of its supporters (and its leaders) stoop down to that tactic. It really is a massive sign of insecurity and sheer nastiness.

    No I do not suggest the CM is lying. I quote figures that he has used, It is for him to explain!

    I have not commented directly or indirectly or in any way as to the appropriateness of the level of public debt. You assume and put words in my mouth again! All pubic debt is a risk if GDP falls! That is all I have said!

    I will let others judge your comparison of me with Picardo and Bossano! Certainly it is not the feedback that I get from many quarters.

    I am bored replying to arguments that do not address what I write but rather arguments that I do not make but you put in my mouth.

    You GSD supporters really must grow up soon or the surprise WILL come at the election anda! anda!

  62. Robert Picha, I think the CM has made his position clear. I am nit putting words in hour mouth, merely suggesting that you allude and lean towards positions that are unfounded and quite clearly indicate your concern. My point is that given current realities as well as evidence from economists we are in an enviable position by any measure.
    You seem to always fall back to victim mode when you don't mike what you hear and play the - if I was a GSD fan I would go down that route - and so on.

  63. Anonymous at 22:02

    What position that I have actually WRITTEN is UNFOUNDED please quote me!

    I have never argued that we are not in an unenviable position.

    I just do not understand where the money to do ESSENTIAL projects that are ALREADY UNDULY DELAYED will come from, Could YOU explain please and tell me where the CM has made THAT clear?

  64. Robert, delighted to hear that you think we are "in an unenviable Position"!
    I'll just have to pay for lunch next time and let you in to my thoughts on that one. You best hope I don't get run over by a bus on the way..;)

  65. Anonymous at 22:11

    There you go putting words in my mouth ... woteva!

  66. Robert te esta peleando solo!


    You really do like to marear la mierda... you quite clearly end saying you didn't say this and you didn't say that but you are happy to stir the wooden spoon for an odd 100 comments before you change the subject lol...

    I can't complain, I'm enjoying the drama!

    Cup Cake

  67. Cup Cake

    What is called marear la mierda in Gibraltar is called debate in the UK I invite you to listen to the Today progamme on BBC Radio 4 ever morning and Newsnight on BBC2 TV every night.

    I love it :(

  68. Robert, despues de todo, cupcake is right porque mierda it certainly is y ya esta empesando a oler (and they know it!)


  69. RV @ 22.26, debate as you describe is what you need. Watching the Murdocks and co today answering questions makes me wonder how one of those should perhaps be held to explain the costly erroneous advice our well paid consultants gave on the Eastern Beach Tunnel!

  70. Biscotela, that's genius man.

  71. If Mr Caruana actually gets to use public funds to invest in the mid-town development, would he not be setting precedence opening the door to other developers to request similar funding in their projects?

  72. anon@ 22:59, no not genius, obvious!


  73. Robert, esta claro que enelGSD estan asustao and will stop at nothing to win. Que miedo me da si ganan a fifth term... You can see from their posts the viciousness that underlies their every word and how they can only resort to bullying and insults. They have obviously learnt well from their leader. The only positive point is that it is obviously the same person/people who write/s in this way as their style is exactly the same throughout and hopefully it is not the way most GSD members behave. Well actually it is probably two people... and some of us have an idea of who they both are...

    Churchill ;)

  74. Churchill...

    Who are they?

  75. Charles Gomez.20 July 2011 at 12:28

    The Mid Town affair reminds me that in the late 80s' property slump, when developers were finding it difficult to sell new apartments, the GSLP government bought several flats from 2 developers who happened to be connected to party supporters. I do not say that there was any thing dishonest in this but it left a very bad impression with me as I knew that other developers desperately also needed support. Indeed if the purchases had gone out to competitive tender the public purse could also have benefited. This was one reason why I became disaffected from the GSLP of which I had been one of the earliest members having joined whilst in my first year at university in 1978. It is a matter of some irritation to me that nothing seems to have changed when it comes to fairness in the award of public funds.

  76. RV,

    The issue of the Public Debt is certainly bamboozling most of the public. The essence of it is being lost and only the screeching comments from both sides seem to predominate.

    Your analysis, safely couched in "legalese" still does not offer any consolation nor does it allay the fears that you purport do not exist. Believe me when I tell you that pensioners in particular have been upset with the scaremongering that has gone on throughout this debate.

    I sincerely hope that both parties temper their language as we approach the final straight.

    As regards, your apparent contempt (and please lets not split hairs over this) of the GSD, for whatever reason should not cloud your responses to those who disagree with you in whatever format.

    Your analysis and your topics are frequently breath taking and interesting to read. However your responses - even if its your blog - requires greater restraint. Some of us have lived the Bossano era and have gazed at amazement at the number of joint venture companies he created for his own economic reasons. Some of which we were later led to believe where quite dodgy!! (remember the chinese exhibitions...) no questions were asked then or were they?

    Anyhow , for what its worth keep up the good work pero no te enfade si te dicen algo que no te gusta...a mal tiempo bueno cara!


  77. Disciple X

    I like your style

    Cup Cake

  78. RV

    Coming back to the Public Debt especially after a couple of glasses of Rioja everything seems clearer!! or perhaps not! :)

    You mention...

    The essence of section 3 of the Act, which sets the borrowing limit, is that government's net borrowing first cannot exceed "... the higher of £200,000 or the lower of ...."two figures alternative figures calculated by reference to two formulae. The first is 40% of GDP. The second is 80% of Consolidated Fund Recurrent Annual Revenue ("CFRAR"). There is then another overall cap which forbids the Annual Debt Service Ratio ("ADSR") to exceed 8%.

    Surely the Act is giving the CM and his Accounting Dept a choice! He can be conservative and stick to the £200M or if not, happily select from either of the two options,.... o no?

    I am not an Accountant.. but it would seem that the CM or any other CM would be unable to anything illegal given these constraints. I know you have not mentioned it in these terms but the CM has his professional advisors who are clearly in a better position than us to give the right advice and I presume a Principal Auditor who is well versed in these matters.

    That said it does not detract from the fact that the CM is edging closer to the limit. Perhaps we all find that a bit risky but let us suppose he does get it right. Let us suppose he does attract more flights, let us suppose that the new offices are filled. Will we look back and say his gamble paid off and we are all better of it. Or do we play safe now and dispute the borrowing taking place and curtail his aspirations.

    I'm glad I'm not in that position and given my inclination I would probably risk less but thats just me, a humble guy working hard to make ends meet.

  79. How low do we think that Picardo and Bossano Will go? Maybe next week one will tell us that we halipton little debt and the other that our surplus is too low, oh sorry Picardo already did that one. No matter we can always count on Dr J and his cruise liner statistics. Bestcone so far gas been Picardo declaring that no Spaniards will fish in Gib if he us elected, this YouTube thingy is great, best yet is that it gives the GSLP so much live air time for us all to be dazzled with. It also gives us an opportunity to see them for who they really are. Someone once told me of Picardo - give him as much air time as you possibly can, I asked why? It's becoming quite obvious now.

  80. Disciple X

    I have purposely not joined in the argument about whether the public debt is too high or not. This is a judgment that the government has to make and only time will tell who is right. What I have said is that it is difficult to see how other essential projects will be funded. I refer to, for example, the power station and the sewage treatment plant.

    If pensioners are scared they should be reassured. This is the responsibility of the government to do. I tried to give some reassurance with my explanation in my blog "Budget Observations".

    I agree that language used by politicians should be tempered and have so said in the past. It is likely to get worse. Unfortunately the Speaker has opened a pandoras box by allowing unparliamentary language in Parliament.

    I will not split hairs on your suggestion that I hold the GSD in contempt. I will simply disagree. If having my own independent views is to show contempt so be it but I have expressed views about the Leader of the Opposition which are as strong.

    Thank you for your compliment on my blog. As to my responses, I take your point. It just angers me if words that I have not written are put in my mouth as the basis of a critical argument against my opinion. I am very precise and careful about what I write. This tactic is a GSD one, frequently used by them. I will heed your advice however.

    As to the interpretation of section 3 of the Act, I have accepted that the CM's interpretation is perfectly plausible. The point is that there is an alternative interpretation. I believe on such a fundamental matter the law should be clear and not open to alternative interpretations.

    I too would be more conservative and borrow less as you would :) Only time will tell which approach is right.

  81. Bank of England interest rates at the moment are at an all time low of 0.5% but in 1989 when Mr. Caruana was still in short trousers it was 14% ie 28 times higher. The forecast is that there will be increases soon. If there is a substantial interest rate of even 3 or 4 % the borrowing situation will look very different. In banking regulation terms Peter Caruana is what is known as as "inexperienced investor" requiring protection. What do the professionals like the Principal Auditor and the Financial Secretary think? These gents should be given immunity from Carucriminations and asked to make a candid report to Parliament.

  82. "Yond Cassius" Gomez is now trying to tell us that the GSLP and the GSD are as bad as one another. Part of his cunning campaign to convince us to vote blank? In reality Joe Bossano's last government left Gibraltar's coffers full and when Peter Caruana leaves office this year he will leave us under a mountain of debt in a time of world wide economic crisis.

  83. Anon 08:30. If interest rates were at 4% we wouldn't need to have £280m+ in the bank classed as gross debt and paying .05% to further subsidise by the tax payer would we.

  84. RV,

    Regarding borrowing now.

    Given that the interest rates are quite low, does it not make sense to borrow now by fixing long term at low rates.

    Interest rates are very likely to go up soon!

    Open to comment.

  85. Disciple X

    I accept that it is a valid consideration for those who wish to borrow so long as they take the view that interest rates will go up sufficiently to cover the interest costs of borrowing now and obtaining a low return on the borrowed monies until that time.

    The level of borrowing is not a debate that I beleive I have joined. My point is (i) a legal one as to whether legal levels have been exceeded, which I believe depends on interpretation and (ii) questioning whether such a fundamental matter as borrowing powers should be open to different interpretations.

  86. Desciple X, are you saying that taking advantage of a strong economy against a weak global economy with genarally low interest rates throughout is to be used to our advantage? It makes sense, borrow for long term capital investments and pay the lowest interest rate that we have seen for decades.
    But surely that would suggest that all those arguing that the GSD have it all wrong and are placing Gibraltar under threat of financial bankcrupcy, would themselves be mistaken? I wonder where on earth they might be getting that from?

  87. Anonymous at 14:23

    That is one view and a valid one too ... affordability as economies downturn is another, surely?

  88. RV

    I take your points.

    This is my interpretation in layman’s terms:

    There is a benchmark which equals £200,000,000.00

    There is two accepted formulae. If either of these produce higher amounts i.e. greater than £200,000,000.00, then the lower of the two will become the benchmark. Therefore, for arguments sake, if:

    Formula 1 – GDP - is £250,000,000.00 and
    Formula 2 – CFRAR- is £300,000,000.00

    Then the new benchmark becomes £250,000,000.00 and not £200,000,000.00

    If however the (Formula 3) Annual Debt Service Ratio ("ADSR") of the gross public debt does not exceed 8% then we are okay. If it has then there has been a violation but I very much doubt it.

    The problem as I see it is whether the criteria for all three formulae, as you rightly point out, has been independently assessed.

    I would think that GDP would be difficult to assess, hence my suspicion that CFRAR has been used. This in my opinion is a risky alternative because it relies heavily but not predominantly on selective Revenue.

    Grateful for comment

    Y con esto me voy a la piscina!!!

  89. Anon 14:23

    Yes that was the crux of my suggestion!

  90. Disciple X

    Your assessment also assumes that borrowings are on fixed interest and not variable interest rates pinned to base rate or LIBIOR.

  91. RV,

    Back from the pool, sad guy I'm turning out to be :(

    Yes that is my assumption.

    Is there any way of knowing if these borrowings are pinned to base or LIBOR? Are these divulged in Parliament?

    I am hoping that at the very least that they are fixed on a low interest. In any case, I'm also hoping we are getting a good deal!!!

  92. Disciple X

    A lot less sad than me ... still at the office y lo ke keda!

    The answer to your question is that I do not know if that information is in the public domain.

  93. L.E.F. says,

    Another way to see things.

    If we spend £17.5 million per year on interest.
    In 10 years we will have spent £175 million.
    Enough to build 3 new airterminals in 10 years.

    Could this not be viewed as money down the drain?

    With a budget surplus of £30 million + £17.5 million in interest we have enough money to do things slowly and surley.

    We could have approximately £45 million a year to spend on capital projects without having this mountain of debt which one day has to be paid back.

  94. RV@17:15

    I am sure that although the information you refer to is not normally published it can be obtained from the Accountant General. I have a feeling that the whole amount is not deposited at the same rate of interest but in separate tranches.

  95. Anon@08:54

    I do not agree with Mr Gomez's blank vote campaign.

    However I do agree with you that Mr Bossano left the coffers full. I would point out though that at that time he called it a "war chest". The financial reserves that he called a "war chest" was meant to sustain us financially should the consequences of his belligerence towards Spain and the UK ever require this reserve.

    My principles dictate that no government has the right to take one penny more than it needs in order to pay the essentials. Remember that at that time we were the highest taxed WORKERS in Europe.

    What on earth was he thinking?

  96. Anonymous at 20:49

    "no government has the right to take one penny more than it needs" that is a big big statement. Need? Who decides what is needed? Is a leisure centre needed? is a spanking new Air Terminal needed? Is a power station needed more or less than the other two? Is affordable housing needed subsidised by taxpayers when some benefit and others don't? Who decides what is needed? Or is it down to the policy of each government?

    Think about it ...

  97. RV,

    Very good points...

    Hence the existence of party manifestos where we read and digest what parties want to achieve.

    Hence the existence of political parties where each produce a wish list of achievable targets that they think they can pull off.

    Hence elections where we elect those who belong to the same party that we believe are capable of achieving those goals that we think are important.

    Hence why I think the Public think Independents have a difficult task to form part of Government.

    Hence why I think Independents are almost unelectable.

    Hence why reform may be needed or maybe not!!

    Ready to be shot down ;)

  98. Disciple X

    Not at all I agree with your observations, however, elections do not determine "need" they determines "desires" :)

    Also it is not "goals that WE think are important" it is goals that THEY think are important and we choose from what is OFFERED :)

    NB Capitals used for emphasis not to show any anger :)

  99. V@20:57

    You've got on your hobby horse again. Please read what Anon@08:54 posted again and then read what Anon@20:49 responded. We appear to have applied different interpretations of the word "essentials". By the way you forgot to mention the much trodden on and massively expensive stone paving of the city centre.

  100. RV,

    Grateful for the debate, pero the "desires" that you refer to, are of late becoming, the de facto 4 year test!

    What they think is important is often an indication of what our society really needs plus some other extras that they think can get them a Distinction as opposed to a Pass.

    As it is any party that does not fulfil the wish list are rapidly labelled as having "failed".

    Am I right in assuming, for arguments sake, that if a power station was not in say, this Government's manifesto they have failed?

    Or has the Government by having ignored it in their manifesto, failed the Public?

    Or, stretched even further, has the electorate failed at not realising this gaffe!

    I am certainly rambling right now and my example is probably way out of the mark - I need my Rioja, where has she hidden it? lol...

    What I am trying to point out is that the Public sometimes has a responsibility to choose appropriately and then entrust to those that they have every confidence will deliver.

    My problem with manifestos is that they don't explain how, in simple and laymans terms, they hope to achieve everything!!

    Ah! found it.... ;)

  101. RV@22:37

    A "war chest" was neither needed nor essential unless you treat the UK and Spain with the abrasiveness that Mr Bossano did at the time.

  102. Disciple X

    I do not agree that what they think is important is what our society need e.g. an air terminal in priority to a power station? Both were promised in the GSD manifesto the later by a date certain long gone by and not started yet. So the power station was in the manifesto and yes on that one they have failed (including failed the public) in my view doubly (a) in not meeting a manifesto promise and (b) n wrong prioritisation of expenditure. The electorate cannot by definition fail but I agree the public has to choose carefully within the limitations of what is on offer.

    Anonymous at 22:37

    Yes but I did not intend to imply that a "war chest" was needed or essential. I was making a totally different point about how one decides what is needed or essential.

  103. RV,

    I disagree on a couple of points:

    1. The electorate tacitly agree, possibly even by default, to certain things as being important to society when they vote for the Party with the manifesto (warts and all) that they think offers the best solutions.

    2. I believe that part of an electorate can fail. Very much like if I where to bet on a horse that offered the better odds and yet failed to win. Perhaps "Fail" is too strong a word but I think you get my point!

    Y con esto descanso...wonderful exchange even ahora que estoy de holiday away from my Rock...looking ahead to some horse riding and plenty of golf...