"Its the Economy ... Stupid!"

I have been asked to desist from writing again about the "democratic deficit" and reforms to correct it. I have been asked to write about something else. I have a commentator who keeps on telling me that its all about "the economy ... stupid!". So I will write about the economy. This subject takes me outside my comfort zone, which revolves around the law.I must quickly admit that my limited knowledge of theoretical economics is based on an "A" Level (actually "S" level that in my days, 1969-1970 school year, was one step higher than an "A" Level) in economics and politics. My practical experience is down to closely following current affairs and to having run and helped run law firms and related businesses.

Anyway, here goes. I will argue that the politics of our economy revolves around expenditure and not around the potential other area from which Gibraltar generates its wealth for the simple reason that certain factors reduce the room within which governments can manoeuvre.

There is a tendency in Gibraltar to use the word the "economy" interchangeably to mean what is in fact the economy, meaning how wealth is generated in Gibraltar and what should be termed "government finances", meaning the monies that the government receives and spends. Undoubtedly the health of government finances is directly related to and dependent on the health of the economy. Conversely, the the need to raise public revenues combined with the knock on effect that need has on the level of direct and indirect taxation impacts on the health of the economy. The reason is simple. Gibraltar's economy, like most economies relies on its competitive edge. The competitive edge of Gibraltar's economy is reliant on fiscal leverage. In simple terms this means low direct and indirect taxes because Gibraltar has no natural resources. However, it does have some 'natural' advantages.

First is its geographical location. This helps in the main 4 sectors of our economy: ship repair, port facilities, bunkering and tourism. Other than, possibly, for port facilities much of the competitive edge on the other of these 4 sectors is achieved by fiscal leverage. Comparatively lower indirect taxes on oil makes bunkering a feasible activity. Comparatively lower indirect taxes makes Gibraltar attractive to masses of day tourists who are the core of the tourist sector. I am not sure that geographical location alone is sufficient to maintain current levels in these sectors.

Second is legislative agility. Legislative agility is a double edged sword because, just as it can be used to benefit one sector, business, company or individual, it can equally be used to detract from another. Therefore, directly tied to this advantage goes the requirement for political stability and trust. It is of utmost importance that Parliament, Government and Opposition are seen and believed to be stable and to be avoiding any whimsical or impulsive behaviour.

Appropriate behaviour is required in order to portray the stability that is needed for all sectors but, primarily, for the other two major sectors of the economy: financial services and gaming. It is, however, this legislative agility that permits Gibraltar to develop these 2 sectors by being able to speedily react to situations and external factors, thus allowing Gibraltar to become an attractive jurisdiction or retain its attractiveness as a jurisdiction. One essential requirement to ensure continued growth in these two sectors is a competitive tax environment.

What this simple analysis reveals is that it is most unlikely that new areas of economic activity will be found or can be developed. So there is little or no politics to be played out on this aspect of the economy. Gibraltar has what it has and can exploit only what it has. What our government from time to time can do is maintain the fiscal leverage and use legislative agility. What our government from time to time can do is ensure prudence in expenditure and to prioritise different areas of expenditure. It is in these two aspects of economic policy that politics can be played out by the different political parties.

Too much expenditure results in too much borrowing, which in turn gives rise to revenue commitments that become fixed. In the absence of an ability to refinance or increase borrowings, which in the present international economic crisis is likely, the demands on recurrent government revenues to service capital and interest repayments continue. It can result also in the Government's liquidity being reduced.

The cure is either to reduce expenditure, which can result in austerity measures, like those being faced by many European countries, or to increase taxation. Increased taxation will adversely affect our economy which is reliant on competitive fiscal leverage. Both are options that do not bear thinking about. Additionally, the belief, encouraged on some occasions by the Chief Minister by his pronouncements on economic growth, that the international economic crisis will not touch Gibraltar is to believe that Father Christmas exists.

Lack of money in other countries, which is one aspect of the crisis, will result in less consumer and business expenditure. It will lead to a reduced demand, at a minimum, for our tourist and finance centre and other services. In time these factors can result in reduced government revenue. This reduced economic activity could lead to a downward spiral, which has to be avoided at all cost. It can only be avoided by prudent expenditure policies.

It is important at the forthcoming election to closely look at, not only policy statements contained in manifesto relating to expenditure, but also at immediate past behaviour. It is palpably obvious that the present Government is on and has for a long time maintained a spending spree with our money. I has done so to both retain power and to see if it can recover some electoral advantage. I would suggest that this behaviour, in the present international economic climate, is irresponsible and unsustainable. What we should look for is policies that espouse prudence and are not profligate, even if this course will seem a worse political offering in the short term. Prudence will stand Gibraltar in good stead in the longer term.

We should also look at the prioritisation of expenditure on necessities and not luxuries. This means prioritising expenditure that favours the needy and disadvantaged. One measure by which a society is judged is by how well it treats its people. I urge voters to be a little selfless in how they choose the next government. If they do so they will be helping others. They will also be helping themselves, in the longer term, to maintain a standard of living that will continue to be envied.

November Election? Some Current Considerations.

According to a story in Panorama the Chief Minister has indicated, on a Spanish Radio programme, that the election will be held before Christmas. Leaving aside the bizarreness of the Chief Minister having ignored his own constituency in Gibraltar by making this statement in Spain, this announcement will agitate more and more speculation. Speculation about who may be leaving politics, who may be standing for election, what pre-election coalitions might be formed and who might win the election. 

What is extraordinary about the whole process is that, weeks before a General Election, the electorate  do not know yet who many of the candidates will be. It just seems to me to be an oddity that political parties should consider that retaining this mystery is in any way an advantage. To me it is further proof of the deficiency in party organisations. These deficiencies contribute to reducing the effectiveness of democracy in Gibraltar. It is also another factor that further helps to propagate the belief that a General Election is an election of a Chief Minister and a Leader of the Opposition. Thus rendering the election presidential in style rather than what it should be, an election for individual representatives to Parliament. It is from amongst those elected that a Chief Minister and Government is formed. 10 votes essentially become 1 vote. 

The added reason for this effect that I term the "presidential effect" is that the combined lack of constituencies/wards and each voter having 10 votes means that no individual actually elects a single identifiable MP who can or will be his/her personal representative in Parliament. This is an added aspect of the existing system that contributes to the "democratic deficit". It is a further aspect of the present electoral system that needs to be looked at. Personal representation in Parliament needs to be improved. How? I am not presently sure, but solutions must exist. Resolving this issue will also reduce reliance on the Chief Minister to resolve individual problems. This will reduce the opportunity for deification of that office.

I do not believe that speculation of the nature that I have alluded to really helps to unravel what may happen at the forthcoming election. What does help is to analyse known factors. Let us look at some of these. First, we know that Peter Caruana will lead the GSD, Fabian Picardo will lead the GSLP and Keith Azopardi will lead the PDP. The leadership of each, meaning not the personality but how each leads his team, will be an or even the crucial deciding element for many in this election. Personality, however, cannot be totally discarded. It always plays its part.

Keith starts from the disadvantageous position of leading the least (by far) supported party. It is for this reason that the PDP needed a charismatic leader. It does not have it in Keith. Keith does not have it in him to enhance the electoral chances of the PDP. It must, consequently rely on two factors to do that. First its policies. Secondly its other candidates. On the first front the PDP's choices have narrowed because the other two parties have adopted democratic reforms as policies, which is what the PDP was majoring on. The result is that, now, the debate will be on detail of these reforms rather than the overall concept. On the second front, all we know to date is that the PDP has a full slate of candidates ... that Nick Cruz and Gigi Vasquez are likely candidates and little more on the identity of its candidature ... not very helpful. One would have thought that a party totally lacking in representation in Parliament would want to announce its candidature early in order to give its candidates as long a time as possible to create a public personae. It seems that this is not to be. There may be a game plan in that strategy but it escapes me.

Fabian, in the perception of some of the public, carries some personal baggage, but who does not? It is in the style of the GSD to pinpoint such baggage. I have doubts that it will impact sufficiently amongst most voters to undermine the GSLP/Liberal's chance of election. If the GSD dedicates its efforts to personal criticisms of Fabian, this has the disadvantage of distracting from real issues. I believe that the important debate is on issues. In this regard, whilst the GSLP/Liberal Alliance (not Fabian alone)  must not ignore personal attacks, it must rebut them robustly, it must not do so in a manner that detracts from policies and substance.

In this regard the GSLP/Liberals have made an excellent start. It has identified the "democratic deficit" issue. It has seen the GSD's failure on this front. It has stepped into a void that the GSD had no need to leave open, nor did it have the right to do so. It promised reforms and never delivered them. There are skeptics who (a) do not believe that the GSLP/Liberals are serious on reforms and (b) say that this policy will not be central to voters' decisions on who to vote for. 

On the first argument, It would be political suicide for the GSLP/Liberals not to undertake reforms having been so explicit on some e.g. freedom of information and having publicly announced its intention to reform the electoral system and Parliament following recommendations from an Independent Commission. Ignoring the Commissions report totally would also be political suicide. The process announced by the GSLP/Liberals also has the advantage that it is likely to deliver broader reforms.

On the second argument, of course there will be many other important issues and debates, but the reform one is equally or more important, certainly in the view of a large number of voters. It is also important for a completely different reason. The GSD persists with its attempts at discrediting the GSLP by constantly regurgitation the pre-1996 state of affairs but what better way to counteract the attempt to create the impression that the GSLP has not changed its spots, than to have policies that would preclude the possibility of that happening? Improved and more accountable democracy is the best check and balance to avoid a return to behaviour similar to that of those disagreeable pre-1996 days. That is not exclusively a problem attaching to the GSLP. It is something that, in the absence of systemic checks, could happen with any party in Government.

The other manner in which the electorate can be convinced that the pre-1996 image of the GSLP is finished and gone (aside from the contents of its manifesto and policies) is the standard of its candidature. One achievement is the change in leadership. Another is that most of its candidates have been in Parliament and for better or for worse are a known quantity. A third is that the standard of potential candidates so far announced is good. We have Dr Norbert Borge, Joe Cortes and George Mascarenhas who may be candidates, subject to selection. All are well respected members of the community, so long as this is the standard of candidates, such persons would not permit themselves to be in any way identified with pre-1996 style GSLP government.

What about the GSD? The massive advantage that it seems to see is that it has been in Government for 16 years and it has achieved a lot in that time. No one will deny it that. Its main achievements, however, are the reversal of the adverse image and reputation that Gibraltar had garnered before its election. However, Gibraltar will not lose its reputation ever again for similar reasons. The lesson has been learnt by all politicians in Gibraltar.

Apart form cleaning up Gibraltar's image, the reality is that the economy has been built up by the GSD on the strong foundations laid by the GSLP pre-1996 administration. This is not a criticism. It is, first, a fact and, secondly, it is necessarily so because Gibraltar's economy can only be built on opportunistically taking advantage of its limited resources: the port, its location (for tourism), size (that delimits requirements) and speed of action on fiscal and regulatory policies. The other reality is that, whilst the government has money coming in and the ability to borrow, it can spend and has the GSD spent! Let us hope that it has not been profligate to a level that the present international economic crisis will not impact badly on Gibraltar's ability to attract revenues. Otherwise in time we will realise that the GSD have bitten off more than what Gibraltar can chew.

The GSD has some electoral problems. The first is undoubtedly wastage. It will over 16 years of Government have upset individual and groups of voters. This is inevitable but makes it more important that the GSD finds other new supporters to vote for it. It will  not do so by attacking the GSLP/Liberals. It will not do so by boasting of past achievements, the electorate has these in the bag already. it will only do so by having new policies and creating a new identity. It has not done much to achieve this. The perception is that it is a party lacking in continuity and in ideas. That it is a party resting on its laurels and those laurels belong to one person: Peter Caruana. It has also failed to react to changing demographics: the passing away of older voters and the advent of the young, who will have very different views from past GSD voters. The GSD are now reacting but it may be too little too late.

Additionally the one individual Minister who can be said to have worked tirelessly to positive effect in his ministry is Daniel Feetham, may not stand at the next election. He has revised and reformed large swathes of law relating to justice. I am  not sure that in practice some of those reforms will not cause issues and too much expenditure for a small jurisdiction like Gibraltar but this is possibly an inevitable cost that we will need to face. I understand the reasons for his not standing; to be stabbed in the presence of his and other children is traumatic. That the stabbing happened because he was Minister for Justice is obvious. That his family and, probably, he feels the risk involved in public office is too great is obvious. My sadness both relates to the event that may force him to resign but also because he has done and behaved in his ministry as I consider an elected Minister should act and behave. He has innovated and held policies, fought for them (including the age of consent law, where the Supreme Court upheld his view), taken them to Parliament and enacted legislation. He has carved out an individual political character for himself to the benefit of his party, the GSD. He is the only person to have done this in the 16 years of GSD Government. The general perception is that all the rest that has been done by the GSD is down to one person: the Chief Minister. 

Therefore the forthcoming election becomes a plebiscite on the Chief Minister. I say that because he has acted in a manner that makes it that way. I hope the other party leaders do not follow suit. I would hope that what we have seen developing so far as the election approaches continues. We have seen the PDP and the GSLP/Liberals announce and debate policies. I hope it continues that way. If the GSD attempts to reduce the election to personalities, in the main, the other parties should  leave the GSD alone to get on with that tactic. I believe it is counterproductive. I believe that voters do not like it. I believe sticking to the issues and to substance will deliver more votes. The GSD may want to ponder on that suggestion too. The GSD have also made the same error as the other parties in not having announced which, if any new candidates it will present to the electorate. 

When do I think the election will be held? Well the 19th October is Gibraltar day in London, so, unless the Chief Minister compounds the error made by his statement about the election on Spanish radio, by announcing the election in London, it will be announced after that date. The election cannot be held before the Electors List is closed on the 31st October. Christmas is fast approaching that leaves only a few Thursdays on which the election can be held, namely, 24th November or the 1st, 8th or 15th December. The 8th is the Immaculate Conception, which is a Catholic Holy Day of Obligation, thus it is an unlikely date, the 15th is too close to Christmas, so we are down to two dates ; we will see.

What do I think will happen at the election? Well I do not disbelieve that so many polls will have got the result too wrong. I also believe in anecdotal evidence, namely natural wastage and demographic alterations. Change is clearly visibly in the air and the GSD are doing little to put a brake on change. All in all I would predict a GSLP/Liberals win by a small but significant margin but all say that a week in politics is a long time ...

The Importance of a Third Party

The recent frank interview of Keith Azopardi, leader of the PDP,  published in the Chronic raised, in my mind, a train of thought about the benefits that a "third party" brings to democracy. In the United Kingdom the Liberals have survived for scores of years without forming government, except, as now, in coalition. The question is why do third parties persevere? A related question is, do they add value to democracy? My view is that the value that a third party adds is tremendous and immeasurable. let us explore why.

Undoubtedly the main ingredient that a third party injects into the democratic process is the possibility of its election into Government or Opposition, if it presents a full slate of candidates. In this sense the description "third party" is a complete misnomer. The PDP is no less a political party and, at an election, offers voters no less than does the GSD and the GSLP/Liberal Alliance. The pejorative title "third party" is only earned or attributed to a party, usually, when it has no or a minority representation in Parliament. It is extremely possible that by electoral defeat, therefore, that either the GSD or the GSLP could one day end up as the "third party".

Frequently a "third party" will be a catalyst for innovative or different policies that the mainstream parties can and do adopt on an assessment of electoral popularity and opinion in relation to these. The most permanent and current example is electoral and parliamentary reforms. In fairness, it has been the PDP who have been constant on that issue. It has put forward concrete proposals, irrespective of whether one agrees with all or some of them or seeks more reforms. It is now that the GSD and the GSLP have been spurred into action on this subject. In this way a "third party" helps to advance wider political arguments and debate of important and relevant issues and helps to innovate.

In addition to increasing the choice for electors, a "third party" fills the vacuum that can and on occasion is left behind by the demise of a party. In the past parties in Gibraltar have disappeared only to be replaced by quickly cobbled together groupings of individuals. These groups have evolved into the semblance of being  political parties. Disorganised parties are not the best way for a democracy to function. The internal democratic machinery that acompanies a party is part of the democratic process. Albeit that such machinery is not compulsorily imposed by law, internal democratic procedures for selection of executive bodies and candidates for Parliament are an integral and important part of democracy.

The ability of the members of a party to call its leaders to account is equally so. This is more prevalent in some parties in Gibarltar than others. If internal party democratic accountability is lacking, the authority of any one individual within a party may develop to an unhealthy level. Such power within a party has wider consequences in a political system so lacking in checks and balances.

The existence of a "third party" also means that there are persons who have been engaged in the cut and thrust of politics for a period of time. They thus have experience, albeit limited because many will not have been MPs, of what it is to be in politics. Additionally their interest in politics will have led them to understand the intricacies and foibles of parliamentary procedures.Some knowledge of the political and governmental process is a must for a democratic society to continue functioning and to evolve.

A "third party" also offers the possibility of a hung Parliament. However remote this possibility may be in the existing electoral system, there would be no possibility at all were there were to be  no "third party". Just the existence of this possibility improves the democratic process because it incentivises the man stream parties to scrutinise their own policies carefully and consequently to fine tune them in the context of the policies and arguments of and stimulated by the "third party".

Additionally, a "third party" provides a home for voters disaffected with the mainstream parties. The votes gained by a "third party" evidence this disaffection and spurs on the renewal of the policies of all the parties. By offering an alternative a  "third party" also mitigates the growing "tribalism" that is prevalent in Gibraltar as between the two main parties, the GSD and the GSLP/Liberals.

All in all, my conclusion is that the PDP, in Gibraltar, should be encouraged and incentivised so that it will continue to enhance the democratic process by its very existence. I hope and trust that it will get enough support to encourage its continued existence and that it will persevere, irrespective of the election result that it achieves. The PDP have a place in Gibraltar and it is a continuing place. Just its very existence enhances the democratic process substantially and helps the evolution and maturity of Gibraltar as a political entity. I wish it well at the forthcoming election.

Finally On the Road to Greater Democracy?

The GSLP/Liberals have been accused, during the debate in Parliament, of not being serious about democratic reform by the GSD. It has also been accused of its proposals being "wooly" by others. I disagree with this criticism. There has also been much debate about "who said it first", by which I mean who made democratic reform proposals first. I find this point puerile and irrelevant.

It is a bit rich for the GSD to make its criticism of the GSLP/Liberals when it has been so remiss in the 16 years that it has been in power on giving effect to reforms. The GSD are quick to remind everyone of events and failings of the GSLP in the 8 years preceding 1996. Before doing so, it should be self-critical of its own admitted failings on the subject of democratic reforms.

It is no excuse to say that the failings of the pre-1996 GSLP government were greater. The GSD got into power with a promise to precisely to put right the wrong that then existed in terms of the perceived oppressiveness of the GSLP administration. It was to give us open, transparent and democratic government. Its failure on this front is of huge import as it was a central promise made by the GSD to put right a wrong committed by the GSLP that was so palpable at the time. 

Additionally, harping back to the past does not bode well for the GSD in this election. It is the GSD that has been in power for 16 years. It is the GSD who will be more susceptible to criticisms of past failings that are more recent and accordingly fresher in people's minds. A campaign that promises nothing new from the GSD will also not assist to improve its electoral chances. Negative and personally critical campaigning is also destructive and so anathema to democracy.

I do not believe that it is not enough for there to be a debate about systemic changes to the democratic process. I believe that there is a need also to change attitudes in politics by making issues and not personalities the subject of any campaign. Reforms to the political system can help to enhance this aim by creating a better environment for debating issues rather than personalities. It will not work, however, without a change in attitude. This change requires the locking up at home of personal dislikes by one against another and not allowing these to take over the election arguments. The reforms will certainly not help to reduce personality based criticisms at the forthcoming election because no reforms will be enacted or were intended by any politician would be enacted by that time.

The position of each of the three main parties on reforms is now clear. The PDP have published extensive reform proposals, the GSD have forced a motion through Parliament with less extensive reforms that in my opinion are not sufficiently wide ranging. Also they have not been properly thought through. The GSLP/Liberals have published an intent to establish an independent commission to look into and recommend reforms of the electoral system and to Parliament. The breadth of the terms of reference of that independent commission are staggeringly wide. Wider than the proposals of both the GSD and the PDP.

It is impossible to justify a criticism of the GSLP/Liberals being "wooly"on this issue without implying by that same criticism a simultaneous belief that, if the GSLP/Liberals were to form government after the next election, it would not enact any reforms. Is such a criticism sustainable? I do not believe it it is. It would mean that a newly elected government would be ignoring the very central policy that it seems to be gearing up to fight the forthcoming election on. Such behaviour would be cynical and disdainful of the electorate. It would simply guarantee a new GSLP/Liberal administration an election loss at the immediately next following election, not least, because the other parties would immediately fill the gap left by that administration by its own ommission. It is for this reason that the GSLP/Liberals, also, cannot be criticised for supposedly not being serious about democratic reforms.

The important place that has been reached by Gibraltar is that democratic reforms of some sort will now happen because all the parties have put it on their agenda. The reality is that only those politicians who form a government can legislate to put these in place. The decision that has to be taken at the next election, therefore is who will  actually effect changes? Will it be a party, the GSD, that has failed to do so in breach of its promise over 16 years of government? Will it be the PDP, or will it be stymied by the impossibility of it forming government? Or will it be the GSLP/Liberals who will take advice from an independent commission before deciding what reforms to adopt and give effect to?

Oh, to those who do  not believe that there are no suitable independent minded persons in Gibraltar to form part of the independent commission, you cannot possibly then be believers in Gibraltar's ability to govern itself at all. Your criticism, to be sustainable, would need to extend to any of the judiciary, the civil service, the Ombudsman and any other tribunal or committee or authority established by law. I am not so cynical. If those critics were to be right, the whole reform debate is an irrelevance and a waste of time and Gibraltar could never aspire to self-determination.