Friday, June 24, 2005

Government not in control of the Economy, Bossano tells House

Joe Bossano, Opposition Leader, arrived at the House of Assembly with the vehemence of a tax inspector on a mission and launched into a figures driven attack on Chief Minister Peter Caruana’s economic management and “creative accounting” in presenting Government finances.

In what amounted to an accusation that Mr Caruana alters his analysis to gloss over economic reality (as seen by Mr Bossano) and that the Chief Minister juggles figures to give them the presentation he wishes, Mr Bossano declared that this year’s budget speech had been prepared to anticipate his own arguments (for draft of the full speech see below).

Himself anticipating accusations that he is “speaking rubbish, delivering a diatribe and of being absurd” Mr Bossano threw down a gauntlet for a fight over the figures.

“Given the absurdity of some of the arguments that he (Mr Caruana) has used over the years one has to wonder whether in fact he knows that what he is saying is not true and does not care, or that he really doesn’t know what he is doing and what he is talking about.”

In one illustration Mr Bossano claimed that what had been done what was to convert part of the proceeds of the sale of properties into annually recurrent revenue.

“Comparing like with like the final picture that now emerges is that instead of the 2003/2004 financial year ending with a surplus of £6.7 million of revenue over expenditure the finals results have been an excess of expenditure over revenue leaving a deficit of £8.328 million. Obviously the published figures will not show this because one of the factors used to make the figures look better was to shift from the property companies part of the proceeds of the sale of houses to the tune of £3/4 million and make the deficit look smaller.”

Mr Bossano, who argued that growth over the past two years has not been sufficient to prevent Government deficits, went on to accuse Mr Caruana of in 2003 giving no indication that he anticipated the elimination of budget surpluses and then later claiming this as Government policy.

“If that were indeed the case we would not agree with the policy of the deliberately creating a deficit and then having to increase electricity, water and a host of other charges to restore the surplus which they claim they had deliberately eliminated in the first place.

I have to say that the more one analyses the statements of the member, the more one comes to the conclusion that either he gets it all wrong or he just simply doesn’t have a clue what he’s talking about,” said Mr Bossano.

Mr Bossano produced figures in a bid to contradict Mr Caruana’s analysis and said that Government was able to pay for capital works to the tune of £21 million because of it sale of property assets created by the GSLP or gifted by MOD.

Mr Bossano defended the scrutiny of accounts as their obligation in a democracy and mocked the idea that when figures turned out to be different from estimates by millions he might expected to declare “so what, it’s only an estimate.”

Mr Bossano said that despite efforts to minimise the deficit Government had denied it had cash problems.

“When he finds there has been a large surplus that becomes the prudent Government policy. When he has a deficit it is not a shortage of money but the normal thing that governments do and can be corrected by budgetary discipline.

The current supposed policy of restoring the surplus only surfaced after I had questioned the sustainability of the trend in Government spending which would lead to the situation of going into the red, i.e., not having enough money to pay for recurrent expenditure.”

Mr Bossano went on to argue that figures given to him in answers to questions did not tally with the arguments produced by Mr Caruana.

To Mr Caruana’s defence of the size of the public sector and denial that it was too big in relation to the size of the economy, Mr Bossano said the GSLP (Gibraltar Socialist Labour Party) does not subscribe to the view that there is an arbitrary figure that determines whether the public sector is too big or too small or the right size, either in relation to its share of GDP or as regards the number of people it employs.

“It has to be as big as it needs to be to deliver the services the Government of the day and this House provides for in voting the estimates of expenditure for the financial year. Our only concern about expenditure level and its growth has been that it should be sustainable.”

Mr Bossano also argued that what is more worrying about Mr Caruana’s “perception of reality” is that “here is someone responsible for public finances who in 2003 thought he would have £6.7 million left over at the end of his pre-election spending spree, only to discover that instead he was short of money to the tune of £8.2 million.”

“A not insignificant discrepancy of £14.9 million. If this was Gibraltar Plc as he sometimes likes to call it, the shareholders will now be baying for his blood."

The Opposition Leader said that as recently as February a GFSB (Gibraltar Federation of Small Businesses) dinner had been told that there would probably be a small deficit.
“Meaning, one assumes, a deficit of a couple of million which appears to be beer money, as far as he is concerned.”

“I ask myself. How can they show a surplus if he was playing down the importance of an imminent deficit?”

Mr Bossano pointed to company tax having produced £10.8 million above the estimate apparently the result of a settlement and this non-recurrent item had made it possible to cover the deficiencies in the agencies. However he said that the estimate on revenue from import duties was £1.6 million less than expected, and, picking up a remark made some time ago by Mr Caruana on the Theatre Royal costing £8.5 million, said this must mean tobacco yields at least £17m.

“Given that the commodities on which he raised duty last year account for the bulk of import duty received it suggests that the scope for raising more money from this source is limited as it appears that price increases may be accompanied by lower sales volumes. This is important in the context of the sustainability of present levels of recurrent spending which inexorably rise every year,” said Mr Bossano.

The Opposition Leader warned that although the growth in the gaming sector is welcome it would not be wise to become dependent on it as Gibraltar was once on the MOD.

“The Government’s approach therefore seems to be, rather than admit that there is a problem of cash in meeting recurrent expenditure, to say simply that all that is required to do is to contain the spending. It remains to be seen whether they can contain the spending at the £177 million that the House is being asked to vote,” he said.

Bossano urges prompt action on MOD

Joe Bossano, Opposition Leader yesterday urged Government to take prompt action in the bid to stop the MOD privatisation.

He said that he is prepared to meet for an emergency session of the House without using it to put questions. He also urged publication of the confidential report on the impact of MOD cuts so that that helps rally public opinion.

Related Articles:

Full text of Budget Speech by the Chief Minister The Hon Peter Caruana QC to the House of Assembly on 23rd June 2005

Full text of Budget Speech response by Joe Bossano GSLP / Liberal Alliance Opposition Leader to the House of Assembly on 23rd June 2005

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