BUDGET IN CONSIDERATION – Balancing the finances



The national budget must be balanced. The public debt must be reduced; the arrogance of the authorities must be moderated and controlled. Payments to foreign governments must be reduced. If the nation doesn’t want to go bankrupt, people must again learn to work, instead of living on public assistance.” These are the prophetic words of Marcus Tullius Cicero – Roman philosopher, politician, lawyer – in 55 BC.


Whilst Cicero’s sentiments are quite obvious and logical, do you profess to have a grasp of all the terminology he employed?
A “balanced budget” refers to a budget in which revenue equals expenditure, and where revenue exceeds expenditure – a budget surplus. “Public debt”, also known as government debt, national debt or sovereign debt, is the debt owed by government. “Arrogance”, the quality of being arrogant, whilst arrogant, is having or revealing an exaggerated sense of one’s own importance or abilities. “Moderate”, make or become less extreme, intense, rigorous, or violent. “Control”, determine the behaviour or supervise the running of. “Foreign payments”, an amount paid or payable, leaving the coffers of one government for another. “Bankrupt” means unable to pay debts. “Public assistance” also known as social support, public aid, or welfare, largely provided by the government, and to a lesser extent by charities, informal social groups, religious groups, and inter-governmental organisations.

The budget in review

In the words of Rick Scott, an American businessman and politician, “Reviewing a government budget is much like going through the attic in an old home”.
The intention of this article is not to offer a budget summary, for such your auditor or financial advisor would have provided you, but rather to provide an alternative insight into the budget.
The double edged sword of a budget is that it tends to be littered with statistics (numbers), which although the intention might well be to clarify and substantiate, could well distract and confuse. If you ever doubt whether you are looking at a budget, remember the infamous words of George W. Bush, past President of the United States of America, “It’s clearly a budget. It’s got lots of numbers in it.”

Statistical sources

So, where do Gibraltar’s statistics emanate from, and is it only released in budget? There are essentially four sources of statistics, namely (i) “Approved Government of Gibraltar Estimates of Revenue and Expenditure”; (ii) “Annual Accounts – Report of the Principal Auditor on the Public Accounts of Gibraltar”; (iii) “Abstract of Statistics”; and (iv) “Statistics”, inclusive of “Statistics by Topic Area”. Below, “Sources of statistics in Gibraltar”, provide a more detailed explanation.
Contrary to popular belief, simply studying the “Approved Government of Gibraltar Estimates of Revenue and Expenditure” does not provide you with the full insight into the budget, for that you will need to account for the other statistical sources as well.
In Economics you can employ a powerful technique, called triangulation that facilitates validation of statistics through cross verification from two or more sources.
Sources of statistics in Gibraltar
• Approved Government of Gibraltar Estimates of Revenue and Expenditure 2015/2016
o Available in hardcopy.
o Dated July 2015 (Exact release date unknown).
• Annual Accounts 2013-2014 – Report of the Principal Auditor on the Public Accounts of Gibraltar for the financial year ended 31 March 2014
o Available in hardcopy.
o Dated August 26, 2015, released on February 24, 2016.
• Abstract of Statistics 2014
o www.gibraltar.gov.gi/new/sites/default/files/HMGoG_Documents/Abstract%202014.pdf
o Released on December 08, 2015.
• Statistics
o www.gibraltar.gov.gi/new/statistics
o Dependant on dataset updated monthly, or less frequently.
• Statistics by Topic Area
o www.gibraltar.gov.gi/new/statistics-topic-area
o Dependant on dataset updated monthly, or less frequently.

Inclusive or exclusive budget?

Although not that pertinently stated, the government of Gibraltar maintains an accounting system on a “cash basis”, reference of which can be found in the “Annual Accounts 2013-2014 – Report of the Principal Auditor on the Public Accounts of Gibraltar for the financial year ended 31 March 2014” – the latest report.
A “cash basis” implies that it “does not reflect a large number of government assets”, “assets not shown include government housing and buildings, vehicles, debtors, as well as shareholding in government-owned companies and joint venture companies”, and “liabilities, such as sundry creditors are similarly not shown”.
According to the “Government Companies (wholly owned)” in the “Approved Government of Gibraltar Estimates of Revenue and Expenditure 2015/2016”, there are two holding companies, namely Gibraltar Investment (Holdings) Ltd, consisting of 21 trading companies (four which are not trading) and 14 property companies, and Gibraltar International Bank Ltd. It does not include Gibtelecom, which it should. Then, there is an item, “Contribution to Government Owned Companies” of £25 million, in this years’ budget it references that “have consistently deducted £25m to fund company losses each year since our first election”. The government thus financially contribute to the companies, but do not report on their performances in the budget address.
It is for you to decide whether it constitutes an inclusive or exclusive budget.

The real budget headlines

The budget consisted of 366 paragraphs and 65 pages, paragraph 86 relating to “Gibraltar’s GDP per capita for 2015/16 is forecast at $90,165 placing Gibraltar in 4th position …” Granted that the GDP or gross domestic product is not a perfect measure, but it does present the total value of goods produced and services provided in Gibraltar during a year. If the average Gibraltarian produced $90,165, what was their financial remuneration for such? Is the GDP measure indicative of Gibraltar’s financial inequality?
Paragraph 89 relates to the level of “Aggregate Public Debt” of £446 million and “Cash Reserves” at around £100 million, thus “Net Public Debt” of £345 million. Considering that this is a “cash basis” budget, what is Gibraltar’s all inclusive “Aggregate Public Debt”? Then, it is understood that prior to the budget address, in the Chief Minister’s Questions and Answers, Parliament was informed that £30million is owed in refunds to the taxpayer.
Then, paragraphs 244 to 253 deal with the securing a “£300 million of new institutional investment”, which has “varying maturities of between 30 years at fixed interest rates”. At the time of writing the nature of the transaction was not yet known, but interest (“3.85%”) is apparently due on this “institutional investment”. An obvious question is why this amount is needed, when paragraph 357 states, “We have the liquidity necessary to deal with the issues that do confront us and we have the liquidity necessary to deal with the issues that could confront us”?

Concerning non-budget arrears

Not referenced in the budget, the “Breakdown of tax arrears as at 31st March 2016” stood at £28.71 million, whilst “Arrears in respect of unpaid rents of unpaid rents pertaining to Government rental homes” in January 2016 stood at £5,923,073.62. According to the “Arrears of Revenue as at 31 March 2014” in the “Annual Accounts 2013-2014 – Report of the Principal Auditor on the Public Accounts of Gibraltar for the financial year ended 31 March 2014”, “House Rents” stood at £4,789,307.25, and the total arrears at £55,791,555.52. Included in this amount is “Sale of Electricity to Consumers” at £6,665,590.63 – which is in excess of the “House Rents”. Accordingly, total arrears due to government must be around £84,501,556.52 or 14.32% of the budgeted revenue for 2016/2017 at £590 million.
Obvious questions are whether amounts are considered to be in arrears the day after it is due, or is it only at a later date, and then the age of the debt arrears (aged debtors), and the possibility to collect these arrears?


It ought to be evident that one can gain a much better understanding of the ability and challenge of the economy of Gibraltar by triangulating various statistics. This article merely provides a very basic insight.
Disclaimer: The intention of this article is not to offend, but to challenge you to look at things differently. I am reminded of the immortal words of Thomas Paine “He who dares not offend cannot be honest.”

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