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Diplomatic row as Sceptre sails into Gibraltar

A major Anglo-Spanish diplomatic row erupted last night over the visit of the nuclear submarine HSM Sceptre to Gibraltar, with calls in Spain for Britain to stop sending nuclear submarines to the Rock.

And in Gibraltar itself there was a lack of information from the Command British Forces, which misled Gibraltarian public opinion -from the Chief Minister down.

Mr Caruana was said to be "furious".

An official statement issued by the Command British Forces said that the submarine had arrived in Gibraltar "on a routine visit" and that it would be carrying out "routine maintenance" on the submarine's outer casing and fin.

They did not even say that the submarine was nuclear-powered!

But as the evening progressed, there were reports from Spain that a fault had developed in an electrical generator which feeds the submarine's cooling system. -

It was an extraordinary state of affairs that the submarine was in Gibraltar and that the people of Gibraltar knew less about it than those elsewhere.

In fact, the Spanish Government had been informed a week ago by the British Government that the submarine would be visiting Gibraltar.

What is outrageous is that, while Gibraltar was being kept in the dark, London was confirming that, in effect, the submarine had a fault in its diesel-driven electrical generation equipment.

The Spanish foreign ministry summoned the British ambassador Stephen Wright and a "firm protest" was lodged.

The foreign minister Miguel Angel Moratinos called on Britain not to use Gibraltar again for repairs to nuclear submarines, while conceding that this was not another Tireless.

Caruana will send protest this morning about lack of information

The chief minister Peter Caruana is this morning lodging a protest to the Foreign Office about the lack of information made available in Gibraltar about HMS Sceptre.

Like the rest of Gibraltar, he was rightly furious about the lack of information.

Up to 7pm, he knew what was in the MOD release - and it was through Spanish sources that he heard about the electrical fault and about the storm

that had developed in Spain over the submarine's visit.

The problem seemed to be the cooling system of an auxiliary diesel engine, and if that was the case, it probably meant there was no danger.

Questioned by PANORAMA late last night Mr Caruana protested: The Government of Gibraltar has not been informed.

Certainly, the whole thing had got out of hand. What Spain had been told Gibraltar had not been told!

Straw trying to hide Gibraltar betrayal plan

by our Political correspondent

The foreign secretary Jack Straw fears that if he discloses details of the Gibraltar betrayal plan it could jeopardise the tripartite talks and wreck a deal with Spain.

This has led shadow foreign secretary Michael Ancram to conclude that the extent of Mr Straw's "intended betrayal of the people of Gibraltar was even greater than we originally thought at the time."

PLOTTING

Mr Ancram has told Mr Straw: If the people of Gibraltar are to trust you now it would be better for you to come clean on what you and the Spanish were plotting in the past."

This new storm over Gibraltar gathers strength as Mr Straw refuses to allow Mr Ancram to see communications between the Foreign Office and Spain, as well as with Gibraltar, from 2002 to 2004, on the question of joint sovereignty.

With the coming into force of the Freedom of Information Act in Britain, the issue was raised by the Conservatives.

In correspondence seen by PANORAMA, Mr Straw told the shadow foreign secretary: "We continue to seek progress on a range of issues relating to Gibraltar, and it would be wrong to prejudice relations with our partners at a time when the tripartite forum established in the autumn of 2004 is still at an early stage. It is my belief that the public interest would be best served by a solution to the Gibraltar issue, and this is less likely to happen if previous correspondence between the parties is disclosed."

EMBARRASSING

But Mr Ancram is not taking No for an answer, and has retorted: What you really mean is that it would be embarrassing to you if the information was disclosed. It is hard to avoid the conclusion that the extent of your intended betrayal of the people of Gibraltar was even greater than we originally thought at the time.

In a letter to Mr Straw this week, he adds: "If the people of Gibraltar are to trust you now it would be better for you to come clean on what you and the Spanish were plotting in the past."

The Freedom of Information Act, adds Mr Ancram, was not introduced so that you could hide your double-dealing shenanigans but so that the British public could see how Government works. In the interest of transparency I urge you to reconsider your decision and to come clean with the people of Gibraltar.

Penny wise, pound foolish?

The Opposition said in a statement last night that it finds it quite incredible that the Government should continue to argue that its policy is to require public spending to be kept to the amounts approved at budget time by the House of Assembly. In this year’s budget the Minister for Health, Ernest Britto, sought approval for a sum of £400,000 to meet the fees of the consultancy on clinical governance in the Health Service for the twelve months from 1 April 2004 to 31 March 2005.

However, in November 2004, the Government transferred a further sum of £350,000 to pay additional fees for this consultancy, exceeding the original amount for the year by no less than 87.5%. As if this were not enough a further £200,000 was provided in January of this year, bringing excess expenditure in this head to £550,000 an increase of 137.5% over the amount in the approved budget which had been £400,000.

Health spokesperson Mari Montegriffo adds: It’s a bit rich, therefore, for the Chief Minister to say, as he did recently to the business community – “If the Government exercises normal and prudent budget discipline by requiring Departments to stick to the spending authorised by the House of Assembly (which, by the way, is a legal requirement), this too is presented as a shortage of money.”

He then accused the Opposition of having a philosophy that the sound management of our collective finances is to allow everybody to spend as much public money as they like, every year, year in year out adding that this was not serious economics and not even kitchen economics. It is a moot point just what kind of economics Mr Caruana thinks it is, to exceed the budget approved by the House on one particular item, by well over half a million pounds.

The Opposition ads it considers that the responsibility for expenditure on some things is what creates the restrictions on the availability of funds for other things, and that this is the exercise of judgement for which the Government is politically answerable.

She said that the fact that Mr Caruana quotes as evidence of the Government’s normal and prudent budgetary discipline, the decision to repair a broken down motorbike, and at the same time is quite relaxed about exceeding fees paid to experts for consultancies by more than half a million pounds, suggests that Mr Caruana is being penny wise and pound foolish in his attitude to controlling public spending.

First meeting as 'Friends' chairman for former Governor Chapple

The Friends of Gibraltar Heritage Society have held their first meeting chaired by their new president, Sir John Chapple, a former Governor and a good friend of Gibraltar.

It was their Annual General meeting, in London on Wednesday. The meeting was followed by a well attended reception, PANORAMA is informed from London.

As stated, this was the first meeting chaired by the recently elected President of the Society, former Governor, Sir John Chapple, who expressed satisfaction at the contribution which has been made by the society towards the recently unveiled statue of General Elliott, in Gibraltar. The society's project of restoring the grave of Sgt Ince was also well received by the membership.

Among the guests was Mr Albert Traverso, joint author of Education in Gibraltar, who was in London on a book signing visit.

Confirmed: Airport talks this month

By our Political correspondent

Tripartite talks over Gibraltar will take place this month, including the issue of joint use of the airport, it was confirmed by the senior Spanish Foreign Ministry official Jose Pons in Algeciras. The meeting will take place in Spain.

As we recently published, the chief minister has been saying that the airport talks will take place this month and follow on to March, with a solution 'possible' this year.

The actual date for the talks is 11 February in Malaga

"Spanish airlines are of course free to use the airport today, but we look forward to the possibility of reaching an expanded use agreement that will enable our airport to contribute more to the social and economic development of the Campo," said Mr Caruana last week.

He added that "any such agreement would need to be free of adverse sovereignty implications for us. We look forward to exploring these possibilities to see if an agreement acceptable to all sides is possible."

It is felt in Spanish political circles that a new deal will be based on the 1987 agreement which Gibraltar has been rejecting since then.

Sr Pons has also referred to the meeting in London on the pensions issue, saying that the aim is to establish how many Spanish pensioner are affected and how much is owed to them.

It would seem that Madrid thinks that there is a sum owed to the pensioners, and not that the talks are to establish if anything is due given that all pensions payments were frozen years ago.

Although the Gibraltar government said at the time of the new talks forum agreement in October that Gibraltar would have nothing to do with the pensions issue,or words to that effect, it was surprising that two senior officials should have attended the talks in London on this particular issue.

The danger is that by attending meetings on the pensions Gibraltar will be inevitably associated with it. Past experience shows that if the talks are sucessful, the British Government will be thanked for it; if the talks are not, the Gibraltar government will be blamed!

United front against the funicular

The Gibraltar Heritage Trust, the Environmental Safety Group (ESG) and the Gibraltar Ornithological & Natural History Society (GONHS) are forming a united front against the proposed Funicular project.

This is another example of the great strength of feeling there is in Gibraltar against this project, which looks more absurd by the day.

Nobody seems to like the idea of a sort of 'flying saucer' landing on the Rock and destroying its natural contours. The notion of a funicular going up all along the north face by the Moorish Castle area is also heavily criticised.

And the need to blast a tunnel in the area is something many people say they would not like to experience.

It is noted that a number of houses in Barcelona were destroyed only this week when blasting took place to extend the underground system there. "It might not be exactly the same thing, but where there is blasting there is danger - and in the funicular case a totally unwarranted danger for no good reason," said a complainant.

Scaffolding scandal

The requirement by Government departments for scaffolding and related equipment is considerable - but the requirements have been without monitoring or control.

A review has established that: Invoices received had been authorised for payment without referral to any initial request for the equipment hire and without full knowledge of the contract issued.

Furthermore, additional payments were made erroneously for extra boards and for safety mesh that should have been supplied at no extra cost under the terms of the contract.

"There were no records found of any formal requisitions for scaffolding equipment...there were no records showing that the correct rate had been paid...there were no records to show the official handing over certificate for the scaffolding," says the Principal Auditor.

There are a number of external and internal scaffolding, towers and trestles in use at any one time by the Buildings and Works Department. Hoists are regularly hired.

But the overall conclusion is that there is substantial scope for improvement.

Recommendations have been made and some have been implemented while, no doubt, others will.

A key recommendation is that "a record showing full details of all hire of equipment including start and end dates, additional requirement, variations to contract etc, be maintained to allow for proper verification of relevant invoices."

Senior management, it is said, should review on a regular and systematic basis, information from the job costing system to allow for effective monitoring and control of costs.

The hire function has now been centralised. And works supervisors, through their depot managers, are required to complete a form requesting the hire of scaffolding, while plant and transport officers must check the scaffolding erected and any deviations against the agreed rates.

RESPONSIBILITY

While elected ministers must be responsible for what happens in their departments, as is standard practice everywhere, it may not be entirely fair at all times to confuse the political and the administrative side of government.

No politician in his right senses could condone what has been happening with the scaffolding, which is just an example of what can happen in Government departments.

But there is a case for individual ministers to keep closer controls over such matters, such as the payment of invoices, as no doubt the Chief Minister would want them to do in the interests of the Government as a whole.

Gibtelecom offer rebates in ADSL fiasco

Following the recent interruptions to their ADSL 'WOW' service, customers are to be credited with half of one month's rent, said Gibtelecom, which describes their action as a 'historic rebate'.

A statement says: "Gibtelecom announces that it will be crediting all its “WoW” ADSL customers with half of one month’s rent as a consequence of the recent interruptions to this service. This step has been taken in accordance with the terms of Service Level Agreement (SLA) entered into with customers. These rebates will appear on ADSL customers’ January bills which will be mailed out in early February."

“WoW” ADSL Product Service Credit Normal Monthly Rental

 

£

£

Standard

12.50

25.00

Pro

20.00

40.00

Pro-Plus

23.50

57.00

 

Gibtelecom go on to apologise for the disruptions in the ADSL service which a spokesperson said “are being recognised by the company with this historic rebate”. The spokesperson added that “the problems encountered have been particularly complex, necessitating the intervention of internet equipment and software experts from several manufacturers around the world. Gibtelecom engineers and managers did also work round the clock over a number of days in order to effect the repairs as expeditiously as possible”.

Gibtelecom will be undertaking further works over the coming weeks to ensure the stability of the ADSL network, and that the quality of the service matches the growing demands of internet customers.

Taken for a ride?

Mr Caruana told the business community last week that ‘if Government decides not to throw away a motorcycle just because it suffers a breakdown and needs a repair, and instead chooses to repair it rather than buy a new one, this is presented as evidence of shortage of money!’

Adds the Opposition: This is a self-serving argument entirely fabricated by Mr Caruana. If it is indicative of anything, what it suggests is that even a decision on whether a motorcycle in a Government Department, which is broken down, should be replaced or whether it is cheaper to repair it, is a decision that only Mr Caruana can take.

"The concerns of the Opposition on this issue were, as our Press Releases have made clear, that the failure to take a decision at the time either way was depriving citizens, who complained to us of a right to a service. The service in question is to provide facilities to take a motorcycle licence test. One imagines that the relevance of this to the Business Community is the effect it would have on the demand for and sales of motorcycles, if people are unable to obtain the necessary driving licence," they say.

The Press release ends: The failure to provide the service and not whether the Government should replace or repair the motorcycle required, was the policy issue raised by the Opposition. Mr Caruana appears not to be able to tell the difference between his formulation and this policy issue. If so, it is indicative of his problem in understanding issues of managing Government spending.

Deluxe Berlin-Gibraltar air cruise

Tour operator Classic Adventure Tours is revolutionising the luxury cruise market introducing a deluxe ‘flight-safari’ on board of 1944 vintage plane DC-3 Dakota, itself the superstar of this holiday of a lifetime, with its peculiar airborne experience of rarely venturing above a thousand metres and so giving the opportunity of magnificent bird’s eye view to passengers.

The air cruise, organised by Hertling & Partner, will start off from Berlin Tempelhof on 8th September, to call at Augsburg for refuelling and boarding additional passengers.

It will then head to Perpignan for a night stay at the Hotel Villa Duflot, furnished in Thirties style and located in the woods.

On second day, the Dakota will continue to Valencia, Tangiers and Gibraltar.

Touch-down is announced for around 6.00 pm and cruisers will be personally greeted by the minister for tourism.

They will then stay at the Caleta Hotel, ‘built onto a cliff at the idyllic Catalan Bay’ as the brochure explains, for dinner at Nuno’s Restaurant and a good night sleep before joining in with the Gibraltarians for National Day celebrations the morning after.

In the afternoon, a trip is scheduled to the Spanish resort of Puerto Banus, followed by an evening dinner at Claus on the Rock, a privileged position to assist to the National Day fireworks display.

As the brochure explains, ‘Claus was born in Cologne and he is said to run the best restaurant on the Rock’.

The following day, the cruisers will taste a bit of history with a two-hour tour of the WWII tunnels, guided by local experts, followed by a visit to St. Michael’s Cave, the Great Siege Tunnels and a Rock tour.

The day will draw to a close with a dolphin tour along the Rock’s coast.

The Dakota will bid farewell to Gibraltar around noon on Monday 12 September, heading to Palma, where it is expected to land at 6 pm, for an overnight stay at the Art-Deco Hotel Palau Sa Font, in the old town.

The morning after the flight will continue to Marseille and Zurich, where a farewell evening is organised at the Hyatt Hotel.

The cruise will end the following day in Berlin at around 4.30 in the afternoon.

And how much will partici-pants pay for this once-in-a-lifetime experience of fluttering over half of Europe at low altitude, in order to appreciate breath-taking views and to feel part of history for having boarded a sixty-year old plane?

Well, prices per person start at just over 3,000 pounds per person: worth every penny, if you’re immune from that bizarre cramp at the base of your stomach during take-off or landing – so many in programme during this voyage!

Gibraltar becoming world famous for GAMBLING

Gibraltar is fast becoming famous for gambling, given the number of internet gambling and betting companies operating here. The report we published yesterday shows that some are going a long way, with billions of pounds being mentioned.

Britain has become a nation of online gamblers, with women increasingly betting on the internet. Research shows that the number of Britons betting online has risen 566% since 2003 - figures that will alarm anti-gambling lobbyists. The UK government's plans to liberalise the betting industry have raised concerns that it will spark off a gambling epidemic.

The new figures were compiled by website 888.com, owned by Cassava Enterprises, a Gibraltar-based firm and one of two online gambling companies looking to list on the London Stock Exchange.

Analysts calculate that PartyGaming - owner of the Party Poker online gambling company and the other company considering an initial public offering (IPO) - could list with a valuation of more than £3bn, estimates The Business, while a report in the Telegraph put this at £2.3 billion. Either way, it's a lot of money!

Online gambling firm 888.com says it has increased its membership from 10m to 13m across 151 countries in a year and from 2.7m over two years. The company told The Business that a large proportion of the increase was due to women. In the early 1990s, women made up only 4% of gamblers. Now 20% of British women visit a casino more than once a year, according to its findings.

The popularity of online gambling has been driven in a large part by the number of people playing poker over the internet, which explains the popularity of Gib-based internet firms licensed by the Government of Gibraltar.

Although estimates about the size and growth rates of the online poker market vary, Sportingbet, the world's largest online betting group, which has just bought Paradise Poker, believes that an average of 37,675 people play online poker for real money every day.

GAMBLERS

While 888.com claims its research shows the UK is a nation of sensible gamblers, the results seem to indicate the opposite. Some 23% of those surveyed said they would be prepared to gamble their home, car or possessions for a large jackpot, while one in 10 Scots said they would consider putting all their wordly possessions at risk for the chance to become a millionaire, says a report.

Women seem to be more sensible. Only 10% of British women would consider gambling everything they owned for the chance of a $5m jackpot, compared with 16% of men.

But the odd thing about Gibraltar-registered PartyGaming, the world's largest online poker company, is that it believes in secrecy. Last week they did confirm that it had appointed bankers to look at floating the business on the London Stock Exchange.

The company, as was reported yesterday, is equally tight-lipped about the quartet of individuals who own the business and are set to become wealthy beyond their wildest dreams. In short, PartyGaming is acting like any seasoned poker player and keeping its cards very close to its chest, said the Telegraph.

For some investors, the planned float and chunky valuation may smack of the excesses of the dotcom boom. But PartyGaming is cashing in on the recent revival of investor interest in "real" internet businesses.

Given PartyGaming's decision to shun the limelight, putting a value on the business is tricky. But bankers at Investec and Dresdner Kleinwort Wasserstein hope to float PartyGaming for at least £2.3bn - a figure they insist is conservative.

The founding quartet's good fortune, however, points not just to their luck and hard work. PartyGaming's apparent success reflects an important element in the business models of several of the most successful consumer-focused internet businesses: acquiring a critical mass of customers.

At its busiest, the site has about 65,000 customers playing at once in games involving about eight players, depending on the type of poker, said a report.

DAZZLING

The PartyPoker.com site dazzles visitors with promises of giant prizes. For example, a $32 fee gives entry to poker tournaments that could lead to a place playing poker aboard a cruise liner with the chance to win $1.9m. "Click Here to Play" declares a giant banner. Do so and the site begins to download software onto your computer allowing you to play online.

One person who has visited PartyGaming's Gibraltar office says: "It's very workaday. It could be an office for a firm of actuaries, except they aren't wearing three-piece suits."

The founders, by all accounts, are sober yet ambitious businesspeople. "If you meet them you are not dealing with Harry Enfield loadsamoneys," says a banker.

The company has recently boosted its management team. Last summer it recruited Richard Segal, the former head of the UK's Odeon cinemas, to become chief executive.

It has also appointed Martin Weigold, the former chief executive of Jetix Europe, the children's television service formerly known as Fox Kids Europe, as chief financial officer.

Although PartyPoker is the company's main website, it also owns the StarluckCasino and PartyBingo sites.

Last year the group made a profit before interest, tax, depreciation and amortisation of more than £186 million, although more formal financial statements have not been released by the company.

The question for potential investors is whether the barriers to entry to PartyGaming's business are high enough to prevent its profits being whittled away by competitors.

What is there to stop its customers switching to another website in the future? While real-world casinos and betting shops trade on their location, cyberspace has no geographical barriers.

IMPORTANT

"The exempt status regime is not only the mainstay of the Finance Centre, it is also the basis of most of the gaming industry. These two sectors account for thousands of jobs in Gibraltar and a large chunk of our economy. Continuity is therefore of vital economic importance," said the chief minister Peter Caruana.

With the tax-exempt company regime on the way out, what will happen to the gaming companies in the short-term? Will the gambling go elsewhere before you can place a bet?

Marina Bay 'Checkout' closing down

by PANORAMA reporter

The Checkout supermarket in Marina Bay is closing down. A meeting with staff representatives was held last night. They have been told that the store will cease trading at the end of this week.

The supermarket will cease trading on 6 February, although employees will continue to be employed until 27 February - and during this period employees will be given annual leave.

The reason for closure? "Management has taken the view that it is no longer commercially viable to operate this store," says a spokesman.

DIRECTOR

The director of Inverrigan Ltd is Mr Rafael Benaim, who was also involved in the closure of the Checkout Store in Main Street. Mr Benaim's business interests include Maxstead Holdings in Irish Town which is an official Gibraltar Government lottery main agent.

Staff at Checkout were told on Friday that the company had entered into a contractual commitment that same day "for the assigment of the Marina Bay premises. The assignee requires vacant possession by 27th February 2005."

Of the twenty employees it is contemplated that 14 will be made redundant: one each on administration, butcher, shelf filler and backdoor; two supervisors and two cleaners; and three cashiers and three delivery.

NOTICES

Notices to affected employees say that their employment will end on 27th February.

Employees have been invited to select appropriate repreentatives who will attend meetings with the company and their representatives.

"We trust all employees will cooperate with management during this difficult time," employees were told by Ian Hayward on behalf of Inverrigan Ltd.

End of tax-exempt regime leads to representations to Govt

by JOE GARCIA

Representations are to be made to the Gibraltar Government by a committee just formed in the finance centre as the problems that could arise from the demise of the tax-exempt regime begin to sink in.

Lawyer Louis B May has taken the lead in the matter and a meeting was held last week. A committee has been formed and a further meeting is due to take place this week.

This is the committee: David Cuby of Mutual Trust/ Finsbury; Marc Ellul of ECE Nominees; Leslie Livens of Atlas Trust; Liz Plummer of Fidecs; Lilliane Riederer of Fidux Trust; Desmond Reoch of Line Management; Jens Sorensen of Sorek Services; Jonathan Stagnetto of Form-A-Co and Louis Triay of Gibraltar International Trust Corp.

The committee is to consider the implications of the proposed changes to the exempt companies and ways of mitigating the effects.

Under the agreement reached with the European Commission, the tax-exempt companies will end by 2010. New entrants will be allowed only until June next year under certain conditions, There are nearly 8,500 exempt companies in Gibraltar.

The tax-exempt system is considered by the EC to be in breach of State Aid. It remains to be seen if any companies will want to leave before time and also if new entrants will be willing to enlist in the knowledge that the system will end within a few years.

STAGNATION

A position of stagnation is in the horizon, it is said in the finance centre.

As the situation stands at present, there is no alternative product available to offer prospective customers.

There is hope in Government circles that the pending court case on the question of regional selectivity' will be won and that a new low-tax system can be put in place that will encourage new growth. But the later than happens, if it does, the greater the risk factor.

The European Commission rejected the Government's tax proposals on the grounds of 'material selectivity', but this would allow for an alternative tax vehicle to be proposed.

However, it was also rejected on the grounds of 'regional selectivity', which provides for tax harmonisation with the UK. If such a concept prevails, Gibraltar will be deprived of having its own, separate corporate tax system to that in the UK.

This would mean that an element of competition, which is so vital for Gibraltar to succeed, would be lost on a permanent footing.

POLITICAL

The British Government, which fears the emergence of integration through the back door, has rallied behind the Gibraltar Government - and in unison both are saying that the question of 'regional selectivity' is nonsense and that the court case will be lost by the EC.

If the case is not lost by the EC, there are also political ramifications in that a European court would have decided, as well, what are sensitive political matters for Gibraltar.

"By taking the matter to court we are putting our entire political status in the hands of a judge," said observers.

If it is ruled that our tax system must be aligned to that of the UK, how long will it be, before other aspects of our EU position are placed within the same parameters? How long will it be before we lose our self-governing status in vital areas?

The general feeling in the EU is that Gibraltar is part of the UK for EU matters. The constitutional arrangement between London and Gibraltar is put on a secondary plane.

However, faced with the hostile decision from the EC, the Gibraltar government clearly had to take action to try and protect Gibraltar's traditional standing.

What about Britain? There are those who say that if the Foreign Office genuinely believes that the court case will go against the European Commission because we are a separate jurisdiction to the UK, then they should be promoting the concept of separateness by there not being any further dilly-dallying as regards constitutional change - because the more self-governing Gibraltar is seen to be, the greater the chances of it being deemed to be a separate jurisdiction to the UK.

RAMIFICATIONS

These and other ramifications stem from the central issue concerning the way the tax proposals have been rejected and the consequential effects on the finance centre in particular and Gibraltar in general.

The committee that has now been set up wants to consider the implications that have arisen and also wishes to explore if there are mitigating circumstances.

HOPEFUL

The Government is hopeful that the court case will go in Gibraltar's favour, and that new finance centre products will become possible and acceptable to the EC.

The court ruling is expected in about three years' time, after the prospect of new entrants into the tax-exempt system would have ended -quite apart from any other negative considerations that may emerge between now and then.

It is understandable that the new committee wants to do something now and not later.

Neish is new Bar leader

Barrister James Neish is to be the next leader of the Bar, PANORAMA can advance today. He will be replacing Tony Provasoli whose term of office is coming to an end.

Mr Neish, who is 53, is also a well-known and respected member of the legal profession.

His education took him from the Christian Brothers to the Grammar School and on to Nottingham university. He also attended at Inns of Court School of Law.

Chief Minister makes major speech on the state of the economy

The economy is in good shape, the chief minister Peter Caruana said in a major speech last night.

The underlying philosophy and core elements of our economic policy, he said, are to pursue policies that create an environment that promotes in-. creased levels of business activity and investment (that is to ensure economic growth) not least by promoting international investor confidence in Gibraltar. Thereafter, to share the proceeds of that success in three parts. First, in reducing personal taxation (which we have done every year since 1996). Second, by investing in improving our essential public services (of which I will say more in just a moment); and third in making capital investments in our future, our city and its public, economic and social infrastructure.

"The economy of Gibraltar has never, in the entire history of Gibraltar, been more prosperous and successful than it is to-day," he said.

This hugely successful economic performance has been, as we promised it would be, reflected in things that benefit the whole community, he added.

Government revenue is at an all time record level. This has allowed us to invest a sum in excess of £150 million over 8 years in publicly funded capital projects.

And despite the very considerable capital and recurring annual budgetary cost of doing all those things, he went on, we have been able to reduce personal taxation in Gibraltar by more than 36%.These are the true measures of our economic performance. Public debt is forecast to end this financial year at £93 million. This is just £10 million more than it was in 1995. As a percentage of GDP, which is the usual way of measuring public debt all over the developed world, ours has fallen from over 25% to less than 19% of GDP and that is using 2002/ 3 GDP figures. If you allow just 5% growth in GDP for each of 2003 and 2004, current debt as a percentage of current GDP is a mere 16.5%. This is very low by any standards in the world. Government reserves are forecast to stand at £35 million as at march 2005. This is higher than in the year 2000, despite the huge amounts of capital investments made since then.

DEFICIT

Nor can the Government be said to have no economic policy or sense of direction or be short of money because Government operated a budget deficit last year, and will probably operate one this year. Unless, of course, all European countries have "no economic policies and no sense of direction" and are short of money, given that almost all European countries operate a budget deficit.

At times sounding like an election speech, Mr Caruana added: It has become fashionable for the Opposition to say that Government is short of money. If Government decides not to throw away a motorbike just because it suffers a breakdown and needs a repair, and instead chooses to repair it rather than buy a new one, this is presented as evidence of shortage of money! If Government exercises normal and prudent budget discipline, by requiring departments to stick to the spending authorised by the House of Assembly (which, by the way, is a legal requirement), this too is presented as "shortage of money".

In another aside to the Opposition he said that "this directionless Government with no economic policy has just signed an agreement for Gibraltar's largest ever inward investment project." Clearly those willing to invest in excess of £ 1 billion in Gibraltar do not share the Opposition's assessment of the Government's handling of our economy, or of Gibraltar's future prospects.

Whilst on the subject of the Eastside Development. I have read the reports of the comments by Snr Juarez, the Mayor of La Linea, in which he hopes that there will be an environmental impact assessment of La Linea's coastline and that there will be discussion of this. There are, of course, EU Directives which stipulate when environmental impact assessments are required and how these should be carried out, both domestically and in relation to one's neighbours. Gibraltar will of course comply with its legal obligations, such as they may be.

However, I think that it is worth pointing out that Gibraltar has not been made aware of any environmental impact assessment of the effects on our coastline of any of the reclamation's that have taken place nearby in Spain recently. These include the huge expansion of Algeciras Port, the Crisnavis dockworks in San Roque; the marina, wharfs and jetties within the Bay of Gibraltar at La Linea, nor the fishing port on the mediterranean coast of La Linea.

AIRPORT AGREEMENT

He went on to speak about the possibility of reaching a new, different agreement, acceptable to all sides, that brings about expanded use of Gibraltar's airport and air terminal. He hoped that that would be possible.

"Spanish airlines are of course free to use the airport today, but we look forward to the possibility of reaching an expanded use agreement that will enable our airport to contribute more to the social and economic development of the Campo. However, any such agreement would need to be free of adverse Sovereignty implications for us. We look forward to exploring these possibilities to see if an agreement acceptable to all sides is possible," he said.

TAX-EXEMPT

The tax-exempt company agreement, "while not containing everything that we wanted, delivers sufficient certainty and stability to avoid the worst consequences for Gibraltar. Compared to what the economic position would have been if we had not reached an agreement, this is an excellent agreement." He went on: Our political opponents cannot decide whether to blame us for the original problem; to acknowledge the true extent of the threat that we faced and criticise the agreement for not delivering a "seamless transition" or to accuse us of exaggerating the problem to try and prevent the Government gaining political brownie points when we deliver an agreement that sufficiently protects Gibraltar. And because they cannot decide which to do, they do all three, despite the obvious contradictions involved, end we were able to obtain the right to new entrants until June 2006. Its less than we wanted but better than anybody else has managed to do.

FUNICULAR PROJECT

The Government is not against it in principle, but subject to heritage and environmental factors which the Government has not yet considered or taken a decision about. The project would also need DPC approval. It is too soon to say whether Government will approve the project or not or whether DPC will approve it. But it is right and helpful that everyone has been able to have their say about it at a time when they can still influence the decision makers.

The state of the economy

FULL TEXT of speech last night by the Chief Minister:

Madam Chairperson, Distinguished fellow guests, ladies and gentlemen given the wholly misleading assessment made recently by the Opposition about the state of our economy, I welcome this appropriate opportunity to speak about that, to review the state of the economy and to comment on related current issues.

The State of Economy

Every year since 1996, I have explained the underlying philosophy and core elements of our economic policy. These remain the same. They are to pursue policies that create an environment that promotes increased levels of business activity and investment (that is to ensure economic growth) not least by promoting international investor confidence in Gibraltar. Thereafter, to share the proceeds of that success in three parts. First, in reducing personal taxation (which we have done every year since 1996). Second, by investing in improving our essential public services (of which I will say more in just a moment); and third in making capital investments in our future, our city and its public, economic and social infrastructure.

The economy of Gibraltar has never, in the entire history of Gibraltar, been more prosperous and successful than it is to-day. This is clearly shown by all relevant and usual economic indicators.

The economy (GDP) has grown overall in size by more than half, that is by 55% since 1996, from £327 million to £507 as at March 2003. The figures for 2003/4 and 2004/5 will show that it has grown still more. In 2002/3, the last year for which figures are available, it grew by 7.9%. The number of jobs in the economy it is at an all time high, and still growing; the unemployment rate (unemployed as a percentage of jobs in the economy) is at a record low at less than 2 %, which is in structural terms full employment; the tax yield from Company profits is at an all time high; ship visits and bunkering volumes are at record levels. Visitor numbers to Gibraltar are at record or near recent record levels; Average earnings have risen by more than 30% since 1996 and take-home pay by even more, since we have, at the same time substantially cut levels of personal taxation; the gaming sector is growing fabulously and now employs about 1000 people. Gibraltar has become a global leader in the virtual gaming industry; even in the finance centre, which has faced its challenges, employment levels have risen by more than 25% in the last 6 years alone.

This hugely successful economic performance has been, as we promised it would be, reflected in things that benefit the whole community. I have already mentioned the record number of jobs and the rising average earning levels. But this is not all. Government revenue is at an all time record level. This has allowed us to invest a sum in excess of £150 million over 8 years in publicly funded capital projects. This is itself a record which has allowed us to increase recurrent public spending in important public services such as health (in which spending has doubled in 8 years on such things as a dedicated ambulance service, many more doctors and nurses, new medical services etc.) education (where we have been able to invest in new school buildings; in a huge amount of community wide training; in increasing student grants and in abolishing parental contributions contribution) and not least in social services, that is the provisions for those in our community most in need of help and support (here we have been able to establish a drug and substance abuse rehabilitation centre in Gibraltar; vastly upgraded the service at Mt Alvernia; introduced a domiciliary care scheme, and a minimum income guarantee for the elderly; all but abolished tax for our elderly; introduced modern principles of care and accommodation for children and disabled persons in the care of the state; hugely increased the level of disability and social allowance and benefits (which had been frozen for many years); increased the wages and given occupational pensions to hundreds of low paid and pensionless publicly funded workers; established a modern, safe and reliable public bus service; established facilities for our citizens to better exercise their rights, such as the Ombudsman and the Citizens Advice Bureau. These are just some of the fruits that have been made possible by our economic success as a community. Individually each is important. Collectively, together with others that I have not mentioned, they have transformed many aspects of life in Gibraltar and Gibraltar itself, physically and economically.

And despite the very considerable capital and recurring annual budgetary cost of doing all those things, we have been able to reduce personal taxation in Gibraltar by more than 36%.

These are the true measures of our economic performance. The facts speak for themselves. You will therefore understand the degree of bemusement with which we hear the accusation levelled at Government recently by the Opposition that “the present Government has no economic policies and no sense of direction”. No-body with sufficient knowledge of economic matters could possibly come to that conclusion honestly. Indeed no-one could do so who has eyes to see, even if they are not economists.

Public Finances

Nor could that judgement be justified by reference to the state of public finances. Public debt is forecast to end this financial year at £93 million. This is just £10 million more than it was in 1995. As a percentage of GDP, which is the usual way of measuring public debt all over the developed world, ours has fallen from over 25% to less than 19% of GDP and that is using 2002/3 GDP figures. If you allow just 5% growth in GDP for each of 2003 and 2004, current debt as a percentage of current GDP is a mere 16.5%. This is very low by any standards in the world. Government reserves are forecast to stand at £35 million as at march 2005. This is higher than in the year 2000, despite the huge amounts of capital investments made since then.

Nor can the Government be said to have no economic policy or sense of direction or be short of money because Government operated a budget deficit last year, and will probably operate one this year. Unless, of course, all European countries have “no economic policies and no sense of direction” and are short of money, given that almost all european countries operate a budget deficit. Nor unless the previous Gibraltar Government also had “no economic policies or sense of direction” and was short of money because they estimated and actually produced consolidated fund budget deficits in 4 of their 8 years in office. No economically literate person would regard small, temporary budget deficits as a sign of lack of economic policies or sense of direction – still less as a sign of “shortage of money”.

It has become fashionable for the Opposition to say that Government is short of money. If Government decides not to throw away a motorbike just because it suffers a breakdown and needs a repair, and instead chooses to repair it rather than buy a new one, this is presented as evidence of shortage of money! If Government exercises normal and prudent budget discipline, by requiring departments to stick to the spending authorised by the House of Assembly (which, by the way, is a legal requirement), this too is presented as “shortage of money”.

If government departments overspend and Government requires them to bring under control just part of this over expenditure, this is presented as “spending cuts” and are said to be the result of shortage of money.

Apparently, as far as the Opposition is concerned, the definition of financial health and what the Leader of the Opposition called in his New Year address “sound management of our collective finances” is to allow everybody to spend as much public money as they like every year, year in year out, regardless of the effect on tax rates. How many of you would be willing to run your own businesses on that ridiculous basis. This is not serious economics. This is not a serious political economic debate or commentary. This is not even “kitchen economics”.

The Eastside Project

Well Madame Chairperson, in addition to everything else that I have just described, this directionless Government with no economic policy has just signed an agreement for Gibraltar’s largest ever inward investment project. Clearly those willing to invest in excess of £1 billion in Gibraltar do not share the Opposition’s assessment of the Government’s handling of our economy, or of Gibraltar’s future prospects.

You will already have read of the scale and content of this project. The positive effects on our economy, business levels and employment and government revenue will be very significant for many years to come. The gain in infrastructure is also huge – 2400 houses (200 affordable to local first time buyers), a 300 room hotel, a 300 large yacht marina, a cruise terminal, a doubling of the size of our two beaches and their protection by offshore underwater breakwaters; a new 30 mega watt generating station to replace and double the size of Waterport; a new sewer network and much else.

In terms of capital premium value to Government alone this project is worth £70 million and (depending on how many houses are built) upto around £100 million.

I’m sorry that the Leader of the Opposition should think that I am managing the affairs of Gibraltar inadequately. People will have to judge for themselves whether this statement is justified by what they see going on around them or whether it is the somewhat ”tongue in check” political wishful thinking of my political rival.

Whilst on the subject of the Eastside Development. I have read the reports of the comments by Snr Juarez, the Mayor of La Linea, in which he hopes that there will be an environmental impact assessment of La Linea’s coastline and that there will be discussion of this. There are, of course, EU Directives which stipulate when environmental impact assessments are required and how these should be carried out, both domestically and in relation to one’s neighbours. Gibraltar will of course comply with its legal obligations, such as they may be. However, I think that it is worth pointing out that Gibraltar has not been made aware of any environmental impact assessment of the effects on our coastline of any of the reclamation’s that have taken place nearby in Spain recently. These include the huge expansion of Algeciras Port, the Crisnavis dockworks in San Roque; the marina, wharfs and jetties within the Bay of Gibraltar at La Linea, nor the fishing port on the mediterranean coast of La Linea.

New Forum for Dialogue

Madame Chairperson, since 1996 the Government has pursued a policy of reasonable and safe dialogue with Spain. We have steadfastly refused to participate in bilateral negotiations between the UK and Spain because that is neither reasonable nor safe. Nor indeed is such dialogue consistent with our political rights as a people in our homeland. But we didn’t just say “no” to bilateral negotiations, for example under the Brussels Agreement. We said no, while at the same time publicly and confidently proposing a reasonable alternative structure for acceptable dialogue. Last autumn we were finally able to usher in a new process or forum for dialogue that meets all of the Gibraltar Government’s long standing and well known terms for dialogue. Through this safe and trilateral process, where we take part on the same basis as the other participants, with our own separate voice and with our agreement needed for all agreements, we will be working to improve relations and co-operation with Spain and to enhance the economic and social prosperity of the people of Gibraltar and of the Campo.

Spanish Pensions Issue

Spain has asked for the Spanish Pensions issue to be discussed as part of this new process of dialogue. The Gibraltar Government is, as is has always been, happy and willing to provide information and also explanations and reasons for its well known position on this issue. This position will not change. But we welcome this fresh opportunity to explain our position directly to our Spanish interlocutors and thus help to ensure that Spanish public opinion, especially in the Campo, does not hold Gibraltar culpable or responsible, with consequent ill effect on cross border relations.

Airport Agreement

Another issue for early discussion in this new trilateral forum is the possibility of reaching a new, different agreement, acceptable to all sides, that brings about expanded use of Gibraltar’s airport and air terminal. We hope that that will be possible. Spanish airlines are of course free to use the airport to-day, but we look forward to the possibility of reaching an expanded use agreement that will enable our airport to contribute more to the social and economic development of the Campo. However, any such agreement would need to be free of adverse Sovereignty implications for us. We look forward to exploring these possibilities to see if an agreement acceptable to all sides is possible.

EU State Aid – Tax Exempt Companies

Madame Chairperson these last few days has also seen the ratification by the full EU Commission of the agreement negotiated by the Gibraltar Government in relation to the continuation of tax exempt status on agreed terms. This agreement, while not containing everything that we wanted, delivers sufficient certainty and stability to avoid the worst consequences for Gibraltar. Compared to what the economic position would have been if we had not reached an agreement, this is an excellent agreement.

Our political opponents cannot decide whether to blame us for the original problem; to acknowledge the true extent of the threat that we faced and criticise the agreement for not delivering a “seamless transition” or to accuse us of exaggerating the problem to try and prevent the Government gaining political brownie points when we deliver an agreement that sufficiently protects Gibraltar. And because they cannot decide which to do, they do all three, despite the obvious contradictions involved. After all, if they think that we were exaggerating the state aid threat to our finance centre, in the first place, why nit pick about whether the agreement delivers a “seamless transition”. Either there was a significant threat or there wasn’t.

No-one who understands the issues involved and the consequences for our economy of the position that we faced, could possibly believe that we have exaggerated the threat. It is not possible to exaggerate the threat. Gibraltar can certainly choose to move from one competitive tax regime to another. But Gibraltar could not have withstood ending the current competitive tax regime (the exempt company) if it is prohibited from replacing it with another one (which is the effect of the regional selectivity issue). That is the threat that we faced. That is precisely the position in which the Commission fully intended to place us, and would have placed us in December, had we not reached this agreement. In fact, if the Government can be accused of anything, it is of down playing the threat, which we did in order not to inflict upon ourselves premature and unnecessary economic harm.

The negotiating priority for the Government was to secure for existing exempt companies continuity until after the Court case, thus saving exist business economic activity and the many hundreds of jobs that it sustains. This objective has been achieved.

Then second objective was to secure the ability to do new exempt company business in the future or as it is called in the EU jargon – new entrants. This proved to be very tall order because the EU Commission has not allowed new entrants in any other case. In the end we were able to obtain the right to new entrants until June 2006. Its less than we wanted but better than anybody else has managed to do.

Madame President, there are many other issues which I know are of interest to your members. Last time I tried to deal with too many issues in one after dinner speech it lasted nearly two hours! I know you don’t want to suffer that! I would however, just mention two other issues.

The Proposed Funicular Project

I am glad to see that a robust debate is taking place in the community about the pros and cons of the proposed Funicular Project. This demonstrates the need for and the success of our policy to introduce a public consultation phase in the planning process. For too long in Gibraltar, important and potentially controversial projects had been approved by Governments and DPC behind closed doors and presented to the public as a “fait accompli” when all decisions had already been made.

The open planning process that we introduced was designed to avoid precisely this. I am delighted that it is working well in relation to this project.

As Trade and Industry Minister Joe Holliday has said recently, the Government has an open mind on the project. The Government is not against it in principle, but subject to heritage and environmental factors which the Government has not yet considered or taken a decision about. The project would also need DPC approval. It is too soon to say whether Government will approve the project or not or whether DPC will approve it. But it is right and helpful that everyone has been able to have their say about it at a time when they can still influence the decision makers.

I understand that some established Gibraltar businesses feel that their own commercial interests are not helped by this competition. That, by itself, could not justify rejection of the project. The Government has to balance the private interests of some established businesses against the overall economic interests of Gibraltar as a whole. The Government believes that the increase in economic benefits to Gibraltar would be considerable.

I have also noted in letters written and public statements made by opponents of the scheme, remarks to the effect that, a further argument against the scheme is that most of the investors are “not from Gibraltar anyway”. I think that this xenophobic argument has no merit whatsoever, since the same can be said of all inward investment. All countries seek inward investment into Gibraltar. Such inward investment is vital to our economic prosperity and development. To suggest that outside investors are not welcome is a huge error of judgement which would cost Gibraltar dearly in the future. Would we say it of those who are about to invest £1 billion in the Eastside Development? Obviously not – but they are not from Gibraltar either.

As far as the Government is concerned the relevant question is whether this project would on balance of all relevant factors, be in Gibraltar’s interests. There are many factors that must be taken into account in making that judgement – economic and commercial factors, environmental factors, heritage factors, public safety factors, traffic management factors. The Government, and within its area of responsibility the DPC as well, will now balance these factors and make a decision – in doing so we will not be taking into account the nationality or the country of origin of the investors.

Arrears of Payments to the Government

Another issue, that I know concerns your Board is the arrears of taxes and other payments due by some companies to Government. Your Board, rightly in my opinion, takes the view that this results in unfair competition with those companies that pay their dues on time. I am happy to say that a much more aggressive process of arrears recovery is now well under way. It is also Government’s intention to introduce this year legislation to allow the Courts, in appropriate cases, to disqualify persons who preside over a company that goes into liquidation leaving debts from being involved in the management of any other new business afterwards. We will of course consult with your Board about that legislation.

By way of closing remark, Madam President please allow me to make this observation.

Time and time again Gibraltar demonstrates an extraordinary ability to overcome political and economic threats thrown in our path by others and which would long ago have “done for” much larger and richer communities than us. Some of the credit must go to Gibraltar’s politicians; some of the credit must go to the people of Gibraltar as a whole for our dignity and resolve in standing up for our rights and aspirations as a people. But a share of the credit must also go to Gibraltar’s businessmen, professionals and tradesmen for the skill and resourcefulness that they have shown for decades, and continue to this day to show, thus allowing us to prosper economically.

Last year was especially full of major issues. The MOD lands agreement, the new tripartite forum for dialogue, the EU State Aid negotiations, the start of Constitutional Reform talks with the UK, the Eastside negotiations, the Health services review and the preparations for the New Hospital. 2005 will see the major focus of domestic policy on housing

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