Sir Joe Bossano’s letter to Gibraltar Savings Bank Depositor’s confirms what Roy Clinton has been exposing for some time. It is that the Government continues to raid the ‘piggy bank’ by deploying savings in the Gibraltar Savings Bank [GSB] to benefit all taxpayers by lending to the Government or companies owned by it.
He does not publicise what, if any, independent assessment of all that GSB lending is undertaken or that, if there is any default, we taxpayers must fund any GSB losses over and above reserves held.
SIR JOE THE INVESTMENT GURU?
Is it all based on Sir Joe’s judgment? We simply do not know, but no savings institution does that, especially if the lender and borrower are connected, which they are through government control. Huge caution and advice are followed by international savings organisations.
What we know from answers to Roy’s questioning is that the GSB “… does not disclose the reasons for its investments”. Additionally, according to Roy, the GSB fails to publish audited accounts in good time.
The level of information available to savers is scarce, something that would not be allowed for commercial entities.
GSB DISGUISES GOVERNMENT BORROWINGS?
In the words of Roy (Gibraltar Chronicle letter, 10th June) “… the Government have been using [the Savings Bank] to disguise borrowings which Sir Joe himself has quantified as being over £1 billion.”
Additionally, Roy uncovers that in the 2024 financial year “… Government has borrowed a further £165 million via Credit Finance, Gibraltar Properties Limited, GSBA Limited and GEP Limited.”
WILL INVESTMENT JUDGMENT PRODUCE GAINS?
Deploying people’s savings for the benefit of all taxpayers is an admission from Sir Joe that savers money is being used by the GSLP-Liberal Government to fund its projects.
Sir Joe writes that doing so, “… produces at one stage or another, increased revenue used in meeting the rising cost of public services.”
Indeed, that is so if, and only if, the deployment of those savings produces profit and not losses. However, every such deployment carries with it the risk of loss.
LOSSES GUARANTEED FROM PUBLIC RESOURCES
It is losses that are guaranteed by public funds, but only recoverable if there are freely available public funds, as and when replenished by more or higher taxation and/or lower public expenditure. It is something that is currently difficult to see on studying public finances, unless Sir Joe, in his past inimitable style, is keeping something out of public gaze.
There is an ancient saying in economics, “the higher the return, the higher the risk”.
Well, in that context it is relevant to note that the interest being paid by the GSB on the new product in September “… continue at 6% for 1 year, 5.9% for 3 years, and 5% for five years.” Those rates are more generous than what is generally available in the UK.
ATTRACTING MORE SAVERS?
Why is that? Is it to attract more savers to keep up growth whilst lending remains at risk?
One hopes not. One hopes that the safety of each savers’ money is well looked after, especially in the uncertain economic times we live in without a Gibexit treaty.
UK Base Rate is forecast to reduce further in the early summer. Sir Joe, however, talks of reducing GSB interest rates in time, but promises to keep savers’ rates of those invested in the Economic Development Fund at present levels until December this year.
Llanito World 