Select Committee on Foreign Affairs Appendices to the Minutes of Evidence


Letter to the Chairman of the Committee from Rt Hon Peter Hain MP


  Thank you for your letter of 24 April asking for a further note about pensions in Gibraltar. As the Committee are aware, a potentially large contingent liability is accruing as a result of the Government of Gibraltar funded Household Cost Allowance (HCA) scheme which we are concerned may be discriminatory against Spanish pensioners under EC law. We estimate the contingent liability to be in the region of £77 million, although it is difficult to be precise.

  The Government does not accept responsibility for any liability arising in this matter and we have repeatedly made this clear to the Government of Gibraltar. We have repeatedly urged the Government of Gibraltar to reform or replace HCA to ensure that it is consistent with EC law and to stop the contingent liability from accruing further. We have offered technical assistance to the Government of Gibraltar to facilitate this.

  The European Commission has commenced investigations into financial arrangements for those of pensionable age in Gibraltar. The UK Government will continue to respond to their inquiries.

  The Chief Minister of Gibraltar wrote to the then Permanent Under Secretary of the Foreign and Commonwealth Office on 24 July 1998 indemnifying the Government against any liability arising from this date until such time as HCA was reformed. The indemnity is a political rather than a binding legal commitment. The Chief Secretary of Gibraltar wrote on 28 March 2002 giving 12 months notice of the withdrawal of that indemnity. In the absence of reform or replacement of the HCA, the contingent liability continues to accrue.

  The Commission is also concerned about another payment made to those of pensionable age in Gibraltar, the Elderly Persons Allowance.

Rt Hon Peter Hain MP

Minister for Europe

16 May 2002

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