Annex 5
Government of Gibraltar Memorandum on
Pensions, the Community Care Trusts and Household cost Allowance
1. The full history and issues of the so-called
"Pensions issue".
2. The Community Care Trust (& Household
Cost Allowance).
3. The nature and extent of consultation
between HMG and GOG relating to Community Care Trust and its operation,
and relating to the pensions issue (prepared by Ernest Montado,
Chief Secretary of the Gibraltar Government).
SECTION ONE:
THE SO-CALLED
"PENSIONS ISSUE"
Gibraltar's historical state pension scheme
1. Gibraltar has had a statutory, contributory,
old age pension scheme since 1955. It was (and still is) based
on the payment of pensions upon reaching pensionable age, in an
amount based on the number of contributions made (in the form
of Social Insurance Contributions) during working life. It is
wholly non-discriminatory as to nationality, residence or other
factors (except that pensionable age remains lower for women than
for men).
2. In 1969 the Franco Regime in Spain unilaterally
closed the Gibraltar border as part of an economic blockade that
would last until 1985. 4,500 Spanish (commuting) workers were
thus "locked out" of Gibraltar (and their places of
work) overnight. There were some 10,000 other Spaniards who had
contributed at some stage between 1955 and 1969 but were no longer
contributing when the border closed. At that time, weekly contributions
to the pension fund, via social insurance contributions, amounted
to seven pence per worker per week. Contributions made by former
Spanish workers therefore ceased in 1969 when their employment
in Gibraltar ended as a result of the closure of the frontier
by Spain.
3. At that time there were already some
Spanish pensioners. Some of the Spanish ex-workers who had been
locked out reached pensionable age during the 13 year period[52]
that the border remained shut. Spaniards could not visit Gibraltar,
and, as there were no other links, the Gibraltar Government had
no physical means of administering the pensions scheme in their
favour. Payments could not be made. Individual personal circumstances
could not be scrutinised or checked. Claimants could not be interviewed.
4. Up to 1969 Spanish workers had contributed
a total of £0.75 million to the Gibraltar pensions fund.
The Gibraltar Government at that time offered to transfer this
fund (the "Spanish sub-fund") to the Spanish Government
[and to the British Government] to administer in favour of the
Spanish ex-Gibraltar workers so that it could be merged with the
Spanish pensions fund to which they would thenceforth presumably
be contributing. This offer was refused.
POST-1969
5. Post-1969 Gibraltar contribution rates
and benefit levels continued to increase as is normal with such
schemes. Spanish pensioners were making no contributions. By 1985
weekly contribution rates had reached £5.90, (compared to
the £0.07 per week in 1969) and pension benefits had reached
£40.60 per week (single person) or £60.90 (married couple)
compared to £1.50 (single) or £2.40 (married couple)
per week in 1969. In 1971, 1978 and 1980, offers were made to
the Spanish Government to transfer the "Spanish sub-fund"
to the Spanish Social Security Fund but these were again refused.
1985
6. during the early 1980s, the then British
Government began bilateral negotiations with Spain for Spain to
re-open the Gibraltar border in order to clear the way for Spanish
accession to the EC (1 January 1986).
7. EC Social Security Regulations prohibited
(and still prohibit) discrimination in social security benefits,
(eg pensions) on the grounds of nationality or residence. Such
discrimination is not prohibited in social assistance schemes.
THE ESSENCE
OF THE
"PENSIONS ISSUE"
8. Upon Spanish accession to the EC, Spanish
ex-workers in Gibraltar, (who had left in 1969, without reaching
pensionable age, and had made no contributions to the pension
fund since) would become immediately and automatically entitled
to receive a pension from the Gibraltar scheme at the same rate
as the Gibraltar resident pensioners (who had been contributing
increased contributions in the meantime) were then receiving.
9. By way of typical example, a Spanish
worker with a full contribution record between 1955-69 would have
made total life long contributions to the fund of around £35,
but (by virtue of the EC Social Security Regulations) would become
entitled to an uprated pension (in 1986) of £41.90 per week
(single person) or £62.80 per week (married couple). In other
words, a Spanish ex-worker would receive more in one week, than
he (or she) had contributed to the fund during his/her entire
working life in Gibraltar, even though they had made no contributions
to the scheme between 1969 and 1986 (and beyond).
10. The liability was jointly calculated
by UK and Gibraltar at around £200 million (at 1985 rates).
The total content of the Gibraltar pension fund was £13 million.
It was common ground that Gibraltar could not afford this liability.
THE GIBRALTAR
GOVERNMENT ALERTS
HMG
11. The Gibraltar Government alerted HMG
as far back as 1976 to the massive pensions liability which would
arise on Spain's eventual entry into the EC. Attached at Annex
1[53]
is a letter dated 23 September 1976 from the Director of Labour
and Social Security in Gibraltar to the Deputy Governor which
was the first official warning of the massive liability which
was foreseen. A copy of this letter was sent by me on 21 March
1997 to the Director of the National Audit Office at his request—(see
Annex 2[54]).
Also attached as Annex 3[55]
is a letter from the Deputy Governor to the FCO dated 23 November
1979 (copied to the Director of Labour and Social Security) which
presented the Gibraltar Government's position at the time. The
Gibraltar Government of the day repeatedly warned HMG that Gibraltar
would never be able to afford this; that in the light of the events
which had happened, Gibraltar should not be expected to pay it;
and repeatedly pleaded with the British Government to ensure that
special provision was made as part of the negotiations for Spanish
accession into the EC to protect the Gibraltar pension scheme
from this impending and unaffordable liability.
SO WHAT
HAPPENED?
12. It was not until 1983 that HMG, having
failed to reach an agreement bilaterally with Spain over the pensions
issue, approached the EC Commission offering two alternatives
as a solution ie either (1) Spain should assume payments of pensions
to former Spanish workers on payment by the Gibraltar Government
of the contributions (plus accrued interest) made by former Spanish
workers; or (2) the EC should agree to a derogation from having
to pay re-valued pensions to the Spanish ex-workers and agree
to the payment instead of pension rates at pre-1986 levels together
with any annual increase in pensions payable in Gibraltar. In
its submission to the EC Commission, HMG enclosed a paper from
the then UK Department of Health and Social Security which stated,
inter alia:
"It is important to recognise that this
problem is not the fault of the Gibraltarian authorities who have
had to plan the financing of the Gibraltar Social Security Scheme,
taking account of the withdrawal from the Scheme in 1969 of more
than half the insured persons, coupled with the need to take on
hundreds more from another country (Morocco). This is an unprecedented
situation between a current Member of the EC and an applicant
country and is the root cause of the predicament."
The Commission rejected the request and stated
that if Gibraltar could not afford the required pension payments,
the Community would expect the UK to meet the cost.
13. Following a bilateral Brussels Ministerial
meeting held in Madrid on 6 December 1985, the Foreign Secretary
announced that former Spanish workers would be paid pensions at
the same rate as pensioners resident in Gibraltar as from 1 January
1986. This decision was taken without consulting the then Chief
Minister of Gibraltar, who reacted publicly by making it clear
that the Gibraltar Government could not accept the liability other
than to pay the accumulated fund of contributions (plus accrued
interest) which belonged to the Spanish pensioners concerned (estimated
at £4.5 million in 1986).
14. The British Government agreed all this
in bilateral negotiations with Spain in 1985, against all the
warnings and pleas from the Gibraltar Government and without consulting
the Gibraltar Government.
1985-88
15. In December 1985 the British Government
agreed to fund in full the payment of pensions to pre-1969 Spanish
ex-workers in Gibraltar for a three year period, and did so. For
its part, the Gibraltar Government paid out to the UK Government
the £4.5 million in the Spanish sub-fund of the Gibraltar
Pension Fund.
1988-93
16. In 1988, following discussions between
HMG and the Gibraltar Government, HMG agreed to continue to meet
the full cost of Spanish pensions for a further period of five
years. But the British Government imposed two conditions:
(1) That at the end of the five year period
(ie in 1993) the Gibraltar Pension Fund was to be dissolved and
the capital shared out between entitled persons; and
(2) That pensions to all pensioners (Spanish
and Gibraltar) be frozen at 1988 rates, at which rate they had
been paid since 1988 and were still being paid. The Spanish Government
was informed of these arrangements at the time and raised no objections.
17. In 1993, the Gibraltar Government complied
with the condition imposed by the UK Government, and dissolved
the fund and ceased to make statutory pension payments to all
pensioners. The Spanish pensioners lodged a complaint to the EU
Commission asking for the restoration of their pensions (the termination
of which had been demanded by the British Government). From that
date the Andalucian Regional Government in Spain made so-called
"advance payments" to Spanish pensioners, and the Gibraltar
Government made similar payments to pensioners resident in Gibraltar.
1996
18. By early 1996, the EU Commission was
about to refer the UK to the ECJ regarding the complaints raised
by Spanish pensioners. In March 1996, HMG agreed to meet the full
cost of the liability to Spanish pensioners, again at EU enhanced
rates. Without time limit, but again on condition that pension
rates for Spanish pensioners AND Gibraltar resident pensioners
remained permanently frozen at 1988 rates. The Spanish Government
was informed of these arrangements and raised no objections.
1996-97
19. Following the UK Government's agreement
in 1996 to pay the liability towards pre-1969 Spanish pensioners
the Gibraltar pensions legislation was restored to the statute
book and the fund reinstated. This was done by means of new legislation
that was drafted by a draftsman seconded from HMG. HMG specifically
approved the new legislation. The UK Government then paid all
arrears of pensions to pre-1969 Spanish ex-workers for the period
1993 to 1996 (at 1988 rates) and continues to pay current pension
liabilities to them (at 1988 rates). The Gibraltar fund makes
payments to all others (ie all resident workers from 1955 and
all Spanish workers from 1985, the date on which new Spanish workers
returned to Gibraltar once the border was fully re-opened.)
2001-02
20. In February 2001 the Gibraltar Government
was informed by HMG that the Spanish Government had made official
representations requesting revalorisation of pensions payable
to Spanish pensioners. The Gibraltar government reiterated that
pensions paid to Spanish pensioners (and to Gibraltar resident
pensioners) had remained frozen solely because that had been imposed
as a condition by HMG when it agreed, in 1996, to fund the liability.
GOG added that the Spanish request was not unexpected given that
it was unrealistic to expect any pensioner to have his pension
frozen forever. It also reminded HMG that Spanish pensioners had,
in the meantime, enjoyed other non-contributory benefits in Spain.
21. On 12 July 2001 the EU Commission wrote
to HMG explaining that they had received complaints from Spanish
pensioners that their pensions had been frozen since 1990. The
Commission asked for a detailed explanation of the rules on regular
increases in pensions in Gibraltar. The complaint before the Commission
was therefore concerned with the freeze on pensions and not about
the existence, or otherwise, of Community Care Trust or the payment
by the Trust of Household Cost Allowances. HMG unilaterally took
the view that in its response to the EU Commission it was necessary
to explain that pensioners in Gibraltar received financial assistance
in the form of the Household Cost Allowance. The Gibraltar Government
recorded its strong objection to this gratuitous, unbalanced reference
to the HCA and expressed its concern that HMG was not addressing
the question from the Commission as to why pensions were alleged
to have remained frozen since 1990. It stressed that the UK's
proposed reply represented a mishandling of the issues involved
and had the effect of steering the Commission away from the question
(why pensions had been frozen) and diverting it to the existence
of HCA. This obviously suited HMG (given its liability to pay
Spanish pensions) but completely failed to place the issues in
the historical, factual context.
22. As a result, in its second letter, dated
15 November 2001, the EU Commission only sought information on
the provision of financial assistance to pensioners resident in
Gibraltar in the form of HCA and the Elderly Persons Allowance
(which is a non-statutory pension entitlement to persons not in
receipt of a Social Insurance old age pension). HMG wrote to the
Gibraltar Government seeking details of HCA (and the Elderly Persons
Allowance) explaining that "the focus of Commission interest
is now HCA and EPA". The Gibraltar Government responded that
the only point at issue was HMG's decision to continue to freeze
the level of pensions payable to Spanish pensioners (and Gibraltar
resident pensioners as a consequential condition). The Gibraltar
Government pointed out—as it had done repeatedly at meetings
and in correspondence since the Spanish Government made its representations
on revalorisation of pensions—that the whole matter could
be resolved by HMG agreeing to revalue pensions payable to Spanish
pensioners on the basis of cost of living increases and that this
would cost HMG £150,000 pa at current inflation levels. The
Gibraltar Government would do likewise in respect of Gibraltar
resident pensioners. This proposed solution has not been responded
to by HMG.
23. The continued and perpetual freezing
of old aged pensions at 1988 rates was entirely unrealistic and
unsustainable. In 1988, the ODA-Led Joint Study Group (comprising
UK and Gibraltar Government officials) which examined the issue
concluded, inter alia, in their Report[56]
(paragraph 5.3.7) as follows:
"5.3.7. The other more drastic action
which is considered is to fix pensions at their current level
(ie fixed in nominal terms). This is illustrated in Annex Tables
5.7 and 5.8 at 1988 earnings and prices. A summary is attached
at Table 5.4. Because the effect on pension rates of 5 per cent
pa reduction in real terms is so drastic, such a policy could
only be sustained for a limited period and it is therefore not
meaningful to examine the impact over the whole period on total
expenditure and the net deficit of the SIF. Thus the Gibraltar
single pension would reduce by 1991 to the real level of the 1988
UK pension, by 1994 it would have reduced to the same proportion
of average earnings as in the UK (ie 22 per cent rather than 30
per cent) and by 1998 it would be about 60 per cent of the 1988
real value. By 2026, if the policy continued, it would be approximately
15 per cent of its 1988 level."
SECTION TWO:
THE COMMUNITY
CARE TRUST/HOUSEHOLD
COST ALLOWANCE
24. It was, and remains, wholly unrealistic
for HMG to have expected Gibraltar pensioners (of any and all
nationalities) to live, until death, on old age pensions frozen
at 1988 rates.
25. Accordingly, in 1989, there was established
in Gibraltar by a group of private individuals a private charitable
trust (Community Care Trust) with the object of performing a range
of charitable functions for elderly persons in Gibraltar. Amongst
its objects, the Trust pays a financial sum to persons of pensionable
age in Gibraltar to assist them in meeting household costs (ie
electricity, water and other utility and household costs which
are particularly high in Gibraltar given the diseconomies of scale
which apply here.).
26. These payments are made by the Trust
in equal amounts to all persons of pensionable age resident in
Gibraltar regardless of nationality. The payments are made regardless
of whether the recipient is entitled to a state old aged pension
or not, or the extent of any such entitlement. This has, in effect,
provided income support to Gibraltar resident persons of pensionable
age. Although these payments are from a private source, the Community
Care Trust, that trust received donations from the Gibraltar Government
Social Assistance Fund amounting to £60,000,000 (prior to
1996) and £5 million subsequent to 1996. Such donations are
not exclusive to Community Care Trust. The Gibraltar Government
has provided grants to the John Mackintosh Homes (another private
charitable trust) which runs residential homes for the elderly
amounting to around £9 million since the 1980s, and to the
Dr Giraldi Trust (a private charitable trust which looks after
the residential and other needs of the disabled) and to the New
Hope Trust (a private charitable trust which runs the drug rehabilitation
programme and other help for persons suffering addictions).
27. The Community Care Trust has been making
these HCA gift payments openly since 1989. The British Government
has been fully aware of their existence from the outset.
28. In February 1996, the British Government
began to urge the Gibraltar Government to reform HCA because it
considered that the scheme might breach EU rules prohibiting discrimination
in social security benefits, given that the HCA was not being
paid to Spanish pensioners who were not resident in Gibraltar.
The British Government view is that HCA may be a social security
(and not a social assistance) measure because it is based on age
and not on need.
29. The British Government has often offered
"technical assistance" to help in the reform of HCA.
All these offers have been taken up. There have been numerous
meetings and written exchanges at technical level, and also at
political level. But the bottom line has always been the British
Government's insistence that HCA must be made means-tested (rather
than universal) and that it has to be means-tested at a threshold
which would result in a significant number of current and future
recipients having payments drastically reduced or cut off altogether.
All this is set out in Section three of this Memorandum detailing
the extent to which HMG has been aware of the existence of Community
Care Trust and its consultations with the Gibraltar Government.
30. Furthermore, the Gibraltar Government
has always made it clear that it has no powers to interfere with
the workings of Community Care Trust. Even were the Gibraltar
Government minded to do so, it lacks the power to modify the Community
Care Trust or to direct the Trustees thereof to modify these payment
of allowances to comply with HMG's requirements, or at all. Moreover,
the Gibraltar Government is not willing to advise or encourage
the Trustees of Community Care Trust to implement the British
Government's demands, which are socially retrograde and unfair
on Gibraltar's elderly as an alternative to HMG's revalorising
its pension payments to Spanish workers (which remain at 1988
rates).
SO WHAT
IS THE
ALTERNATIVE?
31. The alternative is that the British
Government, who are already paying the pensions of pre-1969 Spanish
workers should simply agree to increase them. They are still frozen
at 1988 rates. The UK Government wants to end the alleged discrimination
by depriving Gibraltar pensioners of money that they have been
getting for 13 years rather than revalorising payments to Spanish
pensioners. This is unrealistic.
WHAT ARE
SPANISH PENSIONERS
ASKING FOR?
32. Spanish pensioners are complaining that
the British Government has frozen their pensions at 1988 rates.
They want them uprated. They are no complaining about Community
Care payments to Gibraltar residents. It is not a solution to
them that Gibraltar resident pensioners be deprived of Community
Care payments. This will not make the claim of Spanish pensioners
to a revalorisation of their pensions go away. The issue is not
reform of HCA, but rather the uprating of pensions which have
been frozen at 1988 rates.
33. Spanish Pensioners are formally represented
by an association named ALPEG. The position of ALPEG has consistently
been that their claim relates to the state old age pension and
is based on their view that, under European Law, all state pensioners
are entitled to regular inflation uprating of the state old age
pension whereas their state pension remains frozen at 1988 rates.
ALPAG has made it clear repeatedly that they are not claiming
Community Care payments but simply asking for normal, standard
annual increases in pension levels. ALPEG further states that
their members are entitled to annual pension increases in the
same way as Spanish nationals who, having worked in the UK, and
obtained a UK old age pension, return to Spain and are still entitled
to annual pension increases from the UK.
SECTION THREE:
RECORD OF
THE NATURE
AND EXTENT
OF CONSULTATION
AND INFORMATION
EXCHANGED BETWEEN
HMG AND GOG RELATING
TO COMMUNITY
CARE TRUST
AND ITS
OPERATIONS
34. The following summarises the extent
to which the establishment of Community Care in Gibraltar was
common public knowledge, the extent to which it was in the knowledge
of HMG, and the extent of the information exchanged, and consultations
held, between HMG and the Gibraltar Government over this matter.
35. From Gibraltar Government records, the
first official line of enquiry from HMG dates back to 16 May 1990,
when the Deputy Governor wrote to the Attorney-General enclosing
a leaflet which had been issued on 14 December 1989 by Community
Care Ltd (a company wholly owned by Community Care Trust which
administers HCA and other payments) (see Annex 4[57]).
In his minute to the AG, the Deputy Governor explains that he
had consulted with the FCO and sought advice as to whether the
HCA scheme was compatible with EU obligations. This enquiry was
not raised with, nor referred to, the Gibraltar Government but
a copy of the minute was given to the Gibraltar Government on
9 May 1995.
36. On 27 September 1991, the Assistant
to the Deputy Governor wrote to the Administrative Secretary of
the Gibraltar Government explaining that he had provided the Southern
European Department of the FCO with details of the benefits paid
by Community Care Ltd and asked, on behalf of the FCO, for details
of how Community Care payments operated. This was replied to on
7 October 1991. It was explained that Gibraltar Community Care
was a charitable organisation which made payments to specific
groups details of which had already been made available to the
Assistant Deputy Governor and that there were no contribution
requirements.
37. On 5 January 1994 the Principal Auditor
submitted to the Governor the first set of Community Care Accounts
for 1990 and 1991. This was done in conformance with Sections
61 and 62 of the Public Finance (Control & Audit) Ordinance
which allows the Principal Auditor to examine and certify the
accounts of any organisation (public or private) which is in receipt
of public funds, whereupon he is then required to submit his report
to the Governor. The latter is then required to cause such accounts
to be laid in the House of Assembly. On 18 July 1995 the Principal
Auditor submitted the 1992 and 1993 Accounts to the Governor.
On 8 January 1997 he submitted the Accounts for 1994 and 1995
to the Governor. On 2 July 1999 the Principal Auditor submitted
the 1996 Accounts to the Governor.
All of these accounts have been available to
the FCO, and have been laid in the House of Assembly (and are
accordingly in the public domain).
On 6 March 2000 the Principal Auditor wrote
to the Chief Secretary and explained that, having reviewed the
Accounts for 1997, he had decided not to undertake his own audit
of the audited 1997 Accounts. He added that he had decided that
he would only undertake his own second audit in circumstances
where he felt that this was justified and he saw no reason in
having to do so.
The Accounts for the years 1997 to 2000 were
produced annually by Community Care and copies submitted to the
Principal Auditor but he has not considered it necessary to undertake
any further second audit. There has therefore been no requirement
to submit these Accounts to the Governor for tabling in the House
of Assembly.
The Principal Auditor has confirmed that he
has no record of having been asked for copies of the Accounts
for the years 1997 to 2000 from the Governor's Office. HMG has
not, at any subsequent stage requested accounts of Community Care
until they were requested by UK officials during their visit to
Gibraltar in January 2002 (see paragraph 45).
38. There has been substantial public debate
and comment on the existence and operations of Community Care
since its creation. In particular, Community Care was referred
to in a Court Case[58]
which spawned a series of Gibraltar Government Press Releases
and press reports intermittently between May 1994 and May 1996.
There was also a lengthy public debate in the House of Assembly
on 18 December 1995. The motion before the House declared that
Community Care was a private registered charity established in
1989 which provided assistance to senior citizens in Gibraltar.
It noted that the Government's Social Assistance Fund had provided
grants to Gibraltar Community Care Trust.
39. In February 1996 shortly before HMG
announced the agreement to fund Spanish Pensions indefinitely,
UK officials sought further detailed information on the workings
of Community Care including information as to how Community Care
was set up and by whom; how it was constituted; where it received
funds from; what entitlements did beneficiaries have; who decided
on the level of benefits and allowances; how many persons were
entitled to the allowances; their nationality; what was the entitlement
criteria; what other benefits were paid out; what were the level
of allowances; what was the total yearly expenditure; and, what
other payments were made to Gibraltar pensioners from other sources.
This enquiry was answered in specific terms on 19 February 1996.
On 23 February 1996 further information was provided on the number
and category of persons in receipt of allowances from Community
Care.
40. On 29 February 1996 the then Chief Minister
wrote to the Governor setting out his Government's position on
the nature and operation of Community Care and making it clear
that the question of Community Care payments had been in the public
domain for many years and had been the subject of argument and
comment in two Court Cases since 1993 and in the news media generally.
He stressed that Community Care was a registered charity independent
of the Government and that Community Care payments, to which there
was no statutory entitlement, did not create a liability which
fell either on the Gibraltar Government or the UK Government.
41. UK officials remained unconvinced that
there was no risk of legal challenge to the Community Care arrangements.
A team of UK officials led by the ODA and comprising officials
from the DSS and the Government Actuary Department visited Gibraltar
in April 1996. They requested that the HCA Scheme should be reformed
to address concerns which had been raised about vulnerability
to legal challenge. This was followed by further meetings on 17
July 1996, 19 November 1996, 18 December 1996, 21 February 1997,
4 July 1997, 13 October 1997, 25 November 1997, 29 January 1998,
19 March 1998 and 24 June 1998. There were exchanges of detailed
correspondence and other contacts between the Gibraltar Government
and HMG on 28 June 1996, 1 August 1996, 13 August 1996, 17 September
1996, 20 September 1996, 24 September 1996, 22 April 1997, 29
April 1997, 18 June 1997, 15 July 1997, 16 July 1997, 15 December
1997, 9 January 1998, 13 February 1998, 17 February 1998, 4 March
1998, 11 March 1998, 12 March 1998, 13 March 1998, 24 July 1998
(twice) and 29 July 1998. There were lengthy and detailed discussion
of the workings of Community Care and the provision of all information
requested of the working of Community Care.
During the course of these meetings three proposals
were submitted by the Gibraltar Government which sought to address
the concerns raised by UK Officials about the workings of the
HCA Scheme. This was done on the basis that if it was agreed that
such proposals satisfactorily addressed the concerns raised, these
would be submitted to Gibraltar Community Care Trust for their
consideration. None of these proposals were accepted by UK officials
who did not consider that they resulted in the exclusion of a
sufficiently large number of Gibraltar resident pensioners from
the HCA Scheme. The concern by UK officials appeared to focus
more in ensuring that large numbers of pensioners were excluded
than on the nature and merits of a scheme which reformed HCA and
introduced an element of means testing.
42. The Gibraltar Government also proposed
to HMG in late 1996 that a joint working group should be set up
to examine possible ways of addressing the issues which were of
concern to HMG. HMG replied on 22 April 1997 that they did not
consider that a formal working group would be appropriate and
offered to help the Government of Gibraltar, only on an informal
basis, with advice on how to reform the HCA Scheme.
43. The issue of HCA, did not resurface
until February 2001 following representations made by the Spanish
Government to HMG requesting revalorisation of pensions paid to
Spanish pensioners. The Gibraltar Government responded to HMG
on 14 February 2001 making it clear that the Spanish Government's
representations were concerned exclusively with the unfreezing
of pensions and were not directly related to the operation of
the HCA Scheme in Gibraltar. The Gibraltar Government advised
that the matter could be resolved were HMG to agree to remove
the freeze on pension payments which would cost the UK (who have
accepted liability to pay Spanish pensioners and are paying them)
around an additional £150,000 per annum at current inflation
rates. Were HMG to agree to do so, the Gibraltar Government would
make the same payments to Gibraltar resident pensioners.
44. On 20 February 2001 there was a meeting
in London between the Gibraltar Government and officials from
the FCO, the Cabinet Office, the DSS, the Government Actuary and
DFID where a detailed explanation was once again given about the
nature of the problem in its proper historical context and the
clear need to address the issue of unfreezing pension payments
with each side providing for annual increases to their respective
categories of pensioners. These proposals were not accepted by
HMG. Further correspondence was exchanged on 23 August 2001 and
3 September 2001 where the Government of Gibraltar once again
stressed the need to address the issue by agreeing to revalorise
pension payments.
45. By July 2001, the matter was over shadowed
by the complaints raised before the EU Commission by the Spanish
pensioners. There has been extensive exchange of correspondence
on this issue between 31 July 2001 and 17 April 2002. A meeting
was held with UK officials in Gibraltar on 11 January 2002 where
further detailed discussion ensued on the workings of Community
Care and the Spanish Pension problem generally. Details on the
funding of Community Care were again provided on 28 March 2002
in response to a letter dated 22 January 2002.
Whilst in Gibraltar, UK officials met the Board
of Community Care Trust on 11 January 2002. The Board of Community
Care Trust has confirmed that at that meeting the nature, origins
and operations of Community Care were fully explained. The Board
explained (as the Gibraltar Government had, over the years explained
in numerous meetings) that Community Care was established in 1989
to offer protection to senior citizens with particular regard
to household costs such as water and electricity which were particularly
expensive in Gibraltar given the diseconomies of scale. Initially,
there had been fund-raising activities from the public at large
and a number of private individuals set up the registered charity,
Community Care Trust. The Charity had received a substantial financial
contribution from the Gibraltar Government. It paid out Household
Cost Allowance, wages to Community Care officers, special allowances
to persons over the age of 80, financial support in connection
with the operation of Calpe House (which is residential accommodation
for persons receiving medical treatment in London) and other benefits
to the disabled and very elderly.
According to Community Care Trust, UK officials
requested copies of the latest annual Accounts. The Board informed
the officials that the Board would consider this request. Subsequently
the Board informed Mr Powell of the Convent staff that the Board
had agreed to make available the accounts but, according to the
Board, the offer was never pursued by him (see Annex 5[59]).
Prepared by Ernest Montado, Chief Secretary of
the Gibraltar Government
July 2002
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55
Ev 49-50 Back
56
Joint Study Group Report, May 1988. Back
57
Ev 51 Back
58
A number of Spanish pensioners sought judicial review challenging
the legality of the dissolution of the Gibraltar Social Insurance
in 1993, a requirement imposed by HMG as a condition of its agreement
to pay Spanish pensioners between 1988 and 1993. Back
59
Ev 51-52 Back
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