Select Committee on Foreign Affairs Appendices to the Minutes of Evidence

Annex 5, Annex 3

Letter from Mr R J O'Neill, Government of Gibraltar, to Mr C J H Keith, South European Department, Foreign and Commonwealth Office, 25 November 1979


  1.  I am most grateful to the expert Government Departments in Whitehall for agreeing to see Charles Gareze and myself on 3 and 4 December to discuss the question of the pension entitlements of former Spanish contributors to the Gibraltar Social Insurance Fund, in the context both of a general settlement with Spain as a result of reopening the border and of Spain's probable entry into the EEC.

  2.  We face two problems. The first is what to do about unclaimed benefits "due" to Spanish nationals since 1969. You will remember from past dealings between the British and Spanish Governments and most recently from the last meeting of the Joint Working Party with Spanish officials on the Gibraltar question generally, that the Spanish Government maintain that Gibraltar remains liable for uncollected benefits under the Gibraltar Social Insurance Scheme since 1969. The strict answer to this is that under Gibraltar law all benefits must be claimed within one year (within six months, prior to 1972) and they are foregone if not claimed within that time. It is not the Gibraltar Government's fault that pensioners and others have not come to Gibraltar to collect their benefits. There is nevertheless a possible case for accepting some moral liability, in the context of a reopening of land and sea communications under conditions favourable to Gibraltar; and a much stronger case for accepting some such liability if we could at the same time dispose of the much larger and much more serious problem of Gibraltar's obligations towards former Spanish contributors to the Social Insurance Fund (SIF) who have not yet reached retiring age.

  3.  Here, the problem is the sum of a number of factors: the preponderant number (66 percent) of Spanish contributors to the Fund before 1969, when as I understand it contributions were compulsory for Spanish workers but not for all Gibraltarians; the fact that there are now fewer contributors to the Fund than in 1969, because of the changed nature of the workforce since the border closed; the absence of any continuing contributions from the former Spanish contributors since 1969, and currently; the very steep increase in both contributions and benefits between 1969 and 1979; the fact that, on one view reasonably enough, contributions have in recent year's been allowed to decline in real terms, to cover only the Fund's current commitments; and the fact that once Spain is in the Community(or at the latest, I suppose, at the end of some kind of transitional period) there must be no discrimination between resident Gibraltar and non-resident Spanish beneficiaries. In 1978 we estimated that this would increase the annual rate of payments from the SIF from £1.5 million at present to about £4.3 million.

  4.  Gareze and I would like to discuss in London the steps which would be necessary if we have to prepare ourselves to accept those obligations; and we should also like to discuss possible ways of coming to a settlement with the Spanish Government under which they would take over the accrued pension entitlement of former Spanish workers in Gibraltar who are now contributors to the Spanish social security scheme.

  5.  A settlement with Spain in the form of a single capital payment could be highly advantageous to Gibraltar and also of interest to Spain. (It goes without saying that it would only be of interest to Gibraltar if it was less costly than making in due course all the payments ourselves). Frank Brown did some work in the early 1970s on the level of total contributions to the SIF up to 1972 in respect of Spaniards and the benefits paid to them up to that date. That gave a credit balance in their favour of £538,230. I sent you with my letter of 3 November 1978 a table showing how this sum stood on 30 June 1978. The excess of contributions over benefits paid was then £414,566. I enclose a further copy of that table.

  One basis of settlement with Spain might be to pay over that sum, but I would not expect it to be acceptable. A further basis might be to pay interest on the contributions in respect of Spaniards; in November 1978 we estimated that that could produce a figure of about £1,500. A third approach would be to attribute to Spanish participants in the Fund a share in the overall growth of the Fund proportionate to their numbers. I attach as Annex A,[60] to this letter a note by Gareze showing what the effect of that would be. Disregarding payments we have already made to Spanish beneficiaries, it gives a figure of some £2,300,000. This should be seen against the Fund's 1979 balance of over £6,000,000. Yet another approach is one which the Spanish Government themselves put forward in 1971 and which I think deserves further exploration. It was that the Gibraltar Government should pay over the actuarial sum necessary to cover all pensions payable by the date of the settlement (presumably because no further contributions could be expected) together with the total of employer's and employee's contributions for all persons who had not yet reached retiring age plus accrued interest on them. I do not know whether the Spanish Government would still accept such an approach but it appears to me to make good sense as well as being relatively simple to work out.

  6.  I hope that we can discuss all these approaches to the problem whilst we are in London, together with any others which you have been able to devise. We should also like to talk further about the difficulty we identified in 1978, that the obligations of the SIF are towards individual contributors and that it might be difficult to transfer their interest in the Fund to the Spanish Government or a statutory Spanish social security scheme.

Government Secretariat


23 November 1979

60   Ev 50-51 Back

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