Select Committee on Foreign Affairs Appendices to the Minutes of Evidence

Annex 9(a)

Letter from Mr Ernest Montado, Chief Secretary, Government of Gibraltar, to Hon David Blunt CVO, Deputy Governor, Gibraltar, 31 May 2002


  Following receipt of a letter dated 19 April 2002 from the Foreign Secretary, the Chief Minister has asked me to record the correct position, by way of response to the technical and administrative issues raised in the Foreign Secretary's letter.

  Since the end of last year, I have been tasked to review the workings of the Statistics Office and to oversee the implementation of a number of changes and improvements that have been put in place. Having headed the Statistics Office in the 1970s and as a Chartered Statistician myself I have always taken a close interest in the workings of that office.

  There is a wider policy dimension to the issues raised in the Secretary of State's letter. You are presumably aware of the importance that the current administration has placed on transparency right across Government, since it took office in 1996, and the very substantial reforms introduced. I am sure that, in so far as concerns financial issues, the Financial and Development Secretary will confirm this.

  Since Mr Sedwill's letter dated 24 May 2002 to me speaks of "good governance", and the Foreign Secretary (in his letter under reply) speaks of "full transparency and probity", I think that it is necessary, desirable and appropriate to spell out the record of this administration generally on this issue.

  It is widely acknowledged in Gibraltar that this administration completely transformed for the good, transparency in Government in Gibraltar. Indeed it was elected in 1996 with a manifesto commitment to do just that.

  I wish to deal with each area of transparency, probity and good Government in turn, and, in doing so, would remind you that none of these issues have been raised by HMG or the Convent with the Gibraltar Government and that it has all been driven exclusively by the policy of the Gibraltar Government:-


  When this administration came into office in 1996 about 45 per cent of Government revenue was outside the Consolidated Fund, and thus the subsequent expenditure of those funds was outside the appropriation mechanism and scrutiny of the House of Assembly. This situation has been completely rectified so that 100 per cent of Government revenue and expenditure is now subject to the full scrutiny of the House at Budget time.


  Prior to 1996 a significant amount of Government activity was conducted through a network of publicly unaccountable Government owned companies. These have been reduced to a minimum and in the case of the Companies that remain:-

    (1)  Ministers are no longer directors;

    (2)  Their accounting and financial affairs have been placed under the direct control of the Accountant General;

    (3)  Their accounts are now published and laid in the House of Assembly; and

    (4)  Ministers have, since 1996 made themselves accountable in the House of Assembly for the affairs of these companies, as if they were Government departments.


  Historically, the Principal Auditor's (Government Auditor) Office has always been, and has functioned as, an ordinary department of Government. It had also become significantly under resourced and under staffed. In recognition that all these factors were undesirable the Government took practical steps to distance the Principal Auditor from Government, ring fenced it, and its staff, from the remainder of Government; significantly increased its staffing levels and other resources, and took steps to prevent the Office's destaffing in the future. The Government is also working on draft legislation (subject to existing Constitutional constraints) to make the Principal Auditor completely independent of Government, as this Government believes it should be. All this was acknowledged by the Principal Auditor himself in his last Annual Report to the House of Assembly.


  Every single Government procurement contract, whether it be of goods or services, is since 1996 subject to open and transparent public tender process. Public procurement, for the whole of Government, has been centralised in a Public Procurement Office so that standards and controls are uniform and easily verifiable. Adjudication is by a two-stage process of departmental tender board reviewed by a Treasury Tender Board. Both stages are conducted by civil servants. Ministers are no longer involved in procurement decision making. Tender awards are published. Payments to each Government contractor of recurrent contractorised services is disclosed, individually, in the Budget estimates.


  Since 1996, all recruitment to the Civil Service, Government Agencies, Government companies and single purpose exclusive Government contractors, is effected by an open, advertised recruitment process culminating in a selection process conducted by civil servants. Ministers are not since 1996 involved in this process.


  The Government established in 1999 a statutory, public services Ombudsman with wide powers to investigate all Government Departments and agencies etc. The Ombudsman is totally independent of Government, is financed directly by the House of Assembly and his Annual Report has to be published and laid in the House of Assembly within 60 days.


  The Government has, for the first time ever, introduced into Gibraltar's statutory planning procedures, a public information, consultation, objection and participation right.


  National Income Accounts (as opposed to the Government's Annual Income and Expenditure Accounts) have never been published in Gibraltar. Overall figures for GDP estimates have been made public but throughout the 1990s there was increasing concern about their accuracy to the extent that the Government Statistician felt that it was no longer credible to publish GDP figures until specialist advice was obtained on how best to review the then existing methods and systems for National Income accounting. Also, more effective systems were needed to collect and collate the necessary new economic information from the private sector.

  When the current administration came into office in May 1996, it decided that the situation, as described above, was unacceptable and could not continue. You may like to refer in Hansard, to what the Chief Minister has frequently said in the House on this issue to this effect, as well as on statistics availability generally. I would refer you, in particular to his Budget Speech in 1999, which dealt with these issues in some detail.

  The Chief Minister therefore instructed officials to do whatever was necessary to place Gibraltar in a position to produce and publish defensibly accurate National Income Accounts on an annual basis. He further instructed that assistance should be requested from a National Accounts expert in the UK, if necessary. Such assistance was thus requested by us in 1997 and FCO/DFID identified Mr Mansell for us in March 1998. The first phase of this consultancy was completed in 1999. The second phase was put on hold pending the outcome of an input/output study which the Government had decided to commission from Professor Fletcher (Bournemouth University) who had undertaken two such studies for Gibraltar in 1980 and 1989. This was done shortly after the Mansell report was produced. The Input/Output study provided an opportunity to collate a wide range of statistical data at a micro economic level which would serve to plug important gaps in our statistical database and create control totals giving sufficient coverage and confidence to restart work on the National Accounts.

  The recommendations in the Mansell Report were concerned with conceptual treatment of some of the key elements which form the National Income Accounts. Although the Government gave no undertaking to implement the recommendations, these were accepted and have been worked on, but, as the Mansell Report infers, cannot be tested until the relevant data becomes available.

  The Input/Output study commenced in 1999 but unfortunately suffered protracted delays beyond the completion date of 2001. This was mainly due to problems over the accuracy of available trade statistics and when that was rectified a severe halt to data processing of these statistics when the major earthquake which hit India at the time seriously affected the operations of the Indian data processing company which was commissioned by the Input/Output consultancy team to undertake this work. The Study is now completed and we received a draft Report a few weeks ago. This now provides a firmer basis for sourcing and validating data for National Income Accounting.


  The absence of an Annual Abstract of Statistics since 1998 has not resulted in the absence of "comprehensive official statistics" as the Foreign Secretary appears to have been led to believe. Most of the information contained in the Annual Abstracts are published separately on a regular basis and are contained in publications such as the annual Employment Earnings, Tourism, Hotel and Air Traffic Surveys (conducted under the provisions of the Statistics Ordinance) as well as in a miscellany of other Reports produced by departments and statutory bodies. The Annual Abstract simply brings together the key social and economic indicators into a single report. The Government Statistician took the view in 1999 that he wanted to produce an improved publication which would contain more accurate GDP and trade statistics—the key data emerging from the Input/Output Study.

  The Chief Minister took the view last year that, given the delays in completing the Input/Output Study, it was no longer acceptable for the Annual Abstract to remain unpublished and instructed me to address the matter the explained this in the House of Assembly on 5 November 2001 in answer to a question. I did so shortly after and I am pleased to say that a new Annual Abstract will be published shortly.

  Moreoever, I would add that, as a matter of Government policy, the Opposition have access to all the statistical and accounting information in the possession of the Government throughout the year. You will have seen from Hansard that the Government provides comprehensive, voluminous and unlimited detailed statistical data to the Opposition at Question Time in the House in the form of both oral and written replies. This also is novel in Gibraltar.


  EU requirements on statistics are well covered. We conform to UK and other international standard classification systems and methods. We produce also extensive statistical data on employment and earnings which appear to account for the majority of the relevant UK regulations and directives. We are checking whether there are any reporting requirements for transmitting data which may not have been followed. If we identify any shortcomings, I see no major difficulty in dealing with these satisfactorily.


  The Statistics Office suffered some disruption prior to 1996 when it was split up. Half its staff resources had been deployed to the Income Tax Office and the employment and earnings surveys were conducted there using secondary data from PAYE records. This was done to reduce form-filling by the business sector—a move which that sector welcomed—but it resulted in substantial delays in the production of timely reports on employment and earnings. Indeed, the quality of the data was unsatisfactory and the delays in producing reports meant that much of the information lost its value and application. The changes prior to 1996 also affected generally the workings of the remaining section of the office which became understaffed. The Statistics Office was reintegrated in 1997 and new premises and new computer facilities provided in 1998. The employment/earnings surveys reverted to a questionnaire method in 1999 and after some difficulties in readjusting to survey methods, reports are being published now not only in a more timely manner but also with better quality data. The Government Statistician has so reported in submitting the results to the House of Assembly.

  Also, extra staffing resources were provided in 1999 and 2000 as preparations began in advance for the 2001 Census of Gibraltar. The office was able to undertake the Census successfully at the end of last year and comprehensive results are expected later this year. This is clearly indicative of the extent to which the office has restored and developed its capacity and efficiency.

  Everything that I have set out above has repeatedly been the subject of statements by Ministers in the House of Assembly during successive budget debates and in the course of question time in the House and in the local press since 1997. It seems to me unfortunate that the Secretary of State must have been unaware of any of this. I find it particularly unfortunate that no-one, either in the FCO or here at the Convent, has ever raised any of these issues with us first to establish the facts or to express any concerns either during this term of office of this administration or even throughout the eight years of office of the previous administration. Had anyone done so, I doubt whether the concerns set out in the Secretary of State's letter would have surfaced at all.

  I make a final point which I explained to you last week. I do so purely in a personal context and in the light of my close involvement here with all these issues over the past 16 years. That is, I consider it is unfair that the record of this administration on transparency, probity and good government (including statistics) should have been put into question in this way. I am not therefore surprised that it has so disappointed the Chief Minister.

  I would be grateful, if despite the length of this letter, it were to be shown in full to the Secretary of State.

Ernest Montado

Chief Secretary

31 May 2002

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