Memorandum from the Office of the Leader
of the Opposition, Gibraltar
LETTER FROM JOE BOSSANO, LEADER OF THE OPPOSITION
TO THE CHAIRMAN OF THE COMMITTEE
1. I refer to the reply of the Foreign Office
to your Committee's report in respect of Household Cost Allowance
being paid to Gibraltar pensioners by the private charity Gibraltar
Community Care.
The reply says that I was told in 1988, by the
UK, of their concern about these payments, and, that UK only learned
the details of the payments in 1996.
This is totally untrue. In 1988 Household Cost
Allowance was not being paid. The first payment by Community Care
was made in December 1989.
2. In 1988 I reached an agreement with UK
under which they accepted meeting the full cost of Spanish pensions
for five years, until 31 December 1993, subject to the following
conditions demanded by UK:
(a) Existing benefits to be frozen for
five years.
(b) Social Insurance Fund to be dissolved
on 31 December 1993.
(c) After 1 January 1994, the remaining
balance of the Social Insurance Fund to be distributed to Gibraltar
pensioners as single lump sum payment. UK would make an equivalent
final payment to Spanish pensioners. Both Gibraltar and Spanish
pensioners to be able to buy annuities with their final payment.
(d) Gibraltar's pensioners whose income
after 1.1.94 as a result of the above arrangements fell below
a certain threshold, would qualify for assistance from Gibraltar's
existing supplementary benefits arrangements.
3. In reply to point (0) in your report
on Community Care payments, the FCO states:
"The British Government made
clear to the then Chief Minister in 1988 that any new arrangements
which the Government of Gibraltar might introduce for payment
to the elderly must be non-discriminatory and means tested."
This reply is designed to mislead the Committee.
The points made to me by the British Government in 1988 were about
the arrangements to be introduced in 1994, after the dissolution
of the social insurance fund was dissolved. This was on the basis
that the annuities bought by pensioners with the lump sum payments
to be distributed in 1994, would provide an income stream lower
than the discontinued frozen pension. The British Government wanted
an assurance that the topping-up of the annuities would be means
tested, that the distribution of the final sum would be non-discriminatory
and that the annuities would also be available to Spanish pensioners.
4. On 18 November 1988, Baroness Chalker,
the then UK Minister, made the following points to me about the
arrangements to be put in place after 1993:
(a) Any social security benefits should
be through Gibraltar's existing social assistance arrangements.
(b) The social security benefits should
be means tested.
(c) The level of support should be such
that topped-up annuities should not be at the same level as the
former SI pension which had been frozen for five years.
(d) The benefits should be discretionary
rather than automatic entitlements.
This was on the premise that, after 1993, the
successor scheme for new pensioners would be the result of a Gibraltar
wide employer based occupational pension outside the scope of
EU Regulation 1408/71, a condition then considered essential by
UK.
Kevin Chamberlain was the FCO legal advisor
involved in these discussions and, at the time, had apparently
obtained confirmation from the UK Attorney General that these
arrangements were in keeping with EU law.
5. In February 1994 the matter was raised
with me at an Inter-Government Ministerial meeting. Although Community
Care had been paying Household Cost Allowance for several years,
its accounts tabled in the House of Assembly and the details of
the payments in the public domain, the question was not raised
at all in several days of discussions. The Social Insurance Legislation
in Gibraltar had been repealed and the SIF dissolved, as requested
by UK by 31 December 1993. The Gibraltar Government set up a Transitional
Interim Payments Fund from which monthly payments started in January
1994. These payments to former recipients of SIF pensions at the
same level as their former pensions were being made by way of
loans to be deducted from their eventual entitlement under the
successor arrangements when these came into force, backdated to
1 January 1994. The Junta de Andalucia, the Regional Government
in Spain, made identical arrangements for their pensioners, whom
they had instructed not to accept the final distribution from
the dissolved SIF. The Spanish view was that the UK decision to
dissolve the SIF and distribute the balance was illegal and contrary
to EU obligations and UK would be required by the ECJ to restore
payment of SIF pensions for life. The UK assured me that they
had no doubt of the legality of what they had proposed and were
willing to see it tested in the ECJ. Their only concern was about
the level of protection of the incomes of existing Gibraltar pensioners
in the successor scheme and that I should not maintain the same
level of income as had been payable under the SIF frozen pension.
At this stage they were still adamant that the arrangement for
post 1994 pensioners should be an employer based occupational
scheme so that it would be outside the ambit of EU Regulation
1408/71.
6. The concern of the British Government
in 1994 was over the strict criteria on the use of the social
assistance scheme already in place to limit the fall in the income
of Gibraltar pensioners below the level of the frozen pension
that had been discontinued. The frozen pension level for a single
person with the maximum contribution record was and still is about
48 pounds a week. The social assistance scheme then in place paid
persons with reduced pensions the difference between the amount
received and about 38 pounds a week provided they had no other
income excluding Community Care payment of Household Cost Allowance.
Reforming the latter payment was never raised with me in any of
the discussion on the dissolution of the social insurance fund
or the successor arrangements.
7. In 1996 the British Government decided
that, rather than defend infraction proceedings, they were willing
to continue paying Spanish pensioners for life. I was told that
UK still believed they were not legally obliged to do so but that
they wanted to avoid the infraction proceedings for other reasons.
I was then asked to reverse everything I had
been asked to do since 1988. The original demand to freeze pensions
in 1988 and discontinue them in 1993 was to reduce the cost from
an estimated 250 million pounds to 50 million pounds.
8. I was asked in 1996, as I have already
explained to the Committee, to agree that the restored pensions
would stay frozen for the lifetime of the Spanish pensioners,
in order to contain the cost to UK. The social insurance legislation,
repealed in 1993, was to be reinstated and there was to be two
separate pension funds, a closed fund, which paid pensions to
Spanish pensioners and to Gibraltar pensioners based on contribution
for the years of the closed frontier. UK would pay money into
this fund to meet the cost of Spanish pensions which were to remain
frozen. A second open fund would operate to pay pensions earned
by social insurance contribution made after the frontier opened.
UK would make no payment to this fund for Spanish pension which
would be paid for by current contributions. On this occasion I
was asked to agree not to pay any increases in pensions, which
were now to be frozen for life, other than means tested social
assistance under the existing arrangements, which also remained
at frozen levels. I agreed to this but reminded officials that
Household Cost Allowance paid by Community Care was not frozen
and would continue to go up every year. It was only following
this, and for the first time, that UK raised objections to Household
Cost Allowance. I was told UK would not proceed to implement the
decision to restore frozen Spanish pensions unless I gave an undertaking
to stop the charity making HCA payments to pensioners as from
June 1996, immediately after the general election. In addition
I had to give an indemnity to UK that if Spanish pensioners claimed
past, present or future HCA payments, the Gibraltar Government
would reimburse the British Government. Sir Hugo White put these
conditions to me on instructions from London and told me I had
the weekend to think it over. I gave my reply on the spot. I said
I would not interfere, in any shape or form, to get Community
Care to discontinue or even curtail HCA payments. That I was not
prepared to give any indemnity whatsoever to reimburse the British
Government, and that if I had been minded to do any of these things,
I would not be prepared to do so on the basis of a secret deal
with UK whilst maintaining the opposite view in public. I therefore
made clear that if they proceeded down these lines the matter
would feature in the 1996 election campaign. I also made clear
that since they had been telling me for eight years that the freezing
of social insurance pensions and the subsequent dissolution of
the SIF was legally defensible, they should go ahead and defend
it in the ECJ, given that they had always claimed that nothing
in EU law required social insurance pensions to be payable at
any given level or indeed to exist at all. The matter was left
there before the general election and I put it in the public domain
in my speech on the ceremonial opening of the House of Assembly
in May 1996.
Joe Bossano
Leader of the Opposition
January 2003
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