Good evening, I hope that you have all had a very happy and enjoyable festive season with your family and friends.

The Millennium has a very special significance to those of us that are Christians as it is the 2000^th Anniversary of the birth of Jesus Christ. But it is also a significant event to all people regardless of religious belief. We are part of that very small fraction of human beings that, since the world began, have witnessed the start of a new millennium. The millennium is a milestone in the affairs of mankind. It was therefore great to see so many people deciding to greet the new millennium together, as a community, at Casemates Square.

I would like to take this very early opportunity to thank those who have worked during the festive period in our health and essential services, especially the Royal Gibraltar Police that has presided over a peaceful and trouble-free Christmas and New Year period as has become increasingly the norm in recent years.

Time moves on. The world changes. In some respects for the good, in others not for the better. We in Gibraltar have got to be part of that changing world but we must be careful not to lose sight of those values that we cherish: Peace, good order and stability, genuine personal freedom, social solidarity, religious and racial harmony, our history and culture and our reputation, and of course, our determination as a people to prosper economically and politically in the face of adversity. In short -–the spirit of Gibraltar. We are small enough to preserve many of the sound values of the past that, regrettably – show signs of being diluted away in many larger countries. Our first task in this Millennium should therefore be to reaffirm and consolidate those values that we want to underpin our society in this new century.

The year started problematically with the fishing crisis which threatened to plunge our relations with the Campo into crisis. It seems clear that the dispute was being manipulated. From the outset it was clear to the Government that the dispute was not really about fish or conservation, but represented an overt challenge to British sovereignty, jurisdiction and control over Gibraltar waters. We were therefore very pleased to bring that serious problem to an end on terms which returned the fishing position to the status quo before the problem began in 1997, while at the same time fully asserting and protecting our sovereignty, jurisdiction and control over the waters, and the validity of our laws and the authority of our Law Enforcement Agencies in them – all of which were recognised by the Spanish fishermen in the agreement. I believe that sound and responsible leadership is not about fuelling disputes but about seeking solutions to them that do not involve conceding anything of fundamental importance.

ECONOMY

During the year the economy has continued to make very good progress. The Finance Centre has been buoyant, despite the threats posed to all offshore centres by international tax initiatives. I have no doubt that the Finance Centre is now reaping the rewards of this Government`s investment in sound regulation, implementation of our international legal obligations and the transformation of Gibraltar``s international image and reputation.

Cammell Laird has continued to improve the performance at the ship repair yard, and port activity has continued to grow. Tourism has continued to prosper – cruise ship calls, our reputation with cruise companies, visitor numbers and hotel occupancy have all improved significantly; tourists continue to visit Gibraltar in record numbers.

Even though the very strong pound has dampened day visitor expenditure in our shops, they have brought considerable economic benefit. For the benefit of those small businesses that most feel the pressure of international competition we have introduced the most far reaching and comprehensive package of business assistance measures that Gibraltar has ever seen.

The last 2 years have also seen the growth of operators like Victor Chandler, Ladbrokes, Corals and others involved in high quality international betting operations.

The overall result of all these things has been buoyant levels of economic activity and employment levels in all these sectors.

EMPLOYMENT AND TRAINING

Unemployment figures to be published later this week will show that the present level of Gibraltarian unemployment is the lowest that it has been since current records begun in1989. It is important to create different types of jobs to meet the employment needs of people of all levels of qualification. However we are particularly conscious of the need to create the right sort of jobs that will appeal to our youngsters when they graduate from University and thus attract them to return to settle in Gibraltar. This enriches our family lives, our economy and our community.

In parallel to this we have concentrated on the provision of high quality training and apprenticeship opportunities for our youth in construction and basic trades, finance centre activities, tourism and ship repair. I have no doubt that, while still more needs to be done, these policies are clearly meeting with success.

SOCIAL AFFAIRS

It is, of course, important for the Government to concentrate on the economy. The economy is the engine room of Gibraltar. It provides the jobs and the income that make everything else possible. But the Government is equally aware that things need to be done which are of social worth even if they do not generate income or economic activity. A significant share of the wealth created by Gibraltar`s economic successes has to be invested in improving the quality of life of all our citizens. That is why Government has invested in the beautification of our streets and roads, in building specially designed houses for our elderly, in long overdue refurbishment of housing estates, in better street cleaning, in building a new Health Centre, better sports facilities and a Youth Centre and playground at Laguna Estate; in improvements in our social services and facilities for our disabled; in the establishment of a Drug Rehabilitation Centre in Gibraltar; in improving family allowances and disability allowance; in giving over 500 pensioners the opportunity to receive a full pension, which they were not getting before; and many other such projects. The year 2000 will see further progress in the upgrading of Gibraltar – both physically and in terms of services and facilities available to citizens.

The new Sports City at Bayside, which will provide greatly expanded and improved sports facilities is now under way. The Youth Leisure Centre at King`s Bastion will get off the ground this year. More of our streets will be beautified – Waterport Road will start in the next few weeks. The magnificent new Casemates Square is now nearly ready, needing just the trees, benches and street furniture.

One problem that affects many elderly people and renders some of these prisoners in their own homes is the lack of lifts in many Government housing Estates. To remedy this a phased lift installation programme for all Estates where lifts can physically be installed is under way – starting with Glacis Estate where a refurbishment and lift installation project is already in progress.

During the next few days Government will be announcing details of its Upper Town urban renewal programme which will hopefully lead to a vast improvement in the quality of life in the Upper Town – and the reversal of its recent depopulation This programme will involve investment in street and building refurbishment, provision of parking facilities, green spaces and recreational facilities, new property development and increased owner occupation.

Also in a few days time, the Government – through the new Elderly Care Agency – takes operational control of Mount Alvernia. This will herald a transformation in Gibraltar`s elderly care facilities. The current residential home facilities will be

expanded and new nursing home, domiciliary care , respite and day care centre services will be added, resulting in Gibraltar`s first ever comprehensive and specialist care services for the elderly, which this community wants and our elderly deserve.

HEALTH

Progress has also been made in restructuring and improving our health services. Additional staff and consultants have been employed; a new well equipped Health Centre has been built; private practice is being regulated for the first time ever – so that it does not operate at the expense of free, efficient, public health care. A patients charter of rights will be announced in the next few weeks. But neither the modernisation of our health services nor our health service legacy to future generations can be complete without a new hospital, which Gibraltar now needs. The building of a new hospital during the next four years will therefore comprise one of the centre pieces of the Government`s manifesto at the General Elections due this year. Quite a lot of preparatory work has been done already during the last year. In a sense this is the main millennium project for Gibraltar.

HARBOUR VIEWS

When we took office in 1996 we inherited two very large problems with very considerable financial and other consequences for Gibraltar.

One of these was the very serious construction problems affecting the Harbour Views Estate. The extent and cost of the works required are breathtaking. There are 22 buildings. All of them have to be re-roofed. All of them have to have a new waterproof outer layer built around them. All of them have to be fitted with a smoke extraction system. All of them need to have windows replaced. The total cost is in the order of £17 million.

Happily these very complicated works are now under way in four blocks which are due to be completed in February or March this year. Works on the remaining 18 blocks will also start very soon.

Residents of other Estates which are now a few years old are also experiencing difficulties with poor construction. It is simply unacceptable that people should be lured into home ownership and then sold shoddy construction and left to deal with developers and construction companies who lack the financial resources to rectify the defects. Accordingly the Government will this year be introducing legislation to ensure that developers and building contractors make a proper

financial provision by way of a bank bond to ensure that sufficient funds are available to repair defects that emerge after the buyer moves in.

INCINERATOR DISPUTE

The other large problem that we inherited relates to the Incinerator, where an inept contract was entered into in 1990 committing the Government to deliver to the operators more refuse than Gibraltar produced, was likely to produce or is even now producing. The plant simply does not work properly and massive capital investment in it is required, in addition to the fact that the Government is at the receiving end of a large legal claim for damages from the owners of the plant. Legal proceedings are in progress.

TAXATION AND PUBLIC FINANCES

As you know it is the policy of the Government to reduce the burden of personal tax as much as possible consistent with prudent financial management and the need to finance public and social services and public investment. We are therefore pleased to have reduced taxes again in 1999, as we have done every year since 1996. The policy will continue.

And so, as will be apparent from the examples that I have given, there has been a considerable but sensible amount of public investment to improve Gibraltar`s economy, physical appearance, public and social services and building infrastructure. And this investment has been paid for even though we have lowered taxes (and therefore reduced Government revenue), maintained the public debt level. In addition we have increased public reserves. So there has been no spending of inherited "kitties" as the Opposition would have you believe.

STYLE OF GOVERNMENT

Further progress has also been made on what I call "style of Government" issues. You have seen how Government has fully restored transparency to public finances; published the accounts of Government companies; ended several so-called "Joint Venture Contracts" when these were not in the public interest; made all jobs recruitment subject to advertisement and selection board; made all public purchase subject to open tender. There has been an end to the culture of secrecy intimidation and favouritism. Most recently we have established a well resourced office of administrative Ombudsman, with very considerable power to investigate and report to the House of Assembly on cases of maladministration affecting citizens. This is a major step in holding the public administration to account for individual cases, thus empowering the citizen in his dealings with Government. Legislation is now being prepared for the introduction in 2000 of the next phase which is the establishment of a Statutory Civic Rights Agency providing Consumer Protection, Trading Standards and Citizens Advice.

INTERNATIONAL ISSUES

On the international front we have had a relatively good and stable year. In early 1997, when we studied the first early drafts of the proposed Amsterdam Treaty we identified and pointed out to the British Government various provisions which would, in effect, give Spain a veto over UK`s participation in the Schengen Agreement. We alerted the British Government to the fact that, if left in the Treaty, Spain would use those provisions to try and block Gibraltar`s inclusion as the price to buy off the Spanish veto to the UK`s own participation. As a result of our representations those provisions were changed and all subsequent drafts of the Treaty right up to the night of the signing by Heads of Government, at their Summit in Amsterdam in June 1997, did not contain language giving any country a veto. Hours before the Treaty was agreed by Heads of State the language requiring Member State unanimity for UK`s participation in Schengen and thus giving Spain a veto, was re-introduced into the text. The British Government claimed that this was a mistake by the EU Presidency but they were unable to reverse the position. As a result of this fiasco, and despite Gibraltar`s vigilance during the negotiating process leading up to the Amsterdam Treaty, Spain has effectively obtained a veto to UK participation in existing Schengen Agreement provisions.

The Schengen Agreement deals with such things as internal and external border controls, police cooperation, visas and asylum and share information systems.

As we speak UK is seeking to participate in parts of the Schengen Agreement – though not in the important parts relating to border controls. Spain is inevitably, and as predicted, trying to use her veto to extract concessions from the UK over Gibraltar`s participation. We have made it perfectly clear to the British Government that we wish and expect to participate in all parts of the Schengen Agreement that UK participates in – and furthermore that the constitutional autonomy of our local competent authorities cannot be compromised as a trade-off for the Spanish veto. We continue to watch the situation very closely.

Earlier in the year, the Government submitted to the Foreign Affairs Committee of the House of Commons a detailed and lengthy document of written evidence carefully explaining all of Gibraltar`s problems and grievances both inside and outside the EU. I then gave oral evidence to the Committee. The subsequent Gibraltar Report of the FAC of the House of Commons accepted most of the Gibraltar Government`s analysis and views and was the most favourable House of Commons report on Gibraltar that there has ever been. The Report now stands are the bedrock of British Parliamentary support for Gibraltar.

We have sought to cultivate and maintain this support and indeed to project Gibraltar`s case internationally in several ways during the last few years. First by transforming Gibraltar`s international reputation and thus media coverage; second by arranging frequent and regular visits to Gibraltar by MP and MEPs; third by Gibraltar Government visits to Brussels and by opening Gibraltar`s own office in Brussels; fourth by numerous newspaper and magazine interviews, and appearances on UK, European and Spanish TV. Our problems with Spain have of course not gone away that was not the goal. The goal was to raise the profile of our case, lobby support and to focus the spotlight on Spain as the unreasonable party employing uneuropean and undemocratic behaviour for which she would increasingly be made internationally accountable. We believe that the pendulum has begun to swing in our favour, with the Spanish Foreign Minister reduced to admitting in Parliament last month that the border restrictions were in order to "deny oxygen" to Gibraltar. There is now no hiding place for the truth and realities of Spain`s anachronistic policies and attitudes towards Gibraltar.

In the meantime we will, of course, continue to seek good, constructive and European neighbourly relations with Spain. To this end we remain confident and happy to engage in dialogue with Spain. But we will continue to make it clear that relations must be based on mutual respect and respect for our European democratic, legal and constitutional rights. We stand ready to extend to Spain the hand of European, neighbourly friendship and cooperation. If she will not reciprocate, if she continues to refuse to dialogue with us, she will increasingly be seen as the cause of the tension - however many false and slanderous statements Spain makes about Gibraltar. That is the sensible way for us to carry on playing our cards.

The process of looking at our Constitution with a view to identifying desirable modernisation of it has also now begun by a Select Committee of the House of Assembly. Evidence and representations from the general public has now been invited. When the process is completed later this year I hope that it will be possible to propose changes to the UK that will have the support of both sides of the House. That process will be briefly interrupted by a general election this year – but it will continue after the election where it left off.

The aim of constitutional development is two-fold. First, to establish a stable, secure and enduring constitutional link with the UK that is non-colonial in nature, appropriate for the new millennium that we have just started, and which puts an end to our colonial status while preserving British sovereignty. And second, and

equally important to modernise our internal institutions to provide modern, democratic checks and balances to the powers of Government and other institutions. This will provide, in a modern, European democratic way, the ultimate guarantee of real and meaningful personal freedom and equality of opportunity for all citizens. Needless to say the guarantee and security on sovereignty contained in the preamble to the Constitution will not be touched.

When I first entered politics one of the objectives that I set myself was to reduce the very high levels of politicisation that existed in Gibraltar. It is, of course, right and sensible that people should be knowledgeable and aware of the problems and threats that Gibraltar faces from time to time. It is, however, wholly unnecessary and destructive of the quality of life in Gibraltar for politicians to constantly wind people up and keep them, mainly for their own political ends, in a state of fear, anxiety and political frenzy. I hope that we have succeeded in injecting a greater degree of pose and tranquility into day to day life in Gibraltar in this respect.

And so in accounting to you for 1999 I am happy to report to you that things are progressing steadily and well. I know that there is much left to do and that it has not yet been possible to address some people`s personal needs and problems. But with the economy working well and improvements in infrastructure, services and facilities beginning to come through, Gibraltar is very well placed to face the challenges of the new millennium. The spirit of Gibraltar prospers.