Industry says increases should not exceed inflation

The Federation of Industry has suggested to the government that increases in its expenditure should be contained at least to the level of Malta's inflation that now stands at 1.3 per cent.

The government should, moreover, not consider an increase in taxation as a solution because at this stage such action would only contribute to slow down the economy even further, the FOI said.

The country, it added, expected the prime minister and the other ministers to support Finance Minister John Dalli and as a start to render their ministries truly responsible.

The FOI was referring to Mr Dalli's criticism of heads of department for failing to reduce government expenditure as directed by his ministry at the beginning of the year.

The minister rightly insisted that all new programmes should be resource driven, or, in layman's terms, self-financing, the FOI said

It noted that Mr Dalli defended himself from the full responsibility of new taxation which he seems to attribute to the unrestrained spending habits of other ministries.

The FOI also noted Moody's remarks issued simultaneously with Mr Dalli's statements and commented that although the assessment of Malta has changed for the better, Moody's still continued to criticise the government for failing to reduce budget deficits and the national debt and for not having made enough progress to liberalise the economy such as its dependence on the dominant public sector.

The federation recalled that as far back as 1992 it had drawn the government's attention to the need to restrain public expenditure and had repeatedly gone on record ever since appealing to both political parties to do something about it.

The situation was bound to get more complicated at this point in time when the economy was not growing at a satisfactory rate.

The government, encompassing all ministries, was responsible to implement correct financial and economic practices.

It now needed to produce results and not simply express disappointment that the economy was not growing as planned and that it was being let down by heads of department, the FOI said.

"It is time for immediate action and the FOI appeals to the prime minister and the other ministers to take all such collective steps that are necessary to bring about an improvement in the situation," the federation said.