Amendment to law on financial administration "unconstitutional"

Opposition MPs Charles Mangion and Josè Herrera insisted yesterday that the government was undermining parliament through an amendment to the Financial Administration and Audit Act providing that the minister of finance may authorise the issue of sums not exceeding 10 per cent of the sum appropriated in the Budget, without the prior approval of the House. The minister will be required to submit a report to the House within a month of such appropriation.

Dr Mangion said it was the rule that the government could not spend money which was not appropriated by parliament.

This proviso undermined the control on the public purse which should be exercised by parliament. Clearly, parliament should set the example of accountability. For these reasons, this proviso should be removed.

Dr Herrera insisted that public funds could only be appropriated by parliament. Indeed, governments resigned when the Budget was not approved by the House.

What the government was now proposing went against parliamentary democracy and the word and the spirit of the constitution itself. The fact that the constitution stated that public monies could also be administered according to any other law in force in Malta should not be interpreted in a way that gave the government the authority to itself appropriate funds. Not only was the government giving itself the power to appropriate funds but it would then be required only to report to, not seek approval from, the House.

The government could thus appropriate Lm90 million without parliamentary approval. This was scandalous and amounted to the termination of the parliamentary system.

Dr Herrera said that the current system of supplementary estimates was enough to cover spending the government may be required to make in view of emergencies or poor spending projections. What, therefore, was the purpose of the new provision and why was the threshold set at 10 per cent of the Budget?

One could consider court action because parliament was being denied its most important role.

The bill was moved on Tuesday by Parliamentary Secretary Tony Abela. Its main purpose is to protect public funds from fraud and other irregularities. The bill also provides for the recovery of public money lost as a result of fraud or other irregularities.

Dr Abela said the law needed to be amended in view of EU membership and because the economy had diversified into various areas and the involvement of the government in the economy had increased. More importance needed to be given to the way public finances, including funds received from the EU, were utilised by the various public entities.

This bill would enable the government to improve systems and procedures when presenting projects for EU funding.

The various EU funds that Malta would obtain after May 2004 would have to be used in a transparent manner. The government intended to use such funds to improve the infrastructure, the environment and the transport network as well as the restoration of the national heritage. This bill would enable Malta to prove in a professional manner that these funds were being used according to what they were intended for.

Referring to the provisions against fraud, Dr Abela explained that when irregularities or fraud were detected and a report was made to a head of department, he would take all measures for the protection of public monies, including the levying of administrative penalties and legal action for the recovery of any loss. Notwithstanding any stipulation to the contrary, any bond, bank guarantee or other security given for the proper performance of a contract paid for from public funds would also extend to the recovery of any funds or administrative penalties for which the person supplying the bond may be liable.

Dr Mangion said that this bill did not help to increase transparency and government accountability, but was somewhat artificial in that all it did was to bring Maltese law into line with the EU's acquis.

Contrary to what was being said before the elections, the state of public finances was not under control. The deficit in the first seven months of this year was of Lm127 million, and projections made at the last budget on the deficit would be massively exceeded. And this notwithstanding the fact that government departments had to cut down on costs as from January of this year.

Indeed, overspending was not due only to government departments but also the many public authorities, foundations and other entities which had been set up by the government and which escaped parliamentary scrutiny as regards their expenditure.

Public funds in this bill was defined as including funds received from foreign entities, such as the European Union for example. The effect of this amendment was to address the issue of funds received from the European Union. Therefore the real problem regarding public funds in the hands of authorities and other entities did not fall within this definition.

Opposition leader Alfred Sant said that what Malta needed was focus on the government's spending priorities.

As it were, there was an enormous difference between spending projections made by the government for this year, and actual spending - and this had nothing to do with the holding of the referendum and the election, about which everybody knew well in advance.

The government was squandering funds everywhere. Costs on the new hospital had risen astronomically, beyond Lm150 million, and there were reports that it could be unmanageable. Thousands had been spent on a hospital migration plan which had been shelved.

Hundreds of blue eyed Nationalists were being employed as consultants, raising government outlay and blocking promotions.

When the government established a private-public partnership for street embellishment purposes, one would have expected that more would be achieved for the same outlay as before. But the government was ending up spending between Lm2-3 million more on flowers for roundabouts. Beautiful as these flowers were, was this outlay justified in current circumstances?

The problem facing parliament and the country was that the government was not giving a true picture of the state of public finances. Much spending was being hidden, it being made through corporations, foundations and other bodies which were not publicly accountable. The Foundation for Tomorrow's Schools was a case in point, with most of its contracts having been awarded to contractors operating within the minister's electoral district.

The government needed to put all of its cards on the table.

But the government never had any interest in controlling the deficit. For it, money was never a problem and it was continuing to spend according to partisan and corrupt interests and giving assistance in a discriminatory manner. It was no wonder that the government had not introduced accrual accounting, despite its promises.

Labour MP Noel Farrugia said that Malta had been paid Lm8 million to restructure agriculture so as to have more competitive prices available to consumers. Of these Lm8 million, how much was spent on restructuring, in particular on raising standards so as to bring Malta to a competitive level? Once Malta joined the European Union, what would happen when the EU questioned the use of its funds given specifically for this purpose?

Mr Farrugia said allegations made by the former permanent secretary in the Ministry of Agriculture on certain spending by the ministry should be investigated.

The debate continues today.