Fake bonuses and regressive caps

The political crossfire on economic and fiscal issues over the past few weeks has been, in my opinion, grossly hypocritical and highly unproductive. Government's spin machine has been working overtime to dissect the opposition's discussion document on economic and social regeneration in a manner that is certainly not conducive to stimulating any meaningful discussion on the serious problems the country is facing.

Speaking on a discussion program on NET TV, PN president Victor Scerri went as far as saying that everything in Labour's document was wrong and none of it should be implemented. His ultra-defensive and paranoid mind frame was reminiscent of Dr Alfred Sant's pathetic and melodramatic pronouncement during the EU Referendum that "God forbid we had to join the European Union".

Government rightly challenges both Labour and Alternattiva Demokratika to present their own set of economic proposals. It does this without ever supplying its own proposals - the PN is so void of economic vision that the only strategy they propose is that of hope.

On the other hand Labour must ditch this sick habit of issuing proposals and discussion documents that do not get penned and that it refuses to stand by. When the Green Party formulates economic policy, it also seeks external expert advice, but ultimately the policies are our own.

We take full responsibility for and ownership of our proposals. We do this because, unlike government and opposition, we welcome criticism - it is a democratic position our political adversaries are not capable of adopting. We know that what does not kill us inevitably makes us stronger and more credible.

The purpose of this article is to comment constructively on the two proposed measures contained in Labour's document that have been so savagely ravaged by government, namely the proposed removal of the quarterly "bonus" and the removal of the capping on social security contributions.

The so-called "Bonus" is in fact not a bonus. It is an income supplement introduced by the Socialist administration some 20 years ago, payable bi-annually. Presumably, it was introduced to increase disposable income at times of the year when this would have the highest economic and political benefit, for example the one payable a fortnight before Christmas.

The PN government elected in 1987 moved quickly to match Labour's generosity (using the money of employers) and soon legislated to add a further two bonuses in March and September. The fact that we still refer to these income supplements as bonuses is utterly ludicrous.

These mandatory payments are the European equivalent of the 13th and/or 14th payment handed out to many employees across the continent at year end.

Labour's document is not proposing that employers stop paying these income supplements. The proposal is that the money is channelled into a fund to be used to disburse benefits to employees who are away from work for extended periods of time due to sickness - it is in effect introducing a mini welfare state for the seriously disadvantaged.

In truth, as the PN and its various voices are stating, the quarterly payments will not end directly in employees pockets. However, rather than using intelligent and balanced argument to criticise this proposal, the PN has staged a scare-mongering campaign around the issue.

What they don't tell their viewers on NET TV is that in all probability each of them will lose far more than Lm220 a year as a result of the imminent reforms in pensions and healthcare.

As always, the Greens choose to criticise this measure maturely. We disagree with the recommendation to re-channel the "bonus" into a health fund because it is a poorly conceived and socially regressive measure of social redistribution.

In effect, it will mean that somebody earning minimum wage and paying no income tax will lose the full Lm220 per annum. Conversely, someone earning Lm20,000 a year will be losing only Lm143 -the full "bonus" of Lm 220 p.a. less the 35 per cent marginal tax rate he/she already pays, amounting to Lm77.

In this case, Robin Hood would be nicking the merry men to fund the Sheriff's extravagances. I just cannot fathom how even the last remaining socialists left in the Labour Party, like Evarist Bartolo and Michael Falzon, have not spoken categorically against this proposal. History will judge them.

Labour's document also recommends removing the capping on National Insurance contributions. In effect what is being suggested is that the more people earn, the more they contribute to the welfare state - plain and simple progressive social re-distribution.

Now here is where we witness PN hypocrisy at its finest. Government knows that radical reform in pensions and healthcare is necessary and will be carried out in the near future. Take it from me - very soon we will all have to pay more to secure welfare either via steeper NI contributions or through direct contributions to private pension plans as well as private healthcare insurance, or a combination of both.

By thrashing the proposal for the removal of the capping, government is creating the impression that (at least until the local council elections are over) it can reform welfare on thin air rather than on our money.

What does the Green Party think about the removal of the capping on NI contributions? We recognise first and foremost that NI contributions are paid not just to provide for our retirement pensions. We pay 10 per cent of our income (with employers pitching in as much) to finance the whole welfare state that includes mainly retirement pensions, healthcare and education, as well as other benefits like widows' pensions, children's allowances and housing.

Like ex-Finance Minister John Dalli (now branded an armchair critic by his own party) once correctly advised, we agree that the NI contributions is split into two parts that reflect the cost of pensions and healthcare.

In addition we recommend that part of the Social Security contribution be allocated to the cost of providing state education. One must remember that this also includes the cost to running institutions such as MCAST and the University, as well as providing 'free' primary and secondary schooling in state schools.

We believe that it is only fair that since retirement pensions are capped then the part of the NI contribution payable into the pensions' fund also remain capped and will not increase according on one's earnings.

However, as regards contributions paid for healthcare and education, the political and social reality is different. As a party committed to fair social redistribution, we cannot agree that someone earning, say, Lm8,000 a year should contribute exactly as much to healthcare and education as earning, say, Lm18,000.

We can therefore agree to a rising of the cap on both these two portions of the Social Security contributions paid out of the employee's salary, if this measure is part of a widely agreed reform in welfare.

We do not agree though that at this stage the capping should be raised for the employer's portion of the contribution since this will increase business costs drastically and erode our competitiveness even further. However we stress that we will only agree to this measure with one very strong proviso: "free" state-provided healthcare and education must remain available to all.

It would be grossly unfair to demand that a sizable portion of the middle class contributes more towards healthcare and education, but then in turn be denied the same benefits to which they are contributing because of means testing.

It is clear that the three parties have divergent views on social justice. The Greens are clear and committed. We believe that everyone should contribute proportionally to the welfare state, according to one's means. Retirement pensions, healthcare and education must be available to all.

Labour's position is often ambivalent - by flirting with the proposal to remove the quarterly "bonus", it remains evident that they still seem to be searching for that proverbial boxxla socjali (social compass).

On the other hand, the Nationalists choose to criticise irresponsibly and indiscriminately the proposals to remove the "bonus" (a regressive measure) and the proposal to remove the capping on Social Security contributions (a progressive measure) from the same ideological platform.

Their hypocrisy shows that, metaphorically speaking, their ideological compass has become a politically convenient and portable electric fan fitted with a reverse gear whenever Mr Saliba deems necessary!

Mr Fenech is the spokesperson on Finance, Economic Affairs and Tourism of Alternattiva Demokratika - the Green Party.