Dalli accuses opposition of 'selling people's future for power'

Nationalist MP John Dalli has hit out at the Oppostion over its stand on pensions reform, saying it was "selling the people's future for power".

He told Parliament that demographic changes meant that the current formula on which the pensions system was based could not be sustained. The figures simply did not add up.

It was not true, he said, that this government was reducing social services, as some opposition speakers had claimed. What this government was doing was ensuring that social services were directed to the people who really needed them. Indeed, half the country's recurrent spending went on social services.

Rather than reducing pensions, what the government was doing was ensuring their survival at adequate levels in the future. At the same time, the right balance had to be found to keep the economy going. It was therefore, strange that this reform was not finding the support of both sides of the House. It was scandalous to see a section of the House using this exercise for political gain. This amounted to selling the people's future for power.

When the House had been united, as in the case of the financial services sector, it managed to produce legislation which, in the past 12 years, led to steady growth. Why should the House not be united in safeguarding the people's future as well?

Retaining the same ceiling on pensionable income did not make sense when wages were rising significantly.

And, furthermore, 61-year-old persons were now more healthy than in 1979 when the last reform was made. So why should parameters not be changed on the basis of new realities?

In 1979, on average, one would get seven years' pension for 30 years of work. But now, 22 years of pension were being paid for 30 years of work.

At present 18.5 per cent of the population was aged over 60. Soon, a third of the population would be over 60. Therefore, the parameters on which one calculated pensions had to be changed, Mr Dalli said.

Earlier in the debate, Jeffrey Pullicino Orlando (PN) said that without reform, many Maltese would eventually not be able to enjoy a proper standard of living.

Successive studies confirmed the need for reform and it would, therefore, have been grossly irresponsible of the government not to have done anything. That the opposition was opposing reform showed that it was the party which was irresponsible and had thrown its social conscience overboard.

Dr Pullicino Orlando praised the pensions working group for its studies and extensive consultations and criticised the MLP for having kept away from all talks.

Education Minister Louis Galea said the opposition's stand amounted to political opportunism - it did not want to lose any votes by, say, supporting a higher retirement age. Yet according to a The Times survey, 70 per cent of the people believed that the issue had to be dealt with at this point in time.

Dr Galea said the proposals made in this Bill were carefully calculated and fair, involving a gradual raising of the retirement age and a raising of the maximum pensionable income.

These were reforms that ensured that the pensions system remained sustainable, and that pensions remained adequate. The average pension today was 58 per cent of the average wage. If no steps were taken this would fall to 15 per cent of the average wage within a few years.

Dr Galea said that although measures were to start being taken as from next January, those who were 55 and over would not be affected.

In terms of this Bill, those who reached 61 years of age and were not able to continue working would still be able to retire and be eligible for their pension once that would have paid social security for 40 years.

Although the World Bank had proposed that the pension packet should be calculated on the average income of the pensioner's last 40 years, the government was of the view that the situation should remain unchanged (the best three years of the last 10 for employees and the last year for self-employed) for those aged over 45. For younger people the formula would be the best 10 years from the last 40.

The pension were also being index-linked and there would be credits for those who had to stop working to study or to raise their children.

This Bill was also laying the foundations for a mandatory second pillar pension, if and when this was desirable, and for voluntary third pillar pensions.

Joe Debono Grech (MLP) asked why the government wanted to change the pensions system when it claimed that the economy was doing well.

He spoke of how Labour governments had improved workers' rights and social services, saying the Nationalists had voted against when the first pensions system was about to be introduced. In fact, the Nationalists had always voted against the introduction of social services.

It had been a Labour government who had introduced children's allowance, leave, sick leave and other social services such as the minimum wage. Under the present government, social services were being rolled back.

Mr Debono Grech insisted that people in certain jobs, such as stone masons, would not be able to continue working until they reached age 65, as this reform implied. And why were workers not being told that raising the retirement age to 65 was only the first step, and that this would eventually be increased to 72, as was being done abroad?

Carmelo Abela (MLP) denied that the opposition's position was motivated by political opportunism. The opposition was not abdicating its responsibilities, but it felt that pensions reform was not as urgent as the government was making it out to be.

There were other more pressing issues which the country needed to tackle. Had the opposition been motivated by political opportunism it would have simply declared that the government had no electoral mandate to reform the pensions system in this way. But the opposition had gone further and made its own suggestions.

Government speakers were repeatedly making the point that in the future the percentage of workers to pensioners would get smaller. Therefore, the obvious course of action should have been to raise employment levels and the workers' participation rate.

Furthermore, it was this government itself that was promoting early retirement schemes even as it proposed in this Bill to raise the retirement age.

The opposition, Mr Abela said, was strongly against the way the government was proposing the introduction of a mandatory second pillar pension on the strength of a legal notice.

Instead of tackling pensions on their own, the opposition felt a review of spending in the whole sphere of social services, including health, was needed, with an eye also on taxation. This was being said, especially, since the pensions fund would not be in deficit if social security contributions were chanelled solely for that purpose.

Pensions reform needed to be made over a long time frame. It should be carried out in the context of an improving economic climate and it should be backed by wide consensus and an electoral mandate.

Mr Abela said this Bill went against the interests of middle income workers while the well off would be doing even better. It also ignored anomalies in various categories of non-contributory pensions.

Concluding, Mr Abela reiterated the opposition's view that the way ahead should be a commitment to pensions reform in the parties' electoral programmes for the next general election followed by wide ranging consultation and an experts' meeting, publication of a White Paper and a national congress in 2010 when final consensus would be sought for reform from 2011.

Other speakers will be reported tomorrow.