Gonzi accuses opposition of 'vandalising' people's future

The Prime Minister yesterday accused the Labour Party of "vandalising" the future of today's young people by opposing pension reform.

Dr Gonzi told Parliament that there had never been such an irresponsible statement by an opposition leader as that made by Dr Sant last July when he declared in the House that a future Labour government would not consider itself bound by the provisions of the Bill currently before Parliament and would revoke them until fresh decisions were taken in 2011.

If nothing else, this debate had exposed which party was responsible enough to take tough decisions in the interest of the country and the people's future and which party only took decisions motivated by opportunism aimed solely at grabbing power as soon as possible, Dr Gonzi said.

At the beginning of his speech Dr Gonzi said the House had not, for a very long time, had a Bill with such enormous long-term implications on the people's living standards.

This Bill, therefore, placed a huge responsibility on the government and it also granted MPs the privilege of taking effective action to improve the people's welfare well into the future.

Everyone recognised that the current pension system was defective and needed to be reformed to enable it to meet current and future needs. The government was not starting from square one but was reforming a system which already existed.

This was a process which was repeating itself all over the world. He knew of no country which had not undergone this change or was not planning to. Indeed, some countries which had already raised the retirement age to 65 were considering raising it further.

The reform in Malta, however, was not motivated by what was happening abroad, but by the situation here. With every passing year the pressure on pensions was getting stronger and solutions were getting more difficult.

In a short period of years, there would be too few workers to shoulder the pensions bill. And unless reform was carried out now, that burden would be too heavy. Pensions would simply become unsustainable.

Another facet of the problem was adequacy - the maximum rate of pension would soon be too low for pensioners to live comfortably. Dr Gonzi said the PN government had launched studies on how to tackle the problem even before 1996. When Labour took office in 1996 it continued this analysis and experts' reports told the government that the problem needed to be addressed. So how was Labour now arguing that the issue should not be touched at present? What had changed since 1996?

Dr Gonzi pointed out that whereas the annual average number of people who retired had been 1,962 10 years ago, in 2005 that shot up to 4,400 and it would climb to 5,792 this year. The pressure on the public purse was obvious. The government, Dr Gonzi, said, was acting prudently in the measures it was introducing and the reform would be carried forward in stages every five years.

Firstly, the government was acting to strengthen first pillar pensions for which it was directly responsible. It was also setting the groundwork for a mandatory second pillar pension, but this would only be introduced when the circumstances in the country were appropriate. The government would also offer incentives to encourage third pillar voluntary pension schemes.

The retirement age was also being raised gradually to enable society to absorb the changes. It was shameful, Dr Gonzi said, that the opposition speakers had hardly made any objective and constructive analysis of the government's proposals.

His appeal to the opposition was for it to realise how this legislation would determine the future of today's young generation. It was unacceptable that after such hard work over so many years, the opposition was now saying that a fresh process of consultations should be started in 2009. Why that date? On what had the opposition based its decision? What was so special about it?

Dr Sant had also said that decisions should be taken in 2010. Again, on what was that date based?

Worryingly, when speaking in Parliament last July Dr Sant had even said, irresponsibly, that the changes to the pensions system and the social security contributions which this Bill provided for would not be recognised by a Labour government and it would repeal them until new decisions were taken in 2011. This, Dr Gonzi said, was the most irresponsible statement ever made by an opposition leader, who instead of contributing to the modernisation of a system which needed reform, was instead trying to undermine it by sowing doubt.

The opposition was, for political purposes, vandalising the future of the people - the young and those currently in their 30s - and the Labour Party would have to shoulder responsibility for its actions.

If nothing else this debate had served to show which political party responsibly shouldered decisions in the interests of the nation and the people and which opted for political opportunism in order to grab power at the first possible opportunity.

Dr Gonzi said the government would remain open to suggestions on how this reform could be improved up to the very end of the debate in committee stage.

Opposition speakers Josè Herrera and Leo Brincat, who spoke immediately after the Prime Minister, both denied that Labour was being politically opportunistic or washing its hands of pension reform. They insisted that the government did not have an electoral mandate for such a reform.

Dr Herrera said it was unfair of Dr Gonzi so say that Labour wanted to dismantle the people's future when it was thanks to Labour that everyone had a pension.

It was the Prime Minister who was trying to gain political advantage and it was the fact that this reform was not announced before the last elections that constitututed political opportunism.

Undoubtedly, if one looked at the pensions issue using current statistics, one would see there is a problem. It was for this reason that the Labour Party spent such a long time discussing it. It was also true that people were living longer and the birth rate was declining.

But the pensions issue should not be seen only in this way. A problem which Malta had was its low employment rate, including the low participation rate of women. But more women were now opting for further education and employment. This was one reason why one should wait a while to see what was happening.

Furthermore, the opposition felt that the proposals the government had made would not mean a better deal for the people, even though the government's intentions was not necessarily negative.

Whereas one now needed to pay national insurance for 30 years and could retire at 61, what the government was proposing was a 40-year period of national insurance contributions and retirement at 65.

The opposition was not saying there was no problem or that it should be ignored but the government needed the people's mandate to tackle it.

The issue also needed to be seen in a wider context, such as government spending on health care.

Dr Gonzi had argued that the current cap on the maximum pension might not remain adequate. It was obvious that the cap had to be raised, but it was in fact periodically revised through adjustments reflecting inflation.

Concluding, Dr Herrera said the pensions problem existed, but it was not the country's most pressing issue. Reform needed to be authorised by an electoral mandate and change needed to consider more factors and trends than what was being done at present.

Mr Brincat quoted from the MLP's position paper where the party underlined the need for consensus on pension reform - consensus based not so much on the social partners, however important, as on the public who were ultimately affected by this reform.

The MLP was saying that it was committed to reform based on consensus and it had even set a timetable, but it wanted first to give the people the opportunity to give their mandate. The party would only have been opportunistic had it said this was not an issue and should not be addressed.

The MLP was also insisting that the reform should be comprehensive and holistic.

The party's view on the reform proposed by the government was that the measures were limited and their effect was not clear; there would be too few benefits for those with a low income compared to those who were well off; the government's proposals were aimed at an immediate strengthening of its finances; the measures ignored certain contributory pensions and did not address the self-employed, among other categories. Nor did the proposals give proper consideration of part-timers.

Pensions reform needed be bound to a wider strategy that included sustained economic growth, low inflation and social justice, Mr Brincat said.

The Labour Party was promising to hold detailed consultations with the people as well as with social partners in 2009 to be followed by a conference of experts in 2010 for the reform to be drawn up for implementation by 2011.

The government did not have the electoral mandate to implement the reform at this stage in this legislature, Mr Brincat concluded.

The Bill was later given a second reading after a division, the opposition voting against. In her winding up Social Solidarity Minister Dolores Cristina accused the opposition of ignoring significant parts of the Bill and misleading the people on its implications. For example, opposition speakers criticised the government for raising the retirement age to 65 without saying that workers who paid their national insurance for 40 years could still retire at 61 with a pension.

Her remarks and those by other speakers will be reported tomorrow.