Prime Minister Lawrence Gonzi said yesterday that the surcharge on power and water consumption would be reduced to 59.5 per cent in the coming days from the current 63.5 per cent because of a drop in international oil prices. Fuel costs would also go down.
Dr Gonzi was speaking in Parliament during the budget debate.
He said in a two-hour speech that the budget was a window on the future. It showed that the country had achieved its financial targets and the foundations had been laid for a bright future which was there for the people to grasp.
One of the most important results that the government had achieved was a Lm100 million surplus between recurrent spending and revenue. This was in sharp contrast to the Lm68 million deficit under the Labour government. Malta also attracted a record level of foreign investment this year.
Thanks to this improved position the government could now take further measures to promote growth, such as heavier investment in education, tourism, Gozo, industry, health and social affairs.
The reaction to the budget had been immediate and positive. Almost everyone recognised the progress made, except the Leader of the Opposition who opted to be vulgar in his reaction. It was up to him if he wanted to stick to vulgar and antiquated methods.
What came out in strong contrast in Dr Sant's reaction was how be believed he could win power by discouraging the people and then paint himself as the only saviour for Malta.
His own approach, Dr Gonzi said, was completely different and stemmed from the PN's own confidence in the people to overcome any hurdles - and there were hurdles - which came before them. His message to the people was to race ahead, and the government would get out of their way, remove bureaucracy which may hinder them and invest in education so that more people could be independent.
One needed to be factual in what one did and said. Malta faced challenges, but it also had achieved successes which it should be proud of.
Referring to talk of an early election, Dr Gonzi said the government would not lose the chance to work for another full year on more wealth creation and also reap the fruit of its labours.
Reacting to points of Dr Sant's speech on Wednesday, Dr Gonzi said that what was especially significant was his U-turns - he proved the government right on the surcharge, the euro and low-cost airlines. But significantly, he also said nothing about depreciating the value of the Maltese lira, as he had said last year. Nor did he say anything about cutting public expenditure by five per cent, as he said just last week.
According to Dr Sant, government revenue had increased because of the revenue from U-Bet. Was this serious?
Dr Sant had spoken extensively on the report by Prof. Joe Falzon for the Chamber of Small and Medium Enterprises, GRTU. Analyses such as this were useful, although he could not agree with some of its points, including the yardstick on which it was based - the year 2000.
But the most important thing was that this was a report for the GRTU, and then the GRTU praised the budget and said that Malta had turned the corner, and Dr Sant did not!
Speaking about Malta's performance Dr Gonzi said that over the past year Malta placed sixth among the most attractive foreign investment destinations per capita in the EU.
The United Nations Conference on Trade and Development (UNCTAD) placed Malta eighth in its global foreign investment report.
According to Eurostat, last year Malta was in first place in the EU in the per capita value of IT companies. Malta was also first when one measured the value of investment in high-tech manufacturing. One would see further progress this year.
Malta Freeport had placed third in the Mediterranean in terms of throughput and Malta International Airport also achieved high results.
Malta was first among EU accession states in productivity and fourth among countries with lowest costs for business. In 12 months competitiveness improved four rungs. Yet Dr Sant spoke of a disaster in manufacturing industry.
According to Dr Sant, Malta was also failing in education. Was it any wonder that the Malta Union of Teachers was offended? It was true that Malta was in the lower rungs in some score charts, but its progress was among the fastest, particularly in the area of science and technology. Malta was now third in e-government and second in the provision of such services - from 16th place only a short time ago. This was not achieved with a failed education system.
The World Economic Forum placed Malta 12th among 125 countries in the use of IT in government.
Adult education was now 53 per cent when the EU average was 42 per cent. More Maltese needed to continue tertiary education. But just six years ago only 40 per cent of students continued their studies beyond upper secondary level and now that percentage was 56 per cent. In most other EU countries the rise was two per cent. In Malta it was 15 per cent.
Per capita recurrent expenditure on education was now a record Lm1,332, something that all taxpayers should keep in mind when they wondered where their taxes went. This was apart from heavy capital expenditure on new school buildings.
As for health, infant mortality was the second lowest in the world, this when, thankfully, Malta did not allow abortion. Malta's health system was the most generous among the EU countries and Switzerland according to EU statistics.
This did not mean that challenges did not exist. Most actually stemmed from success - such as the fact that people were living longer. The biggest challenge next year was migrating from St Luke's to Mater Dei. Talks would be held with all concerned in the same way as agreement had been reached with the Medical Association of Malta on the new medical admissions ward, which would open on Wednesday.
Another challenge was to try to stop the brain drain of doctors, another result of success - this time the high quality of Malta's doctors.
The government recognised the sacrifices which the people had to endure over the past few years, but it could now show results.
The financial deficit had peaked at 10 per cent when Dr Sant was Prime Minister 10 years ago this week. Now it was 2.8 per cent and the debt had also started a downward track. The Nationalist government, therefore had kept the promise it made at the last election of placing public finances on a sound footing - Finanzi fis-Sod.
But who had actually deceived the people? Was it not the MLP which had said before the election that Malta would only be getting Lm1.5 million from the EU, and then it got €800 million for this year alone?
Economic growth was currently 2.6 per cent and there were positive indications for the end of the year and next year. Foreign investment in the first half of this year was an absolute record at Lm311 million, which was more than the whole of last year. Under Labour 10 years ago investment was only Lm31 million for a whole year. There could not be a better vote of confidence in Malta.
The gainfully occupied were also at a record, 139,000. Yet the highest ever number of young people were continuing to study after secondary school. Private sector employment was continuing to grow strongly while the public sector was getting smaller. So how was the economy said to be in a disastrous state?
Part-time work was important too, for the economy, for individual companies and for the workers, particularly women, and this would continue to be encouraged.
Dr Sant had said that he (Dr Gonzi) had not backed up his claim that 4,300 new jobs had been created in a year. Actually, 6,156 new jobs had been created in the year up to July last year as an explanation he was placing on the Table of the House showed.
Dr Gonzi said he wanted to emphasise that all was not a bed of roses. Tourism posed a particular challenge and in this budget a record Lm16 million were being invested directly into the sector, apart from other indirect investment, such as improvement to the infrastructure which benefited the Maltese and tourists alike. But this challenge would not be overcome by this investment on its own. Investment evaporated if taxi drivers, waiters or bus owners insulted or overcharged tourists, hotels were not up to standard, the country was not clean and vandalism such as the attacks on Portes des Bombes continued. Therefore an all-round national effort was needed to help tourism.
Referring to low-cost airlines, Dr Gonzi said it was worth pointing out that such airlines could have started operations to Malta when they wanted, but like everywhere else they wanted incentives.
The government had managed to find Lm1 million for this purpose. It was good that these airlines were now coming, but people who benefited from low-cost tickets needed to keep in mind that part of the difference was made up by taxpayers' money.
This area marked one of Dr Sant's U-turns. Two years ago during a debate on Air Malta Dr Sant spoke against Malta attracting low-cost airlines, saying that was only a short-term policy. All that changed last Wednesday. How did that happen?
His impression, Dr Gonzi said, was that Dr Sant changed his policies according to opinion polls. This was not serious politics and not in the national interest.
Turning to the cost of living, Dr Gonzi said the highest rate of inflation (HICP) in the past decade was actually in 1997 at 3.9 per cent, again when Dr Sant was Prime Minister, and when oil prices were just $14 a barrel.
Now inflation was 3.5 per cent and oil prices were much higher.
There was a limit of what one could do to control prices of imports as former minister Lino Spiteri himself acknowledged last Thursday. But the government would do what it could, as it had done in the case of medicines. In terms of the agreement reached with medicine importers, the price of various medicinals would drop by between five and 18 per cent. What was important for the government was that prices were transparent and reflected the situation abroad.
Dr Gonzi said oil prices had hurt Malta and the oil imports bill had risen by Lm50 million. At last Dr Sant had admitted that the surcharge should reflect the oil imports bill. On Monday, (during an RTK debate) he promised to announce measures to cut the surcharge by half, but on Wednesday in Parliament his solution was shown to be just a bubble which burst in his face.
In saying that he would cut the surcharge by half, Dr Sant would have to explain where the Lm25 million balance would come from. Would the deficit start going up again?
It was scandalous that the solution Dr Sant spoke about included capping VAT charged on power consumption, when no VAT was actually charged on domestic consumption!
Businesses were charged VAT at five per cent, but that was refunded. So could Dr Sant explain from where he had invented this solution?
Dr Gonzi said it was not true that the workings of the surcharge included inefficiencies in power generation, as Dr Sant had claimed. That was denied before, and the denial was confirmed in independent audits by PricewaterhouseCoopers.
The surcharge reflected solely the higher energy prices.
The government was doing its best to help producers and low income families and had announced measures for this purpose even in this budget, Dr Gonzi said.
Furthermore, he had been informed that because international oil prices had dropped, the surcharge would be reduced in the coming days from the current 63.5 per cent to 59.5 per cent while fuel and diesel prices would also be coming down.
And in any case, surcharge and all, local power tariffs were still lower than the rates set by Labour.
Coming back to the deficit, Dr Gonzi said it was Leo Brincat's own budget speech in 1997 which showed how a projected deficit of Lm82.6 million rose to Lm121 million in that year. What followed was a range of taxes, including power rates which went through the roof, a sewerage tax, a revision of registration taxes, the departure tax, a tax on insurance and a windfall tax on the banks, among many others.
Dr Gonzi said he welcomed Dr Sant's declarations on euro adoption, which meant he agreed with the efforts being made for Malta to achieve the Maastricht criteria to adopt the European currency. Dr Sant knew that Malta was achieving its targets, such as deficit reduction and, Dr Gonzi said, he was optimistic that the inflation hurdle would also be overcome, although there were no guarantees.
What had led Dr Sant to change his position? Perhaps it was the fact that he used to say that the economy should be growing by three per cent before the euro was adopted - and economic growth was now at that level.
Dr Gonzi said Dr Sant's speech on Wednesday was also significant by what he did not say. He did not say anything about the environment, despite its importance to the people and tourism. Nor did he refer to the pension reform, despite its huge importance for the people to have a secure future. He made no reference to port reform, the role of women in society and the budget measures to encourage women to join the labour force.
Dr Sant did not say anything about how EU funds should be used. He made no mention of SmartCity in Parliament, but one had a right to question what he was doing about this project because, Dr Gonzi said, he had heard a lot about friends of friends of Labour (applause and uproar).
Dr Sant did not say anything about new school building, the increased assistance to parents sending their children to private schools, the investment in Malta Enterprise, the investment in Gozo including lower licence fees to tourism establishments, the investment in sports and how the work and pay of the spouses of the self-employed would now be recognised and deducted from profits, and, hence, taxes.
Dr Sant did not say anything about the investment for the elderly and the new investment on cancer care.
There was no word on government spending on agriculture or on the roads.
Referring to the tax bands, Dr Gonzi said the tax revision and the cost of living wage increase meant an increase in income of between Lm2.30 and Lm7 weekly for those who filed a joint tax declaration.
Those filing a separate declaration would be saving between Lm2.25 and Lm5.23 per week. All this would cost the government Lm12 million. And one should keep in mind that wage increases in terms of the civil service collective agreement come into force next year.
Dr Gonzi said this budget opened a window on the future. The technological revolution was a huge opportunity for Malta. It removed the problems that resulted from the fact that Malta was a small island without natural resources.
But success would only be achieved if the people had confidence in themselves, if heavy investment in education was sustained; if change and reform were embraced; if there was further investment in the environment; if Malta removed its energy vulnerability by linking to the European grid and investing in alternative energy, and by providing a safety net for those in need, because social development had to go hand in glove with economic growth.
The budget therefore addressed the needs of families, it addressed job creation by encouraging investment, it helped business activity, it invested heavily in tourism and in Gozo, and it also addressed the needs of the elderly and vulnerable sectors of society.
The government's vision was to continue to modernise the economy, with euro adoption being a major step in this regard. This was not a political goal, but an economic one because Malta could become more competitive.
The next step for Malta was not deficit reduction, but a budget surplus. It would take some time, but at current rates of growth, this aim was achievable.
Another aim was for Malta to become the major financial services sector of the Mediterranean.
The third aim was for Malta to become the heaviest worldwide user of information technology in all levels of society. That was why the SmartCity project was so important. It was a strong signal that Malta was a centre of excellence in information technology.
Malta also had the potential to become a Mediterranean centre for excellence in education and a centre for research and innovation in the region. This would be a gradual process which was starting from the lower levels, as evidenced by the record investment made in this budget for school laboratories.
The vision for Malta was therefore one of courage. There was nothing which could hold the Maltese people back if they had confidence in themselves and employed their resources wisely. The foundations had been laid. It now depended on everyone to grasp the opportunities which were coming Malta's way. A good future was in their hands, Dr Gonzi concluded.