Beyond the positive spin

The Nationalist government is in election mode and is trying to put a positive spin on whatever it is doing. After years of irresponsibly managing our public finances, and pushing up unsustainable deficits and debts, it wants us to congratulate them for getting us out of the mess they pushed us into. The PN government wants us to praise it for addressing the public deficit and debt problems by crushing us under a heavy burden of taxes, bills, surcharges, licences and other contributions that are still eating into our purchasing power and eroding our quality of life.

Government is boasting that the cost of living has stabilised. But that is only what graphs on formal statistics are showing: the cost of living has 'stabilised' by reaching a high plateau. The way Government measures the cost of living does not capture the price rises that are still going on in the daily life of our families. They are finding products and services more expensive. Whatever formal statistics say, in their daily life, families and pensioners are still experiencing hardships and difficulties in trying to cope with the cost of living and to make ends meet.

People will only start believing that they are living better, have more money to spend, and enjoy improved public services when they experience them personally. Government is saying that things are getting better but open-minded people who reach their conclusions after seeing tangible evidence in their daily lives will only believe the government when they experience this improvement personally. They are not experiencing it. They know that they cannot trust the PN government because of the promises it made before the general election of 2003 about "sound public finances" and "a better quality of life" but then delivered painful taxes and deterioration in their quality of life.

Government is trying to spread a feel-good atmosphere in the country. It will manage to give this impression in the media that support it but it will not persuade open-minded and intelligent people unless they see a tangible improvement in their daily life.

It also remains to be seen how far the PN government has really managed to control the public deficit and debt it created. Two years ago on Budget day I could not help smiling when I heard Finance and Prime Minister Lawrence Gonzi boast how his government was controlling his budget deficit and that by the time the next general election would come along, the deficit would be lower than three per cent of GDP. Hearing these words two years ago I had no doubt that the official statistics would show this before the general elections.

We have been here before

I am more certain than ever that during the coming election campaign the PN will erect billboards with some kind of variation on the 'Finanzi fis-sod' theme. I have no doubt that Dr Gonzi will boast in his campaign speeches that his government has solved the deficit problem.

But I also have no doubt that the next government to be elected would once again discover the deficit problem. There are still very serious deficiencies in the way in which government draws up its accounts. As Christopher Mayl wrote eight years ago in "The state of Malta's economy - an accountant's perspective", Government's accounts "are calculated on the basis of actual receipts and payments. Amounts owing to or by the government are ignored, this means that departures from budget can be hidden for a year or more." One-off sales of government shares are shown as ordinary revenue. For at least 12 years the PN government has been saying that it is introducing accrual accounting to give a more exact picture of the country's finances. It still has not happened.

Apart from all this, certain government expenditure, like the new collective agreement for the public service, will come into full effect after the next general election. Other hot issues with serious consequences for public finances, like the public expenditure needed to run both the Mater Dei and St Luke's Hospitals, the viability of the shipyards, and Air Malta will also rise to the top of our national agenda. These would have to be tackled by the new government after an electoral campaign by the PN claiming that they have reduced the budget deficit.

The new government will have few national assets to sell, as most of them have been sold by the PN government to control the public deficit and debt it created. Also, the new government still has to tackle major problems in our economic development. While certain sectors are doing well, others still face serious problems.

The property boom, driven by the repatriation of funds and the amnesty to channel Lm250 million into the official economy before the introduction of the euro, is unsustainable. We cannot continue to build thousands of more apartments simply to increase the huge stock of vacant dwellings, as most of the new buildings are not finding local and overseas buyers.

Manufacturing and tourism still face major challenges. We need new investment in these areas and a fresh start. The number of tourists coming to Malta has increased on last year but is still nowhere near the level we need to give a new lease of life urgently needed by most of those who work in the tourism industry. Government is still failing to draw up and implement a strategic action plan to make this industry recover and thrive.