No crisis in cost of living, Finance Minister insists

Finance Minister Tonio Fenech said yesterday there were no indications that there was a "phenomenal" increase in the cost of living that could be interpreted as a crisis.

He reiterated that the surcharge on utility bills would definitely have to be adjusted after the end of June.

"It is wrong to imagine in any way that this will not be so," he told the media after a meeting of over two hours with the social partners at the Excelsior Hotel yesterday afternoon.

The reality was that the price of oil was always rising and nobody could ever think that this did not have its impact on the country, he said.

Mr Fenech said he invited the social partners to make their submissions on areas which they feel lack the desired spirit of competitiveness and which could be a contributing factor to price increases.

He said the Maltese Council for Economic and Social Development yesterday discussed factors that contributed to a higher cost of living over the past months. The impact that budget measures had on families and work by the government to correct the situation in those sectors where changes in prices are unjustified were also discussed.

Mr Fenech said that when one compared the inflation rate between January 2005 and December 2006 to the period between November 2007 and March this year, one would notice that the rates in the first period were higher than in the second. "That means that we are not going through a phenomenal high cost of living that amounts to a crisis," he said.

Mechanisms the government had at its disposal to control the cost of living would lead to adjustments.

Mr Fenech said that even when one looks at the cost of living analysis, one will realise that even if this is higher than the EU average, it is not the highest among European countries. One has to identify which are those products that are having an impact on the cost of living, he said.

The cost of living was high in the food and non-alcoholic drinks sector and in the restaurants and hotels sector, the minister noted.

The government had already extended an anticipated cost of living increase and this, together with other measures, such as reduction in taxation, strengthened the families' purchasing power to the extent that they could absorb the impact that they may be facing now without experiencing a drop in the standard of living.

Speaking on the price of oil, Mr Fenech said this had nearly doubled in one year. In fact, it increased by 86 per cent. Enemalta is not buying oil at the present rates as it operates a forward-buying system. The 50 per cent surcharge is based on an established price. Therefore, the surcharge should not change until the end of June.

Contracts to buy oil for next year have already been made at prices that are 40 per cent lower than the present price of oil.

When he referred to price increases, Mr Fenech said various sectors were investigated in recent months and there were instances where it was found that prices were related to the situation in the international markets. An investigation is in progress into the price of cheese, butter and milk.

Pierre Fava, of the Malta Employers' Association, said that although certain information coming out during the meeting was confidential, he was of the impression that the surcharge will not be revised upwards before the end of the year.

Gejtu Vella, general secretary of the Union Ħaddiema Magħqudin, said no indication was given as to the extent of the eventual increase in the surcharge.

Tony Zarb, general secretary of the General Workers' Union, said the social partners heard various presentations on how prices are going up and why. The discussion will continue at the next meeting of the MCESD due for June 6.

Mr Zarb said that before increasing the surcharge the government should discuss the impact with the social partners.

The director general of the Chamber of Small and Medium Enterprises - GRTU, Vincent Farrugia, said the GRTU made two recommendations: one to urgently revise the present surcharge system and, two, to reduce tax on diesel. The increase in the price of diesel is being multiplied on many other prices and will be the cause of an increase in inflation, he argued.