The inevitable toughness of being

The current social and economic pain is deep. It can only get worse. There is no respite in sight. The international price of crude oil is set to soar higher into the stratosphere. That will translate into still costlier private and commercial motoring and heftier water and electricity bills.

The new surcharge, almost doubled to 95 per cent, is not the end of the story. It is easy to blur over the detailed implications in the course of this turbulent process, resort to politicking and controversy. It would be totally wrong to do so.

Higher crude oil sees a further shift in financial strength towards the oil-producing countries. There is nothing any other country can do about that, except being more efficient in fuel utilisation and developing alternative fuels to fossil extraction, hopefully without very negative side effects.

Costlier oil feeds into higher production cost, but does not affect competition. Airlines, for instance, are all in the same boat, allowing for more efficient - and luckier - hedging cover for their fuel requirements. The same applies to factories. Wherever they are located the direct and indirect effect of higher fuel costs raises production costs right across the board.

Once producers and service providers ultimately pass the increased cost on, it is consumers who bear the final burden. As their cost of living rises, also under other pressures, such as from dearer food, they react by economising, by saving less or dis-saving, and by demanding higher wages.

Malta is suffering these economic effects in the same manner as every other oil importing country. It would be wrong to bundle together the roles of Enemalta and the government in assessing them and calling for action about them. The two roles should be kept very distinctly separate, not least to allow us all to assess the social dimension in its proper perspective.

Enemalta is a supplier in a hugely dominant position. It has to be strictly regulated to ensure that it does not abuse that position, and also that it does not burthen the consumer with the cost of its inefficiencies. Those two factors suitably provided for, Enemalta should reflect its full production costs in the price of its supplies, which should move with the international oil market, in which Enemalta has to purchase as efficiently as professionalism permits. It is only if faced with tariffs based on real cost, as they are with the prices of other basic consumption, such as of food, that consumers can regulate themselves.

If they consume wisely, with economy and without waste, they lighten the rising burden somewhat. If they do not do so, they suffer the cost of their actions.

The financial situation of Enemalta should be de-hinged from the public accounts. Where the government should come in is to tackle the social dimension as well as that of vulnerable sectors of the economy. Vulnerability, to restate my argument suggested earlier above, is not to be defined in terms of competitiveness. That does not come into it. Rather it has to do with the ability of consumers to continue to purchase a company's output if the cost of producing it is not eased somewhat in the face of soaring input prices.

The social dimension is more easily recognised and, in terms of methodology alone, also less difficult to tackle. Very simply, families who live below a properly defined poverty line, or just above it, cannot cope with high price of supplies which anyone must have to lead a barely decent life.

Water and electricity are the most basic of those supplies. Poor consumers can shop around for bargain food and clothes. They can do nothing about water and electricity, other than economising, which cannot go beyond a certain point. In the name of social justice the government of the day is morally obliged to help such consumers. It can only do so out of its tax take, bringing into play in the clearest sense the redistribution aspect of taxation.

For a government to redistribute, it has first to impose and collect taxes. If the amount required to redistribute grows, in this case because crude oil continues to raise water and electricity costs, very obviously taxes have to grow as well, provided the government itself is efficient in its overall collection and spending. My reasoning is not original. It is simply inevitable. It consists of a mixture of market considerations - passing on international costs, adjusted for inefficiencies, to the consumer, plus social thinking - assisting the weakest segments of our society. That is not to say that all governments will adopt the mixture in the same proportions.

Much will depend on a government's social conscience, on its willingness to act and to explain why and how it is acting. Keeping Enemalta and the government strictly separate allows us to see more clearly what the political administration's social conscience is made of, to recognise the structure and balance of its social and other priorities. Clarity allows an ongoing debate about the appropriateness of social measures relative to the plight of the needy.

The rest of us have to fend for ourselves, adjusting to higher costs of water and electricity as we adjust to other dearer essentials, and to more discretionary spending, such as that on entertainment and holidays. What we are entitled to demand is maximum efficiency from Enemalta, and proper regulation to ensure it.

All this does not make for happy reading. Yet, to escape from its inevitability would be to sink into misreading the unfolding situation, and to wrong approaches by the government. That would soon make the outcome even worse than international turbulence will force it to become.