The Malta Employers’ Association this morning published a position paper on ‘Living with increases in energy prices’ aimed to promote discussion at an MCESD meeting next Monday on energy costs.

In its proposals, the MEA said government plans to cut income tax must be fine tuned to ensure that the benefits also reach those whose income may not exempt them from the surcharge, but is still not high enough to benefit sufficiently from the reduced tax rates.

The number of exempted families from the surcharge should not be increased, however, since exemptions encouraged wasteful consumption.

The MEA said the capping mechanism for large firms should be retained, as it saved jobs, but consideration should be given to introducing a proviso whereby a stated percentage of savings from the capped tariffs would be invested in alternative energy sources, from which the companies themselves would benefit.

It said redundant employees from the shipyards should be deployed into the manufacture, assembly and installation of photovoltaic units. The government should also give special incentives for entrepreneurs seeking to invest in research, marketing and production of photovoltaic technology.

The association insisted that social partners should not give in to the pressure to impose additional labour costs to make up for the erosion in disposable income because of higher water and electricity bills.

“This could result in a devastating stagflationary effect as employers will be squeezed between higher energy costs, higher labour costs and a potential fall in aggregate demand,” the MEA said.

“The COLA mechanism should be respected (even though employers maintain that, in principle, it is a flawed means if increasing wages) and government should, at all cost, avoid a repetition of enhancing the COLA with an additional expense to employers. As things stand, some enterprises will still find it difficult to absorb the COLA increase,” the association said.

It also called for a revision of the surcharge system, saying part of the surcharge should be absorbed in the tariffs and the rest turned into a charge on the electricity metre. This charge would, however, be waived – either permanently or for a specified number of years - if the household has or installs a solar water and/or photovoltaic system.

The MEA also called for other incentives to encourage the diffusion for photovoltaic technology.