Opposition spokesman on finance Charles Mangion yesterday urged the government to go back to the drawing board on its utility tariffs because it was causing large-scale uncertainty, which he called "the worst possible poison for a nation's economy". He drew comparisons with former budgets and asked how credible the government's annual budgets were proving to be. How long would the people continue to be taken for a ride with false promises that progress was just around the corner?
Dr Mangion said the opposition was glad that the minister was appreciating the effect of economic measures on people's spending power. But he had not set out how the €12 million in income tax cuts being given would mean an increase in revenue of €100 million. This was still not making any reference to other taxes, such as the mooted tax on waste collection; or the inflation that was higher than in the rest of Europe; or the expected rise in the price of gas, with the regulator keeping silent.
Mr Fenech had not said what the government would be doing to control medicine prices; how in 2009 the regulators would protect consumers to leave them some spending money.
On the intended efforts on climate change the government had said nothing. Education is needed indeed, but what matters most to the people were the burdens being placed on them.
Dr Mangion said the question begged itself. While the government now intended to push through its budgetary measures, how had the estimates for 2008 been mirrored in reality?
How credible was the annual budget?
Had the government not been aware, when preparing the budget for 2008, of the impending halt to subsidies to the shipyards and the burden inherent in phasing the subsidies out? How long would the people continue to be taken for a ride with false promises of progress being just around the corner?
Costs that the government should have prepared for included the additional €3 million for its employees in Gozo; the public transport guarantee to the tune of €2.5 million, both of which were then moved as supplementary estimates. Was this how the government proposed to revive the economy?
The capital expenditure for 2008 had been scaled back, same as that for 2007. How could the government boast of capital expenditure on the rise?
Following the EU funds practically thrown into the government's lap, from 2007 onwards the government had failed even to procure EU funds according to its own estimates of project costs. Such failure meant that Malta was practically paying as much into the EU coffers as it was raking in. Things could not keep sliding back like this, said Dr Mangion.
Minister Fenech had conveniently failed to explain how the government's revenue was expected to rise between seven and eight per cent when the Central Bank had felt the need to revise prospected economic growth downwards. In the two years between 2009 and 2011 tax burdens were expected to increase by one percentage point.
When the government was dubious of economic growth but still planning to increase its revenues, the only answer was that it had no intention of leaving spending money in people's pockets.
The Economic Survey showed that exports of Maltese products and services between January and June 2008 had fallen. Were the government's measures intended to increase or decrease competitiveness, or to shrink people's spending power?
The inventory of finished goods between January and June 2008 showed that from the €60 million in 2007 they had risen to €165 million in 2008. This meant lack of sales of finished Maltese products. The consequences of such situations reflected themselves in shorter working weeks or even layoffs.
Dr Mangion said that Malta's purchasing power between 2001 and 2007 had been constantly dropping, and prospects for its 2008 GDP continued to point to further reduction.
How, then, had the government decided to introduce the new water and electricity tariffs at just such a time, after years of neglect? The government is causing uncertainty and lack of stability in families and industry alike.
Instead of being grateful for the local banks' financial stability in spite of the worldwide turmoil, it had taken a major step to increase uncertainty without then mentioning anything about it in the budget.
Working families' income in 2008 had been eroded by inflation, spurred on not only by rising costs of foods and fuels but also inefficiencies that by far surpassed the situation in other EU countries.
The government had instigated only two inquiries: into alleged malpractices in the sale of schoolchildren's uniforms, the result of which had not seen the light of day; and into schoolchildren's transport to and from schools. Both aspects impinged on education costs.
Up to the elections the government had boasted of having medicinal prices under control, but this had resulted in just hot air. The upshot of all this was that families were working harder but getting less.
The situation was so hard that it had united all social fronts in clamour against the government's announced water and electricity tariffs. It was true that it was the government's responsibility to take decisions, but only after meaningful dialogue. The government was basing its actions on words rather than action.
Capital expenditure had been pegged at around the 2007 level. Dr Mangion said this level of competence left little prospects of the government's promises actually coming true. The budget allocated just €500,000 for the administration of the company that would oversee the much-vaunted Grand Harbour redevelopment. The vote for roads was much lower than in previous years. Malta Enterprise was being voted €20 million to step up competitiveness, but the budget failed to mention that this would be spread over five years.
Not enough funds were available for research and development, which would have to rely on partnerships with other countries. Venture capital for 2009 was being allocated much less funds than in previous years.
Incentives to help fight global warming were an insult to the Maltese people. The scheme was so bureaucratic that it actually put people off. A prominent ecological consultant had been driven to describe the government's measures as "eco-nonsense" and "non-starters".
Dr Mangion asked where the government had gotten the notion that hybrid vehicles worked on electricity only 20 per cent of the time.
Ecological measures needed much more than popping a couple of items into the budget and allocating a relatively small sum.
He also asked about the directive of October 2008 regarding the redemption of temporary emphytheusis, the majority of which had devolved to the government from the Church. The redemption of emphytheusis on ordinary residences bought for Lm50,000 would now involve about the same price as the original cost, continuing to adversely impact the construction industry. Until this point was cleared up, holders of temporary emphytheusis should be warned to delay any decision.
Concluding, Dr Mangion said it was obvious that the government's intentions behind the budget and utility tariffs were meant only to make good for its own inefficiencies, rather than coming down hard on those inefficiencies. Competitiveness was being undermined rather than helped, and the government ought to go back to the drawing board because uncertainty was the worst possible poison for a country's economy.
Labour MP Gino Cauchi said the people were used to the government introducing new taxes or tariffs during the year, which added to the burden of the budget.
Minister Austin Gatt had already mentioned two measures which had not been mentioned in the budget: a tax on sewage and a possible tax on waste collection.
During the budget debate the opposition had made many valid suggestions, including measures to ensure more money in people's pockets, as well as safeguarding of jobs and adding a stimulus to the economy.
The government now seemed close to budging on utility bills, and was revising the licence fee reforms, which was good news indeed.
The European Commission had proven the opposition right. They were also looking for a way to deal with the crisis, to formulate a plan aimed to generate more money in people's pockets, to increase consumption and to guarantee jobs, help businesses and increase investment in the alternative energy infrastructure. When the opposition proposed the same things, the government said this would not solve the economic slowdown.
Prominent economists say that the worst thing one can do is reduce consumers' spending power, invoke fear and create uncertainty, which was precisely what the government had done. Malta could be affected by the global slowdown in two ways either through less exports or a drop in tourism figures. Both would hit Malta hard.
Mr Cauchi asked whether the government was considering reducing VAT from the current rate of 18 per cent to 15 per cent, and encouraged that if this was the case it would be done soon.
He encouraged measures to draw more tourists to Malta, such as reducing VAT on restaurants, guided tours and car hire.
Concluding, Mr Cauchi said the government should act in the best interests of the country, remove uncertainty, discuss and agree matters with the opposition and to put Malta in a strong position to face challenges.