'Very difficult' for government to meet MEA cost of living proposal

With the government deficit expected to rise to around 4% it will be "very difficult" for the government to pitch in to meet half the cost of living allowance (COLA) of the private sector, as the Malta Employers' Association has proposed, Finance Minister Tonio Fenech said this morning.

He told an interviewer on Radio 101 that rather than giving across-the-board assistance, which would benefit those who needed it and those who didn't, he preferred to give targeted assistance to those sectors or firms where jobs needed to be safeguarded or created.

The government's coffers, he said, were not a bottomless pit, and resources taken from there would be lost from other sectors where jobs and investment could be attracted.

While having a deficit of 4% contrasted with countries such as the UK and Ireland, which had run up deficits of 14% and 11%, it was not a happy situation and government borrowing would eventually have to be repaid.

Mr Fenech stressed, however, that the government's financial situation was secondary to jobs.

While unemployment had risen by some 1,500 in a year, it would have risen by another 2,500 had the governemnt not stepped in to directly to assist a number of companies earlier this year, Mr Fenech pointed out.

Malta, he said, was not out of the woods yet. Everybody had seen the tourism figures for August and the situation was still fluid. It seemed problems were not affecting all operators in the same way.

The current argument over whether the cost of living increases should be given in full did not come as a surprise. The existing COLA mechanism provided for circumstances where increases may not be given in full in exceptional circumstances, but this did not depend solely on the government but on all the social partners. Further debate was therefore needed.

Mr Fenech recalled that in the past there had been cases where cost of living increases were given in advance, with the employers making sacrifices. There, therefore, had to be balance in this debate, he said. However the MEA's proposals for the government to meet half of the private sector's COLA bill, estimated at €12 million, was, at best, "very difficult" because of the government's revenue position.

Mr Fenech said the government was being careful not to continue to subsidise people, or sectors, which did not need subsidies. Decisions on the water and electricity bills had kept this principle in mind. This was a delicate balance which had to be maintained up to the presentation of the budget.

The economy was not in a state to support new taxes. The direction which the state had to take was to focus its spending where it was most needed, Mr Fenech said.This included social security abuse, with some opting to live off benefits or receiving medicines which they did not need. But there were other sectors too where people should not be overly dependant on the government. Investment, for example, should not depend on assistance.

"Rather than taxation, we should be courageous enough to stop spending where it is not justified. Those are the decisions which have to be taken in this budget in order to create jobs and maintain sustainability."

Mr Fenech said Malta remained attractive as an investment destination and talks were being held on various projects which, if they materialised, would grow into major employers.