Budget may be postponed

The 2010 budget may be postponed to allow more time for discussion among social partners about the cost-of-living adjustment planned for next year, which employers say will seriously hurt business.

The possibility of an unprecedented postponement from the set date of November 9 was first revealed by the Chamber of Commerce, which yesterday expressed confidence that the government would delay the budget presentation to the end of the month. It follows the chamber's rejection of the "unsustainable" package of measures proposed on the grounds that it risked the loss of "hundreds of jobs".

When contacted, Finance Minister Tonio Fenech did not rule out a postponement. He said it was not ideal and that if the date were to be changed the decision would have to be made within the government's logistical constraints. However, he said he would be "looking into" the possibility.

Following the announcement last Sunday that all employees will benefit from a weekly €6.06 increase in cost-of-living adjustment (COLA) from 2009, the chamber said economic circumstances were not opportune for an "unprecedented COLA" without mitigating its adverse impacts with other compensatory measures.

A survey conducted among the chamber's members last September showed "hundreds of jobs would be at risk directly due to the cost effects of the COLA".

Most of the drop in employment is expected to occur in the tourism sector, followed by construction and manufacturing, according to the chamber.

Helga Ellul, President of the Chamber of Commerce, said: "We are concerned that things have taken this turn and that with a date for the budget announced so close in November, there remains very little time to discuss and negotiate ourselves out of this situation."

The chamber said its agreement with a 2010 pre-budget discussion paper presented by the government at the Malta Council for Economic and Social Development was dependant on the acceptance by the social partners of a number of proposals made by the chamber itself.

The chamber insisted it was not against the award of the COLA but it argued for a more balanced approach. Its proposals differed from those made by the Malta Employers' Association, which argued that the government should carry part of the burden.

The chamber is instead suggesting that the COLA should be granted as an allowance rather than as part of the salary, and also that it should be tax-neutral.

A moratorium on all government-induced fees and tariffs would also help offset the added costs of the COLA to business, the chamber suggested.

The chamber is also tying in the COLA to an increase in workers' productivity and argues that its mechanism should be reviewed by a pre-specified date.

"It is unacceptable for the social partners to be pushed towards an unsustainable path in terms of competitiveness and employment," Ms Ellul said, adding that the aim was to safeguard jobs.

The chamber insisted there should be a more structural approach that tackled inflation, competitiveness and COLA.

"One of our long-term proposals is to look at the COLA mechanism, to look at inflation - how it's all calculated - and to do that at the beginning of the year, not so close to the budget.

"That way we would have time to study the situation and the effect on competitiveness because they are all interlinked," Ms Ellul said, adding that a month before the budget was not sufficient time to make a serious attempt at this.

The chamber is recommending that the process of probing these issues should start immediately after the next budget to allow employers a proper perspective of the situation next year.

Referring to the economic recession, the chamber said: "In a time of uncertainty, we want certainty."

Reacting to the chamber's stand, the General Workers' Union said it was not acceptable for employers' organisations to repeatedly threaten job losses.

The union said, however, that it was prepared, as always, to take part in discussions aimed at maintaining competition and retaining jobs.

It said employers' organisations were always critical when the government gave an indication about the amount it would give as the cost-of-living adjustment.

The union expressed surprise that the chamber had spoken about a document discussed at the MCESD after it was agreed that it should serve as a basis for more intensive discussions with the government.

The GWU also had some reservations, but decided not to comment about them pending discussions with the government.

The union said the document stated black on white that COLA for 2010 should be given as in previous years.