Opposition leader Joseph Muscat yesterday urged the government to “stop taxing the people dry”, underlining that the key to economic growth was actually fair taxation. The Maltese were earning less and paying more.
Speaking in his reply to the Budget speech, Dr Muscat said what people were most worried about were the steep increases in the cost of utilities. For a minority, the order of the day was cutting corners. However, these should rest assured that the opposition was four-square behind them.
Under the Gonzi administration, there were fundamental problems in Maltese economic management which could not be blamed on the international financial crisis. The problems, which started before the crisis, had shown that Prime Minister Lawrence Gonzi was not as good in economic management as his predecessor Eddie Fenech Adami.
Between 1999 and 2003, the Maltese GDP was 80 per cent that of the EU average, but it had now deteriorated to 77 per cent.
In Dr Fenech Adami’s time, 46 per cent of earnings stayed with families, but under Dr Gonzi it had slipped to 43 per cent.
Respectively, the Maltese worker used to earn 52 per cent of a European worker’s earnings; under Dr Gonzi it was down to 50 per cent. The average income of the Cypriots had gone up.
The employment rate in Malta remained the lowest in the EU, and had fallen back further this year with the labour force contracting by 571.
At the same time, inflation had again started growing faster than in the eurozone. Apart from the water, electricity and gas bills, which saw the Maltese paying 18 per cent more than Cyprus, Malta was also seeing its food prices rising much faster than in mainland Europe.
Energy bills in Malta were much higher than those in Cyprus, evidence enough that the Maltese were not paying more because of the high price of oil, but because of the high price of incompetence, Dr Muscat said.
The people were indeed ready to make sacrifices, but only so long as they had a capable government.
Turning to public finances, Dr Muscat said the government could not be trusted. Before the elections the budget deficit had been dangled at €68 million, only to turn out at €233 million – a “mere” discrepancy of 242 per cent. Public debt had continued to increase and, according to the International Monetary Fund, Malta was the 16th country most in debt in the world.
Dr Gonzi had promised a €98.8 million deficit but actually this had risen to €300 million. He had promised to cut costs by €17 million, but they had increased by €80 million.
The people were paying €50 million a day to service a national debt that had surpassed expectations by €158 million.
Dr Gonzi had promised the first budget surplus after Labour, but that promise had been carried forward from 2010 to 2011. After having sold almost all the country’s possessions, the government was expecting to end the legislature with a national debt of €4.7 billion.
The people would have to wait till the end of January to get their hands on the cost of living adjustment (COLA) of €1.16, but the increases in prices announced in the Budget had been immediate, raking in more revenue.
The government could not even learn from its own experiences. Last year it had decreased tax on spirits and made €1.2 million more in revenue from increased sales. Now it had increased the tax again and was expecting to earn less.
Did the government have a new amnesty on tax up its sleeve to increase revenue?
This was the third consecutive year in which the government had not lived up to its election promise of cutting income tax. On the other hand, the utility tariffs were the highest in 25 years.
The Leader of the Opposition said his side believed that every government had moved Malta forward, contrary to the Prime Minister’s calling the opposition a millstone around the country’s neck.
Next year’s Budget would have gobbled up €122 million which should have stayed in pockets. Each family had lost €600 since the election, and the hardest hit were those who paid most taxes and received no social benefits.
Dr Muscat predicted that in 2011 the government would spend €12 million more, going up to almost €70 million in 2012 and almost €60 million in the run-up to the elections.
In politics there was always a fundamental choice: to tell the truth or to lie. Dr Gonzi had chosen the latter.
The Prime Minister had promised they would spend €9 million more than last year for tourism and €31million more for education. However, this was not true. The expenditure for education was €1.2 million and not €31 million while that planned for tourism was €600,000 more and not €9 million as was claimed.
Dr Muscat said there were numerous projects, which cost millions, which had not been mentioned in the Budget, including the Renzo Piano project. The government had promised there would be a national fund for investment. Such fund should be open to the scrutiny of the Auditor General and the House Public Accounts Committee.
Two other projects not mentioned in the Budget were the Corporate Village and the Sports Village, where a good area of public land was being given away to developers. Dr Muscat also called for equal treatment of investors and augured that the government stopped giving projects always to the same building contractors.
Moreover, there were numerous projects mentioned in last year’s budget which had not yet even take off. These included the new Blood Transfusion Centre, housing at Mtarfa for the aged, improvement in Pitkali vegetable market, an agency for young people, a new public garden in Pembroke and two micro-enterprise parks.
There were others, including park-and-rides schemes and new roads in various areas. Many of the promised roads that were never built happened to be in areas where the PL had a majority.
The government had also promised four new child care centres and a study on improved playing fields for the security of children.
Only 67 per cent out of €2 million voted for the reconstruction of Karin Grech Hospital had been used. Likewise, only €1,056.94 out of €120 million for a new Mcast Campus has been utilised.
The Prime Minister had said that the economic circumstances in 2009 had lead to the projects’ postponement and promised that these would start this year. However, this never materialised. These included the bio-technology park in San Ġwann, micro enterprises parks in Mellieħa and Xewkija, Menqa’s regeneration and the Crafts Village in Ta’ Qali.
Dr Muscat said that the average family fuel expenditure had increased by 71c weekly even before yesterday’s further increase of the price of diesel and petrol. The Prime Minister seemed to be the only person not aware of the burden he was putting on enterprise.
The burden on families, students and enterprise was greater when considering the water and electricity bills which were completely “forgotten” in the Budget. Families had to pay €11 million more this year in water and electricity bills, a burden equivalent to 1.4 per cent of the GDP.
Last year the Prime Minister had promised to increase the value of energy vouchers received by 28,000 families from €4 million to €7 million. However, this reverted back to €4 million in this year’s Budget. Apart from this, the government decided to reduce the subsidies given to WSC from €14.6 million to €12 million with regards to the tax on sewage introduced in the Budget for 2010. In totality €24 million would have been extorted from Maltese families between 2010 and 2011. In return ARMS Ltd’s incompetence was being paid for by the Maltese.
The Maltese were also paying for a corruption tax, expressly embodied in the BWSC power station. But the Budget for the Permanent Commission Against Corruption remained at €58,000 and the government still failed to give proper protection to the whistleblower and proper recognition to what John Dalli and Transparency International had been saying. The present government could not be taken seriously on corruption, he said.
He did not agree with the increase in Vat on tourist accommodation from five to seven per cent. The Prime Minister failed to see the importance of this sector. Labour had always respected this sector and understood the Maltese investors who were now facing financial problems imposed by Dr Gonzi.
Dr Muscat said 24 out of every 100 people depended on tourism for its monetary gain.
The opposition was ready to listen to what the government had to say on Air Malta since the PL wanted the best for employees and the economy. However, it would not be an accomplice: it would help just as it helped ST Microelectronics.
The Prime Minister should stop considering Air Malta as being a burden and that the solution was to reduce its operations and jeopardise jobs.
He said that it was now the government’s turn to show some goodwill. The government must investigate who was responsible for the wrong decision taken, especially the purchase of the RJ airlines and AzzurrAir which alone siphoned off €150 million – one and a half time as much as the €100 million needed by the airline.
The opposition also expected to see all the correspondence with the EU and that the government declared its strategy towards Air Malta and how this fitted into the general tourism strategy.
Dr Muscat said that investment in Gozo during the first six months was €1.3 million. Moreover, there were less than eight persons working in Gozo for every 10 who worked in Malta. There were 16 unemployed in Gozo for every 10 unemployed in Malta.
In the last 10 years, government investment for Gozo was only two per cent of that invested in Malta. While the first €5 million out of €25 million should have been invested this year for EcoGozo, only €82,000 were spent. Dr Muscat said that the helicopter service had been suspended for the last four years. Gozo had the potential to be a motor for the economy if the government invested in the people.
‘Gozitans worst hit by VAT increase’
The investment of €500,000 in an international promotional campaign for Gozo was not enough. He pointed out that Gozitans would be much more affected with the increase in VAT on tourism: the Gozitan Chamber of Commerce said that 44 per cent of businesses were in a worse position than the previous summer while 34 per cent were in the same position.
Turning to the educational sector, Dr Muscat said that one should not measure results by the investments only. Though the government said that around 2,000 young people were not continuing their studies, it did nothing to help them. It did not take concrete measures against the incompetence that resulted in the suspension of EU funds, where hundreds of students were affected.
Dr Muscat said that the government had no idea on the future of ITS, Junior College, Higher Secondary, Mcast and the University. There was no goodwill to discuss a second University in Malta, which would give more opportunities to students and academics. The students should be considered as individuals who were to be given the opportunity to learn and specialise in their career.
Dr Muscat said children had to adapt themselves to the structure and it was impossible for professionals to create a system based on children’s needs. Children were limited in the help provided by the helpline if they phone beyond office hours or in the weekend. Children who brushed with the law were being sent to Mount Carmel Hospital.
Dr Muscat said that there were persistent problems in the health sector. While the Prime Minister had boasted that it would pay Skanska €349 million and “not one cent more”, the government had paid €353 million. While the opposition was in favour of investment in the health sector, accountability should still reign.
Though the government was negotiating to purchase St Philip’s Hospital, the Health Minister said that its purpose would be determined later.
The government had promised to invest €4 million to solve waiting lists but it only spent €262,221. Before the election, the Prime Minister promised that the waiting list for cataracts would be eliminated by this year. Yet, there were 5,436 people still waiting.
The lack of action in the health sector showed that the Prime Minister’s real aim was to introduce a service charge. He did not implement it because the opposition always exposed such plans. The opposition’s vision on the health sector was based on the patients’ rights, where the state ensured that patients were served.
Dr Muscat said that the Prime Minister should only blame himself for his failure in the environment. The quality of air was the clearest example of this failure. People deserved a good environment. The opposition agreed with “polluter pays” principle. However, this practice should replace existing taxes and not supplement them. He praised the PVC and solar water heaters incentives, though the means test should be more realistic.
The 11-year saga on the black dust was evidence of the government’s incompetence. The government first denied the existence of the problem but then proposed a committee to study the issue.
Dr Muscat said that experts claimed that the water table would be depleted in 15 years’ time if things did not improve. Labour governments had a good record in water harvesting and management in times where few spoke on the issue. A strategy was needed to store, recycle and regulate the disposal of water. Kordin’s reservoir could hold 70,000 cubic metres of water but it was not utilised.
Dr Muscat said that the government failed to mention the sharp increases in tariffs in the Mepa reform. Some tariffs were increased by 400 per cent while others were doubled.
He criticised the government for lack of action on social housing accusing the government of cultivating clientelism while not even offering any tangible schemes to assist vulnerable people who were hard hit by the rent reform.
The government had failed to give direction to the agriculture sector. It had not indicated what would happen to the sector after EU subsidies came to an end. It also ignored problems that vine growers were facing.
Disorganisation reigned at the Pitkali market with a few making profits to the detriment of farmers and consumers. Farmers and breeders were also feeling the pinch brought about by the sharp increases in water and electricity rates.
Breeders were not prepared for the new EU directives which would come into force in the near future. The abattoir was still left without new chillers. The government also remained silent on the abattoir incinerator even though the EU was giving it due attention.
Turning to fisheries, he said that there were founded suspicions that the Marsaxlokk facility was accommodating a few chosen fishermen only. Despite repeated promises, the breakwater at Marsaxlokk was left in a state of disrepair.
Dr Muscat spoke on alternatives on how the country should be governed. Many, however, asked about financing because at present taxpayers had already paid €72 million, for corruption, incompetence and wastage.
These included commission for the BWSC power station, millions lost in VAT fraud, the Fairmount contract and public land in Qawra given for free when Maltacom was sold. Thousands of euros were paid to employees in managerial positions which in three agencies cost the country more than €670,000 annually. New managerial positions in the Gozo Ministry cost the country another €200,000 while another €173,000 were spent in refurbishing the Finance Ministry’s private secretariat offices
Dr Muscat then listed a 10-point programme that a Labour government would implement to give new direction to the country. Meritocracy would be given its due. The government would build on the good previously achieved while focusing on urgent changes. It would be honest with the electorate and give a true picture of the economy. Sacrifices would have to be made but these had to be shouldered first and foremost by the wealthiest. The government would ensure fairness and it would not increase burdens on workers, pensioners, students and middle class earners.
A Labour government would radically change policy on how to achieve economic growth and control public finances. Priority would be given to increasing wealth and also increasing public revenue. Reasonable taxation measures would attract investment, sustain consumption and keep profits in the local economy. Innovation would be used to attract bigger markets.
Investment in education, information technology, manufacture, financial services, Gozo and tourism would increase so that €98 out of every €100 accrued from tourism could remain in the local economy.
A Labour government would continue to sustain those who were vulnerable. The present government, on the contrary, was taxing the people dry. He called on the government to take action against exaggerated charges that banks were asking from businessmen and consumers.
Labour would focus on eliminating unnecessary public expenditure by adopting realistic targets which would be monitored. The present Budget did not mention how public expenditure could be curbed. It had discontinued working on the previous Labour administration’s objective of decreasing government expenditure by five per cent.
Dr Muscat said he was determined to curb corruption because this was paid for through taxpayers’ money. A centralised system for ensuring accountability in local council operations and in large contracts would be introduced. Labour would not tax hard working people but would impose higher taxes on those who caused pollution.
A future Labour government would work in the interest of the European Union without being servile. It would ensure that Malta was given its due. The government had to be free to take decisions in the country’s interests and would not be burdened by what beaurocrats dictated from Brussels.
There should be some parameters to ensure that Europe would not have to go through another economic crisis but there should also be room for manoeuvre for the present and the future, said Dr Muscat. He criticised the Prime Minister for agreeing with a small minority that the EU budget for 2011 be limited. The Prime Minister should have realised that by doing so he had put Malta’s position in jeopardy because Malta was supposed to be a net beneficiary in the new EU budget.
Dr Muscat said that Malta should also be assertive in its relations with other countries.
He fully agreed with the increase in maternity leave and the introduction of paternity leave because this increased female participation at work by nine per cent. The burden should not be shouldered only by employers but also by the government. The government’s expenditure for the construction of a new Parliament house would serve to subsidise this measure for 20 years.
A Labour government would endeavour to establish a new middle class. He encouraged unions and employers to embark on the discussion of the living wage concept because this ensured a decent living to everyone and increased social mobility. These had to determine how this concept could be implemented and also what the intervention of the state should be. Agreement on this issue would lead to a new social consensus, said Dr Muscat.
The state had to provide incentives to encourage private employers to adopt the concept. This would also lead to less dependence on social assistance with people earning more and contributing more to the country’s wealth.
Concluding, Dr Muscat said he was determined to make this dream a reality and called on people from different walks of life to join him in building a country befitting for its future citizens.
Reacting to Dr Muscat’s speech in Parliament, Finance Minister Tonio Fenech said the Opposition Leader’s two-hour speech completely ignored the concept of job creation and safeguarding employment.
Dr Muscat is taking for granted the existing jobs which he believes will remain there by simply doing nothing, Mr Fenech said. In a press conference he addressed last night, Mr Fenech said the Budget had focused on creating jobs, presenting schemes for SMEs and keeping in mind the employment realities.