Malta’s economic model favours the rich

Michael Mallia, former Air Malta director, unequivocally exposes the way parliamentarians created the airline’s over-staffing bubble (February 17).

His claims correspond precisely with what a British management consultant told me in 1996 about his work experience with Air Malta and other parastatal companies.

When I made the point that Malta, compared to some other European countries, including Britain, had very little unemployment (one of the indicators of a successful economy), he replied that Air Malta and other parastatal companies could function perfectly well with half their workforce.

This meant, he continued, that if Malta had to emulate what Britain had done in the 1980s to recover from its financial bankruptcy, half the public and parastatal employees would have to be made redundant.

The Maltese economic model (which to a certain extent has been very successful) has been based on almost full employment but low wages and pensions. This is now creating a playground for the rich.

The bulk of income tax is paid by salaried workers (without undeclared other income), NI is paid on approximately the first €17,000 (and not all) income, there is no annual property wealth tax, no means-testing for use of public health services, entitlement to free medicines or student stipends, and no means-tested tertiary education tuition fees. To maintain this apparently successful economy, we resorted to raising VAT, which hits far worse the poor.

Until very recently, our VAT was slightly higher than Britain’s – and we have no air force, navy and only a miniscule army. Official statistics now claim 22 per cent of our over-65s face poverty levels.

Having adjusted their honoraria and pensions to very comfortable levels, parliamentarians have been dragging their feet for several years to improve the first pillar pension system (the only reliable safety-net against poverty in old age) of less equal citizens.

At the same time they have been reassuring us that our economy is a paragon of social solidarity.