Plagued by suspicions that the government is engaging in “cosmetic accounting”, Labour MEP Edward Scicluna has written to European Economic Commissioner Olli Rehn asking whether €40 million in expenditure cuts were first suggested by the Commission.
Prof Scicluna has also asked Mr Rehn to clarify whether the Commission suggested the amount and nature of the cuts and what drove it to query the government’s 2012 economic growth projections.
He expects a reply within three weeks.
Announced last January, the cuts have been repeatedly queried by Prof. Scicluna and his Labour Party colleagues Karmenu Vella and Charles Mangion.
The government has insisted that cuts are pre-emptive and not piloted by warnings from Brussels.
The PL’s trio of economic spokesmen raised myriad questions about the government’s financial methods yesterday, with Dr Mangion’s description of 2012 economic estimates as being borne of “either misunderstanding, incompetence or deceptiveness” typifying the press conference’s vein of scepticism.
Prof. Scicluna chided the government for projecting growth of 2.3 per cent in 2012 last November, “right when it had its feet in a recession”.
Recent statistics show that Malta’s economy contracted by 0.1 per cent in the final quarter of 2011.
He insisted the government would have been aware of impending financial difficulties. “Econometric models exist for a reason. We’ve taught the subject at the University for the past 32 years,” Prof. Scicluna said.
It was a point also made by Dr Mangion, who cited 2011 export, investment and manufacturing figures to support his argument that the government had ample warning of an economic slowdown.
“Is the government cutting, or hiding, the €40 million,” Mr Vella asked, remarking how public entity debt, at €1.5 billion and rising, did not appear on government ledgers.
The government’s decision to pay significant amounts of debt through special purpose vehicles worried Mr Vella, who argued that, in doing so, the government was cashing future income to pay off existing debt, stripping future governments of any revenue and leaving them high and dry.
Mr Vella also presented journalists with a table detailing what he termed as discrepancies between the government’s budgeted, revised and actual expenditure and revenue in 2010 and 2011.
He highlighted the tendency for original budgeted expenditure estimates to be scaled down significantly when the revised and actual estimates were revealed.
In 2010, for instance, €37.7 million was budgeted for health expenditure. This was then revised downwards to €33 million, with, ultimately, €21.7 million being spent. In 2011, the €31.2 million originally earmarked for health was revised downwards to just €18.5 million.
Actual expenditure figures for 2011 are yet to be published.
Mr Vella said the discrepancies meant the Budget was being turned “almost into a propaganda exercise” in which the government could make grandiose claims about expenditure and overestimate its revenue.
News that the government expenditure had risen by €61 million in January further furrowed Prof. Scicluna’s brow, prompting him to wonder whether the government had purposely deferred payments due last year to meet 2011 EU deficit targets.
He spoke forthrightly: “Are we playing with numbers? If the PL is elected to government, will it find a clean table? It’s time for the government to quit talking as though Malta were covered in Teflon.”
Six questions
Edward Scicluna has written to European Economic Commissioner Olli Rehn asking for clarifications concerning last January’s expenditure cuts. His six questions, paraphrased:
• Why didn’t Malta’s 2012 Budget convince the Commission?
• Did the Commission inform the government of its evaluations?
• Were expenditure cuts suggested to the government by the Commission?
• Did the Commission make specific suggestions about how much to cut?
• Did the Commission suggest where and how cuts were to be made?
• Did the Commission insist that capital expenditure be excluded from the cuts?