Cut bureaucracy, public costs

Among the items of costs businesses have to incur in order to operate are government-induced costs. No business can trade within the law unless it has the necessary permits from the various government departments. The old term ‘trade licensing’ has taken myriad meanings, with local councils, Mepa, police, health and safety, income tax and VAT registration requirements far from being the least of it.

Some costs are unavoidable. Not so the time it takes to get the required permits and the to-ing and fro-ing from one department to another. Persistent complaints from within the business sector have led to efforts to cut down government-induced costs, in the first instance by reducing the time it takes to get them.

For instance, Malta Enterprise recently set up a one-stop shop, where it is possible to co-ordinate all the permits one requires to start a business. I was under the impression that this was intended for the benefit of manufacturing or service industries intending to establish themselves in Malta. I was told, however, that the one-stop service is there for all those who want to make use of it.

That is a step forward. In the last two Budget speeches, the Minister of Finance also visited the issue, and undertook to tackle it. He did not, however, give an estimate of how much government-induced costs burden the business sector.

On Monday, The Times published details of a newsletter of the Chamber for Small and Medium Enterprises – GRTU highlighting an effort to quantify the extent of such costs. The title referred to them as red tape. I do not think that is the right description. Basic costs are inevitable. Red tape creeps in when the costs are unnecessarily incurred. Or replies and decisions take too long to be given and made.

According to a study carried out by the Management and Efficiency Unit, headed by John Aquilina, the private sector incurs €116 million in government-induced costs. A breakdown had been provided to the Malta-EU Steering Action Committee. In it, the MEU said that 30 per cent of the administrative burden – some €34 million – was mainly related to Value Added Tax legislation. Another €30 million represented the cost of procedures laid down in company laws.

Amounts aside, other details given by Mr Aquilina were quite staggering. He said that the MEU had found 400 laws and 2,500 legal notices affecting businesses. Of these, around 15 per cent were EU laws with national additions that went beyond the original intent of the EU directives. Another 45 per cent were national laws. Obviously streamlining is required.

Mr Aquilina said that efforts to reduce these burdens had already been made. They resulted in the cutting of €8.5 million, or 278,450 man-hours. This was possible mostly because of further ICT development enabling online filing under company law and VAT.

Statistical returns were also reduced with shorter surveys and reduction in sample size. Another €9 million will hopefully be reduced by December, reaching the target of cutting costs by 15 per cent by the end of the year.

It is good that government-induced costs are being reduced. It remains a fact, though, that much further improvements have to be made. For even as costs are minimally cut, fresh costs will come into play, leaving too high a burden on businesses.

The GRTU, while publicising the costs reduction exercise, was not very complimentary about it. Its director general said that unit was working hard to reduce bureaucracy, but it did not have legislative powers of enforcement. No government department or official was bound to go to the efficiency unit for an impact assessment to be carried out when necessary.

The lack of an executive obligation for departments and the civil servants who man them is indeed a weakness. More needs to be done. Among other things, the government should publicise what is going on.

Thereby claimed reductions will be judged by the public as to whether they have taken place or not. Or whether they were initiated but fell by the wayside as so often happens in the public bureaucracy.

The director general reiterated a call made in the GRTU newsletter to set up a bureaucracy watchdog to ensure legislation and government departments become more business-friendly. In a sense, that will add to the bureaucratic machine.

But it is a worthwhile call. More action is required, as well as greater transparency to ensure that the action is correct and consistent. The government should also explain from time to time how the cost savings were translated into savings for the Exchequer.

At the end of the day if public expenditure is to be meaningfully reduced, that is essential as well.

There is a lot of work for Parliament to tackle. Pity that it is spending so much time on vacation and when not on vacation wasting time on shenanigans.