The bread-and-butter issues
It is not just employers in Malta who are expecting the Government not to use the Budget to try to reverse the swing against it. International agencies will most certainly be closely following the Government’s actions in the final lap of this legislature to see whether it intends keeping strictly to its plan to keep public finance under control.
Up to now, there is no reason to believe that the Government will throw caution to the wind and decide to be overgenerous, a move that would derail its own programme to keep the deficit down to below the three per cent threshold as required by EU rules. Whatever the political cost, it should not be tempted to stray away from its programme; doing so would be a big mistake. It would also be against the national interest. It is unfortunate that the conclusion of the collective agreement for civil servants has coincided with the time usually slotted for the presentation of the financial estimates. As expected, this has led to much talk about the Government purposely choosing this time to finally wrap up the agreement to gain political advantage. The agreement expired in 2010 and it should not have taken this long to be negotiated.
The size of the package, €190 million, is big enough to cause concern over whether the country can afford it at a time when it is struggling to bring down the deficit and the national debt, which has now risen to a staggering €5 billion. True, the cost of the agreement is spread over a number of years but, even so, the amount is substantial.
In the employers’ opinion, it would have been wiser had the Government linked the cost to a targeted reduction in public sector employment to make it cost neutral or at least reduce its cost to the taxpayer. It is a good point but, clearly, this should have been tackled at the time that the agreement expired, not two years later and definitely not close to a general election.
Experience has shown that, at this point in the legislature, an Administration is tempted to make moves that please the electorate. Past administrations have had no scruples overloading state companies or corporations with additional labour, playing havoc with their financial planning.
The Government has said that the collective agreement for civil servants would have no impact on its deficit reduction programme but few believe this. One union said it hoped that the impact of the additional expenditure involved would not hit programmes meant to create jobs. Another obvious concern is the effect the agreement could possibly have on wage demands in the private sector.
As to the warning against the government treating the Budget as a means to get short-term political mileage, the Nationalist Government cannot possibly afford to lose credibility now when it has done so much to rehabilitate public finance. Keeping to its own policy is the best card it can play.
Though there is little doubt that this Government has been politically burdened by a series of administrative errors that could prove to be its undoing, at least it has a sound enough track record to show it is capable of making the right decisions when it comes to bread-and-butter issues. Whether people will remember this come election time is, of course, another matter.