Finance Minister Tonio Fenech is interviewed by Anthony Manduca and says Malta needs a government which can ensure job creation.

The PN is projecting economic growth of between 2.3 and 3.6 per cent over the next five years in order to finance its electoral proposals which cost €1.1 billion. How realistic is this projection when one considers the situation in the eurozone and that GDP growth for 2012 is estimated at 1.2 per cent while the rate for 2013 is forecast to be 1.6 per cent?

Labour has always been associated with low growth rates and unemployment

The revenue projections from the government are not ‘one to one’ with the growth rate. There are elements of taxes collected which have their own growth rate as more of the economy comes into mainstream economic activity. Also we have a strong portion of international business which impacts economic growth but which has a bigger impact, a positive impact, on our taxation system.

So it is not a case of one per cent growth means one per cent increase in revenue. We have in fact forecast an increase in annual revenue of €120 million. Our track record in the past five years was an average of €180 million so we have taken a very conservative estimate of increased revenue. We are therefore confident that, yes, we will be able to sustain our economic activity.

I don’t agree with Joseph Muscat’s declaration that 1.5 per cent and 2.3 per cent in economics is a very big gap. It’s not a very big gap. What’s a very big gap is Labour’s inconsistency on its own growth projections. Joseph Muscat said in an interview in The Times that Labour is aiming at a four per cent growth rate. It seems he believes we can achieve far greater growth rates than we are declaring.

Later, on a TV programme Edward Scicluna said it is impossible in the current economic climate to achieve more than two per cent. They claim to have based their programmes on EU and IMF projections. The EU projection goes until 2015, the IMF until 2014, while Labour’s programme covers until 2017. What about the other years? On what did Labour base its growth projections? We have made our projections and believe the world is passing through a difficult time although things seem to be improving in a number of countries. We expect better growth rates than we’ve had in the past five years.

So you are confident of these projected growth rates?

There were times when we witnessed four and five per cent growth rates, and five years is a long time. The financing of our proposals is based on two strong elements, revenue forecasts and the effort we are going to make to bring about savings of two per cent in government expenditure. We believe this is possible without affecting social benefits, pensions and healthcare and by being more efficient in what we do.

The PN is running on its economic record in government. However, isn’t the country’s rise in unemployment over the last 11 months worrying?

No I don’t think so. We have the fifth lowest unemployment rate in the eurozone and one of the lowest in the whole of the EU. We cannot deny that there is still a crisis around us. The European Commission is projecting job losses in some EU countries, but not Malta. While the eurozone economy is expected to grow by 0.3 per cent, Malta is expected to have five times that growth rate, of 1.5 per cent. The Commission is saying this growth will be driven by increased employment and that present government policies will generate more jobs. That is positive news for the jobs market.

We are obviously concerned at the marginal increase in unemployment and we will make every possible effort at ensuring that everyone is integrated into the labour market. This is done by creating job opportunities. That is why we will invest heavily in our tourism sector, €215 million, which will imply a yearly increase of €3 million for the MTA. We will also double our investment in the manufacturing sector and this will help job creation. We will continue to support the new growth areas of the economy, the creative sector, the digital gaming sector, small businesses, through a number of schemes, because we need to create the jobs.

Unless we create 25,000 new jobs in the coming legislature, we will face a problem of unemployment. Unfortunately, a few months before an election the demand for employment falls, because investors wait. It has always been like this, when an election approaches investment slows down. If you have confidence in the PN’s economic policies then you shouldn’t stop investing, unless, of course, you fear a change in government. Unfortunately under a Labour government the business sector does not have the same confidence in investment and job opportunities as it does under the PN and this is a historic fact.

During 1996 – 1998 under Alfred Sant we had the highest rates of unemployment and the lowest rates of investment in the economy, and I need not go back to the pre-1987 period where job opportunities came through military corps. Business has a tendency to be fearful of labour policies. Labour’s economic programme is devoid of any new initiatives. It repeats what this government has done in this legislature and says it will improve upon. In reality the real new ideas for industry, tourism and small businesses are in the PN electoral programme.

How will a new PN government’s economic policies differ from the outgoing one?

A change in policy is required if the policy is wrong. So when you say change, change to what? Our economic policy is lauded by everyone including the Commission and the IMF which said that Malta made an impressive turnaround in reducing its deficit. Our economic policy is deemed to be the right one so we will continue building on it.

We need to be closer to business and continue supporting business in times of difficulty. Labour MP Chris Cardona, who is his party’s spokesman for industry, said on Xarabank that they will not support and aid industry, they will just ensure they will not be hindered in their work. That is not what industry needs, what industry needs is support.

The Labour Party is emphasising that it has changed, that it is now pro-business. Why shouldn’t the business community, indeed the electorate, believe it?

Because when you look at its electoral programme you really ask yourself what are the proposals that have changed? They have just repeated what the PN has done and said they will improve it; that is not a change. In my humble opinion if our economic policy is good, namely low unemployment, more investment, record results in tourism, increased investment by the manufacturing sector, the creation of 20,000 jobs, and Labour is saying we’ll just continue doing that, then why change, especially when there are still many difficulties out there.

Cyprus is on its knees, Greece is not recovering, France is going into trouble, Spain still has deep problems, Portugal is still facing difficulties, and Italy has entered an unstable period. Do you change government now on the economic front, from which everything depends, such as jobs, health and education? This is not the time to take a risk or to change for change’s sake.

Are you worried that voters will not vote on the government’s economic record but on political issues?

On the issues that matter, such as your job and quality of life Labour has nothing compared to us

This does concern me. In other countries people are voting to have a job, because they are unemployed; in Malta we are not realising that our jobs are also on the line when we come to vote on March 9. We cannot take it for granted that the economic situation will be maintained irrespective of who wins.

Joseph Muscat is quoted to have said that what excites him in the economy is that the economy grows on its own (“l-ekonomija tikber mix-xejn”). I’d like to know what economics book he got that from. The economy grows because you create the right environment, because you give the right incentives to industry, tourism and small businesses, because you give people the right incentives to enter the labour market and you ensure the economy remains competitive.

Labour only talks about childcare, which is half baked, and their energy plan which is not doable in the timeframe they are proposing and which in reality will increase rates, not decrease them. Labour does not talk substance on the economy.

Edward Scicluna said last week that Malta’s economy is suffering from a “lack of potential” and its potential for growth has been stuck at two per cent. What is your reaction to this?

The person who is perceived to be Labour’s economic guru did not give one idea on how to increase Malta’s economic potential. Our electoral programme points out where we see such potential. Linked to this is the larger investment we need in education. Our potential is conditioned by the educational level of our workforce. The services sector is growing rapidly and offers well paid jobs, and we must support it, as well as the other sectors.

Education is so important and we want university graduates to start their own business. People under 25 who start their own business will have a two-year tax holiday, as well as a cash grant which can be as high as €10,000.

Do you acknowledge that red tape and bureaucracy has reached a stage where it is hindering economic growth? If so, what does a new PN government intend to do about it?

In general we have done a lot especially when it comes to small businesses, through the creation of Business First, and we have had excellent feedback on this. The various schemes we have introduced for small businesses have also been very successful.

There is an issue which we need to continue addressing and this is the question of permits and Mepa. You always need a balance but there is scope for some changes to be brought about, which would help with economic growth. The major issue is actually permits which are pre-reform Mepa and are therefore under the old system.

Can the country afford the income tax cuts that will take effect over a three year period, once the 2013 Budget is approved, and which both parties are committed to implement?

Yes, but I stress that we had five very difficult years, and we still reduced 25 taxes. We reduced income tax in the first year of the legislature, we introduced a new lower tax rate for parents, we reduced taxes for small businesses, we’ve supported families who send children to private schools and elderly people to homes, parents who send children to sports events and cultural activities and we’ve removed the credit card tax and the departure tax.

We couldn’t reduce income tax from 35 per cent to 25 per cent in this legislature at one go because of the difficulties around us. We now believe we can afford this cut gradually. In our electoral programme we are also pledging to re-adjust the tax bands for everyone and to remove inheritance tax on property transferred from parents to children.

What is at stake in this election?

At stake is your future, your job. If the economy does not continue to maintain its pace of job creation, if the country is run by a government which does not make the economy and jobs its priority, but will be lost on 800 or so initiatives, which means one measure every two days, you will be lost in doing a lot of niceties but losing focus of the very important things which are jobs, how we achieve economic growth and how we sustain our investment in education and health.

On March 9 the choice is very simple, Malta already belongs to us all, we don’t need Joseph Muscat to do that. What we need is a government which will ensure that our future is safe, that jobs will be created and that the quality of life of our families will continue to be sustained and to progress. Any other choice will mean that we will lose jobs. Labour has always been associated with low growth rates and unemployment.

The choice is very clear. The leader of the Socialist bloc in the European Parliament told us that after France it is now Malta’s turn to have a Socialist government; a year after the change in France the country is experiencing bigger problems, the Socialist President has not only not solved the problems, he has created new ones. This is no time to risk. The Nationalist Party is not perfect, and has made mistakes, but on the issues that matter, such as your job and quality of life Labour has nothing compared to us.