Photo: Jason Borg

The Prime Minister has really gotten himself into a rut this time, and it is all his own doing. His meddling around with what should be a free market economy in a modern European state has landed him with a de facto wage freeze: a 58c cost of living increase in the next budget. That doesn’t go down well with Labour’s predominantly working class voter core. They want more, but that’s his mess to handle.

The cut in water and electricity rates for households earlier this year, we now all know, was built on a deception. The power station that was to magically cut the costs of energy production is nowhere in sight. The more the government talks about it, the less credible it begins to sound.

The consortium that was meant to foot the bill for this year’s cuts has not paid a penny. Yet, the government went ahead anyway, cut the rates and now the money shall have to come from somewhere.

Compounding the problem is the promise to businesses that they too will benefit from the energy pipe dream, come March.

The Finance Minister has been talking of more indirect taxes in the next budget, something that has prompted the EU Commission to raise questions. Joseph Muscat tried to play it down saying it was just a matter of timing. Yes, he would know all about that.

Let us hope that this time around the Finance Minister does not come up with another disgusting partisan budget speech as he did last time and instead stick to the facts. It is hardly likely that Muscat will allow him to do that.

This is a government built on hype and delusion, except this time the chickens have come home to roost.

The new energy rates coupled with populist government handouts have artificially reduced the inflation rate to near zero. This is a throwback to those Mintoffian years where the retail price index was linked to the prices of corned beef and tuna, enabling the government then to similarly claim a low inflation rate and impose an across-the-board wage freeze.

That choked all economic development as it undermined consumer sentiment; Muscat’s economic policy, if that is what you call it, is about to do the very same thing.

The assumption that the low energy rates are boosting consumer confidence is delusional. They help, just help, families make ends meet. Parents, whose children are about to sit for the Matsec examinations and facing exorbitant registration fees will tell you that this is one hell of a hard month, whatever the energy rates are.

What we need are policies that enable the country to finally grow up. Only the Nationalist Party can come up with that, now that Labour is an ideological write-off

The government can point as much as it wants to at the country’s economic growth but that is not the feeling out there. The Prime Minister said he was not surprised by the upward revision of €13 million in Malta’s contribution to the EU, saying it was the result of a “statistical adjustment”.

As always, he was evasive, and deflected the issue by allaying fears that the top-up would affect the budget deficit. The truth is the Europe-wide way of measuring the GDP incorporates changes that include, among other things, the inclusion of drug dealing, smuggling and prostitution in the calculation of the GDP.

Is that what Muscat calls a statistical adjustment and is this the stunning economic growth he boasts so much about?

Yes, there is affluence out there too, as reflected, for example, in the burgeoning rental market where properties with astronomical prices are being snapped up. No one with an average Maltese wage can afford them, and they are most likely being taken up by high salaried foreigners in Malta.

It is not Malta that has gone to Europe but Europe has come here. Yes, there is a trickle down effect, but 58c don’t make up for the shortfall.

The Prime Minister last week told building developers that the supply of high quality properties on the island has dried up.

He didn’t explain why his pseudo-socialist government wants more high quality properties. His peddling of European passports may have something to do with it, but there is a nagging feeling that he actually thinks that he can turn this island into another Dubai.

Glittering high-rise buildings don’t make the country affluent; they only perpetuate an illusion. The truth is that no one with an average salary is eyeing any of those properties. They have their eyes on the measly 58c wage rise.

The Nationalist Party’s reaction to the low COLA was pathetic. Its spokesman Tonio Fenech called on the government to compensate low-income people and in the same breath complained of an ever-rising deficit. He said the government should cut the cost of fuel when he fully well knows that the Labour government is using fuel prices as a marketing tool.

What Fenech should have said is that the government should lay off the price of fuel, which it taxes heavily. This is an ideological issue: the market should be allowed to operate freely and government should stay out.

The Prime Minister, in line with Fenech’s thinking, said he would compensate low-income families.

It was another knee-jerk reaction by Muscat, throwing away taxpayer money to solve a problem he created. He handled the nationwide power outage in very much the same way – government handouts to those who suffered the longest outage.

Even more fascinating was a statement issued by the Labour Party, ostensibly in reply to Fenech. It said: “The Labour Party in government will continue to understand and address the reality of families, who are still feeling the pressure of prices, through measures that will continue to motivate economic growth that would reach everyone.”

Through Labour’s own admission, the near zero inflation rate is an illusion. Furthermore, the party incredibly believes that true wealth can only be created through economic growth and the subsequent trickle down effect. This is conservative economic policy par excellence and totally contradicts what the Prime Minister said that same very day in Brussels – that there shall be handouts.

Not only was the party off message, but it also exposed its own leader who suddenly came up with “measures” to compensate for the low COLA. There were clearly no such measures in mind, as otherwise the party would have known about them.

It was a populist reaction by the Prime Minister and the Finance Minister must now be hard at work trying to fit the new measures into his budget speech.

This country is in dire need of a responsible political ideology that does not perpetuate the nanny state and does not strive on government handouts and cronyism. What we need are policies that enable the country to finally grow up. Only the Nationalist Party can come up with that, now that Labour is an ideological write-off.

The announcement of 10 people to chair the PN’s policy fora is the way forward. They are all newcomers and the hope is that they will soon become the new face of the party and eventually, spearhead the new and responsible policies that this country needs.

Big government, monstrous in our case, is an impingement upon freedom. Unless this country understands that, it will never move forward. Rolling back the State and its numerous agencies, rolling back the irresponsible government meddling in what is supposedly a free market economy would remove the harnesses that choke true economic growth.

The purpose of government is to foster a society where individual human potential can flourish freely. Government does not create wealth, individuals do that; they should be free to do so because public policy gives them the space and freedom to do so, and not have to succeed in spite of a wasteful, populist government.

A COLA that is not based on productivity and competitiveness and a government readily prepared to foot the bill for its hype through indirect taxes to pamper to the disappointed masses, is not the answer. This country does not need a smirking Sugar Daddy. It needs to grow up.