The opinion piece penned by the Opposition spokesman on public finances is a classic case of convoluted logic and erroneous statistics. This member of an administration that registered the highest fiscal deficit in Malta’s history argues that the fiscal surplus achieved by the current administration is a fib. Let us remind ourselves of the track record of the cabinet of ministers, of which Mario de Marco was a prominent member.
On November 28, 2012, Tonio Fenech gave his last budget speech as minister for finance. The previous year he had promised 2012 would end with a deficit of €145 million.
Like in all his previous speeches, Fenech had to in-form Parliament that he had not achieved his target. In-stead he promised that the deficit in 2012 would be €180 million, an upward revision of nearly 25 per cent.
Simon Busuttil and de Marco would have been involved in the preparation of this budget and approved the figures presented. So one has to ask if they were surprised when the final figures for 2012 were vetted and approved by Eurostat?
In 2012, the deficit on the Consolidated Fund was not €180 million, but a staggering €362 million.
This was double what was announced in Parliament by Nationalist cabinet ministers. It was in fact, the highest deficit ever, and nearly 60 per cent higher than the deficit at the start of that administration. And that was 2012.
In the first months of 2013, when de Marco was a member of a supposedly caretaker cabinet, our nation experienced the largest increase in public debt ever observed.
In those last months, the national debt rose from €4.9 billion to €5.2 billion, or by €100 million each month. In three months, the caretaker administration spent more than it earned by nearly as much as it had in the previous 12 months. As a result, in March 2013, our national debt was a staggering 71.5 per cent of GDP. Back at the start of that legislature, it had been 60.4 per cent.
Today de Marco says the IMF is worried about our public finances. Let us remind ourselves what the IMF was saying when he was a cabinet minister.
The current administration has managed to reverse the proportionate rise in the recurrent expenditure that de Marco’s cabinet allowed
On May 7, 2012, they said that “to be credible, the adjustment should be backed by concrete measures and focused on containing spending”. They said that “it will be important to avoid the recent ‘stop-go’ pattern of fiscal policy to ensure continued confidence in Malta’s public finances” and that “bold policy actions are necessary to reduce contingent liabilities arising from the public corporations”. Not quite a resounding vote of confidence.
And, in fact, de Marco’s cabinet holds a record that few administrations in Europe can boast of. They managed to get the Commission to place our country under and excessive deficit procedure twice in just one legislature.
The opinion piece by de Marco is full of statistical errors. For instance, he states that “capital expenditure as a percentage of GDP was, at 3.1 per cent, the lowest in recorded history”.
Quite a bold claim when in four years, the current administration spent €1.7 billion on capital expenditure.
In the first four years of the previous administration, capital spending was €1.1 billion, or nearly 60 per cent less. In fact when one looks at the statistical record, one finds for instance that in 2006, when de Marco was a member of Parliament, capital expenditure was 2.5 per cent of GDP.
Thus it appears that for de Marco “recorded history” goes back to 2007.
If de Marco had bothered to look at Table 12 of the European Commission’s statistical annex to its latest economic projections, he would note that public investment as a percentage of GDP for the period 2008-2012 was 2.6 per cent.
Between 2003 and 2007, the commission notes a ratio of 4.1 per cent. If anything, “recorded history” shows that the cabinet of which de Marco was a member reduced capital spending dramatically. And yet it still left office with the largest deficit ever.
The recurrent expenditure, de Marco says, is now out of control. It is interesting to note that in 2007, recurrent expenditure amounted to 32.9 per cent of GDP. In the following five years, when de Marco was a cabinet minister, recurrent expenditure rose to 34.8 per cent of GDP. Guess what the proportion was in 2016?
It was 32.9 per cent. The current administration has managed to reverse the proportionate rise in the recurrent expenditure that de Marco’s cabinet allowed. That is how a deficit is turned into a surplus.
De Marco today is a champion against increases in recurrent expenditure. When he was a minister, his track record was somewhat different. In 2012, the recurrent expenditure of his ministry was €49.4 million. Just two years earlier his ministry’s recurrent expenditure was €37.4 million. An increase of a third in just two years is no mean feat.
In his article, de Marco calls an eight per cent increase in recurrent expenditure “reckless”, when he managed a ministry with an annual increase of 16.5 per cent, or more than double.
But then, just calling all present recurrent expenditure “dubious pre-electoral promises with little or no added value to the taxpayer” while ignoring one’s own track record in office is a good measure of a politician’s credibility.
Chris Cardona is Minister for the Economy, Investment and Small Business.