Shadow Finance Minister Tonio Fenech told Parliament on Tuesday that given the current economic growth, the government should be working to reduce the deficit, which had increased by €50 million in the first five months of this year.
Speaking during the debate in second reading of the Fiscal Responsibility Bill, Mr Fenech said statistics presented by the NSO showed that the deficit had increased to 5.2 per cent of GDP but the government had declared a deficit of 2.7 per cent.
The discrepancy was due to Enemalta Corporation owing the government €110 million at the end of last year.
The situation had worsened, he said. While in January 2013, the government had collected €64 million from Enemalta when duty was still not being collected, the sum collected this year was €55 million. Mr Fenech estimated that by the end of the year Enemalta would owe the government around €200 million, which would definitely not be covered by the Chinese funds to buy a stake in the corporation.
The reality was that the government was subsidising Enemalta and the reduction in energy tariffs was adding to Enemalta’s burden.
Mr Fenech said that many families were receiving their water and electricity bills but they expecting the reduction to be greater.
When one was calculating the bills every two months, the reduction could not be felt, because one did not qualify for the eco-reduction, as used to happen when the bills were issued every six months and the consumption was spread out. Some even thought that the eco-reduction had been removed.
Enemalta was not collecting the revenue it should from duty and VAT. The situation was getting worse, not better, and the corporation was losing around €6 million a month. Not even the millions coming in from the Chinese and the new consortium would be enough to plug this hole.
The deduction in water and electricity rates came from a government subsidy and the taxpayer was paying for it with increased debts. How much more debt would Enemalta incur? How could the minister seriously stand up in the House and tell members that everything was under control, when his own figures revealed that the burden Enemalta was placing on the government was substantial.
When one compared like with like, over the same five months, it showed that the deficit had increased.
Even in other areas, the government had merely postponed social services payments for later on in the year. Children’s allowances were being paid in three instalments and even the payment to the elderly was being paid piecemeal, but they still had to be paid.
This Bill would oblige the Minister to take corrective measures so that this would not be repeated. From what could be seen, the aims of the government would not be met and the burden of Enemalta was simply being transferred to the public purse.
By the end of the year Enemalta would owe the government around €200 million, which would not be covered by the Chinese funds to buy a stake
The minister needed to explain this to people and tell them that things were not as plain sailing as he had made them out to be.
Former Enemalta chairman Charles Mangion (PL) said that Mr Fenech, who was a former minister, seemed to be suffering from amnesia, because he was forgetting how much debt he left had Enemalta in. So, he said, it was ironic for him to now criticise the government.
This Bill would provide for a council that would continuously observe what was happening at Enemalta. Fiscal responsibility was not just a buzzword but it assured that the financial foundations were strong. This was an act of credibility and commitment by the government.
He said that the reduction in water and electricity rates was being felt because the purchasing power had increased and private consumption only came when people had money in their pockets.
Mr Mangion pointed out that the debt which existed was with the Maltese public, through government stocks and bonds, and there was liquidity in the country.
Turning to the local councils, he said that every year showed that many of them were not functioning properly and an audit needed to be done on their performance and their finances scrutinised.
The Bill should act as a guideline for all those who worked in the civil service, so that responsible decisions were taken with a sense of accountability.
Labour MP Silvio Schembri said the Bill increased government obligations to conduct financial affairs with transparency, stability, equity and effectiveness.
He said that while the government had to tackle public debt issues at a national level, there were also local councils that had to pay for the excessive expenditure of others during previous adminstrations.
Mr Schembri rebuked the former PN Administration for increasing the national debt by spending €2 million to build a bridge that led to nowhere and which did not create jobs. He compared this with the PL government’s measure of introducing child care centres which, according to Eurostat figures, led to an increase in the rate of female work participation and in government revenue.
He said the Opposition, while painting a picture of gloom and doom, had to acknowledge that the economy was doing well. International credit rating agencies had welcomed the government’s economic and financial policies.
It was the government’s aim to continue reducing the national debt from 73 per cent of GDP in 2013 to 72.5 per cent this year and to 71 per cent in 2015. This would be achieved through economic growth.
Winding up the debate, Finance Minister Edward Scicluna said the government’s aim was to reduce the public deficit for 2014 by 0.7 per cent to 2.1 per cent.
He said that while the European Commission gave Malta a breathing period of two years to move out of the excessive deficit procedure, the government managed to do so in just one year.
The government was not afraid of taking corrective measures and of giving new direction to decision-taking while it was attentive not to give the country any shocks.
The government had many other measures which it would introduce to sustain economic growth. This was a record for Malta and higher than the average in the eurozone, as were employment figures.
The government had managed to turn around the economic trend after March 2013 and was achieving significant results.