The designs of the Valletta entrance project are not the only factors raising questions and creating controversy. There is also the little question of where the funds to finance the project are coming from. The initial estimate was that the project would cost €80 million. Later in the day the Prime Minister felt he should ask Renzo Piano to revisit his plans to take into account the approach to Valletta.
The idea is to relocate the bus terminus to allow a grand sweep towards the capital city. That makes sense. If Valletta is going to be upgraded there is more to do than to give it a new entrance plus what one hopes will be attractive buildings in the instep. The bus terminus is an eyesore and creates confusion.
It remains to be seen whether relocating it will reduce the confusion as well as the eyesore. Yet what is to be done had better be taken in hand as part of the Valletta entrance project. This will require additional expenditure. Taking the revision into account and the notorious tendency for public works to overshoot their original estimate it is not unlikely that the project will end up costing around €100 million.
Where is the money coming from, with the government cash-strapped to an extreme? Manna does not fall from heaven any more, yet the Prime Minister and the Minister of Finance would have us believe that the project's funding will not burden the public finances.
In his 2010 Budget speech the minister said that the financing would come from a national investment fund, which would be set up within the Land's Department. Yes, but what will go into it? The Prime Minister stepped in with a post-Budget Speech explanation. The fund would derive its income from rents and concessions on government land and from investing in stocks and shares both locally and globally.
I confess to being nonplussed by this explanation and humbly put that to an insufficient grasp of how the public finances are structured nowadays. My understanding is that receipts from rents and sales payable to the Land's Department normally count as general revenue. If, instead, they are diverted into a fund outside the Consolidated Fund, that would be exactly equivalent to the ultimate use of such funds having come out of general revenue.
However you look at the accounting, the outlays do represent a burden on government revenue. That is so if not in the form in direct outlays, then in the form of foregone revenue.
The catch here might be the Finance Minister's use of the term "taxpayers". Possibly he means that the Valletta project will not be financed out of taxation. If so, he should surely think again. Financing out of public revenue is what one should be talking about. I would be very surprised and disappointed if the government is swinging towards creative accounting, as the Labour opposition is accusing him. Creative accounting does not solve the state of the public finances. Solution thereof can only come out of higher revenue, hopefully as a result of higher growth, and not because of new taxation, though that might also be needed, as Ireland, Portugal and Greece have found out.
Ignore, if you will, the dangers of creative accounting and return to the notion of a national investment fund. Resources-rich countries do set up sovereign wealth funds. They do so not quite to finance grand projects but to have a buffer for the future when oil and other resources revenue dries up. Meanwhile, they use such revenues to feed their sovereign funds, which they invest in a wide range of financial and other assets.
The point is, there is revenue from outside the normal revenue stream. The further point is that it takes time to build up an investment fund. Unless they hugely accelerate the new renting and sale of public land and buildings, the Prime Minister and the Finance Minister are going to find it very hard to build up an investment fund by diverting into it receipt from rents and sales.
The government still owns a large portfolio of land and buildings, directly and through the transfers made to it by the Church as part of the religious schools deal. I am not aware, however, that the Finance Ministry has announced any new plans to dispose of chunks of the property portfolio between now and the general election, by which time the Valletta entrance project is to be completed.
In its interview with him over the weekend The Sunday Times asked the Prime Minister where will the (Valletta project) money come from. He declared that his track record speaks for itself.
Lawrence Gonzi does have a track record which includes targets he set being met. But that does not answer the question. Over the next three years the government has to find some €100 million for the project, assuming it is not to leave hefty unpaid bills for settlement after the general election. And it has to do so without aggravating the budget deficit or, if his Finance Minister's word is to be kept, introducing new taxes.
The Prime Minitser being self-assured that he can do it is not enough. He has to publicly explain how.