Opposition finance spokesman Charles Mangion told Parliament that Malta’s current financial situation was unsustainable. Speaking during the Budget debate on the votes of the Finance Ministry, he questioned why the Prime Minister, last Wednesday, had not offered any sense of financial direction and control of national debt.
The pre-Budget document, which had shown one main objective of controlling the deficit, seemed to have been completely overlooked. Indeed the 2011 Budget made no mention of this year’s creation of a zero-credit fund for such capital projects as the new Parliament and a company for the development of the Grand Harbour.
But the people had heard about the water fountain in St George’s Square, Valletta, which would not address their concerns on hospital waiting lists, making do with pensions of just €500, paying back house loans while rearing children in spite of both parents working, and several others.
The people had expected a serious Budget showing how to face the financial problems still clouding around the country. The government was now saying it had simply adjusted an electoral promise – or should it be called a full-blown change?
Why had Dr Gonzi mentioned nothing about the national debt and deficit, when they were the biggest issues all over the EU? Last year he had said turning the deficit into a surplus would not happen in 2010 but in 2011. Even if he had said 2012 it would not have raised many political eyebrows.
But to say repeatedly that the worldwide financial crisis had not hit the Maltese Islands amounted to incompetence. Worst of all, the crisis had hit tourism and exports, because demand for both had dwindled. Now Dr Gonzi would probably conjure up the change from deficit to surplus just before the elections.
This boom-and-bust cycle that Dr Gonzi wanted to dangle before the people’s eyes lacked of economic credibility, Dr Mangion said.
When the Prime Minister had mentioned debt on Wednesday he had acknowledged it was high. Dr Mangion said that today, debt in the Consolidated Fund and guaranteed debts totalled over €5 billion. Besides, the Auditor-General kept reminding the government that bank guarantees and letters of comfort could also come back to haunt it.
Dr Gonzi liked to say that most of the national debt had been amassed in putting things right on a national level. But, Dr Mangion pointed out, the subsequent sale of those “put-right” national assets should have brought back the outlays and helped to offset the debts, yet these continued to soar.
Dr Gonzi had once said there were still €170 million in outlays on utility costs to bring back. But what had become of the total of €250 million the government had saved on subsidies to utility costs and the dockyards?
Any serious family could tell that the only way to cut down on debt was by saving wisely and cutting back on spending. But over the years the government had run up a bewildering total of €460 million in overruns on several capital projects.
How would the government cut spending? The Auditor General’s Report for 2009 had said what could be done. The government must either declare the AG’s report wrong or use it. The people’s funds must be spent accountably.
Dr Mangion said the analysis in the pre-Budget document of structural problems in the national economy had been one of the best ever. But how could the government’s actions be reconciled with that analysis?
Over the past years Malta had lost its rightful share of world trade, and this had reflected in the balance of payments with resulting less imports of raw materials for re-export and less consumption. The cyclical nature of these events and the necessity of being prepared for the next developments was particularly important.
The government must be more interested in real productive machinery, mostly in tourism sector where thanks were due to Maltese investors who held the lion’s share. Was it still wise, at least for the time being, to hit them by raising VAT from five to seven per cent?
Tourism was bouncing back, but it had not yet reached 2002 levels. Air Malta was still in financial doldrums and having to close routes, while low-cost foreign carriers had quickly suspended routes that did not make enough profit.
Competitiveness was influenced by salaries and other expenses. In Malta, in the four years between 2006 and 2010 they had gone down. The pre-Budget document had confirmed that any wage or salary increases had been so low that they were the lowest in the EU.
Concluding, Dr Mangion said two of the main factors hitting productivity in Malta were the quality of education, which was good but could be better if the country really knew what skills it would need; and bank financial services and charges that needed to be regulated.
Other opposition speakers contributing to the debate were Gavin Gulia, Carmelo Abela and Marlene Pullicino.