The buy-out negotiated by the government with bus owners did not go down very well. It was not just the Chamber of Commerce and Enterprise that found the cost of the deal very hard to swallow. Criticism of the amount of the settlement is widespread. At a time when public finances are in a sorry state it is natural for public opinion to question the government's priorities.
The administration has made it very clear that it had legal advice it was in duty bound to compensate bus owners for terminating their business. This was explained by the Infrastructure Minister and stressed by the Prime Minister.
The legal obligation was not called into question. It was the amount of the settlement that stuck in many a throat. The government has defended its decision by saying that it could not subsidise a service forever, especially when satisfaction given to users remained low.
The satisfaction factor is a weak explanation. It was up to the authorities concerned, starting with the Malta Transport Authority, to do its utmost to ensure that the bus service operated in a decent manner. The subsidy excuse is valid. It is so in the context of the government's determination and obligation under EU rules to do away with subsidies.
As a matter of fact it is possible that the government should have used subsidies as a further argument in addition to the legal one as to why it had to compensate bus owners. It could have worked out the present value of subsidies given at the current rates over the next 10 years. It might well be that such a simple exercise was indeed carried out, but the authorities kept it close to their chest.
If they did so, it has to be because the present value of the subsidies is quite lower than the buy-out cost. We shall not know unless the authorities come out with the comparative figures. They should do so even at this late stage, to round up this stage of the discussion.
The buy-out does seem to have been costly. That is so in particular when one considers that bus owners did not pay anything for the original licences to operate their buses. That some of them bought licences from existing holders at high cost over the years is no more than a reflection of the return they expected to make from their investment.
Public disgruntlement at the amount to be given to the bus owners for surrendering their licences and vehicles is accentuated by the fact that around a fourth of the buses to be acquired with public money are low-floor vehicles.
These were imported fairly recently under another scheme whereby the government subsidised bus-owners with public funds. This point was made in this column when the issue first surfaced months ago. It has now become central to the criticism. It could become more emphatic. For it remains to be seen how much the company to be eventually entrusted with a new contract to operate the public bus service will be willing to pay for low-floor buses.
As a matter of fact it would have made far more sense for the government to negotiate the price of the low-floor buses with the new company and paid bus-owners a back-to-back price based on it.
To do so, it would have had to allocate the compensation to the surrendering of the licence and to the transfer of the vehicle, also feeding in the present value (the concept crops up once more) of the secure job offered to current drivers of the buses. But surely, it would have been a sensible exercise to carry out, if not for anything else, to be transparent with the public about how the compensation figure materialised.
As it is, the government has come up with a rather queer argument. A spokesperson for it said that the money would not be paid out by the government - it would be a liability of the Malta Transport Authority. Since when did the authority acquire such substantial funds? It is rather evident that the authority will have to raise a loan, from the banks or through a bond flotation to raise the required capital.
If the source is a bank loan (netted for what the new company will be paying) it is highly probable that the lending bank or banking consortium will insist on a government guarantee or, at a minimum, a letter of comfort. If the source is a bond issue, prospective investors will weigh carefully the risk of lending their money to the Transport Authority.
The bus owners are no fools. They humiliated the government by saying that they did not trust its ability to pay and demanded compensation up front. They know as much as anybody else that what one is truly talking about is a government liability. This means that those who criticised the way the deal was done and presented as a new burden on the public finances were not simply howling in the wind over an imaginary bad smell.