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Self-aggrandisement is an illness that often afflicts animals of the political kind, especially in a small country where politicians are only rivalled by the parish priest in their popularity down at the village bar.
But there is no sign of this illness in Lino Spiteri, with whom I discuss matters political and economical. He slates the political class, himself included, for not being honest with the people and argues that tackling the massive financial and economic problems is going to take an act of courage.
“In all this financial and economic malaise I would find fault with the government on one count: it is not spelling out the situation bluntly to the people,” Spiteri says. “When Lawrence Gonzi was appointed Prime Minister I thought there would be a break with the past. He should have started by laying out the situation as it is. But unfortunately Government has been contradicting itself.”
It must be a déjà vu for this former finance minister who was the harbinger of bad news soon after Labour took office in 1996 after discovering the country’s finances were not as healthy as the previous Nationalist administration made them out to be.
“These have been seven wasted years in terms of the awareness that could have been created on the dire financial situation the country is in. The Nationalists are culprits in this. When the Labour Party won the election in October 1996, as minister of finance I was made aware by civil servants of the true state of the country’s finances, and the government spoke out clearly. We outlined the difficult starting position and said it needed to be tackled by taking tough measures. The Nationalist Opposition of the time simply denied the existence of a deficit. That is when confusion in the mind of people took a turn for the worse.”
Spiteri says the structural deficit in 1996 was much bigger than expected and much more than had been revealed by the Nationalist administration. “Unfortunately, the Opposition was denying reality and even blamed the Labour government for creating the huge deficit, as if it is possible to create massive deficits in 22 months. In all fairness it is also not possible to solve anything in 22 months. Solutions take time to be identified and implemented just as problems take time to materialise.”
Spiteri understands that in stating things as they are there is the possibility of demoralising the public but insists it will have to be weighed against the probability that people will simply ask for more if they are oblivious of the precarious situation.
“We have come to a situation where public consciousness has been so confused by political rhetoric that even when tackling the effect of the increase in oil prices, confusion prevails. Oil prices have increased 70 per cent this year and you cannot have such an increase in such a basic cost factor without readjusting prices for those costs or without giving a massive subsidy. If you do not adjust prices it’s going to impact on public expenditure. Government has to say this to the people. It has to clearly point out the illness and prescribe the required medicine.”
Spiteri holds the Prime Minister in high regard but says years of power are leaving their strain on the Nationalist Party.
“I think Lawrence Gonzi is trying to make a good start, he is a good man, he means well but I think he’s been taken over by the spinners in his party. The party barks too large in this government,” he says.
Gonzi is on a witch-hunt to trim expenditure in government departments and authorities by cutting down on waste and unnecessary expenses. Controlling the deficit is high on the prime minister’s agenda but whether he will manage by simply cutting waste is another issue altogether.
Spiteri bursts the bubble that controlling waste alone would suffice to bring down the deficit. “When reducing expenditure one has to attack waste. But the truth is, even if such an exercise were undertaken it would in all probability amount to not more than a saving of Lm5 million to Lm10 million at most. It is important on an annual basis but it will not be enough to bring the deficit under control.”
“But,” he stresses, “Government needs to demonstrate it is serious about wanting to reduce expenditure.” He argues on the need for visible symbols or metaphors that signal government’s intention to cut expenditure and which people could identify with.
“Government could start by reducing the traffic policemen that accompany the President from two to one or by cutting down on the use of government cars. These would not amount to much savings but they are symbols. Instead Government is adopting negative symbols such as the purchase of the House, or rather block of flats in Brussels,” Spiteri says.
Dwelling on the Brussels embassy purchase the former Labour minister believes the controversy can never die because Government bought more than twice the space required for its needs.
Almost sarcastically, he adds: “Never mind the embassy was purchased in what I continue to insist were intriguing circumstances, but justifying the decision to purchase more space than required on the premise that some day we might need to expand our operation possibly when we take over the presidency of the Union, is simply too ridiculous to continue repeating.”
The suggestion to develop the Royal Opera House site into a new House of Representatives is another bad signal according to Spiteri and does not tally with the drive to cut expenditure.
“To say that you wish to develop the site is understandable, but to say that you want to do it straight away before the next election smacks of political rhetoric. Government has signalled its intent by saying it will embark on the project that everybody wants but this type of news management is not becoming of Lawrence Gonzi and any other politician. I expected a different approach. To top it all he wants to convert it into a new parliament house.
“I disagree with the suggestion. The Palace has always been our legislative heart and limitations can be addressed by the President’s Office out of the Palace. If more space is required there are more than enough government buildings in Valletta itself where administrative parliamentary work and offices can be located. Why go for an edifice which would cost anything between Lm12 million and Lm19 million?
“My priority would be to try and attract to Malta an international institution and locate it instead of the ruins. Previous governments have tried but so far not succeeded. Such a project would add value to Valletta, something, which a new parliament would not.”
Will government have to bite the bullet and cut down on its wage bill?, I ask. Spiteri answers in the affirmative but says it will be presumptuous for him to offer solutions. “Certainly the way we are going about it is not the way how to do it. Before cutting the wage bill Government has to ensure that employees are effectively utilised. So far we haven’t had a scheme, which determines where the excess labour is and how it can be deployed on activities that yield value even if they don’t reap monetary income.”
He questions whether the public-private partnership to embellish centre strips and roundabouts is the correct way of going about things. “What is this arrangement costing public coffers? If it was simply a question of taking government employees and pushing them into this new company with government still footing the bill, couldn’t have government organised its own employees and reap the same good results? Why is it that the government doesn’t seem to be able to do things in an efficient manner? We have this initiative put forward as a fine example of what can be done but government’s bill has not been cut it has just been transferred form one entity to another.”
In a similarly critical tone he also questions the effectiveness of restructuring in various government-controlled entities such as PBS and the Drydocks.
“Government can absorb the excess labour but will it absorb it productively? Until now all we have is a restructuring of finances - saving money in one area and spending more in others with no reduction in the total. I doubt the restructuring has added any value to government services. Cutting the wage bill means making people redundant and that would have social and human consequences so I can understand that government will continue to act as the employer of last resort. But in doing so it has to deploy its employees productively.”
Unions, constituted bodies, the Opposition and various other organisations are clamouring for a tax cut in the forthcoming budget. Will Gonzi be able to satisfy their demands?
“To clamour for a tax cut in these circumstances is utterly rubbish. You may say there needs to be a smoothing of income tax progression such as an increased threshold, the first band of taxation starting at a lower rate than 15 per cent and that the top band be reached at higher incomes, but a tax cut is nonsense. You don’t attribute recovery to a tax cut and you don’t recommend a tax cut when we have such a massive deficit.
“I very much doubt it the finance minister will be considering a tax cut. Rather foolishly government would come to it for the budget of 2007 but it will do so for political reasons, simply adding another log to the fire that throws up so much smoke in the people’s eyes.”
Last week the EU Commission issued its Euro convergence report for the 10 new entrants and Malta failed in four out of the five criteria required for adoption of the single currency. I ask Spiteri whether he is confident Malta would be able to adopt the Euro along with the first wave of new applicants sometime in 2007.
“I don’t think so. First of all, I don’t think we should adopt the Euro speedily. We should take our time. Secondly, we are not in a position to do it. Not being part of the Euro allows us some flexibility regarding exchange rate adjustment. As for the convergence criteria they are still too tough for us to meet and it’s going to take us years to converge as required.”
It is often argued by Government spokespersons that if Malta fails to join Eurozone as early as possible it will lose out to the eastern countries in terms of competitiveness.
Spiteri does not subscribe to this train of thought. “I don’t think the new entrants who become part of the Eurozone will gain any competitive advantage relative to us. If the Euro is adopted as our currency it would facilitate the life of our importers and exporters, not so much as to exchange rate fluctuations but in terms of transaction costs. But in terms of competitiveness it is not the Euro which is a determinant factor. Once we join the Eurozone our competitiveness is locked in and will be moving along with that of the whole block. At the moment the Euro accounts for 70 per cent of the currency basket but we still have some degree of flexibility. By adopting the Euro flexibility will be lost. The gain would be that we will become part of a more stable currency zone. But I do not think the Euro will have any impact on competitiveness.”
Spiteri believes the country needs a change in government but insists the Labour Party needs to be more constructive in its criticism.
“When a party has been in office for so long arrogance and inefficiency are bound to grow. Both grew in the last period of the Labour government before 1987 when I was a minister and perhaps I too contributed to that arrogance. Now it’s happening again and we do need a change in government. It is much more probable that Labour will get in after the next election but I still ask why the Opposition should simply criticise in a negative manner. After all it is in the Labour Party’s interest to see that problems start being tackled. An Opposition is expected to criticise where the need arises but it also has to demonstrate it is an alternative government.”
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