GRTU Director-General Vince Farrugia is not a happy bunny now that the reform in utility tariffs has been announced. DAVI D DARMANIN speaks to him on what he expects to come out from tomorrow’s budget speech.

If Vince Farrugia is known to be volatile in normal circumstances, then one can only imagine how government’s obstinacy in dropping the bomb for higher utility tariffs made him hit the roof last Tuesday. Until yesterday, he was still foaming in the mouth.
“We are facing very unusual circumstances, and this is our major concern for this budget,” he started. “We have been cautioning government since September for it not to repeat the same mistakes it made in the last two rounds of recession in the 80s and 90s. If there was one lesson we should have learnt from the last recessions is that 98 per cent of enterprises are SMEs, and it is small enterprises that help speed up the recovery of an economy. Government has either ignored or forgotten the experience.
“When the EU is bailing out something to the tune of €2.8 trillion, why does our Finance Minister insist on his deficit targets? We must shelve this prospect for now and look into more important matters, whatever the opposition says if deficit figures go up. The energy tariffs issue was totally unnecessary. Whatever excuse Austin Gatt may come up with, it only showed us clear signs of government being out of touch and using a philosophy that is by now dead,” he claimed.
But irrespective of how government behaved with the consultative bodies, it would be difficult to deny that this was an issue that in some way or another had to be confronted and resolved. In fact, Farrugia never denied that the matter should not have been resolved, but simply, that it could have waited.
“If government created a problem by making the wrong hedging investments, then I don’t know why it must burden the industry with a problem that is not ours,” he said.
Certainly, with Enemalta running at a deficit, this becomes everyone’s problem.
“At this point in time, Enemalta’s deficit is definitely not a major issue when you see what is happening around you. I would have handled Enemalta’s deficit when the economy is comfortable, which it certainly is not at this point in time,” he replied.
Farrugia even disputes Enemalta’s credentials as a corporation.
“What corporation?,” he asked. “Enemalta calls itself a corporation but has not published any audited accounts for the last four years. Enemalta is a government department like any other, and we have now been forced to bail it out because of its inefficiencies.”
In recent years, Enemalta took a bomb loan of €450 million, and according to Farrugia this is repayable in one lump in 2015. “So we are burdened with an increase in tariffs of a company whose accounts remain unpublished and of which we must pay a bullet loan in a few years time. At GRTU we now have a team that is looking very closely at the operation of Enemalta. They have done their homework well and I’m very proud of this,” he said.
One eve of the budget, Farrugia says: “Government does not need to go out of its way to provide financial help. It can, for example, defer the payment of VAT and income tax – thus relieving pressure and still get its returns at the end of the day. What is happening now is the complete opposite. We have no control over this recession and it may very well destroy us. We need more money in people’s hands to relieve pressure from operators. Introducing such measures will not be the end of the world for government.
“Forget the broadening of tax brackets of high income earners. We can live without it for now. Rather, government should widen the brackets of low income earners. In these situations it is always more advisable to start from below. When approached with such propositions Tonio Fenech said that when the US government left more liquidity in people’s hands, they deposited in their savings accounts. Where is he living? Do you know anyone managing to save a cent at this point? Don’t they know that if you buy a loaf you are empowering not only the baker, but also the suppliers, the distributors and the transport companies? Value added in retailing amounts to more than 60 per cent of the economy.”
He doesn’t have any high hopes for tomorrow’s budget speech. Apart from the impending increase in gas tariffs, Farrugia claims that this budget “will remain short of addressing the real problem because it is usually an accounting exercise rather than an economic one.”
“But I hope I’m wrong,” he said to qualify his last statement.
On a more positive note, Farrugia praised the Ministry for Social Policy’s bid to aid first time buyers as “this will also boost the development sector.”
Meanwhile, some retail operators are foreseeing the next Christmas to be the worst ever.
“This is more tied to consumer confidence. We cannot expect good enough expenditure this season when government keeps driving people crazy with a looming rent law reform and increase in tariffs of water, electricity and gas.”

ddarmanin@mediatoday.com.mt

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