News | Sunday, 19 July 2009

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Fenech to ignore employers’ calls for COLA reform

Government on collision course with industry as conference reveals that Malta’s price levels are a shocking 77% higher than EU average

Karl Stagno-Navarra

Finance Minister Tonio Fenech yesterday hinted that government does not intend changing the current Cost of Living Adjustment (COLA) that compensates for inflation, paving the way for a head-on collision course with employers and industrialists who are warning that should the approximately €7 per week increase be given to workers in next year’s budget, “mass unemployment” is to be expected.
Fenech, who was a guest speaker at a national conference on inflation organised by the Labour Party, was replying to GWU secretary general Tony Zarb who challenged him to say what government’s position was on COLA.
“The proposal to keep or change the COLA system is definitely not coming from government,” he stressed.
Zarb, who expressed concern over rising prices, insisted that the cost of living adjustment needed to be respected and workers should get the full cost of living increase.
In his reply, the finance minister said that the established mechanism “would continue” to be followed, but he added “that the mechanism allowed for particular circumstances.”
He said that decisions would be taken in consultation with the social partners, adding that calling for salary increases was easy, “but what is important is that jobs are not put in danger.”
The COLA issue was also raised by UHM secretary general Gejtu Vella who stressed the importance that workers get justly compensated for the high cost of living. However, the union was more preoccupied by the impact higher salaries could have on enterprises.
“What happens if companies closed their doors because of high labour costs?” he asked, appealing to all social partners, especially trade unions, to “act responsibly and not be populist.”
Workers, he said, needed to be informed about the situation, and all social partners must work together in the national interest, rather than defending their own sector’s interest.
The conference was well attended and was representative of almost all the social partners and national organisations.
Delegates were in for a shock, however, when university professor Joe Falzon revealed statistics that showed the price level of goods, compared to the hourly labour cost, stood at 77% higher in Malta than the EU average.
He explained that while in Malta a worker stood to earn an average €9 per hour he worked, in the EU the average stood at €20 per hour, leaving the Maltese to face the reality of coping with a far higher cost of living than the rest of his European comrades.
From examples projected, Maltese pay 202% more for household goods; 200% more for footwear; for furniture, 186%; 286% more for electricity; 180% more for personal transport; 240% more for transport services; 91% more for hotels and restaurants.
Another detailed presentation came from the former chief of the National Statistics Office Alfred Camilleri, who is today the Permanent Secretary at the Ministry of Finance.
He singled out food and non-alcoholic drinks as the main cause of inflation, explaining that they contributed to almost 43% of inflation growth during last month. Meat alone contributed to a fifth of food inflation.
Church representative Mgr Anton Gouder stressed solidarity with those who are vulnerable, and the need for morality in the social sector, while economist Alfred Mifsud asked why it is only Malta that is discussing inflation.
“Inflation is a statistic of the past, and the real issue we should be discussing is the future, job growth and employment,” he argued.
Labour MP Gavin Gulia called on government to consider the French government’s example, by reducing VAT on restaurants to generate more business and preserve jobs in the sector. However, Tonio Fenech replied by asking how much would the consumer really benefit from such a reduction in VAT.
“Unless I am more than 100% sure that it would be the consumer to benefit from a reduction in VAT on restaurants, I will not implement such decisions,” he said, while adding the question if it would be fair to transfer €35 million in lost revenue from VAT on restaurants to new taxes to be carried by all.

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