Political parties of the centre-right like to project themselves as having the best people for the management of the economy. The Nationalist Party in Malta has often adopted slogans that confirm their perception that they are the best people around to manage the day to day running of the country. How can one forget the mantras of ‘finanzi fis-sod’ and ‘par idejn sodi’ that have characterised the PN’s spin both before and after recent general elections?
Sadly for us all, the ability of the Nationalist administration to manage the economy effectively is proving to be no more than a fallacy that is now hurting the prospects of our future prosperity. The poor state of our public finances is so self evident that all the Nationalist cabinet tries to do is mitigate the outrage of people at this failure by attributing it to the world recession, and their decision to support local manufacturing industries that risked sacking people because of a fall in demand for their products.
The government is always very prompt to point out that much bigger countries than us in the eurozone have experienced deficits that are much bigger than ours. They also tell us that although our national debt is increasing fast it is still 11% lower than the EU average.
What they fail to point out is the fact that in our case the state had no reason to rescue any banks with taxpayers’ money. The amount of €8 million used to help manufacturing companies that faced difficult times is money well spent. However, it does not explain why the government incurred such a massive deficit in 2009.
The truth is that the incompetence of the Nationalist administration is far deeper than even their most loyal apologists ever suspected. An overshooting of the fiscal deficit by €160 million can never be explained by the relatively small amount used to help manufacturing companies in distress.
The inability of the administration to even dampen the effect of the recession by an increased expenditure of productive capital expenditure during 2009 is another proof of how we are now governed by experts in how not to manage a national economy. At a time when most countries were priming the economy by accelerating public capital projects, our government spent substantially less on this sector than it had itself planned.
But the greatest proof of mismanagement can be found in the way the Nationalist government is creating uncertainly by not revealing the extent of the increases in water and electricity tariffs. We have to wait until January to see how the increases are likely to affect the plans of businesses to expand their activities.
Just as unacceptable is the failure of the government to introduce some real transparency in the way that energy services rates are calculated. Changes in the accounting policies of Enemalta, including the infamous change in the assumed ‘return on capital employed’ means that consumers, including the business community, can no longer predict what their future costs for energy will be. Enemalta’s inefficiencies are still being charged to energy consumers – something that can only happen when the energy provider enjoys monopolistic conditions and the government that owns it is insensitive to the effects of such malpractice. The link between the market price of oil and energy services in Malta is still very weak, if not even inexistent.
As was to be expected, the gross incompetence in the formulation of this budget was unsuccessfully hidden by some window-dressing tactics aimed at diverting the public debate from the real issues.
The full payment of the COLA allowance was a move in the right direction, but it is hardly sufficient to cater for the full impact of increasing inflation. In fact for 2010 the government is still projecting inflation that is almost double that projected for the eurozone area. The Nationalist administration has lost its battle against inflation and it lacks the political will to resolve this problem effectively.
Even if this budget has been labelled as a tax-free budget, it is more than likely that this time next year we will still be discussing why the public finances are still not under control, why growth projections have once again proved unrealistic, and why our families have had to run so much faster only to remain in the same place.
No wonder many serious analysts believe that the Nationalist administration’s claim that they are the experts of economic management will in 2010 once again prove to be just a hollow publicity spin.
Charles Mangion is Labour shadow minister for finance
Any comments?
If you wish your comments to be published in our Letters pages please click button below. Please write a contact number and a postal address where you may be contacted.
Search:
MALTATODAY
BUSINESSTODAY
Download MaltaToday Sunday issue front page in pdf file format
All the interviews from Reporter on MaltaToday's YouTube channel.
