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NEWS | Wednesday, 14 November 2007

Bondiplus costings ‘reasonable, but not all mine’ – Tonio Fenech

James Debono

The parliamentary secretary for finance Tonio Fenech has denied that government had actually costed Labour’s proposals to subsidise interest rates for first-time buyers at Lm60 million – instead taking responsibility only for the costing of Labour’s overtime proposal presented last week on Bondiplus.
The debatable maths pitted Labour against TV presenter Lou Bondì after a programme featuring Fenech and MLP deputy leader Charles Mangion. In a two-minute right of reply aired last Monday on Bondiplus, Labour claimed the cost of four proposals was Lm15 million, and not Lm115 million as presented by Bondì.
Fenech also told MaltaToday he did not envisage a Lm5 million loss in government revenue should public holidays falling on a weekend be compensated by leave days – another of Labour’s proposals – arguing instead that the figure quoted by on the programme represented a drop in productivity that would be suffered by the economy in general.
Lou Bondì attributed the Lm115 million costing of Labour’s four proposals – tax-free overtime, public holidays compensation, interest subsidies, and halving the energy surcharge – to the government, figures which Charles Mangion decried as an “economic frame up”.
“The figures were given by the government and confirmed by experts contacted by BondiPlus,” Bondì said last week.
On Monday’s programme, Bondì was even more categorical in attributing the figures to government, but Tonio Fenech is insisting the government had only costed the overtime proposal. “The other costings were not worked by the government, but by Bondiplus.”
Referring to BondiPlus’ costing of Labour’s promise to subsidise interests on bank loans for first time property buyers, Fenech said: “When I first talked to Lou Bondì before the programme I told him that the measure would cost a minimum of Lm30 million,” Fenech told MaltaToday.
After making his own calculations Bondì phoned Fenech to tell him that experts had estimated the measure to cost Lm60 million. “Bondì explained to me how the experts he consulted had arrived at this figure and I told him that it was a reasonable figure.”
On his part, reacting to Fenech’s comments, Lou Bondì replied that “the workings and related matters will be discussed in the edition of Bondiplus on Monday.”
Tonio Fenech defends the Lm60 million figure as reasonable referring to Labour’s promise to subsidise any interest rate above 4.5 per cent when interest rates are already in the 6-7 per cent margin.
Fenech distanced himself from the other costing, which tagged a Lm5 million price on compensating workers for public holidays falling on Saturdays and Sundays.
The Lm5 million figure was presented under the heading “Loss in revenue for a future Labour government” in a chart of costings presented during Fenech’s and Mangion’s encounter on Bondiplus.
“The Lm5 million figure is the total cost of declining productivity suffered by the economy as a whole, and not a decrease in government revenue,” Fenech told Maltatoday, who said he still foresees an impact on the government’s coffers with Labour’s proposals.
“As the employer of 40,000 people the government will have to pay workers for extra days of leave.”
The Lm20 million figure for Labour’s reduction of the surcharge was already costed by the government before the Bondiplus programme. This has been calculated by Labour to cost between Lm12 million to Lm15 million.

Fenech on overtime
Disputing Labour’s latest claim that its overtime measure would cost just Lm2 million, Tonio Fenech insists the Lm30 million figure mentioned by the Prime Minister in parliament is “a very conservative assessment” since its 2006 records show Lm12 million collected in tax from overtime.
Labour is basing its Lm2 million estimate on the fact that according to National Office of Statistics figures, less than 6,000 persons did any overtime in 2006.
But Fenech says the Lm12 million figure mentioned by the Prime Minister is based on actual revenue, and not on a survey. He said the Lm30 million figure is a low estimate of potential abuse and not based on “a scientific assessment”.
“It is based on an estimate of a third of the working population shifting their basic pay to overtime to avoid paying any tax.”
But the Lm30 million figure does not include loss in revenue from National Insurance contributions. “NI is only paid on the gross wage. If people start declaring a lower gross wage to declare more overtime, the government will lose even more revenue.”

Labour’s calculations
MaltaToday also asked the MLP to explain the workings it used to conjure its own figures.
It has costed its overtime proposal at Lm2 million, as opposed to government’s Lm30 million, for which Charles Mangion says that employees in certain occupational categories normally earning less than Lm8,000 qualify for overtime.
He cites NSO estimates that in 2006, the total number of employees working overtime amounted to 6,000. “This means that the measure would cost less than Lm2 million.”
But Mangion would not reply to MaltaToday’s question on how a future Labour government would tackle the abuse of people shifting their basic pay to overtime.
Labour has also said the Lm60 million tag on its interest rate subsidy for first-time property buyers was “totally unfounded”.
Mangion claims that “according to reliable sources” from the banking sector, the total income from interest on both first and second homes amounts to far less than Lm60 million. Since the MLP is only proposing subsidising any interest rates on first homes above 4.5 per cent over the next seven years, Mangion insists that government outlay for first-time buyers on interest will amount to just Lm1 million.
Mangion also insists the government will incur no cost by giving workers back extra days of leave for public holidays falling on a weekend. He said the reason why public holidays falling on a weekend were taken away had nothing to do with government expenditure or revenue, but with Malta gaining competitiveness and higher productivity. “Data from a recent EU report confirms that productivity and competitiveness fell between 2003 and 2006.”
According to Mangion this shows that that while the government’s measure had resulted in a loss of quality of life for families, it has not contributed to increasing productivity.
Mangion also insists that, based on the surcharge paid by consumers in both 2006 and 2007, halving the surcharge would cost Lm12 – 15 million rather than the Lm20 million quoted during Bondiplus – arguing that by giving people more money to spend, rising consumption will result in higher growth and tax revenues to offset any other losses resulting from the slashed surcharge.


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