15 December 2004

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A rushed job

The budget is increasingly appearing to have been a rushed and ill thought out exercise.
Someone somewhere obviously did not study thoroughly enough the legal and social implications of some of the measures announced by the Prime Minister on budget day. What could have been a useful exercise in tackling public finances in a serious manner has been rendered an exercise of uncalculated risk-taking that threatens to create industrial turmoil.
The increased tax on foreign travel, the legality of what government intends doing about public holidays and the surcharge on utilities are all measures that have serious question marks hanging over them.
At stake are not only the fiscal and economic targets set by Government but the very credibility of Lawrence Gonzi’s administration.
The added taxation on foreign travel has made travelling from Malta the most expensive in Europe. As a revenue generating exercise, it risks tearing apart government’s policy of encouraging foreign travel and its commitment to the tearing down of all frontiers. If proved to contravene European regulations as recently affirmed by Dr Simon Busuttil, it will also be highly embarrassing for government which has made the Europeanisation of Malta its mantra. Surely the legality of such a measure could have been cleared prior to its introduction in the budget.
It reflects very well on Dr Busuttil to have raised the matter in spite of the embarrassment for the party on whose ticket he was elected to the European Parliament. It is a very welcome example of a new style of doing politics.
The other legal minefield is the abolition of Clause 17 on public holidays, which risks throwing government into a veritable legal quagmire.
It is this newspaper’s belief that any changes to the Industrial Relations Act should have been arrived at after discussion and consultation with all the social partners, especially since the changes made two years ago were arrived at after an intense consultation period.
Yet again we commend the stand taken by the legal advisor of the UHM, who in spite of contesting the last European elections as a Nationalist Party candidate, told our sister newspaper that he was disappointed with government’s stand on public holidays. Dr Ian Spiteri Bailey is also showing signs of a mature way of doing politics. Government must sit down again with the social partners and iron out a social pact acceptable to all players. This agreement becomes more necessary each passing day, if we are to avoid the old style union-government confrontation with the inevitable effect on living standards in the country.
Despite an intense publicity campaign harping on rising crude oil prices, the surcharge on utilities enjoys little public support since it was revealed that it was only introduced to recoup costs and losses since 1999. Many people, including the social partners feel deceived since prior to the budget the surcharge was constantly and publicly being linked to crude oil prices, which have no relevance on Enemalta’s fuel oil bill.
Another budget measure that has brought on criticism from unlikely quarters is the hike in the price of kerosene. Instead of curbing abuse and controlling bus owners who mix kerosene with diesel, government came down with a heavy hand and in the process dug deep into the pockets of both the rich and poor who have traditionally heated their houses by kerosene. It is a clear example of being weak with the strong and strong with the weak.
This whole amateurish way of dealing with the budget has strong overtones of Alfred Sant in 1998 when budget measures had to be re-explained and re-defined weeks after the budget was read out in Parliament. Gonzi’s exercise instils a sense of déjà vu creating uncertainty and widespread apprehension.
The situation is not made any better by the Opposition Leader’s call for a depreciation of the Maltase Lira. It is a big question mark whether this proposal reflects party policy or is just another knee jerk reaction by Alfred Sant.
Politicising devaluation or depreciation is sheer madness and any right-minded economist would say that no Central Bank would proceed with such a measure under circumstances in which it has been talked about so widely and openly.
The country needs to pull its socks up and the only logical way forward is to continue striving for a social pact.

Copyright © Newsworks Ltd. Malta.
Editor: Saviour Balzan
The Malta Financial & Business Times, Newsworks Ltd, Vjal ir-Rihan, San Gwann
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