Labour Deputy Leader Charles Mangion tells Charlot Zahra that Malta’s real test about the Euro starts now
The fact that Malta was given the approval to join the Euro isn’t it an indication that the country’s finances are “in sound hands”, as the Nationalist Party is saying?
The tests that Malta passed in order to join were the nominal ones set out in the Maastricht Treaty about public deficit, public debt, exchange rates, interest rates and inflation.
Malta has always had a stable interest rate in line with the rest of the EU due to the monetary policy adopted by Malta during the past 30 years. Regarding exchange rates, Malta has always had a stable rate of exchange. The only time there was a devaluation was in 1993/1994 under a Nationalist Government and its impact was negative. Otherwise, the manner in which the basket of currencies was operated offered a certain degree of stability. Regarding inflation, one has to consider that in 2005 and 2006 it was higher than the average. It was in the past six months that the inflation rate went down and is now slightly below average. Public deficit looks as if it has been statistically controlled. However the ratio of public debt to GDP is still high despite the sell-off of some of the country’s major assets such as Maltacom, Mid-Med Bank, Maltapost and MIA. The country has passed the initial test, but the real test is starting just now. The challenge is now to maintain the sustainability of the country’s finances.
So what is the real situation of the Maltese economy? Aren’t projects such as Smart City and the expansion of Lufthansa Technik an indication that the economy is progressing an investment is growing, as the big guns of the Nationalist government claim?
We welcome all the new projects and we support them. However Smart City will take 14 years to be completed so let’s look at the economic situation now. I accept that the economy has grown by 3 per cent in 2006. However a deeper analysis shows that most of the growth took place in financial intermediation, online gambling, and construction, contributing to 85 per cent of total growth. The remaining sectors of the economy, such as tourism, manufacturing, and maritime services, contributed only 15 per cent of total growth. This is creating a distortion in the economy. If online gambling had to contract as a result of new international legislation, this would have a significant effect on the economy.
Therefore government must do something to bring back to life those economic sectors that are weak, primarily tourism.
Government should also develop other services, such as offshore technical services, but at present we do not have enough engineers and technicians to do so. We should have prepared for this ten years ago, not now.
Like tourism, these sectors are a source of foreign revenue for Malta, which is imperative to prevent the deficit in our current account to grow. In the last four years, the deficit in the current account has grown.
Moreover, the growth in the economy has not translated itself into a real increase in the income of workers over the past four years, therefore reducing the purchasing power of families, particularly in the middle class.
In addition, in Malta GDP per capita went down from 78 per cent of the EU average in 2000 to 71 percent in 2006. On the other hand, the other countries that joined the EU in 2004 showed a growth in GDP per capita over the same period.
What are the Labour Party’s plans to alleviate the country’s financial situation and bring growth in the economy?
On the fiscal side, we do not believe that the burden of taxation should continue increasing. In the past five years under a Nationalist Government, this has increased from 29 per cent to 36 per cent of GDP. In the first few weeks a new Labour government will make an audit of the country’s financial situation to have an exact picture as to its sustainability.
A new Labour Government will raise the Lm10,000 ceiling for Children’s Allowance to reflect the increase in cost of living, especially the ever-spiralling cost of education.
We will also continue combating tax evasion and promoting fiscal morality. For instance, we would seek to introduce benchmarking for self-employed to know people’s real incomes. At present, only around 600 people declare that they earn more than Lm16,000. I think there are more people who earn that. I would prefer reducing the higher rate of income tax to achieve more fiscal morality.
We have already discussed these proposals with the constituted bodies and have found a positive response to them.
The main thrust of the Labour plan is to increase revenue through increased economic activity. At the same time, we will be cautious in expenditure. We believe that those sectors that are already doing well, such as financial services, should be given the opportunity to grow further.
With regard to manufacturing, Labour is proposing setting up a committee under the chairmanship of the Prime Minister including representatives from the industry which would monitor the situation, anticipate problems and solve them.
However, the growth of the economy is dependent on the education skills of the population. It is useless getting for instance call centres if the linguistic skills in English of most people are not up to standard.
There is a particular shortage of people skilled in scientific and technical backgrounds. A joint effort should be made between University and MCAST to provide the critical mass to provide these people.
Another issue is tackling excessive bureaucracy. Two years ago a committee was set up to tackle this problem, but the results have been minimal. There are authorities that are overlapping on each other, which sometimes contradict each other.
Administrative criteria should be clear and transparent so that their enforcement would be easier. Heads should be accountable for their actions and should answer if they do not implement their business plans.
Overruns in costs of projects should not be tolerated anymore and whoever is responsible should give a clear explanation of this. There should be constant monitoring so as to prevent overruns in the first place.
The use of all public funds should be liable to scrutiny. At present, if the government does not have majority shareholding in an entity, the rules do not permit public scrutiny of those funds.
How will a new Labour Government work within the parameters of the Euro? Don’t you think it is another u-turn like that on EU membership?
One of our aims will be to synchronise the Maltese economy with the Eurozone economies, so that economic decisions that are taken in the Eurozone that are beneficial to the Eurozone countries would be beneficial to Malta too.
We will respect the Eurozone rules and we will ensure that we will pass future tests too, not just the initial one.
I do not believe it is a u-turn at all. Before the 2003 general election we had promised that if the electorate had to decide for EU membership at that general election, then the Labour Party would respect that verdict. And that’s what we did six months after the general election. The Labour Party extraordinary general conference resolved that it would accept the electoral verdict and work within the new structures to get the best conditions for the country possible.
When the Nationalist government decided to join the ERM II mechanism at a time when the economy was contracting, we had advised the government to postpone membership of the Euro until the Maltese economy was synchronised with the Eurozone economies.
However we believe that joining the Euro on its own will not make us more competitive and increase investment. That will increase if it feels that there is stability in the country and is able to be more productive, thus more profitable.
We will be on guard so that on January 1, when Malta joins the Euro, there is no inflation in essential services. We are doing this out of a sense of responsibility.
One of the major criticisms by the Labour Party to the present government is that it is spending too much on capital projects and that these are taking too long to complete. What are the Labour party’s proposals to ensure “value for money” for public funds?
It is customary for projects to have a 10 to 15 per cent contingency provision for cost overruns, but having overruns of 40 per cent or more is unacceptable. Therefore a project’s cost should be evaluated correctly at the onset, as well as have continuous monitoring to detect cost overruns and give an explanation for them.
In each major capital project there should be a representative of the Auditor General’s Office to monitor the progress of that project so as to have a system of checks and balances in place.
There were various instances where the Labour Party criticised certain projects and then it came out that there was professional involvement by some Labour MPs. Don’t you think it’s a conflict of interest?
Absolutely not. I think you are making a direct reference to me. I think this shows how serious we are. As an MP, I have the right to practice my profession, and when a person engages me for a contract, he does not appoint me to involve myself in that project but merely to check out the legal aspect and the title of that property. That’s my job, my profession, and I give that service because I have the right to give it. The fact that I would criticise the project clearly shows that I do not leave personal interest to keep me from saying what I have to say. And I will continue doing so. Now if a person decides not to come to me, than it is his free decision. But I will not compromise myself in not giving a service which is, after all, my job. I cannot work as a doctor or a plasterer, that’s what I know to do. It’s my living and I humbly think that there is no conflict of interest. As an MP, I have every right to practise. When I was a minister, I left the office completely and I did not practice my profession. I know it is my duty as a Minister or Parliamentary Secretary not to do private work. I know that, and if I am appointed in that post, I certainly would not do any private work. But definitely there has not been any conflict of interest. There is a conflict of interest when I am in a position of authority and from that position of authority, I give something that would benefit me, my friends, my family or something similar. I think it is in that case that a conflict of interest arises, and I think that presently there are various conflicts of interest taking place. We’ll see what the future will reserve.
We’ll see later…
Have you ever been involved in speculation of property?
What do you mean by speculation of property? I don’t know what you want to say. If you mean that I have bought a plot, built it and then sold it, yes. My father-in-law had entrusted with this work and when he died, that work continued together with my wife. I don’t know what you want to say. There is a statement that we make every year and you can see that…I do not know what you want to say… Speculation in what sense? Did I have a land in a green area and a permit came out? Absolutely not…I did not have any plots in the extended development zones...This is an unwarranted question, in my view. I am not prohibited from buying property; there is no such prohibition against Charlie Mangion…
Do you think that the Labour Party has moved too much to the political centre?
I think that in the current political reality, in moving towards the centre, we followed what the other Socialist parties in Europe did. However it is of primary interest for the Labour Party, both in the present as well as in the future, that it looks at the welfare state and strengthens it so that no sector of society is left behind. The latest Living and Social Conditions statistics show that 15 per cent of the population is at risk of poverty. We will provide people in difficulty with the necessary assistance so that they could continue walking on their own.
Do you agree with those who say that there is not too much ideological differences between the two main parties and that the only difference between them is in the way in which they will achieve their goals?
No. I think that there are differences between the two main parties. If it weren’t for the Labour Party, then the Nationalist Party would not have looked at the social aspect as it says it is doing today. Whenever the Labour Party introduced social measures in the past, such as the minimum wages, bonuses, free healthcare for all and social housing, among others, the Nationalist Party was opposed to them. It is an achievement for the Labour Party to have brought the Nationalist Party in endorsing those facts that historically it was opposed to. For us, the social aspect is of huge importance in our policies. And it is the belief of the Left that if you do not strengthen the social aspect of the family, then you cannot strengthen the economy. Therefore social considerations have a particular weight so that the standard of living of families is improved.