Financial discussion is always an ongoing part of the political debate, reflecting what is happening in the economy and from there how it sets the social security scene.
Public finances cannot and should not be offered to the public in such a superficial and misleading manner- Lino Spiteri
The discussion is never easy but sometimes it becomes more confusing than usual.
Take, as a starting point, the Labour Party’s determined promise to reduce water and electricity rates should it be returned to office at the next general election. The Nationalist Party and the government have always pooh-poohed this promise.
They persistently harangue Labour to demand a clear explanation about how they intend to effect the reduction.
The Nationalists frame their challenge in a simple statement – that the money has to come from somewhere and Labour may simply be talking about a transfer, using public taxation money to allow it to deliver its promise on tariffs.
The government broadens the framework of its retaliation. It says it is already subsidising the neediest families. Beyond that, it adds, it is important that other households pay the market price of water and electricity supplies on the principle of full recovery of costs by Enemalta, the energy supplier, and by the WaterServices Corporation.
I quite understand the basis of the Nationalist attack. At some point in time before the general election Labour has to explain how it proposes to cut water and electricity bills. My position so far has been that Labour should not give hostages to fortune.
I say that because, to my mind, the way of looking at a restructuring of Enemalta’s cost of generating energy (which is the major element in the cost of providing tap water) is quite simple. It relates to mostlyone-off efficiency gains, on the following counts.
Enemalta may produce energy more efficiently, also with the aid of technical innovation. It might review its manning levels. The corporation might use more efficient fuel, though ever mindful of the need to protect the environment.
Enemalta, and the Water Services Corporation too, might also make efficiency gains in distribution, plugging leaks and attacking consumer avoidance more robustly. It might hedge its purchases of fuel more efficiently.
Beyond these efficiency gains, the cost of producing energy depends on a major variable – the cost of fuel used in production, whether it is a derivative of crude oil, or gas, the internationalprice of both being outside the control of Enemalta or any other producer.
The Labour promise hangs in the air, as the party teases the Nationalists and the electorate by retaining its cards close to its chest, no matter how furiously and relentlessly the Nationalists attack it.
A couple of weeks back there was a remarkable development. Enemalta said it had scrapped a plan to spend some €18million on a refurbishment project to improve production, adding that it had found a way whereby, by spending a mere €100,000 it would achieve the same improvement.
I believe in miracles, but I confess to not understanding how they happen. I certainly could not fathom out this one.
These last few days there was also a remarkable twist in the financial and political tale. On Thursday The Times reported that the Finance Minister had “assured the people” that “the government had no intention of further raising electricity tariffs. An increase (in tariffs) was not on the cards. We need to find different solutions and strike a balance between the need to bolster Enemalta while taking socio-economic realities into consideration.”
The minister was speaking in the context of a downgrade in the rating of Enemalta’s bonds to junk status which induced him to reveal that the government would be taking into its expenditure a chunk of “non-core” Enemalta costs. He claimed this would not infringe EU rules. He knows best in that regard, so we’ll wait and see. But another claim is stupefying.
The minister said that taking over some €25million of Enemalta’s expenditure would not affect the budget deficit targets. If it were true, that would be another miracle in the making.
But what the minister meant was that, under an EU edict the government was cutting the budgeted expenditure in 2012 by €40million, and that gave him wiggle room.
Is such a statement for real? The EU ordered the €40million cut because the government’s revenue forecast was overstated, since it was based on too high a growth rate.
The cuts will affect social services and health provision, among other areas. The government’s claim that they would do no such thing as they would come out of proposed increased expenditure boomerangs into a question whether the administration had proposed increases haphazardly or unnecessarily.
The Finance Minister has the toughest job of all, what with the external threats to the economy, reduced growth forecasts, ballooning public debt and the massive and rising cost of servicing it, rating downgrades, inflationary expectations, how to finance the Parliament and roofless theatre projects, accelerating spending to prepare for the possibility of an early general election, and what not.
But the public finances cannot and should not be offered to the public in such a superficial and misleading manner.
It is one thing for the government to perform a political somersault over energy prices and do exactly what it says Labour intends to do. It is another thing to try to disguise financial realities in this manner.
The government seems to count on widespread lack of interest in figures, forgetting that falsities too tend to come home to roost.