Tightening belt to avoid oil price hikes

Cabinet papers reveal Mintoff’s response to the 1977 fuel crisis, PN’s tussle with contraception, the hunt for a good energy plant site and emancipation for juries

Two days before Christmas 1976, Dom Mintoff’s Cabinet agreed to cut bread rations and increase fuel prices in response to an impending world oil crisis.

Mr Mintoff wanted the crisis on the agenda at that meeting in his office at Auberge de Castille, Valletta, three months after the Labour Party secured a second term in office.

Cabinet minutes reveal the Prime Minister’s preoccupation at the proposed price hikes by Opec, an organisation of oil producing countries.

The minutes start with Mr Mintoff asking his ministers to reflect “deeply” on the President’s message on wastefulness and understand the implications of the proposed oil price increases.

Opec countries, mostly Arab states, were mulling significant price rises that would have hit the Western world badly. The following year was to see a series of Opec meetings as members were split on what to do.

The bombshell was delivered in December 1978 when Opec countries put aside internal divisions and decided on a 14.5 per cent increase in oil prices.

The world had already suffered its first oil shock in 1973 when Arab oil-producing countries boycotted the US, the UK and other allies over their handling of the Middle East conflict.

And Malta, with a 100 per cent dependency on oil imports, was at the mercy of international forces as the country passed through a period of industrialisation to counter the impact of the British forces’ departure in March 1979.

It was within this context that Mr Mintoff wanted Cabinet to treat the subject urgently. What followed was a raft of spending cuts, commodity price increases and subsidy withdrawal on staple food items and fuel.

The minutes document the proposed changes, which had to ensure the burden was evenly spread.

Malta at the mercy of global forces

Cabinet decided that the prices of kerosene, diesel, gas and telephony had to go up. The price of petrol had to remain the same.

But Cabinet was unsure what to do with bread.

The minutes document three alternative proposals: rations had to be cut, the price of bread had to go up or the subsidy removed gradually and replaced with a bread allowance to ease the transition.

Old-age pensioners and the unemployed had to receive any benefits owed immediately rather than wait until the Budget, which Mr Mintoff wanted to be held not later than March 1977.

Mr Mintoff said ministers had to ensure that all vacancies “they had”, especially in factories, were filled and urged them to come up with new ideas to create productive work before March 1979.

Ministers were also urged to cut any bureaucracy that shackled factory development and recruitment.

The details of the austerity programme became clearer on January 20, 1977, when, at another Cabinet meeting, the austerity programme was quantified.

The removal of subsidies on bread and pasta was to save public coffers £25 million and cutting subsidies for animal feeds would save the State £6 million.

Subsidy removal on fuels and kerosene used by bakers would mean a saving of another £4 million.

Cabinet also approved an increase in the national insurance contribution that would raise the social security fund to £16.6 million from £12.6 million.

Ministers agreed on a series of increases in social benefits and the introduction of a bread allowance, which would cost the country some £5.7 million.

At the same Cabinet meeting, Mr Mintoff informed ministers there was still more work to be done on “the planning and recruitment of workers” to be deployed on the construction of the China Dock (dock six below Corradino Hill, which was financed by the Chinese government), the Marsa dock and the Marsaxlokk container port.

The next available Cabinet minutes date to March 4 and 25. In both instances, the employment and economic situations were on the agenda. Mr Mintoff was concerned because unemployment was on the increase and tourism arrivals had dropped.

At the March 4 meeting, held at 9pm, Cabinet decided that, with immediate effect, the feast of St Joseph, celebrated on March 19, would no longer remain a public holiday.

The minutes contain no explanation as to why this decision was made.

Three weeks later, Mr Mintoff informed his Cabinet that a number of British companies were interested in giving “help” to Malta. The companies included Dowty, Plessey and De La Rue.

He also spoke of interest from Saudi Arabia to develop the Marsaxlokk port.

The minutes give a rare, behind-the-scenes glimpse of an economically tumultuous period that was to mark Mr Mintoff’s second term as the country strove to stand on its own two feet.

ksansone@timesofmalta.com