Budget reflects lack of government credibility - Labour MPs

The budget reflected the government's lack of credibility and incompetence, Labour MPs Charles Mangion and Leo Brincat have said in parliament.

Speaking during the debate on a bill to implement budget measures, Dr Mangion said the issue over public holidays was one example how the government lacked credibility and was still unsure of what to do; instead of creating a climate of confidence the government had instilled uncertainty and was wrecking industrial peace.

Dr Mangion observed that at the opening of the debate, Parliamentary Secretary Tonio Fenech, had said nothing about benchmarking of the public service, about accountability and about increased efficiency that were so important for a knowledge-based economy.

Neither had he convinced anyone about what the government was saying about enhancing national productivity or competitiveness.

Dr Mangion said tax rates in Malta were among the highest, unemployment stood at 12 per cent, there was no new foreign investment, exports were down, and even Maltese investors were losing confidence. In 2004 each Maltese household had paid Lm263 more in taxes than in 2003 and it was set to rise further.

It was no wonder that the people felt they were misled before the last election.

Turning a remark by Mr Fenech that the government had achieved its deficit target of Lm94 million at the end of last year, Dr Mangion observed that up to November the total gap was Lm129 million. What had happened in the last month for the deficit to reach Lm94 million?

Public debt servicing costs in the first 11 months of last year rose to Lm89 million from Lm65 million during the same period in the previous year, further straining government finances. One could not over emphasise that it was the PN government which had started budget deficiting. And despite outstanding loans of almost Lm1,400, the country's infrastructure and the environment were far from what was desired.

Indeed, now the government was using the environment to raise revenue. Everybody agreed with the polluter pays principle but the way the government had imposed eco-taxes had drawn a negative reaction from the people as they were seeing these taxes as a revenue raising measure. Contrary to what the government said, it had been shown, twice in six months, that no real consultations were made before the eco-taxes were imposed. This led to mistrust and uncertainty.

Dr Mangion said he would have expected the government to say more on its privatisation programme. The government was projecting revenue of Lm50 million from privatisation this year, including a further sale of shares in BOV, MIA and Maltacom. One needed to assess how the privatisation process had evolved so far and what benefits had resulted. While it would appear that national assets had been sold in a bid to offset the debt, that had been unsuccessful as the revenue ended up as recurrent spending and its benefits had now been lost.

The government needed to clearly declare why it was privatising its companies. Had the privatisations so far led to improved efficiency or better services to the public? Had they led to the development of the local capital market or strengthened the local private sector? Had the government become more efficient as a result? Was there a stronger enterprise culture? He did not think so. Nor had privatisation consolidated public financing. Indeed, the opposite had happened.

How would the sale of Enemalta's gas division affect the price of gas cylinders? How would the sale of the petroleum division affect Enemalta and the cost of production?

Referring to the 17 per cent surcharge on the water and electricity rates, Dr Mangion said that from papers the government made available, it was clear that the government had last year not paid more than 2003 for its oil purchases, so the surcharge was questionable.

Concluding, he said the budget would not boost employment and the measures that had been proposed showed this was a government that had lost credibility.

Labour MP Leo Brincat asked why the government was placing so many burdens on the workers when it claimed the economy was regaining ground.

And if circumstances required sacrifices, why were all the burdens placed on workers and none on employers?

The so-called reforms would only chip away at workers' disposable income. It was no wonder that the trade unions were protesting.

Clearly the government could not blame the international situation for the current situation because competing economies were performing much better.

It was worrying, Mr Brincat said, that inflation was rising faster than economic growth and was above that of other countries. Debt, the cost of living and unemployment were all on the increase.

This budget imposed new burdens, but did not hold out prospects for an economic revival.

The government was giving contradictory signals. It wanted to improve competitiveness but then it raised costs.

Mr Brincat hit out at incompetence in the way the eco-tax was imposed.

In the IT sector, for example, the same amount of tax was being applied on a keyboard which cost Lm2 and another which cost Lm30.

The same could be said for a tower with one hardrive, and another with five drives and one CD Rom, a CD writer and a DVD writer.

The government had failed to utilise funds falling under certain EU programmes. It had also lost excise duty on fuel because of the actions of a well-organised gang. It was being said that the case was very complex and that investigations could take a long time to be concluded. This was not at all convincing. The persistent rumour was that feet were being dragged because of the people involved. He hoped this was not the case.

Concluding, Mr Brincat said the situation in the country had been one of neglect under Eddie Fenech Adami and now, under Lawrence Gonzi, amateur planning and U-turns were also reigning. This was a government which introduced tough measures without doing its homework.

If the prime minister was not even admitting there was a crisis in the country, how could it get out of the crisis, he asked.