Correct diagnosis

It was reported that a Cabinet Minister was seriously concerned with the phenomenal rise in oil prices. The causal factor is that Enemalta Corporation now has to fork out more millions to balance its books. As a result, this Minister opined that the money could only come either from further taxation, an increase in the electricity surcharge, or a combination of both.

It has to be remembered that the Prime Minister and the Parliamentary Secretary at the Ministry of Finance declared that there would not be any taxation measures announced in the Budget. Apparently, this bad habit of introducing taxation through legal notices and not the yearly financial instrument has been found to be very convenient. The government can make political mileage at budget time and then sugar the pill throughout the year when taxation measures are announced.

The idea behind the Prime Minister's declaration of no further taxation implies that there will be greater control on the expenditure side to ensure that the national accounting books are balanced.

The PM may also be concerned that with higher taxation levels, the economic consequences on the performance of the economy will be serious. The people will have less disposable income, and savings and investments levels will be adversely affected. Purchasing power will decline further with the consequent inflationary tendency.

In such a situation, trade unions, perceiving that the cost of living is increasing, will ask for further wage and salary increases to make up for the erosion of the purchasing power. As a result, inflation will rear its ugly head and Malta, having one of the most open economies in the world, will continue to be less competitive when compared to other countries.

Fitch, the international rating agency, has already remarked that while there is more progress in the quest for deficit control, the performance of the economy is actually still disappointing. The implication is clear. It is not enough to balance the books; the most important element is that the national economy (and each government company) is actually positively performing.

If the economy can perform better through stricter controls on the expenditure, the same approach applies to each government company. If Enemalta wants to balance its books, the whole country need not be held at ransom through higher electricity rates or increased taxation. One has to query whether Enemalta is efficiently managed. It is quite convenient for Enemalta, enjoying the benefits of monopoly power, to pass on increased costs to consumers.

But taxpayers are equally entitled to question the way this corporation is performing. A number of questions come to mind. Why has it for so long depended on the importation of oil for its continued operations? Why is it that no serious endeavours have been made to tap other sources of energy? Have any attempts been made to discover alternative ways of providing energy by entering into agreements with neighbouring countries? Does its machinery need upgrading and in its present condition consume much fuel?

Of equal significance is management's control on expenditure. Surely, costs can be minimised and millions of liri can be saved if greater and stricter controls are put into place. Air Malta has taken this path and is congratulating itself for saving so many millions. A similar programme for Enemalta has not been prepared. Perhaps, it is easier to pass losses and increased costs on to consumers than to try to contain them through greater efficiency.

Malta deserves to have the best if it wants to embark on the path of achieving excellence. If the correct diagnosis is made, it has to be based on efficiency and on finding the easiest way out for balancing the books. Further charges on consumers are certainly not the solution as the repercussions may be greater than the immediate remedy. Short-term solutions are dangerous.