Government's reaction to report on welfare reform

A Government report on welfare reform is proposing an increase in VAT of three per cent to partly finance an obligatory free health scheme, sources said yesterday.

It is not yet clear whether the proposed increase in the VAT rate was intended to be across the board or for specific products or services.

The report was presented to constituted bodies and unions during a meeting of the welfare reform commission yesterday morning.

The proposal is one of the controversial measures presented in the government reaction to the report drawn up by the welfare reform commission by its chairman Joseph Schembri.

The government is also proposing that the retirement age should gradually increase to 65 by 2015, and not by 2020, as proposed by the welfare reform commission last month.

Deputy Prime Minister Lawrence Gonzi and Finance Minister John Dalli yesterday took part in the commission meeting.

Sources said the meeting was characterised by a large number of questions put forward by its members from the constituted bodies and trade unions.

The members of the commission have been given only one week in which to absorb the government proposals. They are expected to give their reaction on Friday.

Sources said that the government's proposals were "in certain respects" more radical than those of the welfare reform commission report presented in October, especially as Government is proposing shorter timeframes than the ones drawn up by the commission, including the issue of raising the retirement age.

Finance Minister, John Dalli also called a meeting for representatives of constituted bodies and trade unions at his ministry in Valletta at 5 p.m. yesterday.

Sources said the finance minister only invited one member from each organisation for the meeting, which focused on the budget being presented later this month.

The sources said that Mr Dalli gave them a detailed picture of the government financial situation, followed by a discussion on the budget.

The unions and constituted bodies were given a week to absorb his report before a three-day meeting in Gozo - being described as a 'retreat' - of the Malta Council for Social and Economic Development that kicks off on Friday.

The MCESD meeting will deal with two crucial issues: the government proposals on pensions, and the budget.

Sources said that a number of constituted bodies were seriously concerned by the short time they have been given to study the welfare reform proposals as well as to prepare for the MCESD meeting to tackle the budget.

"The government seems to have embarked on a wrong path, insisting on rushing reforms. We are discussing very serious measures which cannot be implemented haphazardly. A government which says it believes in social solidarity and dialogue should know better," one trade unionist said.